Hanoi vs Ho Chi Minh City business: where to base a firm

Hanoi vs Ho Chi Minh City business is a choice between the seat of government and the commercial centre. Pick Hanoi if you deal often with ministries. Pick Ho Chi Minh City if your customers, suppliers and hiring pool matter more. Many firms open a small office in the second city later.

The short answer

Hanoi is the capital. It has been the capital of the unified country since 1976. Ministries, the State Bank of Vietnam and many national agencies sit there. Ho Chi Minh City is often called the economic capital of Vietnam. It is the larger trading hub, with a long history of commerce in the south.

Neither city is the wrong choice. The right base depends on who your main customer is and who must approve your work. Ask three questions. Who signs off on your licence? Where are your buyers? Where will your first ten hires live?

Sources: Wikipedia, "Hanoi" (capital since 1976, State Bank of Vietnam headquarters); Wikipedia, "Economy of Vietnam" (Ho Chi Minh City described as the economic capital).

Government access

If your sector needs national approval, being in Hanoi saves time. You can meet officials in person, drop off papers and follow up the same week. Industries such as finance, telecoms and energy often fall in this group.

Setting up the company itself does not depend on the city. Under the Enterprise Law of 2014 (Law No. 68/2014/QH13), a company registers with the business registration office at provincial level. That means the same basic process applies in Hanoi and in Ho Chi Minh City. Some licences for your line of business can still need a ministry, so check your sector before you choose.

Source: Law on Enterprises, Law No. 68/2014/QH13, provisions on business registration, Vietnamese official gazette text.

Market and customers

Ho Chi Minh City is where many consumer brands, trading firms and exporters keep their main office. If you sell to retailers, distributors or other private firms, you will likely meet most of them there. Flights, ports and road links to the Mekong Delta and the southern factory belt are close at hand.

Hanoi sits at the centre of the north. It is close to the northern industrial provinces and the ports on the coast. It also has the largest group of state agencies and state-owned firms as customers. If you sell to government or to state firms, Hanoi is the natural base.

The whole country is growing. The economy grew by more than 7 percent in 2018, and both cities benefit from that. Think of the cities as two doors into the same market, not two different markets.

Source: Wikipedia, "Economy of Vietnam" (growth table showing 7.2 percent for 2018).

Talent and size

Hanoi is home to many of the country's universities, so graduates are easy to find for research, policy and engineering roles. Ho Chi Minh City has a bigger pool of people with sales, marketing and logistics experience, since so many commercial firms are based there.

Plan for competition for good staff in both cities. Foreign firms and large local groups hire in both. Offer clear titles, clear pay and a path to growth, and you will keep people longer than a firm that only pays a little more.

What the business climate scores say

The Provincial Competitiveness Index, or PCI, rates how friendly each province is to private firms. It is run each year by the Vietnam Chamber of Commerce and Industry. It looks at things like entry costs, land access, informal charges, time spent on inspections and support for business.

Scores for both cities have trailed the leaders. In the 2015 table, Da Nang led with 68.34. Dong Thap scored 66.39 and Quang Ninh 65.75. Ho Chi Minh City scored 61.36 and Hanoi 59.00, both well behind the top three. So a big city does not mean the easiest local rules. Small provinces often score higher on how fast and clear the local government is.

This matters if your plant, farm or warehouse can be anywhere. A smaller province may give faster paperwork and cheaper land. Your head office can still sit in one of the two big cities.

Source: Wikipedia, "Provincial Competitiveness Index" (table of PCI scores and ranks through 2015).

How to decide

Write down your top five customers and your top three regulators. Mark each as north or south. Whichever side has more marks is your base. Open a small second office only when revenue from the other side justifies the rent and the staff.

Also test costs with real quotes. Ask two or three agents for office rent in the districts you like. Ask staffing firms for typical pay for your first hires. Do this in both cities before you sign anything. Prices change fast and old numbers go stale.

Finally, visit both. Spend three days in each, meet customers, and see how long it takes to get across town. A base you can work in every day beats one that looks best on paper.

Sources

Law on Enterprises, Law No. 68/2014/QH13. Wikipedia articles "Hanoi", "Economy of Vietnam" and "Provincial Competitiveness Index".