Call us now: +49 (0)8122 999 6280
 

Vietnam – ASEAN’s Rising Dragon

COUNTRY FACTSHEET VIETNAM


1. COUNTRY INTRODUCTION:

Country Profiles - VietnamVietnam is widely recognised as a success story in terms of international development. Starting with the enactment of Vietnam’s “Doi Moi” (renovation) policy in 1986, Vietnam has increased economic liberalisation and made structural reforms needed to build more modern, competitive and export-driven industries. In 1995, Vietnam became an official member of the Association of South East Asian Nations (“ASEAN”). In 2001, Vietnam signed the U.S-Vietnam Bilateral Trade Agreement. In January 2007, Vietnam joined the World Trade Organisation (WTO) after more than a decade-long negotiation process. Since then, the National Assembly has passed numerous laws, and Vietnam has complied with a variety of international standards, in particular the opening of most service sectors under its WTO commitments schedule that began in 2007. As of June 2015, almost all the foreign ownership limitations in the service sectors specified under Vietnam’s WTO commitments have been abolished, and only certain highly-specialised and sensitive sub-sectors such as banking, telecommunication, transportation, agriculture and audio-visual services still maintain foreign ownership restrictions.
With a population of 92.7 million people, of which 25% are between 10 and 24 years old, Vietnam has an eager work force with a high literacy rate and comparatively good education levels. It is generally considered as politically stable, and Vietnam’s infrastructure has made significant progress over the last years. Vietnam’s geographic location and proximity to its ASEAN neighbours increasingly makes Vietnam a local hub for investment into other ASEAN countries. The government recognizes that Foreign Invested Enterprises (FIE’s) play a key role for the development process of Vietnam by improving the balance of payments, promoting technological innovation, introducing modern business management methods, creating jobs, improving infrastructure and bringing overall competitiveness to the market. With tax breaks and tax reductions, the government is actively promoting investment across a wide array of industry sectors, specifically in areas related to new, “high-tech” products or with added-value exceeding the mere assembly of products.
The government has set the objective of making Vietnam a modern, industrialised nation by 2020 under the umbrella of the Socio-Economic Development Strategy (SEDS) 2011-2020. The SEDS focuses on structural reforms, environmental sustainability, social equity, and emerging issues of macroeconomic stability requiring changes in the banking system, market institutions as well as State Owned Enterprises (SOEs). Over the past few years, Vietnam has made intensive efforts to integrate further into the global economy and, on a regional level, the ASEAN Economic Community 2015 (AEC) has become a reality. Moreover, the EU and Vietnam have concluded an EU-Vietnam Free Trade Agreement (FTA) that will likely come into effect by 2018. This FTA is particularly significant for Vietnam and for the EU, as the EU is Vietnam’s largest trading partner after China, enjoying a surplus of USD 2 billion / EUR 1.89 billion in 2014. It is estimated that through the FTA, Vietnam’s GDP could rise by over 15% and that the value of its exports to the EU could increase by almost 35%.

 

2. KEY ECONOMIC DATA:

Population: 92.7 million
GDP (Current US$): US$ 200.49 billion / EUR 189.37 billion1
GDP (Current US$, per capita): US$ 2,164.00 / EUR 2,044.00
GDP (PPP): US$ 594.89 billion / EUR 561.91 billion
GDP (PPP, per capita): US$ 6,422.00 / EUR 6,066.00
Real GDP Growth: 6.2% year-on-year
Consumer Price Index (CPI): 2.8%
Labour Force: 54.93 million
Unemployment Rate: 2.4%
Main Industries: Food processing, garments, shoes, machine-building; mining, coal, steel; cement, chemical fertiliser, glass, tires, oil, mobile phones
Main Exports: Clothes, shoes, electronics, seafood, crude oil, rice, coffee, wooden products, machinery
Exports Partners: US 21.2%, China 13.3%, Japan 8.4%, South Korea 5.5%, Germany 4.1% (2015)
Main Imports: Machinery and equipment, petroleum products, steel products, raw materials for the clothing and shoe industries, electronics, plastics, automobiles
Imports Partners: China 34.1%, South Korea 14.3%, Singapore 6.5%, Japan 6.4%, Hong Kong 5.1%, Thailand 4.5% (2015)
Currency: Vietnam Dong (VND)
Ethnic groups: Kinh (Viet) 85.7%, Tay 1.9%, Thai 1.8%, Muong 1.5%, Khmer 1.5%, Mong 1.2%, Nung 1.1%, Hoa 1%, other 4.3%
Religions: Buddhist 7.9%, Catholic 6.6%, Hoa Hao 1.7%, Cao Dai 0.9%, Protestant 0.9%, Muslim 0.1%, none 81.8% (2009 est.)
Languages: Vietnamese (official), English (increasingly favoured as a second language), some French, Chinese, and Khmer, mountain area languages (Mon-Khmer and Malayo-Polynesian)
Literacy Rate: 94.5%

1 All exchange rates as of March 2017
 

3. BUSINESS ENVIRONMENT:

Vietnam continues to work to improve its business climate in order to attract foreign direct investment (FDI), and has sustained registered FDI of roughly USD 18.5 billion / EUR 17.5 billion per year over the last five years. In 2015 Vietnam successfully attracted new and additional investment in the IT and energy sectors. Investors commonly cite Vietnam’s geographic proximity to global supply chains, political and economic stability, recently signed free trade agreements (FTA’s), and an increasing desire to diversify their manufacturing base in Asia away from China as reasons for investing in Vietnam. Fuelled by a growing economy with a young, increasingly urbanised population and inexpensive labour, Vietnam could become the next manufacturing powerhouse of Asia. Manufacturing already dominated FDI inflows last year as investors continue to move large scale operations from other developing countries to Vietnam.
Information technology (IT) also attracted major investments from Samsung (USD 3 billion / EUR 2.8 billion), LG (USD 1.5 billion / EUR 1.4 billion), and Microsoft (USD 500 million / EUR 472 million). The FDI inflows to the IT sector are in line with Vietnam’s strategic efforts to shift FDI from low-end manufacturing to the high-tech sector. Vietnam also continued to attract investment in infrastructure projects such as power generation, roads, railways and water treatment. Vietnam needs an estimated USD 170 billion / EUR 160.5 billion in additional infrastructure development in order to meet growing economic demand. In energy alone, Vietnam’s General Statistics Office (GSO) estimates that electricity demand will continue to grow at a rate of 10 percent to 12 percent per year, rising from 169.8 terawatt hours in 2015 to 615.2 terawatt hours by 2030.
Vietnam’s Law on Investment (LOI) and Law on Enterprises (LOE), both effective since July 1 2015, have provided both Vietnamese and foreign-invested companies with greater flexibility, both in the scope of their permitted activities and their internal organisational structure. In 2015, Vietnam also issued the underlying decrees to implement several key laws, including the Enterprise Law, the Investment Law, the Bankruptcy Law, Housing Law and Real Estate Business Law. The State Bank of Vietnam (SBV) executed its plan to strengthen the banking sector, and was successful in maintaining stability of the Vietnamese Dong (VND) despite a challenging global currency environment. While Vietnam continues to attract increasing amounts of FDI, several challenges in the business climate remain, including: corruption and weak legal infrastructure, a shortage of skilled labour and low labour productivity, a weak judicial system, the need for better infrastructure, and a cumbersome bureaucracy that still focuses on monitoring and control rather than business facilitation.

 

4. MARKET OPPORTUNITIES:

With disposable income levels in major urban areas four to five times the national average, significant opportunities in the consumer and services sectors are fast emerging. A 2013 study by the Boston Consulting Group predicted that Vietnam’s middle and affluent class will double by 2020, exceeding 30 million consumers. Sales of equipment, technologies and consulting and management services associated with growth in Vietnam’s industrial and export sectors and implementation of major infrastructure projects continue to be a major source of commercial activity and interest for foreign businesses. Telecommunications, information technology, oil and gas exploration, power generation, transportation infrastructure construction, environmental project management and technology, aviation and education will therefore continue to offer the most promising opportunities for foreign companies over the next few years as infrastructure needs continue to expand with Vietnam’s pursuit of rapid economic development. Healthcare will also be a growing sector as the government expands programmes and an increasingly wealthy population spends more on medical treatment. The government plays a significant role in the economy, with state-owned enterprises (SOEs) making up 35% of GDP. The government’s strategy to “equitise” (partially privatise) SOEs in all sectors of the economy is slowly moving forward. While the government will maintain majority ownership in the largest and most sensitive sectors of the economy, which includes energy, telecommunications, aviation and banking, the ongoing equitisation process is likely to present opportunities for foreign companies.

 

5. SOURCES:

Country Introduction & Key Economic Data:

The World Factbook: https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html
Statistical information: http://unctadstat.unctad.org/CountryProfile/GeneralProfile/en-GB/704/index.html
Economist Intelligence Unit Country Reports: http://country.eiu.com/vietnam
Knoema “World Data Atlas”: https://knoema.com/atlas/Viet-Nam

Business Environment & Market Opportunities:

Country Commercial Guide: https://www.export.gov/article?id=Vietnam-Market-Opportunities

International Rankings:

IFC/World Bank “Doing Business” Report 2017 – Ranked 82 / 191:
http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/vnm.pdf
Transparency International “Corruption Perception Index” – Ranked 113 / 176:
http://www.transparency.org/country/VNM
World Economic Form – Global Competitiveness Report (2016/2017) – Ranked 60 / 138: http://reports.weforum.org/global-competitiveness-index/country-profiles/#economy=VNM

 

ASEAN Business Partners has – both in Germany as well as in Vietnam – excellent contacts to the MPI, the Vietnamese Chamber of Commerce VCCI and to other organizations and government agencies. Combined with our legal, financial and management expertise this is the basic requirement for your business success in this key ASEAN country.

 

Useful Links:

https://country.eiu.com/vietnam

https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html

http://www.adb.org/publications/viet-nam-fact-sheet

http://www.worldbank.org/en/country/vietnam

http://www.asidnet.org/web/

http://countrystudies.us/vietnam/

http://cpi.transparency.org/cpi2013/results/

http://www.weforum.org/reports/global-competitiveness-report-2013-2014

 

Print This Page