Understanding-Vietnam

Contents
2
Vietnam – Macroeconomic Indicators
Vietnam – An attractive destination
Chapter 1: Business Environment
• SWOT Analysis
• Infrastructure
• Market orientation
• Calling for Investment
Chapter 2: Political Outlook
• SWOT Analysis
• Domestic Politics
• Long-term Political Outlook

Contents
3
Chapter 3: Economic Outlook
• SWOT Analysis
• Economic Activity
• FDI uptick signals investment-led growth
Conclusion

4
2013* 2014* 2015f 2016f 2017f
Nominal GDP, US$bn 141.0 184.0 220.8 248.6 280.4
GDP per capita, US$ 1,900 2,028 2,364 2,639 2,952
Real GDP growth,
% change y-o-y
5.42 5.98 6.4 6.6 6.4
Population, mn 90.0 90.7 93.4 94.2 95.0
Unemployment,
% of labour force, eop
4.8 2.08 3.4 3.5 3.5
Lending rate, %, ave 9.0 8.0 7.0 7.0 7.0
Exchange rate VND/US$, ave 20,900.00 20,800.00 20,330.00 20,215.00 20,000.00
Goods and services exports,
US$bn
132.2 150 168 186.8 208.3
Notes: * General Statistics Office; f BMI- Business Monitor International forecasts.

5
 According to GSO (Vietnam General Statistic Office), GDP of Vietnam in
2014 reached $ 184 billion, up 5.98% compared to 2013.
 GDP per capita of Vietnam in 2014 reached $ 2,028.
US
Germany
Japan
China
India
Vietnam
GDP growth of Vietnam, comparing to some other countries.
- Source: IMF

6
 Goods and services exports of Vietnam in 2014 reached $ 150
billion, up 13.6% compared to 2013.
21.2
17.9
10.6
8.4
6.7
6.0
6.7
5.6
5.0
2.7
23.6
20.9
11.4
10.3
7.8
7.3 6.9
6.2
5.6
3.6
Phoneandaccessories
Textiles
Computers,electronic
productsandcomponents
Footwear
Seafood
Machineryandspareparts
Crudeoil
Woodandwoodproducts
Vehiclesandparts
Rice
2013 2014
10 Biggest Export Group
22.9
23.8
18.4
13.1
13.5
28.5
27.9
19.0
14.8
14.7
US
EU
ASEAN
China
Japan
2014
2013
Biggest Export Markets
- Source: General Department of Vietnam Customs

7
 The avarage CPI of Vietnam in 2014 was 4.09%, the lowest point in
the last 10 years.
 PMI index of Vietnam has been over 50 for 14 months.

1. Location:
- Vietnam’s location – its proximity to China and South East Asia, and its good sea links
– makes it a good base for foreign companies to export to the rest of Asia, and
beyond.

2. A low manufacturing cost but skilled workforce country:
- Vietnam has a large, skilled and low-cost workforce, which has made the country
attractive to foreign investors.
- The labor pool is increasing by up to 1.5mn a year, while wage costs are still low
compared with other countries in the region, although wage growth has picked up
pace in recent years.
- Some of costs that related to business operation:
3. Foreign Direct Investment strongly supported by Government:
- The government is looking to fully maximize economic gains from FDI by reviewing
and establishing new standards to give priority to investment projects that are likely
to boost employment and labor productivity, allow for technological transfer, and
improve the overall efficiency of the economy.
Fuel:
Electricity:
Updated on Mar 5 2015
Gasoline A95
(per liter):
Diesel
(per liter):
$0.76 $0.71
per kWh (ave)
$0.07
Labor cost:
- Applied since Jan 1 2015
First area: $150
Second area: $130
Third area: $120
Forth area: $100

4. Political stability:
- The Communist Party of Vietnam (CPV) remains committed to market oriented
reforms. The one-party system is generally conducive to short-term political
stability.
- Political reforms for a more balanced and democratic political system as a crucial
element in driving the country's economic growth over the long run. These limited
reforms will first come in the form of allowing for more debate within the National
Assembly (NA) on:
• economic policies,
• increased transparency and accountability from the government,
• greater efforts to clampdown and address rampant corruption at the lower
level, and
• an increased tolerance towards the impact of social media and the internet.

5. Foreign Trade Regime:
 Member of the WTO in January 2007.
 Bilateral trade agreement with the US in effect since December 2001.
 Vietnam-Japan Economic Partnership Agreement since July 2009.
 Free Trade Agreement with the EU since June 2012.
 Under negotiation to be a member of Trans-Pacific Partnership (TPP).
Impact of TPP:
 Contribute to Vietnam’s GDP growth.
 Stronger trade with US.
 Capturing greater exports in manufacturing industries where China’s
comparative advantage is fading.
 Overall boost to exports.
 Higher income enabling re-investment and more rapid growth.

12
Chapter 1: BUSINESS ENVIRONMENT
SWOT ANALYSIS:
Strengths: Weaknesses:
• Having a large, skilled and low-cost
workforce, which has made the country
attractive to foreign investors.
• Vietnam’s location – its proximity to China
and South East Asia, and its good sea links –
makes it a good base for foreign companies
to export to the rest of Asia, and beyond.
• Vietnam’s infrastructure is still weak. Roads,
railways and ports are inadequate to cope
with the country’s economic growth and links
with the outside world.
• Vietnam remains one of the world’s most
corrupt countries.
Opportunities: Threats:
• Increasingly attracting investment from key
Asian economies, such as Japan, South Korea
and Taiwan. This offers the possibility of the
transfer of high-tech skills and know-how.
• Vietnam is pressing ahead with the
privatization of state-owned enterprises and
the liberalization of the banking sector. This
should offer foreign investors new entry
points.
• Trade disputes with the US, and the
general threat of American protectionism,
which will remain a concern.

INFRASTRUCTURE:
Physical Infrastructure:
- Vietnam's inadequate infrastructure has become a major grievance for foreign investors and may
thus impair future FDI.
- Thanks to development assistance from international donors, is investing heavily in constructing
new roads, railways, ports and power plants.
- As an example of progress already made, more than 90% of rural households now have
electricity, compared with just over 50% 10 years ago.
Labor Force:
- Vietnam's large, well-educated and inexpensive labor force remains one of the country's chief
attractions to foreign investors.
- The labor pool is increasing by up to 1.5mn a year, while wage costs are still low compared with
other countries in the region, although wage growth has picked up pace in recent years.
- Workforce by Occupation- 2014:
- Vietnam does not have a bad industrial relations record. Most strikes have resulted from legal or
contractual breaches, including failure to pay wages and benefits, failure to pay social insurance
contributions, and failure to pay severance pay at termination.
- The government has raised the monthly minimum wage rate to VND 2.15 million to VND 3.1
million ($100-$145), dependent on economic zone, from January 1 2015.
Agriculture Industry Services
46.6% 21.4% 32% - Source: GSO

MARKET ORIENTATION:
Foreign Investment:
- FDI is an integral part of Vietnam's ambitious economic expansion plans; and, with ratings
agencies pushing their grades higher, the country looks like a solid investment destination,
especially for manufacturing.
- Most FDI into Vietnam comes from North East Asia, notably Taiwan, South Korea, Japan and
China/Hong Kong. Canada and the US are the largest non-Asian FDI sources. Leading sectors for
FDI are manufacturing, other industry and oil and gas.
Foreign Trade Regime:
- Vietnam has committed to bound tariff rates (or legal ceilings) on most products ranging from
zero to 35%. Reductions in most bound rates from 17.4% on average in 2007 to 13.6% are to be
phased in gradually by 2015.
- Vietnam became a member of the Association of South East Asian Nations (ASEAN) since 1997–
with Brunei, the Philippines, Indonesia, Laos, Myanmar, Malaysia, Singapore, Thailand and
Cambodia – as well as of the linked ASEAN Free Trade Area. Vietnam is thus party to negotiations
on free trade agreements being conducted by ASEAN, such as talks with the EU, China, Australia
and New Zealand.
- A member of the WTO in January 2007.
- A bilateral trade agreement with the US in effect since December 2001.
- Vietnam-Japan Economic Partnership Agreement since July 2009.
- A Free Trade Agreement with the EU since June 2012.
- Under negotiation to be a member of Trans-Pacific Partnership (TPP). 14

TAX REGIME:
- Corporate Tax: from Jan 1 2014, the main corporate tax rate is 22%, and the rate will be reduced
to 20% from Jan 1 2016. The corporate tax is targeted to be 17% in 2020.
Firms involved in prospecting, exploration and mining of petroleum, gas and other rare and
precious natural resources are subject to rates from 32% to 50%.
• Resident firms are taxed on global income.
• Non-resident firms are taxed only on Vietnamese-sourced income.
- Individual Tax: The bill stipulates that personal income is to be taxed at a rate between 5% and
35%, for individuals resident in Vietnam for 183 days or more in a 12-month period.
- Indirect Tax: Main VAT rate is 10%.
15
COSTS – RELATED TO BUSINESS OPERATION:
Fuel:
Electricity:
Updated on Mar 5 2015
Gasoline A95
(per liter):
Diesel
(per liter):
$0.76 $0.71
per kWh (ave)
$0.07
Labor cost:
- Applied since Jan 1 2015
First area: $150
Second area: $130
Third area: $120
Forth area: $100

CALLING FOR INVESTMENTS
Offers from State Government:
- Corporate Tax: beside the route map of reducing corporate tax which presented above, there are
some advantages for new enterprises invest in difficult areas, high-tech zones, software
developing, education – training developing, vocational training, health, culture, etc. to attract and
create favorable conditions for investors interested in this sector, by reducing or exempting
corporate tax in 3 to 5 years.
- Import – export tax: reducing or exempting tax for materials, supplies and components imported
to create fixed assets of the encouraging investment project; projects funded by official
development assistance (ODA); etc.
- Credit policy: interest rate ceiling for short term loans in VND 8% per year (applied since March 17
2014), for priority economic sectors: agriculture and rural development, exporting, supporting
industries, small and medium-sized enterprises and hi-tech enterprises.
CASE STUDY: INVESTMENTS OF SAMSUNG IN VIETNAM
- Samsung has been invested more than $4.0 billion for projects in Bac Ninh and Thai
Nguyen.
- Samsung’s advantages:
• corporate tax: 10% in 30 years.
• tax exemption for 4 years since having profits
• and 50% of the payable tax in the next 9 years.
• Besides, Thai Nguyen province proposed Samsung to have other advantages, such as
free infrastructure renting fee, free import tax of raw materials, machinery.

Chapter 2: POLITICAL OUTLOOK
17
SWOT ANALYSIS:
• The CPV remains committed to market
oriented reforms. The one-party system is
generally conducive to short-term political
stability.
• Relations with the US have witnessed a
marked improvement, and Washington
sees Hanoi as a potential geopolitical ally in
South East Asia.
• Corruption among government officials
poses a major threat to the legitimacy of the
ruling Communist Party.
• There is increasing (albeit still limited) public
dissatisfaction with the leadership’s tight
control over political dissent.
• The government recognizes the threat
corruption poses to its legitimacy, and has
acted to clamp down on graft among party
officials.
• Vietnam has allowed legislators to become
more vocal in criticizing government
policies. This is opening up opportunities
for more checks and balances within the
one-party system.
• Although strong domestic control will
ensure little change to Vietnam’s political
scene in the next few years, over the longer
term, the one-party-state will probably be
unsustainable.
• Relations with China have deteriorated over
recent years due to disputing the islands in
the South China Sea.

18
DOMESTIC POLITICS:
CPV under increasing pressure for political change:
- The ruling CPV, which has fiercely defended its totalitarian stance in the past, also appears to
be slowly losing its grip on public opinion with increasing adoption of the internet, and in
particular, social media's role in promoting political discussion among the country's youth in recent
years.
- Political reforms for a more balanced and democratic political system as a crucial element in
driving the country's economic growth over the long run, and limited reforms have been
introduced gradually by the CPV.
Democratic reforms to come amid push to expand economy:
- Reforms for a more balanced and democratic political system as a crucial element in driving the
country's economic growth over the coming years, which has been forecasted for Vietnam's real
GDP growth to average a robust 6.7% from 2013-2022 (Vietnam’s real GDP growth in 2014 is
5.98%).
- The CPV will eventually allow for limited democratic reforms to be introduced in the coming years,
albeit gradually. These limited reforms will first come in the form of allowing for more debate
within the National Assembly (NA) on:
• economic policies,
• increased transparency and accountability from the government,
• greater efforts to clampdown and address rampant corruption at the lower level, and
• an increased tolerance towards the impact of social media and the internet.

LONG-TERM POLITICAL OUTLOOK:
Key political challenges over the coming decade:
1. Inflation and devaluation as drivers of discontent:
- The Vietnamese government’s loose fiscal and monetary policies have led to high levels of
inflation and repeated devaluations of the VND in recent years.
2. Divisions within the Communist Party:
- High inflation and devaluation have opened schisms within the CPV leadership between
proponents of <continued economic reform> and <a more conservative wing which believes that a
deceleration or even reversal of reform policies would benefit macroeconomic stability>.
3. Demands for increased religious rights
- One of the most concerted challenges against the CPV in recent years has come from Catholics
wishing for a stronger recognition of their right to worship in what is still a nominally atheist
country.
4. Relations with China:
- Relations with China have become increasingly strained in recent years as Beijing has expanded its
economic, political and military influence southwards. The main point of contention is the
conflicting territorial claims for the Paracel and Spratly Islands in the South China Sea.
- Vietnam’s relations with China have also been strained by the large bilateral trade deficit it runs
with its northern neighbor, which amounts to more than 10% of GDP.
- Because of those, Vietnam will seek increasingly close relations with the US – and potentially
India and Japan – in the defense sphere, as a hedge against China’s rising power in the region.

Chapter 3: ECONOMIC OUTLOOK
SWOT ANALYSIS:
• Vietnam has been one of the fastest-
growing economies in Asia in recent years,
with GDP growth averaging 7.1% annually
between 2000 and 2012.
• The economic boom has lifted many
Vietnamese out of poverty, with the official
poverty rate in the country falling from 58%
in 1993 to 14.0% in 2010.
• Vietnam still suffers from substantial trade,
current account and fiscal deficits, leaving
the economy vulnerable to global economic
uncertainties in 2012.
• The heavily-managed and weak currency
reduces incentives to improve quality of
exports, and also keeps import costs high,
contributing to inflationary pressures.
• WTO membership (and TPP membership-
in the near future) has given Vietnam
access to both foreign markets and capital,
while making Vietnamese enterprises
stronger through increased competition.
• The government will in spite of the current
macroeconomic woes, continue to move
forward with market reforms.
• Although inflation has subsided in 2014,
complacency by the State Bank of Vietnam
on this front could result in a decline in
investment.
• Prolonged macroeconomic instability could
prompt the authorities to put reforms on
hold as they struggle to stabilize the
economy.

ECONOMIC ACTIVITY:
Manufacturing and retailing to help support Growth
- The industrial sector, which accounts for approximately 33% of the economy and includes
manufacturing, mining, water management, and power generation accelerated by 6.1% y-o-y
in June and 5.8% for the first half of the year.
- At 21% of GDP, manufacturing accounts for the lion's share, accelerating by a robust 7.8%
y-o-y in H114, driven by textiles (21% y-o-y), leather goods (19.2%), and motored vehicles
(22.9%), a trend we expect will remain in play given the continued strength in the country's
domestic demand and export markets.
Exports continue to strengthen
- Vietnam's export sector continues to be a driver of
growth for the country, and we forecast this trend to
remain in play over the coming months. Exports for
2014 expanded by a robust 13.6% y-o-y, and saw the
accumulated.
- Moreover, we expect exports to continue driving
growth going forward given that the Viet-namese
government has been making a concerted push to
build diplomatic and trade ties with many countries
and is negotiating several free trade agreements. One
of the most important ones is the Trans-Pacific
Partnership (TPP), which could be signed by as early as
2015.
21.2
17.9
10.6
8.4
6.7
6.0
6.7
5.6 5.0
2.7
23.6
20.9
11.4
10.3
7.8 7.3 6.9
6.2 5.6
3.6
Phoneandaccessories
Textiles
Computers,electronic…
Footwear
Seafood
Machineryandspareparts
Crudeoil
Woodandwoodproducts
Vehiclesandparts
Rice
2013 2014

ECONOMIC ACTIVITY:
Investment and Infrastructure Development to Drive Growth
- The investment picture also remains very bullish in Vietnam as the country has been able to
attract both private investment as well as foreign aid, which will help underpin both short-and
long-term growth. There were a total of 1,588 investments in 2014 with a total value of
$ 20.23 billion.
- The largest source of investment this year has been from South Korea at $ 7.3 billion, followed
by Hong Kong ($ 3 billion), Singapore ($ 2.8 billion), Japan ($ 2 billion). Several companies,
such as Samsung, continue to be attracted to the country's lower labour costs, which suggests
that foreign investment will continue to flow to Vietnam.
22

Seeing a steady inflow of FDI
- Vietnam's current stage of economic development requires significant amount of foreign
investment in transportation and logistical infrastructure to support its long-term economic
growth plans, present significant scope for investment opportunities in the infrastructure sector as
well as higher-value manufacturing industries.
- Efforts by the Vietnamese government to speed up the privatization of state-owned enterprises
(SOEs) and allow for more foreign competition in the banking sector should provide a strong
catalyst for investors to take advantage of opportunities in the financial services industry.
The government pledges more support for foreign companies
- The government is also looking to fully maximize economic gains from FDI by reviewing and
establishing new standards to give priority to investment projects that are likely to boost
employment and labor productivity, allow for technological transfer, and improve the overall
efficiency of the economy.
23

CONCLUSION
With all above data, you can see that:
 Vietnam is stable and equal social-political environment.
competitive labor cost.
 Foreign Direct Investment strongly supported by Government.
 Main Export Markets are US, EU, Japan, etc.
Worldwide Companies are seeking new primary and secondary sources for low cost
manufacturing and supply bases;
China hasn’t been the priority choice when there are many problems such as
increasing production costs, rising foreign exchange rates, restrictive government
policies, inflation and even the possibility of widespread civic disputes.
Vietnam represents a “first mover opportunity” for
those who want to make the investment in time, energy and money.
24

Understanding-Vietnam

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Understanding-Vietnam

Ähnlich wie Understanding-Vietnam (20)

Understanding-Vietnam