Current business situation
Liberalisation, market opening and social policies have led to significant economic growth, development progress and poverty reduction. Since 1993, the economy has grown over five per cent each year (source: World Bank, GDP growth, annual %, Dec 2014). A growth domestic product (GDP) per capita of US$1911 in 2013 (source: World Bank, GDP per capita, Dec 2014) and the poverty rate decreased to 17 per cent in 2012 (source: World Bank, WDI, Poverty rates at national poverty lines, Dec 2014).
Economic reforms culminated in WTO accession in 2007, which has further boosted international trade and foreign investment and trade has increased strongly in both directions. Vietnamese export figures have been growing at double-digit rates for several years, reaching US$132 billion in 2013. Trade flows from Australia to Vietnam started decreasing in 2012 for the first time in 10 years, from US$2.1 billion in 2011 to US$1.6 billion in 2013. Goods worth US$3.5 billion were imported into Australia from Vietnam in 2013 (source: UN, Comtrade Database, Dec 2014).
Australia ranks in the top 15 of Vietnam’s most important trade partners in both directions of trade (source: UN, Comtrade Database, Dec 2014). Australia’s main exports to Vietnam are timber products, plastic materials, oil and steel scraps; while it mainly imports crude oil, telephones and components, seafood and cashew nuts from Vietnam (source: The Voice of Vietnam, Vietnam posts record trade surplus with Australia, 31 Aug 2014).
The country was reclassified by the World Bank as a lower middle-income country in 2009. Labour productivity is improving as the economy moves increasingly from agriculture and industry into services. The country’s score from 2013 to 2014 in the World Economic Forum, Global Competitiveness Index has increased markedly, ranking Vietnam as the 68th most competitive economy, out of 144 in its latest edition. However, inadequate infrastructure, macroeconomic instability, skills shortages, restricted land ownership rights, a troubled banking sector, corruption and dominant state owned enterprises (SOE) are challenges that still need to be tackled.
Bureaucratic difficulties are not uncommon when dealing with customs, requiring patience, persistence and sound business advice.
Confucianism is fundamental to Vietnamese culture and stresses hierarchy, duty, loyalty, honour, respect for age and seniority and family values. Saving face is crucial; avoid directly contradicting your business partner.
Establishing contacts and networks often requires introduction through an existing contact or an official channel such as Austrade. ‘Cold calling’ usually is not appreciated. “Getting to know each other” is an important and sometimes the only element of an initial meeting. Visible anger or disappointment are considered as a sign of personal weakness, and will harm achieving your goals. Moments of silence are acceptable during negotiation. Don’t feel obliged to fill the silence.
Handshakes are appropriate in a business context, hugging or kissing are not. The exchange of business cards is important and a sign of respect to have them in Vietnamese and English. Present your card with the Vietnamese side facing up. Always receive cards with both hands and carry a large supply, even for short visits.
Gift giving is widely practiced, even in business. Gifts are usually presented at the end of a meeting or during a meal and are not opened publically. They should be small but inexpensive. An everyday item with your company logo or a book on Australia are good examples; handkerchiefs, knifes, anything black and chrysanthemums should be avoided. It is customary to send gifts and cards to all your business associates and contacts for the Vietnamese Lunar New Year or ‘Tet’.
Most of your contacts in foreign invested companies will speak some English, but this may not be the case at government ministries and state owned enterprises. Do not assume that because an interpreter is used that your contact does not speak English. Verify that your interpreter is familiar with the dialect spoken (northern or southern) and that the translation is contemporary. Maintain eye contact with your business partner, not your interpreter. Have important documents and presentations translated.
It is impolite to undermine the authority of a more senior Vietnamese person by directing questions at a more junior person whose English skills may be better.
Vietnamese will often smile and agree with you when in fact they may not have fully understood what you have said.
“Yes, but” or “maybe” can actually mean “no”. Be cautious about using humour or jokes. Misunderstandings are likely and can cause unnecessary irritation and embarrassment.
Eating and drinking are a major part of doing business in Vietnam and dinners help to develop networks and give your local contacts “face”. Don’t be surprised if your contact insists on involving a senior Embassy or Consulate representative. This may also give “face” to your local contact. The guest of honour should be the first one to leave the table after a meal, understand if you are the guest of honour and know when it is time to leave.
Toasting is common during meals and other activities (such as karaoke). If strong alcohol is served, do not drink before a toast is made. The glass should be held in the right hand, supported by the left. Returning a toast is standard practice. Common toasts are ‘Tram phan tram ('chum fun chum' = empty your glass 100 per cent) and ‘Chuc Suc Khoe’ ('chook sook hue' = good health). Smoking during meals is not uncommon.
Negotiations with Vietnamese counterparts require patience, as decisions are not usually made during an initial meeting. It is often beneficial to send a written proposal well before the meeting and follow up with additional information after the meeting. Lawyers are expected to operate behind the scenes rather than actively taking part in the negotiations.
Vietnamese people tend to expect strong after-sales service support and a continued relationship with the supplier.
The Vietnamese tend to be very price conscious and negotiating other details of a transaction might be an easier way to improve a deal than price negotiations. A follow up e-mail or call within two weeks after a meeting is recommended to indicate interest and to maintain contacts.
Websites of Vietnamese companies or institutions may not be up-to-date. Internet infrastructure is improving and e-mail is becoming more popular. However, letters might be required occasionally, especially when dealing with government agencies and state owned enterprises, which often have to be in Vietnamese. Phone calls are a popular option to replace e-mails when communicating with established contacts. Replying swiftly to business related communication is appreciated, but not always reciprocated by Vietnamese counterparts. A delay may be taken as a negative answer.
The full name is only used on extremely formal occasions. A person’s first name is used in a business context as well as in private. The surname comes first in a Vietnamese name, followed by the middle and given name e.g. Nguyen Hong Lan. In this case, the person should be addressed as Mrs. Lan. Following this pattern, Vietnamese people will often address Australians by their title and first name e.g. Mr. Greg. This is neither intended as a sign of intimacy nor of disrespect.
Vietnamese people will often ask your age immediately when first meeting you. This is because personal pronouns change in Vietnamese, depending on the relative age of the people involved in a conversation. Knowing your age is required to determine the correct form of address. Money, age and family are openly discussed in Vietnam.
Western customs regarding business attire apply.
Setting up in Vietnam
The bureaucratic nature of Vietnam’s economy, frequently changing regulations, the importance of personal contacts and cultural specifics make a trusted local business partner a valuable asset.
Established trading companies are a viable alternative. Austrade’s team in Vietnam can assist in establishing a network by reaching out to senior government officials, as well as decision makers at state owned enterprises and private companies.
Banking and finance
The Vietnamese banking system is relatively undeveloped, with a high rate of non-performing loans and weak capitalisation limit liquidity, plus access to credit is difficult. The Dong is not a freely convertible currency and Vietnamese enterprises can struggle to meet payment obligations in a foreign currency.
Rates of non-payment are high and due diligence is particularly crucial. Risks to Australian companies can be minimised by obtaining a Standby Letter of Credit, issued by a centrally located branch of a trusted bank or a Trade Credit Insurance.
The Export Finance and Insurance Corporation (EFIC) is Australia’s export credit agency and aim to help Australian businesses overcome the financial barriers they face when exporting. By offering a wide range of export credit and insurance products, it helps Australian exporters to take advantage of trade opportunities. The EFIC also provides regularly updated country risk analysis.
Links and resources
Government, business and trade
Vietnam Trade Promotion Agency
Ministry of Foreign Affairs
Vietnam Chamber of Commerce and Industry
United Nations Vietnam
International Finance Corporation
The Australian Agency for International Development
News and media
Vietnam Economic News
Vietnam Investment Review
Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.