Current business situation
Liberalisation, market opening and social policies have led to significant economic growth, development progress and poverty reduction in Vietnam. Since 1990, the economy has grown an average six per cent per annum, second only to China (Source: World Bank, GDP growth, 2016). Gross domestic product (GDP) per capita was over US$2,111 in 2015 (Source: World Bank, GDP per capita, 2016). This makes Vietnam the fastest growing middle class in the Southeast Asian region, which is expected to rise from 12 million in 2012 to 33 million in 2020.
The Vietnamese Government is gradually liberalising foreign investment and the legal system is also undergoing major change to better align commercial statutes with international norms. Recent participation of foreign companies into leading state-owned enterprises showed the government’s determination to accelerate a plan to reduce holdings in state-owned firms. Foreign direct investment (FDI) has significantly increased and reached US$11.8 billion in 2015 (Source: World Bank, FDI, 2016). Over 70 per cent of the total FDI figure is represented by the manufacturing sector which indicates that Vietnam is indeed being looked at as the new manufacturing hub for Asia.
Vietnam has a growing population of around 92 million in 2015 (Source: World Bank, Population, 2016) with a young and dynamic workforce (63 per cent are under 35). Given the availability of cost-competitive labour, an ambitious programme of major infrastructure developments and international trade links, Vietnam has quickly established itself as a go-to destination for labour intensive and increasingly advanced manufacturing.
Total two-way trade between Australia and Vietnam in 2014-15 was around A$10.2 billion. While the global economic slowdown presented challenges, the long term outlook for Australia-Vietnam trade and business relationships remains positive. There are many opportunities in industries for both countries such as:
- food and beverage
- education and training (VET, skills development, research)
- healthcare and medical
- mining and resources
- infrastructure, building and construction
- machinery and services
Vietnam proactively participates in various free trade agreements like ASEAN Australia New Zealand Free Trade Agreement, ASEAN Economic Community, and the EU-Vietnam FTA. It is also a party to Regional Comprehensive Economic Partnership negotiations. The FTAs have further boosted international trade and foreign investment into Vietnam.
Establishing contacts and networks often requires introduction through an existing contact or an official channel such as Austrade. ‘Cold calling’ is usually not appreciated. Visible anger or disappointment is 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.
Most of your contacts in foreign investment companies will speak some English, but this may not be the case at government ministries and state owned enterprises.
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 Ms. 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.
Setting up in Vietnam
Vietnam is ranked 82 out of 190 economies (Source: World Bank, Ease of doing business, 2016) of doing business. The government has been implementing structural reforms, environmental sustainability, social equity and emerging issues of macroeconomic stability.
However 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.
Banking and finance
A hundred per cent foreign-owned banking licenses became available in 2007 as a condition of Vietnam’s accession to the WTO. ANZ and Commonwealth Bank of Australia have both established a presence in Vietnam to provide personal and business banking services. Domestic banks have been developing rapidly but still lag behind foreign counterparts, while regulatory standards are not yet in line with the rest of the world. Clear challenges exist, and there are decisive weaknesses to be addressed, particularly concerning non-performing loans and the existence of small lenders with a disproportionately large exposure to real estate and risky individual loans.
In order to avoid non-payment when working with local partners, Austrade encourages businesses to do due diligence and require 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
Asialink: Vietnam Country Starter Pack 2016
International Finance Corporation
Ministry of Foreign Affairs
PwC: Doing Business in Vietnam 2016
United Nations Vietnam
Vietnam Chamber of Commerce and Industry (VCCI)
Vietnam Trade Promotion Agency
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.