(Last updated: 8 Jul 2011)

Trends and opportunities

The market

Vietnam’s economic growth rate has been among the highest in Asia in recent years. This growth has been accompanied by a surge in construction activities, which has created a strong demand for building and construction materials.

With a population of more than 88 million, accommodation in Vietnam is still a critical need, especially in big cities such as Ho Chi Minh City (HCMC), Hanoi, Can Tho and Da Nang.

Accommodation for low-income people is always an important target for the government. High-rise apartment building remains an appropriate solution for urban accommodation, since land prices are quite high in big cities. However, in Hanoi and HCMC there are many apartment building projects for high and medium incomers. Those buildings are well designed, located in prime city districts and linked to luxury facilities such as supermarkets, and leisure centres. This is quite a new trend, because traditionally Vietnamese people prefer to live in separate housing.

Also relating to housing construction, the emerging consumer class in large cities has grown remarkably, and created increased demands for imported high-end construction materials.

Developing the national infrastructure is still an important target for the Vietnamese Government. Projects including highway construction, power plants, metro, water supply and drainage systems, and industrial zones are proceeding. Many of these are financed by international funds from the World Bank Asian Development Bank, and Official Development Assistance (ODA) from developed countries.

Opportunities

Vietnam is developing a number of ‘new towns’ as satellites of major metropolitan or industrial areas. These master-planned developments often call for investments in industrial parks, commercial areas, residential housing, hospitals, schools, retail, etc. These projects including Hanoi expansion to include neighbouring Ha Tay province and major new town developments in the South are centered around Ho Chi Minh City and the provinces of Dong Nai, Binh Duong, and Ba Ria – Vung Tau.

These new construction projects require large quantities of interior finishing materials as well as core building materials.

Australian exporters have opportunities to export construction materials that Vietnamese manufacturers cannot produce, or where local production cannot meet market demands. The following are areas that offer the most opportunities:

• metallic materials (aluminium, steel sheets)
• fibreboard of wood or other ligneous materials
• non-wooden materials (composite)
• high-end products
• sawn timber for floorings, furniture

Current developments also holds great opportunities for Australian companies who want to invest in, or provide services (eg. design, construction, and consulting) to these fields.

Manufacturers of advanced processing plants and machinery, to increase competitiveness of Vietnamese producers will also have a good chance in this market.

Tariffs, regulations and customs

Tariffs for imported construction materials are subject to relatively high duties. This is to protect local producers from foreign imports. As a general rule, higher tariffs are applied to imported products that compete against locally produced products in order to minimise the competitive impact.

Marketing your products and services

Market entry

For most building projects the building and construction materials import process usually begins with communication from the architectural firm, generally in charge of the project, to an import-export company that has an import license for building and construction materials. These import-export companies handle the ordering of the materials, the entire shipping process, and the delivery of the materials to the development sites.

In general, construction materials in Vietnam are distributed to end-users through quite complicated distribution systems, including importers, wholesalers, retailers, etc. Therefore, Australian exporters of construction materials should appoint local sales agents or distributors to handle import and distribution procedures.

In order to be successful in the Vietnamese market, Australian suppliers are highly encouraged to visit the market and spend time assessing market needs, sales potential and possible distributors for their products. It is important to conduct a detailed analysis of the market prior to entry.

Organising seminars on company products and technologies for potential end-users is critical to building brand recognition in this still somewhat insular industry. Providing technical support to your local partner will also signal your commitment to the market.

For companies that want to establish an investment project in Vietnam to produce construction materials, there are two common vehicles: 100 per cent foreign owned enterprises and joint ventures.

Distribution channels

The structure of distribution channels depends on the type of construction materials. In general, the most common distribution system for imported construction materials is as follows:

• The sales agents are key contacts for the market, and are in charge of import procedures. The sales agents for northern and southern Vietnam are often different and located in Hanoi and Ho Chi Minh City (the two biggest markets).
• The sales agents will distribute products to their wholesalers.
• Wholesalers will distribute products to retailers whose shops sell products to end-users. Construction material shops are often concentrated in certain areas in cities (known as construction material trade centres). In some cases, sales agents also act as wholesalers to shorten distribution channels.

Product demonstration seems a good way to introduce the new product to Vietnam’s construction market. To enter the market, Australian suppliers need to have a local agent or distributor present in Vietnam. An appropriate agent/distributor can assist in contacting potential buyers/users, provide after sales service as well as organising product demonstrations.

Links and industry contacts

Government, business and trade resources for Vietnam

Asian Development Bank – www.adb.org/VietNam/
Ministry of Construction – www.moc.gov.vn
Ministry of Planning and Investment – www.mpi.gov.vn
Ministry of Transport – www.mt.gov.vn
The World Bank Group – www.worldbank.org.vn

Contact details

The Australian Trade Commission – Austrade – is the Australian Government’s trade and investment development agency.

Through Austrade’s network of offices in over 50 countries, we assist Australian companies to succeed in international business, attract productive foreign direct investment into Australia and promote Australia's education sector internationally.

For more information on how Austrade can assist you, contact us on:

Australia ph: 13 28 78 | Email: info@austrade.gov.au

A list of Austrade offices (in alphabetical order of country) is also available.