(Last updated: 15 August 2008) 

Current business situation

The Department for Foreign Affairs and Trade (DFAT) provides advice for business travellers and tourists going to Vietnam. This is regularly updated, and should be checked before planning travel.

Country facts

Capital city:	Hanoi
Surface area:	332,000 sq km
Population:	84.4 million
Official language(s):	Vietnamese
Head of State:	H.E. President Nguyen Minh Triet
Head of Government:	H.E. Prime Minister Mr Nguyen Tan Dung
Australian exports to Vietnam:	A$1,630 million
Australian imports from Vietnam:	A$4,522 million
Vietnam's principal export destinations:	USA, Japan, Australia
Vietnam's principal import sources:	China, Singapore, Taiwan

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)

Economic climate

Key economic indicators and statistics for 2007:

• GDP – US$70 billion
• GPD per capita – US$818
• Real GDP growth – 8.5 per cent
• Inflation – 8.3 per cent (recent inflation in the 2008 calendar year has been of concern with year on year inflation rates being 21.4 per cent, 25.2 per cent, 26.8 per cent in April, May and June 08 respectively according to Vietnam Chamber of Commerce and Industry)

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)

Vietnam has been in transition from a centrally-planned to a market-based economy since 1986. Despite the many positive reforms in the last few years, progress is slow and trade and industrialisation policy remains largely one of import substitution affording disproportionate protection to the dominant state-owned sector.

High economic growth and development was achieved in the early-to-mid 1990s, but growth slowed in the late-1990s due to the combined effects of the slow reform process and declining foreign and domestic investment resulting from the regional economic crisis of 1997. Momentum has picked up but this is mostly due to high earnings from crude oil exports.

As part of its efforts to improve the investment climate, the government is undertaking a privatisation program and is revising its investment laws.

The main deterrents to trade and investment are:

• the lack of a comprehensive and transparent legal system
• restricted land usage rights
• complex foreign investment laws
• continued corruption in infrastructure projects
• the poor state of the financial system

Eighty per cent of banking is controlled by five state owned banks. Another 12 per cent of the market is controlled by semi-autonomous domestic players. The sector is weighed down by non-performing loans and government lending practices which favour SOEs.

Standard and Poor's rate the systemic risk in the banking sector as one of the highest in the Asia-Pacific region (along with China and Indonesia). As a long-term objective, Vietnam is committed to global economic integration through participation in APEC, the ASEAN Free Trade Area and World Trade Organization (WTO). Since joining ASEAN in 1995, Vietnam's exports to ASEAN countries have grown an average 23-25 per cent per annum.

ASEAN-initiated FDI accounts for 30 per cent of total FDI. The US-Vietnam Bilateral Trade Agreement was ratified in December 2001 and Vietnam became a member of the WTO in November 2006.  

As a signatory to the ASEAN Free Trade Area, Vietnam is required to reduce many of its tariffs to less than five per cent by 2006. Vietnam’s membership of the WTO also will require a more level playing field and more transparency in the economy. Strong protection for domestic firms is, however, expected to continue for some time.

Political climate

The Socialist Republic of Vietnam (SRV) is a one-party communist state. Although conservatively communist, Vietnam has undertaken some reforms in recent years. The political stability of Vietnam lies in the strength of its single, undisputed ruling political party, the Communist Party of Vietnam (CPV).

At the senior level Vietnam is run by a ‘troika’ consisting of the President, the Prime Minister and the General Secretary of the CPV.

In 1986, at a time of economic crisis following years of economic stagnation, the Party embarked upon a program of limited market-based economic reforms. Under these reforms known as ‘doi moi’ the private sector was permitted to exist in a limited capacity.

There was also greater decentralised economic planning and a greater acceptance of market forces as the determinant of prices and production. This model has been steadily pursued and a socialist market-oriented economy is now in place. During 1994-1995, at the height of the open door policy, the Vietnamese Government continued its emphasis on political and social stability as it seeks to erase any remnants of domestic turmoil resulting from numerous years of war. The pace of economic liberalisation has outstripped political advances. Vietnam’s leadership continues to acknowledge the need for political conservatism and initiates limited political change.

The CPV’s exclusive role in government is constitutionally mandated. Members of the Central Committee of the CPV come from the top echelons in the bureaucracy, the military, the internal security services, the media and the many state owned enterprises, which form the core of the nation’s economy.

There is a growing sense of grass-roots democracy in Vietnam. A slow but steady move towards a more open and transparent system based on the rule of law is expected, within the context of a one party state. The Vietnamese Government will continue to pursue a policy of gradual economic reform, covering state enterprise, banking, foreign trade and public administration. Implementation, however, will remain a challenge, potentially slowed by vested interests.

Trade relations and statistics

Since the collapse of the USSR, Vietnam has largely set aside ideological considerations in seeking to integrate itself into the international community. Vietnam’s external relations can be characterised by:

• Vietnam joining ASEAN in 1995 marked a significant step forward in its regional integration.
• The relationship between Vietnam and the USA continues to be complex. Although the economic relationship has expanded through the recent ratification of a Bilateral Trade Agreement other issues have represented challenges to both sides.
• Vietnam’s relationship with Russia is still significant via defence links, however, trade and aid links have diminished in comparison with earlier years.
• Japan is now Vietnam’s major trading partner and bilateral aid donor.
• Vietnam applied to join the WTO in 1995 and was formally accepted into the WTO in November, 2006.
• It became a member of the Asia Pacific Economic Cooperation (APEC) forum in November 1998.
• Although there have been periods when Vietnam’s relationship with China has historically been adversarial, in recent years Vietnam and China have formed a closer relationship with a broader range of exchanges. Vietnam has shown interest in China and the achievements of China’s leadership in transforming China from a centrally planned to market economy. The interests of a range of European nations in remaining politically and commercially active in Vietnam are still quite strong; notably the French, Germans, British and Swedish have strong diplomatic and commercial representation on the ground.
• Neighbouring countries such as Korea, Singapore, Malaysia, Thailand and Taiwan are all significant sources of foreign direct investment for Vietnam, and recent investment promotion efforts by the Vietnamese Government are aimed at investors from these countries. Under the AFTA Agreement there will be a tariff-free zone within ASEAN in place no later than 2006. Vietnam is taking steps to prepare to compete with other ASEAN members under AFTA and companies from other ASEAN nations are eagerly awaiting new opportunities within Vietnam that will result.

Major Australian exports to Vietnam (2007):

• Non-monetary gold – A$394 million
• Copper – A$223 million
• Wheat – A$102 million
• Aluminium – A$92 million 

Major Australian imports from Vietnam (2007):

• Crude petroleum – A$3,680 million
• Non-monetary gold – A$103 million
• Furniture – A$90 million
• Crustaceans – A$76 million  

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)

According to statistics provided by Vietnam's Ministry of Planning and Investment, there were 87 Australian investment projects in Vietnam at the end of 2003. These projects had an investment capital of US$561 million. Nearly 70 per cent were 100 per cent Australian-owned.

Australia, through AusAID is one of the largest aid donors to Vietnam since 1991. In recent years, Australia's bilateral aid to Vietnam has amounted to almost A$60 million per year, in addition, Vietnam receives around A$14 million per year through Australian funding for regional programs, NGOs and emergency assistance.