Doing business
Current business situation
Vietnam, with the increasingly deregulated business environment, ambitious
reform, has experienced a robust growth with average GDP growth of 6 per
cent in the last 20 years (World Bank, GDP growth, 2016). GDP is forecast
to be 6.3 per cent in 2017.
“Vietnam continued to surprise the region and the world by the depth
and pace of economic integration and regulatory reforms, which led to a
significant improvement in the investment environment.” (Doing business
in Vietnam, PwC, 2017).
Economy:
- Dynamic economy with average GDP growth of 6 per cent in last 20 years (6.2 per cent in 2016). 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.
- 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. Foreign direct investment (FDI) has significantly increased and reached US$ 24.4 billion in 2016 (Source: World Bank, FDI, 2017). Over 70 per cent of the total FDI figure is represented by the technology manufacturing sector which indicates that Vietnam is indeed being looked at as the new manufacturing hub for Asia.
- Emerging as a manufacturing hub for electronics (Samsung, LG, Intel). Given the availability of cost-competitive labour, an ambitious program 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.
- GDP per capita: USD$ 2,215
Workforce and growing middle class:
- Vietnam has a growing population of around 92 million in 2015 (Source: World Bank, Population, 2016) with a young and dynamic workforce. It also has the fastest growing middle class in ASEAN, from 12 million in 2012 to 30 million in 2020.
- Vietnam has advantage of the golden population structure with median age of 30, making up 60 per cent of the population.
- Besides, it has an educated, young digital-savvy generation with high mobile commerce penetration.
Political environment:
- Vietnam has a very stable socio-political environment with an increasingly deregulated business environment.
- It has significantly improved the ease-of-doing-business index in the past years, now standing at 68th in the 2017 Ease-of-doing-business Index.
Move up the value chain to avoid the middle income trap:
- The country has been moving up from low value-add agriculture to high-tech agribusiness, and diversified the key sectors from agribusiness to services.
- Vietnam is one of the countries that are active in embracing Industry 4.0 across all sectors which has benefited from the boost in the level and quality of education.
Free trade agreements:
- Vietnam proactively participates in various free trade agreements, showing its rapid integration into a global economy. The FTAs have further boosted international trade and foreign investment into Vietnam (TPP11, RCEP, AEC, 11 more regional FTAs with few more under negotiation)
Trade relationship with Australia
Total two-way trade between Australia and Vietnam in 2014 to 2015 was around A$ 10.2 billion. Vietnam is the 15th largest trade partner and Australia’s fastest growing export market in ASEAN. 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
- agribusiness
- education and training (VET, skills development, research)
- healthcare and medical
- mining and resources
- infrastructure, building and construction
- aviation
- defence
- machinery and services
- ICT
- tourism
Business Culture
Business practices
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. 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 68 out of 190 economies (Source: World Bank,
Ease of doing business 2017
,
) in Ease of doing Business index.
The government has done an ambitious structural reform, which tackles
economic challenges such as public debts, SOE equitization, non-trade
barriers as well as 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
business banking services.
Domestic banks have been developing rapidly but 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. EFIC also provides
regularly updated country risk analysis.
Links and Resources
Government, business and trade
Asialink: Vietnam Country Starter Pack 2016
AusCham Vietnam
International Finance Corporation
Ministry of Foreign Affairs
PwC: Doing Business in Vietnam 2017
United Nations Vietnam
Vietnam Chamber of Commerce and Industry (VCCI)
Vietnam Customs
Vietnam Trade Promotion Agency
News and media
Vietnam Economic News
Vietnam Investment Review
Vietnam News
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.