Good morning, Vietnam!
Hanoi, 24 January 2020 - Vietnam is an economy on the move. I’ve been in Vietnam for just three days, but, from what I have seen, the Vietnam economy is clearly growing fast. It reminds me of where China was 30 years ago, and where many of China’s second tier cities were 20 years ago, and where third and fourth tier Chinese cities are today. Australian businesses, exporters, importers, and investors need to sit up and take notice.
A 2017 PwC forecast said Vietnam would move from the 45th largest economy in the world, which it then was, to the 20th largest by 2050 if it maintained GDP growth rates of five percent per annum. At the time Vietnam had been growing at around six percent per annum for 20 years, and had just moved into a higher growth phase. In 2017 it posted growth of 6.8 percent and in 2018 it posted growth of 7.08%. Current growth rates make it the fastest growing economy in the world.
Vietnam’s economic success is largely due to the Doi Moi economic reforms that commenced after the collapse of the Soviet Union, when it became clear it had to move from the centrally planned economic model to a more productive economic system. Doi Moi is the term used to describe Vietnam’s economic “renovation” that put it on a path to a “socialist-market economy”, much like Deng Xiaoping’s economic reforms did for China.
Importantly Vietnam has also been seeing substantial rises in GDP per capita, as this graph from the 2019 edition of PwC’s Doing Business in Vietnam shows:
At left, a sign of Vietnam's growing affluence: this blue Lamborghini and red Ferrari were parked outside a store selling luxury fashion goods in Hanoi. Labourghini, Ferrari, Maserati and other luxury brand car manufacturers have dealerships in the city of 11 million.
The PwC report makes a strong case for foreign investment into Vietnam, and Australian businesses should consider these reasons to invest in the country:
Strategic location close to China makes it attractive to companies looking to diversify their supply chains;
Integration into the global economy shows it is open to trade with other countries;
Strengthening institutional and regulatory framework which makes it easier to do business in the country;
Large market with increasing purchasing power and an emerging middle class in a total population of 95 million people;
Young population with a growing workforce and talent pool – I have been impressed by the number of young people in the services sector who speak good English and Mandarin;
Stable and high economic growth;
Competitive labour costs and increasing productivity, including in the higher value-added goods sector;
Continuously improving infrastructure as the government invests more to support its fast-growing economy and to attract foreign investment (Hanoi is currently spending close to double Vietnam's GDP growth on infrastructure around the country).
The PwC report gives considerable detail on areas that foreign companies should look at investment into. These include:
Business process outsourcing;
Solar and energy;
Retail banking;
Modern agribusiness and food;
Tourism;
Consumer goods; and,
Manufacturing, “As China’s manufacturing sector experiences rising labour costs … Vietnam is well positioned to be Asia’s new manufacturing centre.”
Another source for information on the Vietnam market is the Australian Trade and Investment Commission (Austrade). Its website has useful information about the market and business opportunities.
Aside from the assistance Austrade can provide, Australian companies looking to enter the Vietnam market would be well advised to identify a local advisor or business partner with the networks to assist you in your industry sector.
Feel free to reach out if you require assistance through my networks in Vietnam.