International Trade in Vietnam

News Related to International Trade in Vietnam

Business outline for Vietnam

Main Industry Sectors

The declining agricultural sector is dominated by cultivation and plantations (rice, coffee, cashew nuts, corn, pepper, sweet potatoes, peanuts, cotton, rubber and tea), and aquaculture. However, it is the sector that employs the biggest part of the population.

Industry is the main driver of growth in the Vietnamese economy. The sector is still dominated by large public groups. The country's main industries are textile, food industry, furniture industry, plastics and paper industries. The energy sector is in full-growth since several years ago (coal, hydrocarbons, electricity, cement, steel and naval industry). Even though it is the "new comer" in the oil industry, today Vietnam is the third biggest Southeast Asian producer. The country has also invested into high value-added industries such as cars, electronic and computer technologies (software).

The services sector is sustained by tourism and telecommunications.  These profitable sectors should strongly contribute to the economic health of the country in the next following years.

Economic Overview

After adopting a major reform plan (Doi Moi) in 1986, Vietnam experienced a period of  strong growth.  From 2004 to 2007, the annual GDP growth surpassed 8%, then, it slowed down to 3.5% in 2008. Vietnamese growth is sustained by international trade and foreign investments, with exports ensuring more than two-thirds of the GDP.  However, due to the international economic crisis, the country entered into recession in 2009 and its growth was almost zero in 2010.

The government launched reforms for all the key sectors of the economy and anticipates partial privatization of public companies; however, their implementation remains gradual. A tax reform has also been undertaken in order to compensate for the fall in customs revenues, as a consequence of its entry into the WTO and to make the country more attractive to investors.  In order to deal with the global financial crisis, the government has established several recovery plans aimed at improving the business climate and therefore promoting production and exports, stimulating consumption and investments, increasing social security and reducing poverty, introducing monetary policies and effective taxation.

The reforms have succeeded in the improvement of the standard of living of the inhabitants. The GDP per capita went from USD 220 in 1994 to more than USD 1,000 today. The percentage of the population living on less than a dollar per day has declined in a significant way and it is now lower than China, India or the Philippines. However, the urban unemployment rate has risen in recent years and under-employment, estimated at 30% remains constant.

FDI in Figures

FDI inflow has increased considerably since the country authorized foreign investments in 1988, and it has reached record levels in 2008 with USD 1.9 billion. The social-political stability of the country is one of its main assets. Nevertheless, FDI was strongly affected by the global economic crisis, showing a drop of more than 80% in 2009.

Traditionally, Vietnam was directed towards light industry, but FDI is now rapidly growing in heavy industry, real estate and tourism.

Despite the crisis, investment planners in Vietnam estimate a significant growth in the FDI capital.  According to a survey carried out by the Asian Business Council, Vietnam ranks in third position amongst Asian nations, in terms of investment attractiveness for the 2009-2010 period, just behind China and India.

Some measures remain to be taken for the improvement of Vietnam's competitiveness in order to attract more FDI, namely the improvement of its legal procedures, the acceleration of the process of setting the legislation for investments and companies, the intensification of the decentralization process, the creation of an incentive policy for the development of supporting industries and the simplification of economic partnerships.

For more information, you can consult The Investment and Trade Promotion Center of Ho Chi Minh City (ITPC).

FDI Government Measures

The promotion of foreign investments is part of the country's development strategy. Therefore, the government has never stopped perfecting its judicial system, creating more incentives and taxation policies for foreign investors and trying to respect its commitments with regard to the international community. "Business forums" are frequently organized between the Vietnamese government and the private sector, these being opportunities for foreign investors to establish fruitful dialogue and to assert their interests. Additionally, Vietnamese efforts to maintain socio-political stability and set up and professionalize investment promotion activities also play a crucial role in increasing the FDI flow.

Country Strong Points

The country's strong points are:
- Positive economic prospects in terms of growth, despite the global crisis;
- A young, cheap, rapidly growing and more and more techonologically qualified manpower;
- A certain social-political stability;
- A government committed to liberalizing the economy and to introducing reforms based on the free market.

Country Weak Points

The country's weak points are:
- Weak investment and financial freedom;
- The lack of gurantees for property rights;
- A high level of corruption (in the legal system, as well as for civil service).

Although it is undergoing reforms, the financial sector is neither well regulated nor independent of the government. Foreign investment is subject to an array of unclear regulations, which cannot be legally guaranteed. The judiciary is subject to political influence, and commercial cases often take years to be resolved.

Foreign Trade Overview

Vietnam is one of the Asian economies most open to international trade, which represents more than 100% of the GDP, more than twice the Chinese rate and more than 4 times the Indian rate.  Vietnam has demonstrated its strong commitment to trade liberalization in these recent years. It has joined the WTO and signed Free Trade Agreements (FTAs) with ASEAN countries and the USA. Vietnam also has a cooperation agreement with the EU.

Vietnamese trade is characterized by a strong geographic inequality, the country shows a trade surplus with western countries and a growing deficit with its Asian neighbors. Vietnam is currently classified as the third largest rice exporter in the world. The other exports mainly constitute textiles, clothing and footwear products and crude oil, whereas imports are mainly made up of tool machinery, refined oil and steel.

The main export customers of Vietnam are the USA, Japan, the EU, Australia and China. For imports, the country's main partners are China, Singapore, Japan, South Korea and Thailand.

The global economic crisis affected Vietnam's foreign trade. Exports dropped by 14% in relation to 2009, and imports by 28%, the trade deficit rose to USD 500 million.