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Business and Market Overview on Vietnam

ECONOMY. In 1986, the Vietnamese government abandoned its Marxist economic policy and implemented “doi moi” (renovation) involving economic structural reforms. These reforms included modernising and liberalising the economy and developing more export driven industries. Vietnam joined the Association of Southeast Asian Nation (ASEAN) and became a signatory of the ASEAN Free Trade Agreement (AFTA). The US-Vietnam Bilateral Trade Agreement in 2001 has brought major changes to Vietnam’s economy and hopes to become a member of the WTO in 2006.

Vietnam’s GDP grew at an average of 7.3% annually in 2000-2004 and reached US$44.5 billion by 2004 and unemployment declined from 6.4% in 2000 to 5.6% in 2004. However, inflation steadily increased reaching 7.8% by 2004 and prompted Vietnam’s government to implement monetary and fiscal controls to manage inflationary pressures.

The manufacturing sector contributed towards 40.1% of Vietnam’s GDP in 2004 while the service sector contributed 38.2%. The agriculture sector contributed towards 38.7% of the country’s GDP in 1990 but declined to 21.8% by 2004. Major industries include processed foods, garments and shoes, mining (coal and steel) cement, fertilisers, glass, tyres, paper and petroleum. Major agriculture products include rice, coffee, rubber, cotton, tea, pepper, soybean, cashew nuts, peanuts, sugar cane, peanuts, bananas, poultry and seafood.

DEMOGRAPHY. Vietnamese (also known as Viet or Khin) is the major ethnic community accounting for nearly 86% of the country’s population and reside mainly in the eastern half of the country. Minorities include Chinese who live mainly in the urban areas, Khmer Crom (related to the Khmers of Cambodia), Tays and Montagnards who live in the mountainous regions of the country.

In a government census, about 80% of the population do not subscribe to any religion but among those who do, 9% are Buddhist and 7% are Christians. Other religions practiced include Islam, Cao Dai and Hoa Hao. The national language is Vietnamese and languages spoken among the minorities include Tay, Muong, Khmer and Chinese (mainly Cantonese and Mandarin). English is the preferred second language but generally understood and spoken among the educated elite

The majority of the Vietnamese population live in the rural areas but the proportion of the urban population is gradually increasing from 19.7% in 1990 to 26.0% in 2004. Vietnam’s largest city is Ho Chi Minh City (population 5.0 million) and Hanoi (population of 3.5 million) followed by Nai, Haiphong and Dac Lac.

Household income in Ho Chi Minh City is nearly three times the national average – the city accounts for nearly half of all the motorbikes in Vietnam. An estimated 20% of the population live below the poverty level and mainly from rural households. 10%-15% of the households are middle to high-income households while 65%-70% are lower-income households.

INFRASTRUCTURE. Vietnam’s telecommunication systems lag behind many neighbouring countries in the region and therefore government puts great emphasis on its modernisation. Digital exchanges now connected to Hanoi, Da Nang, and Ho Chi Minh City and main lines have increased while the use of mobile telephones is growing. The national road system stretches from the northern to southern tip of Vietnam. Northern and southern Vietnam are served by two international airports and two main sea ports serving international shipping.

INTERNATIONAL TRADE. Vietnam’s major trading partners are the US, Japan, China, Australia, Germany, Singapore, Taiwan, Thailand and South Korea. Major exports include oil, seafood, rice, coffee, cashew nuts, rubber, tea, garments and shoes. Major imports include machineries and equipments, petroleum products, fertilisers, steel products, cotton, grains, cement and motorcycles.

CONSUMER USAGE OF TECHNOLOGY. There were nearly 10.1 million telephones installed in Vietnam and nearly 5.0 million mobile phone subscribers in 2004. The government is putting considerable efforts to modernise and improve the country’s telecommunication system but still lags compared to Singapore, Thailand and Malaysia. Computer penetration is low; estimates vary from 2% to 4% of the population in 2004 and an estimated 5.8 million internet users. The penetration of television is only 20% and concentrated to homes in the cities and towns. Similarly, installation of refrigerators is concentrated in the cities where 60% of the homes have refrigerators.

RETAIL MARKET. Retail sales in Vietnam grew by 8%-12% annually from 2000 to 2004 brought about by increasing disposable income due to the country’s strong economic growth. Vietnamese consumers spend two-thirds of their income on retail purchases amounting to US$16.3 billion in 2004. Traditional wet markets and the “mom and pop” shops dominate the retail industry accounting for 95% of the total retail trade. Many of these retail shops measure no more than five square metres (54 square feet). Modern retail establishments are limited but gradually emerging in the country and generally locally owned businesses concentrated in Ho Chi Minh City and Hanoi.

FOOD CULTURE. Rice and noodles are the staple food of the Vietnamese but taste preference differs by region. Foods in central Vietnam are spicier while foods in northern and southern Vietnam are less spicy and tend to be saltier. The Vietnamese often dip their foods with chilli, garlic or fish sauce to add flavour. The French colonialists introduced European style bread and bakeries into the Vietnamese food culture. Western style fast food service establishments are beginning to emerge alongside the traditional snack bars, cake shops and mobile food carts.

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