Vietnam has been one of the fastest-growing economies in Asia in recent years, with the economic boom lifting many of the Vietnamese out of poverty. The country has been strengthening its trade and aid ties in a bid to increase foreign direct investment into the manufacturing sector, and to diversify its exports away from lower value products. Vietnam’s relations with the US have witnessed a marked improvement, with Washington seeing Hanoi as a potential geopolitical ally in South East Asia.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 20 of Vietnam’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our results-proven research teams. We aim to keep you ahead of the curve, so you can operate with confidence in Vietnam.

Country Risk

Vietnam Country Risk

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Core Views

  • The low inflationary environment in Vietnam (we forecast CPI to average just 2.1% in 2016) will provide ample room for the State Bank of Vietnam (SBV) to ease its monetary policy, but we expect apprehension regarding foreign exchange stability and strong economic growth momentum to temper the central bank's easing bias. As such, we forecast the monetary authority to cut its policy rate by a relatively shallow 50bps to 6.00% by end-2016.

  • Despite the ousting of pro-reform Nguyen Tan Dung, and the reappointment of conservative Nguyen Phu Trong to the General Secretary position during the CPV's 12th National Party Congress, we believe that the upcoming leadership is unlikely to make dramatic changes to existing policies that have propelled Vietnam's rapid economic growth over the past few years. More importantly, the injection of new blood into...

Vietnam Operational Risk Coverage (9)

Vietnam Operational Risk

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BMI View: Vietnam's labour market offers a number of notable advantages for firms looking to invest. Companies enjoy access to a competitive and available workforce characterised by high rates of literacy and numeracy for Vietnam's income level and an increasingly skilled and well-educated graduate population, suiting the needs of firms engaged in a diversity of activities. However, the cost of labour represents a source of risk to companies due to a difficult labour-management environment, troubles in hiring foreign workers and a high rate of labour strikes, increasing firm costs and threatening business activities. Taking these factors into account, Vietnam receives a score of...

Vietnam Crime & Security

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BMI View: Oman's transport sector has been experiencing a significant expansion. The government has a five-year spending plan (2011-2015), which foresees OMR30bn (US$78bn) of expenditure, the majority of which is allocated to social and transport infrastructure. In addition, the participation of Oman in one of the biggest infrastructure projects in the Gulf - the inter-Gulf Cooperation Council rail network - will greatly enhance the country's transport links.

Transport Infrastructure Outlook And Overview...

Vietnam Labour Market

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Vietnam offers a number of notable advantages to firms in the national labour market. Companies enjoy access to a competitive and available workforce characterised by high rates of literacy and numeracy for Vietnam's income level and an increasingly skilled and well-educated graduate population, suiting the needs of firms engaged in a diversity of activities. However, the cost of labour represents the largest source of risk to companies due to a difficult labour-management environment, troubles in hiring foreign workers, and a high rate of labour strikes, increasing firm costs and threatening business activities. Taking these factors into account, Vietnam received a score of 49.3 out of 100 for its labour market risk, meriting a rank of 14 th regionally out of 29 Asian countries. The country therefore falls in the middle of the sub-regional pack, between Southeast Asian leaders such as Singapore (second), Malaysia (ninth) and Thailand (10 th...

Vietnam Logistics

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While Vietnam's logistic infrastructure is basically sound, its rapid rate of economic growth, export-focused industrial base and ambitious economic goals have meant that constant improvements are required to keep pace. Logistics operations are still costly relative to key regional peers such as China, Malaysia and Thailand, primarily because of unpredictability in supply chains, which increases costs by making it necessary for businesses to carry more inventory than they would otherwise need to manage their everyday operations. We give Vietnam a score of 64.3 out of 100, in 11 th place in the 30 Asian countries and territories we assess in our Logistics Risk Index.

According to the World Economic Forum's Global Competitiveness Survey, inadequate supply of infrastructure is ranked as the fifth most problematic factor for firms doing business in Vietnam.

The key causes of supply chain unpredictability are...

Vietnam Trade & Investment

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Vietnam falls in the middle of the regional pack for its level of Trade And Investment Risk, offering both major advantages and drawbacks to foreign investors and businesses. Firms benefit from a high level of economic openness, which has enabled an impressive expansion in both trade and foreign investment. However, firm productivity and competitiveness are hindered by a diversity of factors, including high levels of government intervention in the economy, pervasive corruption that adversely impacts the efficacy of the legal system, an underdeveloped banking system, and a limited playing field for private companies vis-à-vis public firms. Taking these factors into account, Vietnam received a score of 43.1 out of 100 for Trade And Investment Risk, placing 16 th out of 29 Asian countries, between excellent sub-regional performers such as Singapore (2 nd), Malaysia (5 th), and Thailand (9 th), and underdeveloped countries...

Vietnam Industry Coverage (29)

Agribusiness

Vietnam Agribusiness

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BMI View: Recent developments in the country's economic and business environments add further weight to our positive view on Vietnam's agribusiness sector. The industry holds strong growth opportunities in terms of production, exports and retail sales, particularly with regard to the rice, coffee, livestock and dairy sectors. Moreover, economic and financial integration in South East Asia will benefit Vietnam's exports of rice, dairy and coffee. However, Vietnam is facing growing competition in its key markets. The fulfilment of its promising potential will only be achieved if the country steps up its competitiveness and improves both product quality and supply chain efficiency. Vietnam will have to significantly ramp...

Autos

Vietnam Autos

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BMI View: Proposed cuts to the tax rates levied on smaller cars should provide fresh impetus to the new vehicle sales market over H216. We still expect a slowing in growth from the elevated levels seen across 2015. We forecast 15.9% growth for the sector in 2016, with commercial vehicles to outperform passenger cars.

Industrial Growth Favouring Commercial Vehicle Segments
Vehicle Sales By Segment, Units
...

Commercial Banking

Vietnam Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Consumer Electronics

Vietnam Consumer Electronics

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BMI View: Vietnam's consumer electronics market was boosted by tariff reductions and retail sector liberalisation in 2015, factors that will diminish and so spending is forecast to decelerate to a CAGR of 6.5% over 2016-2020. The growth story is still positive, based on rising household incomes in a market where device penetration rates are still low. This will see volumes and value increase as consumers acquire their first devices alongside an easing of price sensitivity in higher value consumer segments. Our bullish core scenario is, however, susceptible to downside risks including a hard landing in China or a broader emerging market debt...

Defence & Security

Vietnam Defence & Security

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BMI View: We expect Vietnam's defence budget to continue increasing in absolute terms in the next five years. This will be driven by the country's need to significantly modernise its armed forces, in particular its navy, in order to counter maritime piracy and increase its military stance against China in the South China Sea. Despite this increase, however, the budget will remain limited compared to the significant changes that are needed, as well as the investments required for the development of the domestic defence sector, therefore the number of opportunities for third parties seeking to enter the Vietnamese defence market will remain limited for yet another few years.

Vietnam's 2009 Defence White Paper highlights a national defence policy that focuses essentially on the development of armed forces for the purpose of defending the country&#...

Food & Drink

Vietnam Food & Drink

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BMI View: Vietnam is one of the most promising consumer markets in Asia, benefitting from favourable demographic dynamics, rapid economic growth fuelling household incomes and sustained levels of investment. Reflecting this positive view, all categories within the food, drink and mass grocery retail sectors will grow at a rapid pace throughout our forecast period to 2019.

Headline Industry Data (local currency)

  • 2015 total food consumption growth: +18.0%; compound annual growth rate (CAGR) 2014 to 2019: +18.6%.

  • 2015 alcoholic drinks value sales growth: +8.0%; CAGR to 2019: +10.0%.

  • 2015 soft drinks value sales growth: +5.7%; CAGR to 2019: +8.4%.

  • 2015 mass grocery retail sales growth: +10.7%; CAGR to 2019: +11.5%.

Freight Transport

Vietnam Freight Transport

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BMI View: Strong foreign direct investment (FDI), in addition to steady trade growth and the prospect of ongoing infrastructure development, both public and private, will impact favourably on the freight industry. Falling fuel prices will encourage road transport whilst rail transport will be spurred on by new investment both domestic and foreign. Government approval of the development project of Long Thanh Int'l Airport signals recognition of the need to strengthen Vietnam's credentials as an air transport hub for the Southeast Asian region.

We expect export growth in Vietnam to be maintained at a steady level in the medium term...

Information Technology

Vietnam Information Technology

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BMI View: We do not expect there to be major disruption to the Vietnamese IT market growth story, or to the wider economy, from the regional decline in equity markets in August 2015. As a result, our core scenario for outperformance in 2015 and over the medium term remains in place in the Q415 update. Our bullish outlook is based upon our view that broad-based economic growth will substantially deepen the retail hardware market, as well as ensure a strong momentum for economic modernisation in the enterprise market, a trend illustrated through our household income growth forecast for Vietnam. We...

Infrastructure

Vietnam Infrastructure

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BMI View : The positive outlook for Vietnam's construction sector is supported by strong economic growth and regulatory changes. We expect residential and non-residential building segment to outperform in the long term, as real estate and manufacturing sectors will continue to benefit from increased foreign investment.

Latest Updates And Structural Trends

  • Our Country Risk (CR) team maintain their forecast for Vietnam's real GDP growth to come in at 6.6% in 2016 (from 6.7% in 2015), which would make Vietnam one of the fastest growing economies in Asia. In turn, our outlook for Vietnam's construction industry remains positive and we forecast real growth of 5.9% and 6.3% in 2016 and 2017 respectively.

  • Vietnam's transport sector has...

Insurance

Vietnam Insurance

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BMI View: Vietnam's insurance industry is growing rapidly, bolstered both by domestic economic growth and by a gradual improvement in terms of the range of products available in the market. The non-life sector is more established, with motor and health and personal accident insurance particularly popular. Life insurance is currently the smaller sector, and demand for long-term savings or retirement products continues to be hampered by low household income levels. Premiums across both life and non-life are expected to increase throughout our forecast period through to 2019. As the investment environment gradually improves, we expect to see more multinationals entering the market who are...

Medical Devices

Vietnam Medical Devices

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BMI View: We expect the Vietnamese medical device market to increase by 7.0% in US dollar terms in 2016, up from 4.4% in 2015, due to a smaller depreciation of the local currency against the US dollar. The market will remain one of the strongest performers in the Asia Pacific region, with Vietnam growing as a manufacturing location for medical device companies and exports posting consistent growth.

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Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD) Total (Local Currency mn)

Metals

Vietnam Metals

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BMI View: Tin prices will be capped by US dollar strength in 2016, leading us to trim our price forecast to USD14,500/tonne. Beyond 2016, prices will recover gradually as the global tin market posts sustained market deficits and inventories dwindle.

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Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Vietnam Metals

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BMI view: We will maintain our aluminium price forecast for 2016 at USD1,575/tonne. Although prices will bottom in H116, production will outstrip consumption until 2018 and anchor prices. In particular, cheap Chinese exports will keep the market well supplied.

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Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Vietnam Metals

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BMI View: Globally, iron ore prices will remain subdued due to weak demand growth in China and expanding output by major miners in Australia and Brazil. China will see output slow as the country's iron ore miners operate on the higher end of the global iron ore cost curve.

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Global Iron Ore Forecast
2014 2015e 2016f 2017f 2018f

Vietnam Metals

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BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

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Global Nickel Forecasts
2013 2014 2015e

Vietnam Metals

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BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

Vietnam Metals

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BMI View: Gold prices will prove resilient in 2016 due to a dovish shift in global monetary policy and elevated systemic financial sector risks. However, we do not foresee a sustained multi-year recovery and the mining sector will thus remain under significant stress. We forecast slowing mine production growth and increasing consolidation.

BMI Gold Forecasts
2014 2015 2016f 2017f ...

Vietnam Metals

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BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

Vietnam Metals

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BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

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Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

Vietnam Metals

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BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

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BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Mining

Vietnam Mining

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BMI View: The cooling of the Chinese economy will remove the shine off mining investment in South East Asia. Frontier regions will be the first places where miners pull back their investment as brownfield projects take precedence. Nonetheless, it is certainly not all gloomy in the mining sector. Resilient demand from the power sector will continue to support growth in coal production, while Indonesia's export ban on unprocessed ores will help support bauxite prices.

Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to uncover its potential over the coming years. The cooling of Chinese economic growth will remove a crucial pillar of support for mineral prices, particularly industrial metals such as iron ore and copper. For...

Oil & Gas

Vietnam Oil & Gas

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BMI View : Declining production and rising domestic consumption will end Vietnam's self-sufficiency in crude oil and natural gas by 2019 and 2017, respectively. Consumption growth will be driven by a more than threefold increase in the country's refining capacity over the next five years, as well as sizeable gains in gas demand from the automotive and power sectors - characterised by the growing proliferation of natural gas vehicles and gas-fired electricity generation.

Headline Forecasts (Vietnam 2013-2019)
2013 2014e ...

Petrochemicals

Vietnam Petrochemicals

BMI View:

BMI View: Vietnam is set for a surge in refining and petrochemicals capacities in the next five years as investors seek to establish new operations in the Southeast Asian country. Strong growth in end markets and Vietnam's position as a global manufacturing hub are driving production, although there are enduring risks associated with land acquisition and regulatory approval as well as regional market over-supply.

Currently, limited capacity leads to a reliance on imports for domestic conversion and end-product manufacturing. With refinery developments in the pipeline, Vietnam will be able to increase capacities, particularly for polypropylene and ethylene in the medium term. However, slow land clearance and financing problems delay these projects, postponing capacity increases by a number of years.

The main risks will...

Pharmaceuticals & Healthcare

Vietnam Pharmaceuticals & Healthcare

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BMI View: Vietnam's disease profile will be increasingly attractive for prescription drugmakers as chronic conditions become more prevalent. To adequately meet this large unmet medical need, pharmaceutical firms will have to adapt their product portfolios to account for the low purchasing power of the populace. Equally critical will be the need to coordinate with local healthcare institutions to improve Vietnam's diagnosis rates, which remain impeded by its underdeveloped medical system.

Headline Expenditure Projections

  • Pharmaceuticals: VND92.471trn (USD4.22bn) in 2015 to VND105.482trn (USD4.61bn) in 2016; +14.1% in local currency terms and +9.2% in US dollar terms. Forecast largely unchanged from last quarter.

  • ...

Power

Vietnam Power

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BMI View : There are significant opportunities for independent power producers (IPPs), turbine manufacturers and private investors in Vietnam's thermal power generation sector - particularly the coal segment. A flurry of private sector activity in the coal sector will be supported by rapid growth in electricity demand and market deregulation, as well as delays to nuclear expansion and insufficient domestic gas supplies.

Headline Power Forecasts (Vietnam 2014-2020)
2014e 2015f ...

Real Estate

Vietnam Real Estate

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BMI View: Strong economic growth is resulting in higher levels of take-up from tenants. Combined with the small amount of development activity in all three sub-sectors we cover, this is resulting in falling vacancy rates. Higher household spending will drive the growth of the retail real estate sector, although in absolute terms incomes will remain low. The sub-sector will also be boosted by Vietnam's growing tourism industry, while overall economic growth will support the commercial real estate industry in general and in particular demand for office and industrial space. Demand for industrial space will also be created by rising foreign investment in Vietnam and growing export volumes.

Vietnam's real GDP growth for the first three quarters of 2015 came in at an impressive 6.5% y-o-y, beating the Bloomberg consensus estimate of 6.4%. The strong economic showing is due in part to...

Retail

Vietnam Retail

BMI View:

BMI View: Vietnam is a relatively underdeveloped but rapidly growing retail market. A resilient economic performance, rapidly rising household incomes, favourable labour market conditions and soaring tourist arrivals are expected to remain the key drivers of investment and growth in the sector. That said, household spending growth will be capped by modest inflation figures, while a potential economic slowdown in Vietnam's key export markets poses a further downside risk to our short term forecasts.

Headline Household Spending
(2014-2020)
e/f = BMI estimate/...

Telecommunications

Vietnam Telecommunications

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BMI View : Vietnam has experienced strong uptake of 3G and fibre broadband in recent quarters, demonstrating the rising inclination towards both mobile and fixed data use. We now hold a more positive outlook on the adoption of premium services and advanced networks, although the government's restrictions on 4G rollouts could restrict operators' abilities to meet rising data needs in the short term.

4G Rollout Restrictions - A Downside To Technological Infusion
Vietnam Mobile Market Forecsts
...

Tourism

Vietnam Tourism

BMI View:

BMI View: Tourism is a growing industry in Vietnam and the sector has experienced some growing pains in recent years. Poor service standards and uncertainty surrounding visa and investment regulations have contributed to slowing growth rates and for much of 2015 international arrivals figures fell. We do expect to see a recovery in 2016 as Vietnam continues to invest in improving accommodation options and standards and becomes more accessible for visitors from outside of the Asia Pacific region. Investment in transport infrastructure, particularly air travel, will also provide a supportive boost to the travel industry. As such we are forecasting growth across all key market indicators over through to 2020.

Key...

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