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

  • Despite increasing political and international pressures, China will continue to hold a firm stance on its nine-dash line claims to the South China Sea. Therefore, there remains no end in sight to the ongoing maritime dispute between Vietnam and China. That said, we believe Vietnam will not want to strain ties with China given the latter's increasing economic importance.

  • We hold a positive view of the Vietnamese economy on the back of rising foreign investor interest, continued efforts by the government to improve the country's business environment, and the potential for greater private sector participation. As such, we maintain our forecast for real GDP growth of 6.4% in 2015, up from 6.0% in 2014.

  • Following the devaluation of the Vietnamese dong by 1.0% for the second time in 2015, we do not expect the State...

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Vietnam Operational Risk Coverage (9)

Vietnam Operational Risk

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Vietnam is a generally safe country for foreign business travellers, expatriates and tourists. The rate of street crime (especially of a violent nature) is low, and the main risks stem from petty crimes such as pick-pocketing and bag theft. There is a sizeable shadow economy in Vietnam, implying a significant presence of organised crime, but this is highly unlikely to affect foreigners. The country's international strategic environment presents the biggest risk, as Vietnam's dispute with China is ongoing. Although conflict is unlikely, Vietnam possesses an inferior military relative to the global superpower. Overall Vietnam scores 58.3 for Crime and Security Risk in BMI's Operational Risk Index, ranking the country 18th among its 38 Asian peers.

Vietnam is generally safe for foreign business travellers, expatriates and tourists. The most common dangers for foreigners are similar to those found...

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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...

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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...

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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...

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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...

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Vietnam Industry Coverage (21)

Agribusiness

Vietnam Agribusiness

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Agribusiness Market Value
BMI Market Value By Commodity (2011-2019)

BMI View: Recent developments in the country's economic and business environment outlooks 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, the upcoming economic and financial integration in South East Asia ...

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Autos

Vietnam Autos

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Sales

Cumulative sales of new cars in Vietnam grew 72% to 25,633 units in January and February 2015, according to data released by the Vietnam Automotive Manufacturers Association (VAMA). The rise was attributed to a significant acceleration in economic growth, boosted by rising domestic consumption, exports and investment. Sales of passenger cars, sports utility vehicles and multi-purpose vehicles rose 68% to 16,003 units, while sales of commercial vehicles were up 80% to 9,630 units. Toyota Motor was the leading brand during the two months with sales increasing by 51% to 7,130 units, while Vietnamese automaker Truong Hai (Thaco), which has brands including Kia, Mazda and Peugeot in its portfolio, posted a rise of 121% in sales to 8,712 units.

According to VAMA, auto sales surged towards the end of 2014 and increased by an eye-watering 41.1% year-on-year (y-o-y) in December 2014 to 16,413 units...

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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

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Consumer Electronics

Vietnam Consumer Electronics

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BMI View: There is some downside risk to our consumer electronics spending outlook in 2015 due to an ongoing tightening of domestic credit conditions in the second half of 2014 due to a build of bad debts by Vietnamese banks. However, we maintain that Vietnam's consumer electronics market has a bright outlook as rising incomes and falling average device prices in key device categories over the medium term catalyse strong growth in spending. We maintain a positive outlook for the...

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Defence & Security

Vietnam Defence & Security

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We forecast that Vietnam will spend up to USD7.7bn on defence in 2015. This is a notable increase from the USD6.7bn which the country spent on defence last year. On average, Vietnamese defence expenditure has risen since the commencement of the decade. Up to and including 2019, we expect Vietnam to spend an average of USD9.3bn on defence annually, with defence spending reaching USD11.1bn in 2019.

We have given Vietnam an overall security risk index of 75 for Q115. On average, the country has scored an overall security risk index of 76 for the period February 2009 up to and including Q115. As the discussion below will illustrate, we believe that Vietnam faces a moderate risk of becoming involved in a major interstate conflict. That said, we believe that the country has a low risk of experiencing a major terrorist attack, although it does face a moderate risk of experiencing major criminal activity.

Key...

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Food & Drink

Vietnam Food & Drink

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BMI View: We hold a positive outlook for the Vietnamese consumer, as the government targets economic growth through public spending and promoting investment and exports. We forecast real GDP growth at 6.4% in 2015 and 6.6% in 2016, on the back of supportive government policies, as well as a strong outlook for foreign investment and exports. However, political risks remain in the form of Chinese tensions, which we believe will continue for some time.

Headline Industry Data (local currency)

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

  • 2015 per capita food consumption growth: +17.0%; CAGR to 2019: +17.6%.

  • ...

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Freight Transport

Vietnam Freight Transport

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BMI View: We continue to believe that the Vietnamese economy is set to perform strongly in 2015, due to continued strong foreign direct investment (FDI), healthy export growth and ongoing efforts by the government to improve macroeconomic fundamentals. In turn, the country's freight industry is set to benefit as a result. The outperformers in terms of mode will be inland waterways and road freight, due to consumer demand rising in Vietnam on the back of falling fuel prices and easier monetary policy and still-strong fiscal spending plans by the government.

Vietnam and South Korea have concluded negotiations for a bilateral free trade agreement (FTA), which seeks to triple bilateral trade turnover to USD70bn by 2020, offering potentially significant upside risk over the medium to long term. The anticipated bounce from the FTA is an integral...

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Information Technology

Vietnam Information Technology

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BMI View: We maintain a positive outlook for the Vietnamese IT market in the latest update, but we highlight increased downside risk from a tightening of domestic credit conditions into 2015 as a result of a build up of bad debt. Credit markets could cause short-term disruption but our forecast for robust medium-term growth in Vietnamese IT spending remains in place, with a forecast for a compound annual growth rate (CAGR) of 11.2% 2015-2019...

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Infrastructure

Vietnam Infrastructure

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BMI View : We maintain a generally positive outlook for Vietnam's construction sector, but highlight prevalent business environment issues will hinder the sector from reaching its maximum potential. Positive drivers include easing monetary policy, improving economic environment and positive reform momentum. We expect the transport sector to be key to driving growth.

  • We maintain a positive outlook for Vietnam's construction sector and expect growth of 5.9% in 2015 and to average 6.1% per annum between 2016 and 2019. This is slower than the 10-year historical average growth rate of 7.1% between 2004 and 2013.

  • We expect monetary easing by the State Bank of Vietnam (rate cuts to 6.00%) to provide greater liquidity and lower cost of capital for construction companies, also increasing business...

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Insurance

Vietnam Insurance

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BMI View: We have a positive outlook for Vietnam's overall insurance sector over the 2015-2019 forecast period and confirm rapid growth in both the life and non-life segments. Economic strengthening and new innovations induced by continued foreign direct investment (FDI) should impact positively on household confidence and future demand for insurance products. Also taking into account Vietnam's growing middle-class, we believe that there are ample attractive opportunities for future investment.

Vietnam's insurance sector is set to catch up with its counterpart markets across South East Asia in the medium to long term. Insurance providers in both the country's life and non-life segments are expected to increase their written premiums at double-digit rates throughout the 2015-2019 forecast period. The sector is becoming...

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Medical Devices

Vietnam Medical Devices

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...

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Oil & Gas

Vietnam Oil & Gas

Petrochemicals

Vietnam Petrochemicals

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BMI View: The Vietnamese petrochemicals market continues to exhibit solid growth. While the domestic producers struggle to keep pace due to capacity constraint, Vietnam relies heavily on imports and we warn of project delays and heightened competition from US producers in the medium term, which could increase costs and undermine competitiveness.

Vietnam is growing rapidly in terms of chemicals and derivatives. 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.

Aside from...

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Pharmaceuticals & Healthcare

Vietnam Pharmaceuticals & Healthcare

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BMI View: Vietnam's underdeveloped healthcare system will continue to be an impediment to pharmaceutical companies as patients face challenges in accessing drugs. This challenge is further compounded by the regional variations in healthcare infrastructure, including a concentration of doctors and hospital facilities in the urban provinces of the country.

Headline Expenditure Projections

  • Pharmaceuticals: VND80,731bn (USD3.81bn) in 2014 to VND92,719bn (USD4.32bn) in 2015; +14.8% in local currency terms and +13.4% in US dollar terms.

  • Healthcare: VND254,679bn (USD12.01bn) in 2014 to VND291,313bn (USD13.57bn) in 2015; +14.4% in local currency terms and +12.9% in US dollar terms.

Risk Reward Index:...

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Power

Vietnam Power

Real Estate

Vietnam Real Estate

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BMI View: All major metrics indicate that the commercial real estate market will grow in 2015. Growing yields and rental rates, particularly in the retail sector, support the argument that the real estate sector in Vietnam will be one of the fastest growing across the globe in the long term.

The growth of the commercial real estate sector is underpinned by a strong economy. BMI forecasts that Vietnam's GDP growth will average 6% a year over our forecast period to 2018. This, coupled with a large and growing population, indicates the opportunities for growth in the commercial property sector. Indeed, over the long term we expect strong growth in all three of the commercial real estate sub-...

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Retail

Vietnam Retail

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BMI View: Foreign retailers will continue to lead the growth in retail sales in Vietnam, owing to the continued consumer preference for foreign labels. Moreover, private retail sector growth continues to outstrip public sector retail. These considerations are drawing a large number of foreign retail brands to Vietnam, which offers one of the fastest growing retail sectors in Asia, and both regional and international brands are keen to expand their presence. We expect this trend to continue, however there are some risks, as the continued economic slowdown will, in our view, result in the prolongation of the current trend towards saving and price-conscious purchasing.

In line with our positive outlook for the Vietnamese economy, we forecast real GDP growth at 6.4% in 2015 and 6.6% in 2016, on the back of supportive government policies, as well as a strong outlook for foreign investment and...

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Shipping

Vietnam Shipping

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We continue to be optimistic towards the Vietnamese shipping industry this quarter, with forecasts unchanged from Q2 2015. Leading the way in terms of the highest rate of year-on-year (y-o-y) container throughput will be the port of Da Nang (10.0%), while the port of Ho Chi Minh City is anticipated to see y-o-y tonnage throughput growth of 7.61%, beating the port of Da Nang's forecast.

Underpinning this impressive growth is growth in exports. Indeed, total export turnover in Hanoi, the capital city of Vietnam, increased 4.3% y-o-y in Q1 2015 to USD2.67bn. Total sales of goods and services in the reported period rose 11.9% to VND442trn (USD21bn), while retail sales increased 11.7% to over VND104trn (USD4.9bn).

The key exports in the reported quarter included textiles and garments, processed agri-products and electronics with the major markets being Japan, China, ASEAN nations and the US. Overall export turnover...

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Telecommunications

Vietnam Telecommunications

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BMI View : Although the adoption rate of 3G has been strong and 3G accounted for estimated 21.2% at the beginning of 2015, the usage of data has been relatively low with less than 15% of 3G subscribers using data. That said, we have recently raised our outlook slightly for the country's broadband market, as telecom operator Viettel has made plans to roll out high speed internet service nationwide in 2014. This will help to increase Vietnam's broadband penetration from 5.6% in 2013 to 8.2% over the next five years. Meanwhile Pay-TV sector is plagued by low prices deterring investment.

Key Data:

  • We are forecasting 129.320mn mobile subscribers by end-2019, a 134.2% penetration rate. However, we highlight the figure is distorted by inactive prepaid subscriptions and multiple SIM ownership.

  • ...

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Tourism

Vietnam Tourism

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BMI View: Vietnam offers enormous potential as a tourism destination, with a range of attractions and extensive transport connections supporting growth in tourism arrivals, while domestic economic growth supports expansion of the outbound travel market. However, Vietnam faces criticism for poor service levels and extensive visa restrictions, and this could see the country lose out to regional competitors such as Thailand, at least in the short term.

Vietnam is expected to see only limited growth in tourism arrivals in 2015, of around 1.2%. In part, this...

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