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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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 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 up investments on crop...

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Autos

Vietnam Autos

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Sales

New vehicle sales in Vietnam grew 59% y-o-y to 17,283 units in June 2015, according to data published by the Vietnam Automotive Manufacturers Association (VAMA). Vehicle sales rose around 67% to 91,711 units in H115, compared with 55,007 in H114. Sales were mainly driven by strong domestic consumption, exports and investment. Cumulative sales of passenger cars, sport utility vehicles and multipurpose vehicles increased by more than 60% to 51,348 in H115, while commercial vehicle sales grew more than 75% to 40,363 units.

Sales in May jumped by over 40% to 16,946 units, from 12,071 units a year earlier, according to the VAMA. Sales in the first five months of the year increased by just under 70% to 74,428 units, from 43,671 units a year earlier. Cumulative sales of passenger cars, SUVs and MPVs combined increased by close to 58% to 42,239 units in this period, from 26,815 units previously....

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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: We upgraded the growth outlook for Vietnam's consumer electronics devices market in the Q3 update after local retailers reported very strong sales of PCs, tablets, TVs, digital cameras and smartphones in H115 - particularly around the Tet New Year holiday season. Although we expect growth to slow in H215, we consider Vietnam's consumer electronics market to have a bright outlook over the medium term as rising incomes and falling average device prices in key device categories catalyse strong growth in spending. We maintain a positive outlook for the duration...

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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: The key component for our forecast for Vietnamese IT market growth outperformance over the medium term is our view that broad based economic growth will substantially deepen the retail hardware market. This view is supported by the introduction of a household growth forecast for Vietnam in the forecast section of the Q315 update. We forecast a compound annual growth rate (CAGR) of 11.6% 2015-2019, with total spending expected to increase from 1.52% of GDP in 2014 to 1.57% in 2019. Meanwhile, Vietnam's development as an...

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Infrastructure

Vietnam Infrastructure

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BMI View : We maintain a positive outlook for Vietnam's construction sector and expect growth to be underpinned by an improving regulatory environment, favourable monetary conditions and a strengthening economy, with the transport sector being a key driver. We highlight that our forecasts still represents a slowdown from previous years due to a challenging business environment that will hinder investment over the coming quarters.

Key Trends And Developments

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

  • Positive reform momentum as seen in the new Decree regarding Public-...

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Insurance

Vietnam Insurance

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BMI View: Vietnam's insurance market is one of the fastest growing in the region. Both life and non-life insurance premiums are expected to record robust growth over our forecast period to 2019, supported by domestic economic growth, wider product availability and expanding distribution networks. Despite this growth, overall penetration and density will remain very low indicating that this market still offers extensive long-term growth potential.

We have a positive outlook for Vietnam's insurance sector, with insurance companies expected to increase their written premiums at double-digit rates in the next five years. Important factors that underlie this rapid growth include the country's improving regulatory system, general economic strengthening and effective product innovations. Non-life insurance will account for the...

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Medical Devices

Vietnam Medical Devices

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BMI Industry View : The Vietnamese medical device market is expected to remain one of the strongest in Asia, despite a moderation in import growth over the past couple of years. Continuing strong economic growth and increasing political/trade links with the outside world should boost income levels and allow for a continuation in the rapid rise in health spending seen in recent years. The country has attracted increasing interest from foreign investors and is starting to establish itself as a low-cost manufacturing base.

Headline Industry Forecasts

  • The medical device market is estimated at USD645.4mn in 2013, or USD7.0 per capita. It is expected that the device market will continue to expand strongly at a 2013-2018 CAGR of 16....

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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

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BMI View : We have grown increasingly bearish on Vietnam's long-term oil and gas production outlook, as new output and ongoing project expansions fail to offset severe decline at the country's major producing fields. This is particularly pertinent as a number of new projects have hit delays. Coupled with lower oil prices, this has resulted in BMI downgrading its oil production forecast for Vietnam. Renewed exploration and several discoveries offer significant upside risk to our view. However, more attractive pricing terms and improvements to the regulatory environment may be needed to accelerate project developments.

Headline...

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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: Counterfeit and substandard medicines will remain highly pervasive in Vietnam's pharmaceutical market. While this reflects the limited capacity of regulators to address the problem, its persistence also illustrates the presence of a sizeable market for manufacturers of counterfeit and low quality medicines. We highlight that pharmaceutical products most affected by this practice are small molecule medicines.

Headline Expenditure Projections

  • Pharmaceuticals: VND80,731bn (USD3.81bn) in 2014 to VND92,719bn (USD4.32bn) in 2015; +14.9% in local currency terms and +13.4% in US dollar terms.

  • Healthcare: VND234,889bn (USD11.08bn) in 2014 to VND258,648bn (USD12.05bn) in 2015; +10.1% in local currency terms and +8.7% in US dollar terms.

  • ...

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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.

The thermal generation segment in Vietnam will continue to offer sizeable opportunities for investors and equipment suppliers. A number of large-scale power projects have advanced in recent months - with institutional investors and utilities entering the sector in order to benefit from the huge growth potential.

This is just a snapshot of the type of opportunities on offer to investors. Our views on the...

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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: Vietnam is one of the most attractive destinations for retailers in the South East Asian region, due to the booming economy that's growing at over 6% a year and is one of the most popular FDI destinations. The rising household spending and young population represents many opportunities for retailers to establish brand loyalty in the country. However the income in absolute terms is relatively low with 88% of the population earning less than USD5,000, limiting retailers slightly in the medium term to concentrating on essential goods, with the food and drinks subsector being particularly significant. Vietnamese shopping preferences are quite traditional resulting in the prevalence of family shops and wet markets, partly as a result of the low levels of urbanisation in the country, so retailers must adapt to local preferences which are not yet...

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Shipping

Vietnam Shipping

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BMI View: We continue to be optimistic towards the Vietnamese shipping industry this quarter, with the port of Ho Chi Minh City and Da Nang both poised to register double-digit container throughput growth in 2015 (10.83% and 12.18% respectively). Tonnage throughput, meanwhile, will also perform strongly over the course of 2015.

The Vietnamese economy will remain on a strong growth trajectory over the coming years on the back of continued export resilience and ongoing reform measures by the government to shore up the country's business environment, factors that are welcome news to the country's shipping industry going forward. As such, we maintain our forecast for real GDP growth to accelerate to 6.4% in 2015 from 6.0% in 2014, and for the economy to grow in excess of 6.0% in real terms over the coming years.

The strong growth showing in H1 2015 owes in...

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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 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 156.299mn mobile subscribers by end-2019, a 162.1% 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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