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.
Vietnam Country Risk
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
Vietnam Operational Risk
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
Vietnam Crime & Security
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
Vietnam Labour Market
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...
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
Vietnam Trade & Investment
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 (20)
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...
BMI View: Higher imported car taxes could well lead to a slowing in growth within Vietnam's new vehicle sales market over 2016 from the elevated levels seen in 2015. However, given strong domestic demand and a robust economic backdrop, we believe the market can still show solid growth of 16%, with commercial vehicles outperforming passenger cars.
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|e/f=BMI estimate/forecast. Source: BMI/VAMA|
Vietnam Commercial Banking
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Vietnam Consumer Electronics
BMI View: We believe the Vietnamese economic and consumer electronics growth story is resilient and we maintain our bullish medium-term outlook in the Q116 update. Broad-based economic growth is expected to have a positive impact on the household income profile of Vietnam over the medium term, which will deepen the devices market, as well as easing price sensitivity in the higher value replacement market. Meanwhile, falling average device prices in key device categories will add to device spending growth momentum. We forecast a CAGR of 9.1% for 2016-2019, with even stronger growth expected in the smartphone, tablet, and LED/LCD TV set markets. However, there is downside to this outlook, with a hard landing in China or a broader emerging...
Defence & Security
Vietnam Defence & Security
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
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%.
Vietnam Freight Transport
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...
Vietnam Information Technology
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...
BMI View : A recovery in Vietnam's property market, coupled with positive regulatory changes, robust economic growth and favourable funding conditions will help to spur construction activity over the coming quarters, with the transport sector expected to outperform. Growth remains below potential as ongoing reforms of state-owned enterprises will require years of implementation before any significant impact is seen.
Forecast And Latest Updates
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.
An expected recovery in the real estate market supported by easing foreign restrictions on property ownership, resilience in exports as well as a growing tourism sector will support growth for the...
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...
Vietnam Medical Devices
BMI View : We expect the Vietnamese medical device market to remain one of the strongest performers, with an 8% compound annual growth rate to 2019, which will be slightly higher than the projected economic performance during the period. The country is growing as a manufacturing location for medical device companies and we expect exports levels to continue rising.
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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
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.
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
BMI View: Vietnam will be a highly attractive market for private healthcare providers in the region. Beyond the expected strong increases in healthcare spending, there are also significant service gaps in the market that will provide revenue earning opportunities to companies looking to invest in the sector. These stem from the underdeveloped state of the public health sector characterised by overcrowded hospitals and patients with limited access to advanced medical treatments. This will in turn affect the strategies employed by pharmaceutical firms, as private hospitals will present an alternative sales channel for high value medicines.
Headline Expenditure Projections
Pharmaceuticals: VND80.73trn (USD3.81bn) in 2014 to VND92.47trn (USD4.17bn) in 2015; +14.5% in local currency terms and +9.4% in US dollar terms....
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.
Vietnam Real Estate
BMI View: Vietnams present economic growth of 8.7% is supporting a strengthening commercial real estate market. A growing job market with a higher share of tertiary services act as stimulators for office space demand whereas growing household spending will benefit the retail real estate
subsector. Growing trade flows will spur the demand for industrial space. For 2015 and the following years we expect demand to outstrip supply, leading to rising rental rates across all subsectors.
We expect Vietnam's economy to grow in the coming years due to rising foreign investor interest, continued efforts by the government to improve the country's business environment, and the potential for greater private sector participation. In 2015 we forecast the economy to grow by 8.7%. We anticipate the economy to annually expand by 11% on average until...
BMI View : In the long term, the outlook is good for Vietnam's retail sector. Modern retail has made significant inroads into the largest cities, and as incomes rise and infrastructure improves, more people should be able to access modern retail opportunities. The government is welcoming of foreign investment into the retail industry, and those firms already in the market stand to benefit as mergers and acquisitions become more commonplace. However, the population is still largely rural, with little appetite for significant retail spending, and incomes are generally low, meaning that opportunities for retailers in non-essential segments are limited.
We forecast strong economic growth, with real GDP growth estimated at 6.4% in 2015, rising to 6.6% in 2016 before falling back slightly over our forecast period, to reach 6.2% in 2020. Increasingly strong trade links...
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|
BMI View: Vietnam's tourism industry is an important part of the country's economy, and enjoys strong support from the government which works hard to incentivise investment and encourage travel from abroad. Economic growth in key source markets and a competitive regional airline industry is helping to boost source markets in Asia Pacific, but Vietnam may be too reliant on visitors from this region given the regional tension currently. Overall there is ongoing investment in order to meet supply, and there is ongoing development on secondary locations outside of the traditional destinations of Hanoi and Ho Chi Minh City, which have received investment historically. The boosting of transport infrastructure is also helping to raise the ceiling of potential for the wider industry.