Global IssuesInternational OrganisationsAfricaAsia NorthAsia South and SoutheastAustraliaEuropeLatin AmericaMiddle EastNorth AmericaPacific
Start writing the country or territory name in the box. Typing more letters narrows the search. Click "go" or hit "Enter" to go to the information paper on the country or territory.
(We don't have information papers on all countries and territories.)
Although we have tried to use plain English content on the site, you may come across specialist terms and acronyms. Find out what they mean in our glossary of terms.
If you come across a term that isn't included in the Glossary please send us an email.
This snapshot has been prepared by New Zealand Embassy Viet Nam.
You can find key facts about Viet Nam on our country information paper.
Population (2006) - 84.11 million - Exchange Rate (as at 23 May 2007) - 11,660 Dong = 1 NZ$ - GDP Per Capita (2006) - US$ 723 - Real GDP growth in 2006 (% change year-on-year) 8.2% - Consumer Price Index (% change year-on-year) 7.0% - Current Account Balance (2006) US$726 million - Foreign Direct Investment (2006) - US$ 10.2 billion - Unemployment rate (2006) – urban areas only 4.4%
Data drawn from the General Statistics Office (GSO) and State Bank of Viet Nam (SBV).
After five years of consistent 7-8% growth, Viet Nam’s economy is expected to maintain a similar pattern over the next five years, allowing the country to graduate to middle-income status as early as 2010. Buoyed by political stability, high literacy and consensus around economic reforms, Viet Nam offers unparalleled opportunity for investment, exports and other cooperative arrangements. The country is moving firmly to improve the climate for business, through greater transparency, a stronger legal system and tackling corruption, and a range of other reforms directed firmly by central government leaders.
This economic snapshot, which draws on government comment and published sources, has been prepared primarily for a series of business seminars being conducted in New Zealand on the opportunities for New Zealand business to engage in Viet Nam, to strengthen the fit between New Zealand know-how and Vietnamese needs, and to consider it as a base for economic activity within the wider ASEAN region.
This paper does not address in any detail the current bilateral trade relationship since this information is available in the Viet Nam information paper and recent statistics on the Statistics Website [external link]. Rather, it is intended to provide some of the background on the changes taking place within Viet Nam itself.top of page
Viet Nam has been in transition from a centrally-planned to a market-based economy since the introduction of the Doi Moi (Renovation) reforms which commenced in 1986. In the early 1990s GDP growth surged to around 9% per annum before the 1997 Asian financial crisis saw growth pegged back for a period. However, after 2001, momentum again increased, with average GDP growth rates from 2001-2006 sitting at around 7.5%.
The population is young and literacy is high (around 90%). On current projections, it is expected that the main consumer group (population in the age group of 15-64 years) will be around 68 percent of total population by 2011. One million workers join the workforce each year.
Poverty rates are now down around 20% and the government has set itself the ambitious target of graduating from “low” to “middle income” status by 2010. To do so will require GDP growth to average 7.5-8% for the next three years, a target that the World Bank, IMF and ADB all consider to be achievable. Prime Minister Nguyen Tan Dung recently outlined an ambitious goal of 8.5% for the current year.
In keeping with its growing economic standing, Viet Nam is also playing a more active part on the global stage. Just prior to becoming the 150th member of the WTO in January 2007, it hosted a successful APEC Leaders’ Meeting in Hanoi. It is also poised to assume a two-year term on the United Nations Security Council in 2008-09.
Recent elections for the next five-year term of the National Assembly are likely to signal both a continuation of current economic reform policies and a further generational change in senior government positions as Prime Minister Dung brings through younger, technocrat, Ministers to continue to drive the economic reform process forward. While WTO membership and an increasing economic openness may have some consequences for sectors of society, it is unlikely the economic modernisation agenda will be reversed (a conclusion also reached by leading Vietnamese economist Le Dang Doanh, above ).top of page
Viet Nam’s 8.2% GDP growth in 2006 was driven largely by the construction, manufacturing, retail trade, tourism and transport sectors. 42% of GDP now comes from industry and construction, 38% from services and 20% from agriculture (including forestry and fisheries). Within the Asian region, Viet Nam remains one of the fastest-growing economies. Per capita GDP, at US$633 in 2005, is now US$723, and heading towards US$1,000 by 2010.
Foreign Direct Investment (FDI) is also increasing rapidly. Last year, total approved FDI reached US$ 10.2 billion, of which US$ 7.8 billion was for new projects and US$ 2.4 billion for the expansion of existing projects. Government estimates suggest FDI to reach US$ 12 billion this year.
Ho Chi Minh City (around 8 million people) and its surrounding provinces (Binh Duong, Dong Nai and Ba Ria – Vung Tau) attract nearly 60% of the FDI and are seen as the main drivers of economic development. In these areas, GDP per capita reaches almost US$2,000 (as opposed to US$723 nationally).
Viet Nam’s stock index climbed 145 percent in 2006 – the fastest growth of any world exchange – with market capitalisation reaching 23 percent of GDP. This has been driven by enhanced foreign ownership regulations, a steady increase in the numbers of listed companies and increased domestic and foreign investment. The market is expected to continue developing this year, although probably at a more sustainable pace, as more stocks enter the market and help to balance demand.
Credit status has also improved. The OECD has recently reduced Viet Nam’s credit risk rating to grade 4. Moody’s Investment Services raised Viet Nam’s credit status from stable to positive and Standard and Poors increased Viet Nam’s credit outlook to “BB+”.
As recent developments have shown, this is an economy in major transition. Canon and Intel are investing heavily in facilities in Viet Nam, which is being viewed as an “up and coming” IT destination. A significant advantage is the use of the romanised alphabet in Vietnamese language; and Vietnamese firms are already conducting ICT outsourcing and sub-contracting.
Tourism is also developing rapidly, creating major demand for the development of facilities, including eco-tourism, and supporting infrastructure. In 2006 Viet Nam welcomed 3.5 million foreign tourists. By 2010 that figure is expected to almost double. And domestic tourists number around 16 million a year. Not surprisingly, demand for products to support the tourist industry – particularly food and beverage - is growing. In addition there is a growing outbound market. Last year, 6.5 million Vietnamese travelled overseas, often visiting relatives or friends who are part of the wider Vietnamese diaspora.
Other services sectors such as architecture, environmental services, engineering and higher education are increasingly looking at foreign cooperation to meet growing demand. In particular, significant infrastructure developments are planned in the next decade including a new international airport in southern Viet Nam as well as significant upgrades at other airports to meet growing tourist demand. Light rail urban transport in both Hanoi and Ho Chi Minh City are in planning, and there are extensive national roading and rail projects in train, along with upgrades to the telecommunications network.
The growth of private sector enterprise has been a major driver of both job creation and economic growth. The World Bank estimates that private enterprise generated nearly 90% of the 7.5 million jobs created during the period 2000-2005. Skilled labour shortages are now becoming apparent and the government is putting significantly increased funding into education and training to meet the skills deficit. It has signalled clearly that it would like New Zealand suppliers involved in addressing Viet Nam’s needs.
In a recent assessment, HSBC[1] pointed to a number of factors central to its principal conclusion that Viet Nam is the next Asian economic tiger. Their report noted the broad level of political stability and support for economic reform, high literacy levels and a dynamic private sector, plentiful natural resources including oil, and (as yet) relatively low levels of environmental degradation, along with a healthy fiscal situation, including strong domestic savings.
The assessment also included some cautionary words around population density, high rates of land use, and pressures on access to education at the secondary level and beyond. It noted the infrastructural bottlenecks, lack of transparency, some poor management and weak profitability of state-owned enterprises, and the fact that more work was needed on a reliable legal system and in addressing corruption.
While corruption and non-transparency of the bureaucracy remain problematic, Prime Minister Dung’s government has made their resolution a top priority. 2007 has been made a key year for reforming public administration, including reducing the implications of red-tape for foreign business interests.
The Enterprise Law (2005) and Investment Law (2005) should also over time improve business conditions, in line with expectations of a WTO member. A law on the securities market, that came into force this January, provides the legal basis for investor protection and market transparency, including disclosure requirements for publicly held companies. Maximum foreign ownership limits in listed companies have been lifted from 30% to 49%.
Membership of the WTO will be an important driver in addressing some of the legal and institutional concerns, although progress will take time. Reform of the State Bank of Viet Nam, for example, is being undertaken to create a modern institution focused on control of inflation and the regulation of the banking sector, in line with international norms.
An ambitious equitisation (semi-privatisation) plan has been launched, to cover sectors such as banking, insurance, aviation, cement, steel and textiles. The goal is to reduce government-controlled state enterprises to 550 by 2010.
One readily-apparent feature of this economic growth pattern is that, with demand for power growing 15% annually, power shortages remain a major challenge for economic sustainability. Hydropower accounts for 56% of power supply, and this leaves the country vulnerable to drought or unseasonable climatic conditions.top of page
Viet Nam, which became the 150th member of the World Trade Organisation on 11 January 2007, is making steady progress in implementing its accession commitments. Over time it is likely that WTO membership will open significant opportunities for New Zealand companies, as tariff barriers are reduced and legislative and regulatory frameworks improved.
WTO membership will bring significant changes to Viet Nam’s tariff structure with average tariffs declining from a current rate of 17.4% to an average final bound rate of 13.4%. Average agricultural tariffs will decline to an average final bound rate of 21% (down from 23.5) while industrial goods’ average tariff will decline to 12.6% (down from 16.6). Most tariff cuts are scheduled to take place over the next five years. On the services side, Viet Nam has improved access for foreign education providers, granted full trading and wide-ranging distribution rights to foreign firms. It is also opening up the banking, telecommunications and insurance sectors to foreign competition. QANTAS’s recent entry into the domestic airline business marked the first foreign participation in that sector.
WTO accession also provides greater opportunities for exporters and manufacturers as the country becomes eligible for most-favoured-nation treatment by WTO members and is no longer subject to quotas.
The negotiations achieved certainty of market access for products of particular importance to New Zealand such as dairy products, meat, seafood, vegetables and fruit, wine and beer, paper and an array of manufactured products. Gains were also made in the services sectors, especially in relation to education services. This should serve to safeguarding New Zealand’s commercial interests and allow for future expansion of the trading relationship. top of page
Viet Nam continues to run a trade deficit which, although not significant, continues to grow. But as shown below, both exports and imports have increased during the past decade. Many of the major imports are raw materials for construction or manufacturing for re-export, but there is a growing demand for high value-added luxury items and foodstuffs to service both growing domestic demand, as well as the burgeoning tourist industry.
Demand remains strong for the country’s export of commodities, crude oil and manufactured goods. Private investment and private consumption are also recording robust growth, with a consequential impact on imports. Inflation, at around 7%, is an important consideration, and continues to rise on the back of the increased demand for imports. Rising food prices (and increased availability of foreign products) are also major inflationary contributors.
Viet Nam has a strong and growing agricultural base and an increasingly dynamic manufacturing economy. From being a net importer of rice 20 years ago, it is now the world’s second largest rice exporter (behind Thailand). It is also the world’s second-largest exporter of coffee (after Brazil). Seafood exports, currently worth US$3.4 billion, are likely to double by 2010.
Strong export growth continued during 2006 with increasing diversification. Main commodities such as crude oil (Viet Nam does not yet have a refining capacity – although one is currently being built, so it exports crude oil and purchases refined), rice, seafood and coffee will remain important economic staples. But manufactured exports are showing significant growth. Exports of clothing, electronics and wood products each expanded by over 20% in 2006. Furniture and machinery dominate in Vietnamese exports to New Zealand.
Imports also continue to develop on the back of rising consumer demand, increasing wages and a steady growth of remittances from overseas Vietnamese (US$4 billion in 2006). Leading imports are machinery and equipment, fuels, steel and iron, cloth, plastics, garment and textiles accessories and chemicals.
Overall this year, Viet Nam is expected to export goods worth US$47.5 billion worth, up 20% year-on-year, and to spend US$52.2 billion on goods imports, up 17.5%.
Bilateral trade has shown a significant increase (approx 40%) to US$285 million in the year ending June 2006 (up from US$161 million for the previous year). Viet Nam, currently New Zealand’s 30th ranked trading partner, is one of the fastest-growing markets for New Zealand products within the APEC region.
In 2006, exports to Viet Nam grew by 62%. Many growth items (hides and skins, timber and logs, aluminium, steel products and food and beverage) are used in manufacturing in Viet Nam for re-export or to support the burgeoning tourist industry.
Vietnamese exports to New Zealand grew too, up 44% in 2006. Solid gains were made in engines and motors, furniture, footwear, computers and plastics.
Viet Nam ’s recent pattern of rapid development and marked change is set to continue over the coming decade. Its strategic location, young population, stable government and commitment to economic reform offer numerous advantages. As economic partners have already demonstrated, this country must be viewed both as a market (in a rising income environment) and as a production base for exports into the region. There is potential for economic growth to continue on its current path, particularly if the reform process is maintained. Challenges remain, especially around managing compliance and with establishing sound legal and institutional frameworks. But if the Doi Moi policies are carried forward, and economic, training, administrative and other shortfalls are addressed, the new Asian tiger economy is set to ride high.
