Focus on: VietnamInternational Business Report 2012 – Economy focus seriesThe economy The business perspectiveThe economy is expected to have expanded by The Grant Thornton International Businessaround 6% in 2011, and current estimates expect Report (IBR) surveys over 11,500 businesses in 40this to increase in the medium term. However, with economies around the world. This report focuses ona weakening in many of Vietnam’s major export the experience of businesses in Vietnam and theirmarkets – particularly Europe – government expectations for the next 12 months, as illustrated inexpansion targets may become more difficult to figure 1.meet. Consumer price inflation has been running at The IBR survey tells us that PHBs in Vietnammore than 20% since June 2011 and remains a major are optimistic about the economy over the nextconcern. 12 months, although less so than in 2010. Business The key indicators1 are highlighted below: expectations for revenue and profitability have both• the economy grew by an annual 6.1% in fallen compared to last year but hiring expectations Q3-2011 remain robust. The cost of finance and a lack of• after hitting a three-year high in August, demand remain major constraints on potential inflation slowed again in December to 18.1%, expansion. down from 18.9% in November• Foreign Direct Investment for the first nine months of 2011 reached USD9.9 billion, although this was around 72.5% of the total for the same period 12 months previously• a trade deficit equivalent to USD800m was reported in in October 2011..1 source: International Monetary Fund, The Economist and Experian.
The outlook Figure 1: Key indicators for MLEsThe economy slowed in 2011 as much higherinterest rates and accelerating inflation weakened Vietnam compared to the Asia-Pacific average 2009 2010 2011 2011private consumption and investment growth. A Viet Viet Viet APACsluggish global economy and continuing rampant Outlook for the economy over the next 12 months Net optimism +31% +72% +34% -9%double-digit inflation will also dampen foreigndirect investment in 2012. However, the economy is Change in employment levelsstill expected to grow at 6% again in 2012. Net hiring expectations +60% +60% +64% +34% From 2013-16, a more helpful globalenvironment is expected to see Vietnam hit an Constraints on expansionaverage growth rate of 7.3% per annum assuming Cost of finance 66% 54% 59% 31%the government and central bank can get a handle on Shortage of orders/reduced demand 44% 64% 50% 47%inflation. Remittances from Vietnamese overseas are Source: Grant Thornton IBR 2011expected to remain robust in the medium term,boosting private consumption. 2012 objectives include stabilising the macroeconomy, curbing inflation and reaching aneconomic growth rate higher than that of 2011 inorder to ensure social security, improved livingstandards, political stability, defence and security,law and order and the improved efficiency ofinternational integration. Talk to us to find out how we can help you dealwith the challenges your business is facing today.Ken AtkinsonT +84 8 3910 9100E email@example.com
International Business Report resultsThe Grant Thornton IBR 2011 reveals that global Figure 2: Outlook for the economy over the next 12 months: 2010-2011business optimism dipped again in the fourth Net percentage of businesses indicating optimism less those indicating pessimism2quarter. Business sentiment for the next 12 months 80 70in Vietnam fell marginally from 38% in Q3, to 34% 60in Q4. 50 The sovereign debt crisis is weighing heavily on 40business confidence in Europe; business optimism 30 20across the European Union dropped to -17% in Q4. 10However, confidence in the BRIC economies ticked 0upwards to 34%. -10 Year-on-year optimism amongst businesses has -20 Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011declined slightly from net 22% in 2010, to net 16% Vietnam 62 80 54 38 34across 2011. Asia-Pacific 5 17 8 -7 -9 Global 23 34 31 3 0Optimism/pessimism Source: Grant Thornton IBR 2011• businesses optimism in Vietnam declined again in Q4, dropping from 38% in Q3 to 34%• optimism also fell further in the Asia-Pacific3 region, down to -9% in Q4• globally, business sentiment dropped by 3 percentage points in Q4 to stand at 0%.2 the balance is the proportion of companies reporting they are optimistic less those reporting they are pessimistic.3 for the purposes of IBR, the term ‘Asia-Pacific’ refers to those Asia-Pacific economies covered by our survey – Australia, mainland China, Hong Kong, India, Japan, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand and Vietnam.
Employment Figure 3: Employment history: 2006-2011• net 64% of businesses in Vietnam expect Percentage balance of businesses indicating an increase against those indicating a decrease employment to grow in 2011, compared with 80 70 34% of businesses across the Asia-Pacific region 60• actual employment growth reported by 50 businesses in Vietnam for 2010 (54%) was lower 40 than expected 12 months previously (60%). 30 20 10 0 2006 2007 2008 2009 2010 2011* Exp. Vietnam – – 83 60 60 64 Exp. Asia-Pacific – 50 31 8 33 34 Act. Vietnam – 77 48 54 54 – Act. Asia-Pacific 49 47 25 19 31 – *actual 2011 data will be documented in IBR 2012 Source: Grant Thornton IBR 2011Revenue expectations Figure 4: Revenue expectations: 2007-2011• expectations for increasing revenues over the Percentage balance of businesses indicating an increase against those indicating a decrease next 12 months remain high at 91% 100 90• the Asia-Pacific business average is much lower 80 at 53%, but is up from 45% in 2010 70• globally, expectations have risen from 40% in 60 2010 to 53% in 2011. 50 40 30 20 10 0 2007 2008 2009 2010 2011 Vietnam – 98 91 95 91 Asia-Pacific 73 68 16 45 53 Global 70 63 11 40 50 Source: Grant Thornton IBR 2011Profitability expectations Figure 5: Profitability expectations: 2007-2011• net 90% of businesses in Vietnam expect to Percentage balance of businesses indicating an increase against those indicating a decrease increase profits in 2012 90 80• this is well above the Asia Pacific business 70 average of 37% 60• the global average rose from 29% in 2010, to 50 39% in 2011. 40 30 20 10 0 -10 2007 2008 2009 2010 2011 Vietnam – 97 94 91 90 Asia-Pacific 58 42 -6 26 37 Global 52 41 -5 29 39 Source: Grant Thornton IBR 2011
Constraints Figure 6: Constraints on expansion• the cost of finance (59%) is cited as the most Percentage of businesses rating constraint 4 or 5 on a scale of 1 to 5 where 1 is not a constraint and 5 is a major constraint pressing constraint on expansion by businesses in Vietnam this year, significantly higher than the Cost of finance 59 31 Asia-Pacific business average (31%) Shortage of orders/reduced demand 50• a shortage of orders/reduced demand is also a 47 significant worry for Vietnamese businesses Shortage of working capital 47 31 (50%) as it is across the Asia-Pacific region Shortage of long term finance 37 (47%). 27 Availability of skilled workforce 34 37 Regulations/red tape 34 32 Transport infrastructure 33 20 ICT infrastructure 25 22 Vietnam Asia-Pacific Source: Grant Thornton IBR 2011Support of lender Figure 7: Level of support provided by lenders• fewer than 50% of businesses in Vietnam feel Percentage of businesses supported by lenders 50 40• just 33% class lenders as supportive of their 30 business 20• this compares with 75% of businesses in the 10 Asia-Pacific region as a whole 0 9 33 24 42 49 14 14 3 5 1• 19% of businesses in Vietnam believe that lenders are unsupportive of their business, far Very Supportive Neither Unsupportive Very supportive supportive unsupportive higher than the average across the Asia-Pacific or unsupportive region as a whole (4%). Vietnam Asia-Pacific Source: Grant Thornton IBR 2011Vietnam specific questions Figure 8: Do the government exchange rate controls, and resultant USD/VND liquidity issues, have• more than three-quarters of businesses in an impact on your business operations? Percentage of businesses Vietnam believe the government exchange controls and resultant USD/VND liquidity Yes, severe impact 27 issues are having at least some impact on their Yes, some impact 50 business operations No impact 24• two-thirds of businesses have adopted a stronger focus towards the domestic market, as opposed Source: Grant Thornton IBR 2011 to the international/export market compared to before the Global financial crisis first arose• environmental issues have become more important to 51% of businesses in Vietnam compared with this time last year.