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March, 2015
Contents
2
Vietnam – Macroeconomic Indicators
Vietnam – An attractive destination
Chapter 1: Business Environment
• SWOT A...
Contents
3
Chapter 3: Economic Outlook
• SWOT Analysis
• Economic Activity
• FDI uptick signals investment-led growth
Conc...
4
Vietnam – Macroeconomic Indicators
2013* 2014* 2015f 2016f 2017f
Nominal GDP, US$bn 141.0 184.0 220.8 248.6 280.4
GDP pe...
5
Vietnam – Macroeconomic Indicators
 According to GSO (Vietnam General Statistic Office), GDP of Vietnam in
2014 reached...
6
Vietnam – Macroeconomic Indicators
 Goods and services exports of Vietnam in 2014 reached $ 150
billion, up 13.6% compa...
7
Vietnam – Macroeconomic Indicators
 The avarage CPI of Vietnam in 2014 was 4.09%, the lowest point in
the last 10 years...
Vietnam – An attractive destination
1. Location:
- Vietnam’s location – its proximity to China and South East Asia, and it...
Vietnam – An attractive destination
2. A low manufacturing cost but skilled workforce country:
- Vietnam has a large, skil...
Vietnam – An attractive destination
4. Political stability:
- The Communist Party of Vietnam (CPV) remains committed to ma...
Vietnam – An attractive destination
5. Foreign Trade Regime:
 Member of the WTO in January 2007.
 Bilateral trade agreem...
12
Chapter 1: BUSINESS ENVIRONMENT
SWOT ANALYSIS:
Strengths: Weaknesses:
• Having a large, skilled and low-cost
workforce,...
Chapter 1: BUSINESS ENVIRONMENT
INFRASTRUCTURE:
Physical Infrastructure:
- Vietnam's inadequate infrastructure has become ...
Chapter 1: BUSINESS ENVIRONMENT
MARKET ORIENTATION:
Foreign Investment:
- FDI is an integral part of Vietnam's ambitious e...
Chapter 1: BUSINESS ENVIRONMENT
TAX REGIME:
- Corporate Tax: from Jan 1 2014, the main corporate tax rate is 22%, and the ...
Chapter 1: BUSINESS ENVIRONMENT
CALLING FOR INVESTMENTS
Offers from State Government:
- Corporate Tax: beside the route ma...
Chapter 2: POLITICAL OUTLOOK
17
SWOT ANALYSIS:
Strengths: Weaknesses:
• The CPV remains committed to market
oriented refor...
Chapter 2: POLITICAL OUTLOOK
18
DOMESTIC POLITICS:
CPV under increasing pressure for political change:
- The ruling CPV, w...
Chapter 2: POLITICAL OUTLOOK
LONG-TERM POLITICAL OUTLOOK:
Key political challenges over the coming decade:
1. Inflation an...
Chapter 3: ECONOMIC OUTLOOK
SWOT ANALYSIS:
Strengths: Weaknesses:
• Vietnam has been one of the fastest-
growing economies...
Chapter 3: ECONOMIC OUTLOOK
ECONOMIC ACTIVITY:
Manufacturing and retailing to help support Growth
- The industrial sector,...
Chapter 3: ECONOMIC OUTLOOK
ECONOMIC ACTIVITY:
Investment and Infrastructure Development to Drive Growth
- The investment ...
Chapter 3: ECONOMIC OUTLOOK
Seeing a steady inflow of FDI
- Vietnam's current stage of economic development requires signi...
CONCLUSION
With all above data, you can see that:
 Vietnam is stable and equal social-political environment.
competitive ...
25
THANK YOU!
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Understanding-Vietnam

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Understanding-Vietnam

  1. 1. March, 2015
  2. 2. Contents 2 Vietnam – Macroeconomic Indicators Vietnam – An attractive destination Chapter 1: Business Environment • SWOT Analysis • Infrastructure • Market orientation • Calling for Investment Chapter 2: Political Outlook • SWOT Analysis • Domestic Politics • Long-term Political Outlook
  3. 3. Contents 3 Chapter 3: Economic Outlook • SWOT Analysis • Economic Activity • FDI uptick signals investment-led growth Conclusion
  4. 4. 4 Vietnam – Macroeconomic Indicators 2013* 2014* 2015f 2016f 2017f Nominal GDP, US$bn 141.0 184.0 220.8 248.6 280.4 GDP per capita, US$ 1,900 2,028 2,364 2,639 2,952 Real GDP growth, % change y-o-y 5.42 5.98 6.4 6.6 6.4 Population, mn 90.0 90.7 93.4 94.2 95.0 Unemployment, % of labour force, eop 4.8 2.08 3.4 3.5 3.5 Lending rate, %, ave 9.0 8.0 7.0 7.0 7.0 Exchange rate VND/US$, ave 20,900.00 20,800.00 20,330.00 20,215.00 20,000.00 Goods and services exports, US$bn 132.2 150 168 186.8 208.3 Notes: * General Statistics Office; f BMI- Business Monitor International forecasts.
  5. 5. 5 Vietnam – Macroeconomic Indicators  According to GSO (Vietnam General Statistic Office), GDP of Vietnam in 2014 reached $ 184 billion, up 5.98% compared to 2013.  GDP per capita of Vietnam in 2014 reached $ 2,028. US Germany Japan China India Vietnam GDP growth of Vietnam, comparing to some other countries. - Source: IMF
  6. 6. 6 Vietnam – Macroeconomic Indicators  Goods and services exports of Vietnam in 2014 reached $ 150 billion, up 13.6% compared to 2013. 21.2 17.9 10.6 8.4 6.7 6.0 6.7 5.6 5.0 2.7 23.6 20.9 11.4 10.3 7.8 7.3 6.9 6.2 5.6 3.6 Phoneandaccessories Textiles Computers,electronic productsandcomponents Footwear Seafood Machineryandspareparts Crudeoil Woodandwoodproducts Vehiclesandparts Rice 2013 2014 10 Biggest Export Group 22.9 23.8 18.4 13.1 13.5 28.5 27.9 19.0 14.8 14.7 US EU ASEAN China Japan 2014 2013 Biggest Export Markets - Source: General Department of Vietnam Customs
  7. 7. 7 Vietnam – Macroeconomic Indicators  The avarage CPI of Vietnam in 2014 was 4.09%, the lowest point in the last 10 years.  PMI index of Vietnam has been over 50 for 14 months.
  8. 8. Vietnam – An attractive destination 1. Location: - Vietnam’s location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia, and beyond.
  9. 9. Vietnam – An attractive destination 2. A low manufacturing cost but skilled workforce country: - Vietnam has a large, skilled and low-cost workforce, which has made the country attractive to foreign investors. - The labor pool is increasing by up to 1.5mn a year, while wage costs are still low compared with other countries in the region, although wage growth has picked up pace in recent years. - Some of costs that related to business operation: 3. Foreign Direct Investment strongly supported by Government: - The government is looking to fully maximize economic gains from FDI by reviewing and establishing new standards to give priority to investment projects that are likely to boost employment and labor productivity, allow for technological transfer, and improve the overall efficiency of the economy. Fuel: Electricity: Updated on Mar 5 2015 Gasoline A95 (per liter): Diesel (per liter): $0.76 $0.71 per kWh (ave) $0.07 Labor cost: - Applied since Jan 1 2015 First area: $150 Second area: $130 Third area: $120 Forth area: $100
  10. 10. Vietnam – An attractive destination 4. Political stability: - The Communist Party of Vietnam (CPV) remains committed to market oriented reforms. The one-party system is generally conducive to short-term political stability. - Political reforms for a more balanced and democratic political system as a crucial element in driving the country's economic growth over the long run. These limited reforms will first come in the form of allowing for more debate within the National Assembly (NA) on: • economic policies, • increased transparency and accountability from the government, • greater efforts to clampdown and address rampant corruption at the lower level, and • an increased tolerance towards the impact of social media and the internet.
  11. 11. Vietnam – An attractive destination 5. Foreign Trade Regime:  Member of the WTO in January 2007.  Bilateral trade agreement with the US in effect since December 2001.  Vietnam-Japan Economic Partnership Agreement since July 2009.  Free Trade Agreement with the EU since June 2012.  Under negotiation to be a member of Trans-Pacific Partnership (TPP). Impact of TPP:  Contribute to Vietnam’s GDP growth.  Stronger trade with US.  Capturing greater exports in manufacturing industries where China’s comparative advantage is fading.  Overall boost to exports.  Higher income enabling re-investment and more rapid growth.
  12. 12. 12 Chapter 1: BUSINESS ENVIRONMENT SWOT ANALYSIS: Strengths: Weaknesses: • Having a large, skilled and low-cost workforce, which has made the country attractive to foreign investors. • Vietnam’s location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia, and beyond. • Vietnam’s infrastructure is still weak. Roads, railways and ports are inadequate to cope with the country’s economic growth and links with the outside world. • Vietnam remains one of the world’s most corrupt countries. Opportunities: Threats: • Increasingly attracting investment from key Asian economies, such as Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech skills and know-how. • Vietnam is pressing ahead with the privatization of state-owned enterprises and the liberalization of the banking sector. This should offer foreign investors new entry points. • Trade disputes with the US, and the general threat of American protectionism, which will remain a concern.
  13. 13. Chapter 1: BUSINESS ENVIRONMENT INFRASTRUCTURE: Physical Infrastructure: - Vietnam's inadequate infrastructure has become a major grievance for foreign investors and may thus impair future FDI. - Thanks to development assistance from international donors, is investing heavily in constructing new roads, railways, ports and power plants. - As an example of progress already made, more than 90% of rural households now have electricity, compared with just over 50% 10 years ago. Labor Force: - Vietnam's large, well-educated and inexpensive labor force remains one of the country's chief attractions to foreign investors. - The labor pool is increasing by up to 1.5mn a year, while wage costs are still low compared with other countries in the region, although wage growth has picked up pace in recent years. - Workforce by Occupation- 2014: - Vietnam does not have a bad industrial relations record. Most strikes have resulted from legal or contractual breaches, including failure to pay wages and benefits, failure to pay social insurance contributions, and failure to pay severance pay at termination. - The government has raised the monthly minimum wage rate to VND 2.15 million to VND 3.1 million ($100-$145), dependent on economic zone, from January 1 2015. Agriculture Industry Services 46.6% 21.4% 32% - Source: GSO
  14. 14. Chapter 1: BUSINESS ENVIRONMENT MARKET ORIENTATION: Foreign Investment: - FDI is an integral part of Vietnam's ambitious economic expansion plans; and, with ratings agencies pushing their grades higher, the country looks like a solid investment destination, especially for manufacturing. - Most FDI into Vietnam comes from North East Asia, notably Taiwan, South Korea, Japan and China/Hong Kong. Canada and the US are the largest non-Asian FDI sources. Leading sectors for FDI are manufacturing, other industry and oil and gas. Foreign Trade Regime: - Vietnam has committed to bound tariff rates (or legal ceilings) on most products ranging from zero to 35%. Reductions in most bound rates from 17.4% on average in 2007 to 13.6% are to be phased in gradually by 2015. - Vietnam became a member of the Association of South East Asian Nations (ASEAN) since 1997– with Brunei, the Philippines, Indonesia, Laos, Myanmar, Malaysia, Singapore, Thailand and Cambodia – as well as of the linked ASEAN Free Trade Area. Vietnam is thus party to negotiations on free trade agreements being conducted by ASEAN, such as talks with the EU, China, Australia and New Zealand. - A member of the WTO in January 2007. - A bilateral trade agreement with the US in effect since December 2001. - Vietnam-Japan Economic Partnership Agreement since July 2009. - A Free Trade Agreement with the EU since June 2012. - Under negotiation to be a member of Trans-Pacific Partnership (TPP). 14
  15. 15. Chapter 1: BUSINESS ENVIRONMENT TAX REGIME: - Corporate Tax: from Jan 1 2014, the main corporate tax rate is 22%, and the rate will be reduced to 20% from Jan 1 2016. The corporate tax is targeted to be 17% in 2020. Firms involved in prospecting, exploration and mining of petroleum, gas and other rare and precious natural resources are subject to rates from 32% to 50%. • Resident firms are taxed on global income. • Non-resident firms are taxed only on Vietnamese-sourced income. - Individual Tax: The bill stipulates that personal income is to be taxed at a rate between 5% and 35%, for individuals resident in Vietnam for 183 days or more in a 12-month period. - Indirect Tax: Main VAT rate is 10%. 15 COSTS – RELATED TO BUSINESS OPERATION: Fuel: Electricity: Updated on Mar 5 2015 Gasoline A95 (per liter): Diesel (per liter): $0.76 $0.71 per kWh (ave) $0.07 Labor cost: - Applied since Jan 1 2015 First area: $150 Second area: $130 Third area: $120 Forth area: $100
  16. 16. Chapter 1: BUSINESS ENVIRONMENT CALLING FOR INVESTMENTS Offers from State Government: - Corporate Tax: beside the route map of reducing corporate tax which presented above, there are some advantages for new enterprises invest in difficult areas, high-tech zones, software developing, education – training developing, vocational training, health, culture, etc. to attract and create favorable conditions for investors interested in this sector, by reducing or exempting corporate tax in 3 to 5 years. - Import – export tax: reducing or exempting tax for materials, supplies and components imported to create fixed assets of the encouraging investment project; projects funded by official development assistance (ODA); etc. - Credit policy: interest rate ceiling for short term loans in VND 8% per year (applied since March 17 2014), for priority economic sectors: agriculture and rural development, exporting, supporting industries, small and medium-sized enterprises and hi-tech enterprises. CASE STUDY: INVESTMENTS OF SAMSUNG IN VIETNAM - Samsung has been invested more than $4.0 billion for projects in Bac Ninh and Thai Nguyen. - Samsung’s advantages: • corporate tax: 10% in 30 years. • tax exemption for 4 years since having profits • and 50% of the payable tax in the next 9 years. • Besides, Thai Nguyen province proposed Samsung to have other advantages, such as free infrastructure renting fee, free import tax of raw materials, machinery.
  17. 17. Chapter 2: POLITICAL OUTLOOK 17 SWOT ANALYSIS: Strengths: Weaknesses: • The CPV remains committed to market oriented reforms. The one-party system is generally conducive to short-term political stability. • Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. • Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. • There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight control over political dissent. Opportunities: Threats: • The government recognizes the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. • Vietnam has allowed legislators to become more vocal in criticizing government policies. This is opening up opportunities for more checks and balances within the one-party system. • Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable. • Relations with China have deteriorated over recent years due to disputing the islands in the South China Sea.
  18. 18. Chapter 2: POLITICAL OUTLOOK 18 DOMESTIC POLITICS: CPV under increasing pressure for political change: - The ruling CPV, which has fiercely defended its totalitarian stance in the past, also appears to be slowly losing its grip on public opinion with increasing adoption of the internet, and in particular, social media's role in promoting political discussion among the country's youth in recent years. - Political reforms for a more balanced and democratic political system as a crucial element in driving the country's economic growth over the long run, and limited reforms have been introduced gradually by the CPV. Democratic reforms to come amid push to expand economy: - Reforms for a more balanced and democratic political system as a crucial element in driving the country's economic growth over the coming years, which has been forecasted for Vietnam's real GDP growth to average a robust 6.7% from 2013-2022 (Vietnam’s real GDP growth in 2014 is 5.98%). - The CPV will eventually allow for limited democratic reforms to be introduced in the coming years, albeit gradually. These limited reforms will first come in the form of allowing for more debate within the National Assembly (NA) on: • economic policies, • increased transparency and accountability from the government, • greater efforts to clampdown and address rampant corruption at the lower level, and • an increased tolerance towards the impact of social media and the internet.
  19. 19. Chapter 2: POLITICAL OUTLOOK LONG-TERM POLITICAL OUTLOOK: Key political challenges over the coming decade: 1. Inflation and devaluation as drivers of discontent: - The Vietnamese government’s loose fiscal and monetary policies have led to high levels of inflation and repeated devaluations of the VND in recent years. 2. Divisions within the Communist Party: - High inflation and devaluation have opened schisms within the CPV leadership between proponents of <continued economic reform> and <a more conservative wing which believes that a deceleration or even reversal of reform policies would benefit macroeconomic stability>. 3. Demands for increased religious rights - One of the most concerted challenges against the CPV in recent years has come from Catholics wishing for a stronger recognition of their right to worship in what is still a nominally atheist country. 4. Relations with China: - Relations with China have become increasingly strained in recent years as Beijing has expanded its economic, political and military influence southwards. The main point of contention is the conflicting territorial claims for the Paracel and Spratly Islands in the South China Sea. - Vietnam’s relations with China have also been strained by the large bilateral trade deficit it runs with its northern neighbor, which amounts to more than 10% of GDP. - Because of those, Vietnam will seek increasingly close relations with the US – and potentially India and Japan – in the defense sphere, as a hedge against China’s rising power in the region.
  20. 20. Chapter 3: ECONOMIC OUTLOOK SWOT ANALYSIS: Strengths: Weaknesses: • Vietnam has been one of the fastest- growing economies in Asia in recent years, with GDP growth averaging 7.1% annually between 2000 and 2012. • The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 14.0% in 2010. • Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to global economic uncertainties in 2012. • The heavily-managed and weak currency reduces incentives to improve quality of exports, and also keeps import costs high, contributing to inflationary pressures. Opportunities: Threats: • WTO membership (and TPP membership- in the near future) has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition. • The government will in spite of the current macroeconomic woes, continue to move forward with market reforms. • Although inflation has subsided in 2014, complacency by the State Bank of Vietnam on this front could result in a decline in investment. • Prolonged macroeconomic instability could prompt the authorities to put reforms on hold as they struggle to stabilize the economy.
  21. 21. Chapter 3: ECONOMIC OUTLOOK ECONOMIC ACTIVITY: Manufacturing and retailing to help support Growth - The industrial sector, which accounts for approximately 33% of the economy and includes manufacturing, mining, water management, and power generation accelerated by 6.1% y-o-y in June and 5.8% for the first half of the year. - At 21% of GDP, manufacturing accounts for the lion's share, accelerating by a robust 7.8% y-o-y in H114, driven by textiles (21% y-o-y), leather goods (19.2%), and motored vehicles (22.9%), a trend we expect will remain in play given the continued strength in the country's domestic demand and export markets. Exports continue to strengthen - Vietnam's export sector continues to be a driver of growth for the country, and we forecast this trend to remain in play over the coming months. Exports for 2014 expanded by a robust 13.6% y-o-y, and saw the accumulated. - Moreover, we expect exports to continue driving growth going forward given that the Viet-namese government has been making a concerted push to build diplomatic and trade ties with many countries and is negotiating several free trade agreements. One of the most important ones is the Trans-Pacific Partnership (TPP), which could be signed by as early as 2015. 21.2 17.9 10.6 8.4 6.7 6.0 6.7 5.6 5.0 2.7 23.6 20.9 11.4 10.3 7.8 7.3 6.9 6.2 5.6 3.6 Phoneandaccessories Textiles Computers,electronic… Footwear Seafood Machineryandspareparts Crudeoil Woodandwoodproducts Vehiclesandparts Rice 2013 2014
  22. 22. Chapter 3: ECONOMIC OUTLOOK ECONOMIC ACTIVITY: Investment and Infrastructure Development to Drive Growth - The investment picture also remains very bullish in Vietnam as the country has been able to attract both private investment as well as foreign aid, which will help underpin both short-and long-term growth. There were a total of 1,588 investments in 2014 with a total value of $ 20.23 billion. - The largest source of investment this year has been from South Korea at $ 7.3 billion, followed by Hong Kong ($ 3 billion), Singapore ($ 2.8 billion), Japan ($ 2 billion). Several companies, such as Samsung, continue to be attracted to the country's lower labour costs, which suggests that foreign investment will continue to flow to Vietnam. 22
  23. 23. Chapter 3: ECONOMIC OUTLOOK Seeing a steady inflow of FDI - Vietnam's current stage of economic development requires significant amount of foreign investment in transportation and logistical infrastructure to support its long-term economic growth plans, present significant scope for investment opportunities in the infrastructure sector as well as higher-value manufacturing industries. - Efforts by the Vietnamese government to speed up the privatization of state-owned enterprises (SOEs) and allow for more foreign competition in the banking sector should provide a strong catalyst for investors to take advantage of opportunities in the financial services industry. The government pledges more support for foreign companies - The government is also looking to fully maximize economic gains from FDI by reviewing and establishing new standards to give priority to investment projects that are likely to boost employment and labor productivity, allow for technological transfer, and improve the overall efficiency of the economy. 23
  24. 24. CONCLUSION With all above data, you can see that:  Vietnam is stable and equal social-political environment. competitive labor cost.  Foreign Direct Investment strongly supported by Government.  Main Export Markets are US, EU, Japan, etc. Worldwide Companies are seeking new primary and secondary sources for low cost manufacturing and supply bases; China hasn’t been the priority choice when there are many problems such as increasing production costs, rising foreign exchange rates, restrictive government policies, inflation and even the possibility of widespread civic disputes. Vietnam represents a “first mover opportunity” for those who want to make the investment in time, energy and money. 24
  25. 25. 25 THANK YOU!

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