Wiki Investment

Vietnam

3 Chapter Economic Policy

3.1 To stability of macro economic from high growth
- GDP and Economic growth rate
  
  Economic liberalization was started in 1986 with its Doi Moi policy. In 2007, Vietnam took part in the World Trade Organization. Vietnam has a developing economy in the Southeast Asia. In recent years, the nation has been rising as a leading agricultural exporter and an attractive foreign investment destination. Vietnam's key products are: rice, cashew nuts, black pepper, coffee, tea, fishery products and rubber. Manufacturing, information technology and high-tech industries constitute a fast growing part of the economy. Vietnam is also one of the largest oil producers in the region. The economic activities that mainly contributed for GDP of Vietnam in 2014 was agriculture, forestry and fishing (17.7%); manufacturing (13.2%); and mining and quarrying (10.8%).
  
  Source: IMF ‘World economic outlook database, April 2015’
  
  Source: IMF ‘World economic outlook database, April 2015’
- Change of Inflation rate
  
  Source: IMF ‘World economic outlook database, April 2015’
  
  In recent years, Vietnam’s exports have been propelled by inflows of foreign direct investment into manufacturing. Thanks to low inflation, private consumption is growing strongly, leads to improving consumer confidence. Although solid growth is recorded in merchandise exports in the first half, imports still increase faster than exports which mean strong domestic demand for capital and consumer goods. Inflation seems to decrease and the forecast for 4.0% year-average inflation in 2016 is retained.
- Financial income and expenditure
  
  The renovation of an approximate 30 year since 1986 has given Vietnam a lift from one of poorest countries in the world to a country with average income. Vietnam has also made a marked improvement in reducing poverty. The number 50% of people living in extreme poverty in the early 1990s has changed to 3% today. However, there still exists a big gap of income between wealthy and poverty, between different positions in occupation as well as rural and urban areas.
  
  Similar to many other economies in the world, the wage level in Vietnam is divided by the type of jobs. The top professions that pay the highest salary are Mineral and Metallurgy (9.2million VND/month), Banking (7.6million VND/month) and Pharmacy (7million VND/month) while some other jobs like Textile or Food Industry workers are only paid with the wage from 2.1 to 2.3 million VND a month. The variety in monthly salary between positions also shows a big distance from 2.5 million VND for a secretary to 20 million VND for a CEO. Additionally, the wage is distinguished between private and state-owned companies, domestic and foreign-owned companies.
  
  Vietnam has average income but extravagant expenditure. To disentangle this matter, the government has issued a new decree to increase the minimum wage by VND 250,000 – VND 400,000($11.8-$18.9) per month for laborers in 2015 and is planning to raise it more in 2016.
  
  IMF ‘World Economic Outlook Database, September 2015’

3.2 Change of import and export and image for the future

2.2.1 Trade of Vietnam

　Since Vietnam started to embark in Doi Moi (Reform) policy, the country has made many positive changes in the transition from a centrally planned economy to a market economy with socialism orientation in the past nearly 30 years. Thanks to liberalization of prices and agriculture since 1980s, a much higher productivity and agricultural exports have increased continuously.

　After the progress in Reform, Vietnam also had the open door policy to join in the relations with the World Bank, International Monetary Fund, and Asia Development Bank which helped Viet Nam in applying international standards. In 1995, Vietnam took part in Association of Southeast Asian Nations (ASEAN), Asia Europe Meeting (ASEM) in 1996 and Asia-Pacific Economic Cooperation (APEC) in 1998. Becoming the 150^th member of WTO in 2007 turned Vietnam to a new page that marked the nation’s presence in the global economy of this largest trade organization in the world. Free Trade Agreement of Trans Pacific Partnership on November 13^th, 2010 was also a remarkable event to Vietnam.

2.2.2 Export of each country and each item in Vietnam

Vietnam

is the 33rd largest export economy in the world according to the Economic Complexity Index (ECI). In 2014, Vietnam exported $150billion and imported $148billion, resulting in a positive trade balance of $2billion. Export of Vietnam increased a big amount to the US in 2014 which was a raise of 20.1% compared to the previous year. Shrimp export grows dramatically because of shortage from Thailand’s suppliers due to shrimp disease. Meanwhile Vietnam has emerged as producing and processing place for high quality shrimps. Vietnam is now the 3^rd biggest market supplying shrimp to the United States, after Indonesia and

India

Country	2013	2014
Country	US$ million	US$ million	Over total (%)	Changes (%)
United State	23,853	28,644	19.1	20.1
Japan	13,065	14,693	9.78	12.5
China	13,178	14,931	9.94	13.3
Korea	6,683	7,144	4.76	6.9
Malaysia	4,985	3,928	2.61	- 2.1
Germany	4,737	5,178	3.45	9.3
Hong Kong	4,114	5,202	3.46	26.4
Australia	3,488	3,990	2.66	14.4
United Kingdom	3,696	3,649	2.43	- 1.3
Cambodia	2,934	2,688	1.79	- 8.4
Others	56,139	75,070	49.9	33.7
Total	132,135	150,186	100.0	13.7

Source: General Statistics Office of Vietnam

The growth in export 22.9% of footwear in 2014 is related to the rising consumption and improvements in standards of living in countries around the world, most notably in the European Union.

Expectations around the performance of the Vietnamese industry are high for the current year. Allied to the prospect of European recovery, there are also good prospects in relation to one of the major trade agreement being negotiated at the moment, the Trans-Pacific Partnership, which is seen as a source of numerous opportunities for footwear exporters in the near future, allowing more competitive access to such markers as the US and Japan.

Main Export Items of Vietnam

Items	2013	2014
Items	US$ million	US$ million	Over total (%)	Changes (%)
Telephones and their parts	21,244	23,607	15.7	11.1
Textile, sewing products	17,947	20,949	13.9	16.7
Computers, electronic products & parts	10,601	11,440	7.6	7.9
Footwear	8,410	10,340	6.9	22.9
Crude oil	7,278	7,229	4.8	- 0.7
Seafood	6,717	7,836	5.2	16.7
Machinery, instrument, accessory	6,014	7,314	4.9	21.6
Wood and wooden products	5,562	6,232	4.1	12.0
Means of transport and equipment	4,967	5,627	3.7	13.3
Parts of motor	3,262	3,522	2.3	7.9
Others	40,133	46,090	30.7	14.8
Total	132,135	150,186	100.0	13.7

Source: General Statistics Office of Vietnam

2.2.3 Import of each country and each item in Vietnam

The value of imports in 2014 grew to US$147.8 billion, an increase of 12% from 2013.

Vietnam

is the 32^nd import country in the world in 2014. Number one import country of

Vietnam

China

which takes 29.6% over the import total. The main items that China exports to Vietnam are Other Machinery, instrument, accessory (US$ 7.9 billion), Telephones and their parts (US$ 6.3 billion) and Textile fabrics (US$4.6 billion) according to General Statistic Office of Vietnam in 2014.

Main Import Countries of Vietnam

Country	2013	2014
Country	US$ million	US$ million	Over total (%)	Changes (%)
China	36,887	43,711	29.6	18.5
Korea	20,678	21,763	14.7	5.2
Japan	11,558	12,926	8.7	11.8
Taiwan	9,402	11,079	7.5	17.8
Thailand	6,283	7,093	4.8	12.9
Singapore	5,685	6,839	4.6	20.3
United States	5,224	6,297	4.3	20.5
Malaysia	4,096	4,207	2.8	2.7
Germany	2,954	2,620	1.8	- 11.3
India	2,879	3,113	2.1	8.1
Others	26,387	41,127	2.8	55.9
Total	132,033	147,849	100.0	12.0

Source: General Statistics Office of Vietnam

Main Import Items of Vietnam

Items	2013	2014
Items	US$ million	US$ million	Over total (%)	Changes (%)
Machinery, instrument, accessory	18,687	22,500	15.2	20.4
Computers, Electronic products & parts	17,692	18,722	12.7	5.8
Textile fabrics	8,397	9,428	6.4	12.3
Telephones and their parts	8,048	8,476	5.7	5.3
Petroleum oil, refined	6,984	7,665	5.2	9.8
Iron, Steel	6,660	7,775	5.3	16.7
Plastic materials	5,714	6,317	4.3	10.6
Auxiliary materials for textile, garment, leather, footwear	3,725	4,692	3.2	26.0
Animal fodder and materials	3,078	3,252	2.2	5.7
Chemicals	3,042	3,315	2.2	9.0
Others	50,006	55,707	37.7	11.4
Total	132,033	147,849	100.0	12.0

Source: General Statistics Office of Vietnam

3.3 Industry structure
- Industry structure
  
  Vietnam’s industry structure is divided into the following sectors:
  - Primary Sector: From 1994 to 2004, agriculture and forestry increased 4.1% each year and contributed 21.8% to the GDP in 2004. In 2005, 60% of the employment served in agriculture, forestry and fishing; however, only 30% of export was supported by the agricultural production. Vietnam has become one of the world’s largest rice exporters since government issued the reduction of rice export monopoly.
  - Secondary Sector: For years, Japan has been investing into Vietnam and contributed US$180 million to finance of SME (small and medium enterprise) since 2008. Auxiliary industries areas were constructed by Japan in Que Vo district, Bac Ninh province and some places. Garment, textile, leather, electronics, information technology, car and engineering are focused in development. Besides, cattle and aquaculture is also a priority. In order to raise domestic and export necessity, latest technology and business plans are being applied.
  - Tertiary Sector: the expansion of inventive items and sale channels was a result of insurance’s increasing sector with life insurance up to US$2 billion and non-life one up to US$562 million, in 2010.
  Source: General Statistics Office of Vietnam
- Trend each industries
  
  ●Textile industry
  
  Vietnam’s textile and garment industry has been growing over the past years, keeping a chief part in national socio- economic development. This sector requires a huge number of employees every year, supplies jobs and generates income for 2.2 million people. Export of textile and garment merchandises brought US$20.9 billion for the country in 2014 and was ranked as a number two in the country’s total export revenue. For textile industry, Vietnam has advantages which include small investment capital, short capital turnover, receiving many policies from the nation because of providing much employment and large domestic consumption.
  
  Thanks to the relationship with WTO in 2007, Vietnam had good opportunity to grow up and benefits as well as equal treatment in trade just like other members of this organization. The country has become a strong member in the global textile market and plays a major role in increasing Vietnam’s prosperity. Compared to the previous years, textile industry is considered as an only sector in the nation to keep its export revenue and Vietnam’s pride of this commendable performance. With more than 3,800 companies, Vietnam textile industry is leading the export sector.
  
  ● Electric industry
  
  Vietnam’s electricity mainly supplies for agriculture, industry, services, household and other purposes. Fuel for electricity in Vietnam includes:
  - Coal: coal consumption is increasing rapidly every year. Besides the task to improve coal-mining sector, Vietnam has to import relatively coal with higher price. In order to contribute domestic power industry, state owned Petro Vietnam (PV) is planning to buy 11 million tons of coal per year from 2017.
  - Natural gas: due to high foreign investment during years, there is a growth of natural gas exploration. Although of the equal between productivity and consumption at current time, PV still desires more in a potential supply and expects liquefied natural gas (LNG) terminals of Thi Vai and Son My to be started in 2017 and 2018, respectively. Via a sale and purchase agreement signed with Russia’s Gazprom, PV Gas will get 48 billion cubic feet of natural gas per year from the Thi Vai LNG terminal.
  - Nuclear: The first nuclear reactors for power generation will be built at Ninh Thuan 1 by Russia and Ninh Thuan 2 by Japan and make Vietnam the first country that has this construction in Southeast Asia. According to Fukushima nuclear accident of Japan in 2011, both of these projects are delayed and not built until 2020.
  - Wind: the first offshore wind farm in Asia is built in Vietnam. Phase I (16MW) of Bac Lieu wind farm is in activity, Phase II (83.2MW) is planed to be finished in 2016. A workability study grant was awarded by the United States Trade and Development Agency in March 2015 for potential Phase III. And the Tay Nguyen wind farm with capacity of 120MW is going to operate the first Phase (28MW) in 2016, as expected.
  Source: IndexMundi
  
  ● Motorcycle industry
  
  Approximately 35 – 37 million of motorbikes have sold in a market of 90 million people. According to Masayuki Igarashi, a general director of Honda Vietnam, motorbike market of the country is slumping and will not stop declining in the future. The price per unit of motorbike is decreased from US$25 to US$100 but the market still keeps going down.
  
  Kiyokazu Sasabe, deputy general director of Honda Vietnam said that 500 employees in two factories in the northern province of Vinh Phuc were cut off in 2013 due to the increasing in motorbike sales. More importantly, a lot of staff in motorbike shops also lost their job for the business losses.
  
  In order to solve the problem, the association of Honda Vietnam, Suzuki Vietnam, Yamaha Vietnam, Piaggio Vietnam and SYM had been established on August 26, 2013 with the hope of positive future bike market. After sales falls in previous years, Honda Vietnam claimed that a gain of 3% in increasing sales had occurred from April 2014 to March 2015 thanks to the launch of new motorbikes. At present, Honda Vietnam has three motorcycle factories and one car factory with a total of 9,000 workers.
  
  ●Automobile industry
  
  Vietnam auto industry has been beginning since the reform in 1986. In 1991, automobile manufacture and assemble industry was entered in development by the help from government. Since then, Honda, Toyota, Ford, GM… has invested and established assemble enterprises in Vietnam. Parallel with that, domestic auto enterprises were also operated by the nation. Currently, there exists hundred auto part manufacture enterprises which merely produce simple parts such as seats and auto storage batteries with low productivity and technology.
  
  In 2012, the sales volume of domestic automobiles and the import volume of completed vehicles decreased by 33% and 49.8% year on year, respectively. Reason of this decline was the raise of taxes related to automobile. Korea and China were the largest auto exporters to Vietnam at this time.
  
  For years, economic growth plus higher income per capita has created the demand for passenger and commercial vehicles. Besides advantages of low employment, land and energy cost, Vietnam meets the difficulties in auto industry chain. Main auto manufacturers and companies in Vietnam belong to Honda, Toyota, Ford, GM, Hino Motors, Isuzu, Mercedes-Benz, Mekong Auto Corp., Vietnam Motors Corp., and Vina Star Motors Corp. To compete with the countries in ASEAN+3, the auto import tariff will be only 0% in 2018. More supportive policies will be issued by the government in order to help domestic automobile industry growing.
- References:
  
  http://www.tradingeconomics.com/vietnam
  
  http://www.adb.org/countries/viet-nam/economy
  
  http://www.vietnamonline.com/az/average-salary.html
  
  http://www.sggpnews.org.vn/National/Society/2015/1/112142/
  
  http://www.vietrade.gov.vn/en/index.php?option=com_content&id=2256:achievements-of-viet-nam-doi-moi-policy-&Itemid=287
  
  http://www.vietrade.gov.vn/en/index.php?option=com_content&view=article&id=2254:vietnam-export-and-import-to-the-us-first-10-months-of-2014-gained-impressive-results&catid=20:news&Itemid=287
  
  http://www.economywatch.com/world_economy/vietnam/structure-of-economy.html
  
  http://www.vietrade.gov.vn/en/index.php?option=com_content&view=article&id=1330:strstreng-of-the-vietnam-textile-and-garment-industry&catid=270:vietnam-industry-news&Itemid=232
  
  http://www.eia.gov/todayinenergy/detail.cfm?id=22332
  
  http://www.indexmundi.com/g/g.aspx?v=79&v=81&c=vm&l=en
  
  http://tuoitrenews.vn/business/18144/motorbike-market-almost-reached-saturation-in-vietnam-insiders
  
  http://english.thesaigontimes.vn/41139/Honda-motorcycle-sales-up.html
  
  http://pitchengine.com/pitches/082e3632-1c0a-4cbf-96b6-ef052e8ecad5

Vietnam

3 Chapter Economic Policy

1 Chapter Basic knowledge

2 Chapter Investment Environment

3 Chapter Economic Policy

4 Chapter Incorporation

5 Chapter M&A

6 Chapter Corporate Laws

7 Chapter Accounting

8 Chapter Tax Laws

9 Chapter International Human Resources Management