General

The Socialist Republic of Vietnam has 96 555 396 inhabitants, of which the capital Hanoi has 7 781 631. Hanoi is only the second largest city, the first place is given to the city of Ho Chi Minh City that has 8 636 899 inhabitants. Therefore, it is also the intention that many of us will move between these two cities. The country is bordered by Cambodia, China, Laos and Malaysia and is surrounded by the South China Sea. Furthermore, the country is also very diverse, the government recognizes 54 different ethnicities, which indicates a very diverse market. Vietnamese is the national language but as a foreign language French is most often spoken, which will certainly play to our advantage.

Vietnam

Surface

331 212km²

Population

96.55million

GDP

223.9 billion USD

Language

Vietnamese

Currency

Vietnamese Dong (1 EUR = 26.009 VND)

Politics

Vietnam is a one-party state ruled by the Communist Party of Vietnam (CPV). This party determines the overall strategy and is involved in all important political decisions. Furthermore, the country is led by four pillars (the four royal pillars); CPV General Secretary, State President, Prime Minister and National Assembly Chair. The National Assembly consists of 500 representatives. Elections for party and government leaders take place every five years. The last elections were in 2016, so the next one will take place in 2021. Nguyen Phu Trong has been the president of the Socialist Republic of Vietnam since October 2018 and Nguyen Xuan Phuc has been prime minister since April 2016.

The country has to contend with a number of problems such as corruption, a weaker banking sector and weaknesses in trading facilities. That is why the objectives of Prime Minister Nguyen Xuan Phuc are to improve the business environment on the one hand and to combat corruption on the other. Fighting corruption is certainly a priority. By trying to improve these two working points, the government wants to be able to continue the economic growth that has been around 6% per year for some time. This is also apparent from their goal of being a developed nation by the year 2020. That is one of the reasons why they are one of the fastest growing economies in South East Asia. In addition to these problems, the country is seen as one of the most politically stable countries in South East Asia.

Economy

The Vietnamese economy is the 45th largest economy in the world when measured in gross domestic product and the 33rd largest country when measured in purchasing power parity (PPP). In addition, the country is a member of the Asia-Pacific Economic Cooperation Association of Southeast Asian Nations and a member of the World Trade Organization (WTO).

Since the 2000s, stable economic growth around 6% has always been measured. This has fallen slightly during the financial crisis, but in the meantime the country has recovered more than just. One of the main reasons for this economic growth is the increasing domestic demand. At the start of the economic reforms, in 1986 GDP per capita amounted to 100 USD. In the meantime, it is almost USD 2000 per capita, which makes Vietnam a “lower middle-income country”. This considerable growth of the middle class has by no means come to an end. The middle class is expected to grow exponentially, and with it domestic demand

Foreign Policy and Trade Relations

An important milestone is the free trade agreement that was agreed between the European Union and Vietnam, namely the EU-Vietnam Free Trade Agreement. The European Union is one of the largest foreign investors in Vietnam with industrial processing and production as the most important sectors. Partly for this reason, a trade agreement and an Investment Protection Agreement were chained on 30 June 2019. These have yet to be ratified. This means, among other things, that virtually all customs duties between both parties will be abolished. Furthermore, 65% of the duties on EU exports to Vietnam are abolished as soon as the free trade agreement enters into force. The remaining 35% will be phased out within 10 years. With regard to Vietnam’s exports to the EU, 71% of the duties will be abolished once the free trade agreement enters into force, and the remaining 29% will be phased out within 7 years. In addition, agreements are also made on the protection of intellectual property, on the liberalization of investments and on sustainable development, including the implementation of the fundamental standards of the International Labor Organization (ILO) in Vietnam. The European Union describes the trade agreement with Vietnam as the most ambitious free trade agreement between the EU and an emerging country to date.

The accession to the WTO was an important step for Vietnam, this opened doors to various trade agreements. Trade agreements play an important role in attracting more complex high-tech goods that increasingly take the place of low-tech primary goods. Trade agreements naturally also have disadvantages, for example, the Vietnamese economy will have to deal with more foreign competition, mainly in the agricultural sector.

Vietnam – Belgium 

Export

Vietnam imported € 206769.69 million worth of goods worldwide in 2018, which corresponded to a 1.23% share in global imports. Vietnam thus occupied 23rd place among the importing countries in 2018. The total Flemish export to Vietnam in 2018 amounted to € 497 million. Vietnam thus achieved a 55th place in the ranking of the total exports of goods from Flanders, corresponding to a provision of 0.152% of the total Flemish exports. Vietnam has a share of 0.2% of Flanders’ total exports.

In comparison with 2017, exports to Vietnam have increased enormously. For example, exports in 2019, with data available up to April, are 24.80% higher than in 2018. The most common sectoral exports to Vietnam are chemical and pharmaceutical products (22.08%), machinery, appliances and electrical equipment (17 , 16%) and pearls, precious stones, precious metals and diamonds (15.82%).

The most important Flemish export products to Vietnam in 2018 were precious stone and metal (15.8%), machinery and mechanics (15.2%), pharmaceuticals (13.4%), wood products (5.7%), plastics (4 , 8%), flour products (4.7%), iron and steel (4.4%), optics and precision equipment (3.6%), drinks (3.6%), fertilizers (2.5%)

Import

Vietnam imported € 206769.69 million worth of goods worldwide in 2018, which corresponded to a 1.23% share in global imports. Vietnam thus occupied 23rd place among the importing countries in 2018. The total Flemish export to Vietnam in 2018 amounted to € 497 million. Vietnam thus achieved a 55th place in the ranking of the total exports of goods from Flanders, corresponding to a provision of 0.152% of the total Flemish exports. Vietnam has a share of 0.2% of Flanders’ total exports.

In comparison with 2017, exports to Vietnam have increased enormously. For example, exports in 2019, with data available up to April, are 24.80% higher than in 2018. The most common sectoral exports to Vietnam are chemical and pharmaceutical products (22.08%), machinery, appliances and electrical equipment (17 , 16%) and pearls, precious stones, precious metals and diamonds (15.82%).

The most important Flemish export products to Vietnam in 2018 were precious stone and metal (15.8%), machinery and mechanics (15.2%), pharmaceuticals (13.4%), wood products (5.7%), plastics (4 , 8%), flour products (4.7%), iron and steel (4.4%), optics and precision equipment (3.6%), drinks (3.6%), fertilizers (2.5%)

Promising Sectors

These are the sectors that will be increasingly important to Vietnam in the future:

Food and beverages – Vietnam is one of the most attractive potential markets for food and beverages. This is reflected in both the retail and the direct demand for imported products. Increasing tourism is creating more demand for international products. It is also very important that the food products are safe with, for example, a specific demand for organic and organic products.

Machines – Thanks to important free trade agreements such as the EU-Vietnam Free Trade Agreement and the CPTPP, export sectors such as the textile industry, agro-industry and electronics industry can grow strongly. The export of clothing and footwear is extremely important in the Vietnamese export. In order to fully enjoy the recently concluded free trade agreements, more added value and local production of substances are important. Large investments in this production are therefore required. Another sector in which the Vietnamese government wants to create more local added value is the agro-industry. Vietnam is a major exporter of unprocessed agro products, but local processing is necessary. Manufacturers of machinery in the agricultural sector, food processing and related sectors can respond to this trend and thus create extra value. Finally, Vietnam has also become a major exporter and producer of consumer electronics. Despite the economic strength of the industry, the supply of various components is still limited. There is hardly any own, local, supply industry at the moment.

Environment and cleantech – The country is highly susceptible to the effects of global climate change. Floods and droughts in particular have a huge impact on, for example, the agricultural sector. Furthermore, urbanization and growing economic concentration are putting pressure on the environment. Finally, Vietnam still has a long way to go in terms of waste processing. Waste is dumped in landfills and there is little question of proper separation, recycling or processing.

Chemical sector – There is a strong sustained growth in the chemical sector, especially with regard to fuels. This is due to robust economic growth, increasing infrastructure projects, construction activities and a strong demand for fuels in the transport, aviation and housing sectors.

Contact

Should you be interested in our project or would you like more information, do not hesitate to contact us at handelsmissievub@inisol.com.

Sources: FIT, Worldbank, Doing Business 2018, Atradius, OEC, export.gov, UNCTAD