Country Book Vietnam - 2014 Updated

Last update on May 8th, 2013Last updated on Mar 13, 2014

DP VIETNAMsince 1995

Last update on May 8th, 2013

Country Key Figures - 2013 Source: IMF

GDP / Capita

GDP/Capita $1,705

GDP Growth

Population 63.70 millionin Million

1,360.76 million

Inflation 1.57 %

3.013 %

Min Wage

Key Economic Indicators

2013 2014 2015 2016GDP (Billion USD) 156 171 184 202GDP growth (%) 5.2 5.2 5.3 5.4Inflation (yearly average - %) 8.8 8.0 8.5 7.8Current account balance (% GDP) 7.9 6.3 3.7 2.3Public debt (% GDP) 50.9 50.8 50.4 48.9

$44,387GDP / Capita

$6,629

128 USD/MonthMinimum wage increased last time in Oct 2013, and it is suggested tocontinue to increase in 2014.

In 2011, Vietnam is overheating and rein in double-digit inflation. Aftermonetary policy tightening, inflation reduced in 2013 at 8.8%, and it isexpected to reduce to 8% this year, which is also the government's target.

$1,705

5.24%

91.473

8.80%

With the consistent growth of population at around 1.2% per year, Vietnampopulation is expected to reach 92.5 million by 2014. The more populouslabour force will be precious assets of Vietnam when the economy isimproved and there are more employment opportunities.

GDP / Capita

41.1443.00 43.58 44.39

45.35

35.0037.0039.0041.0043.0045.0047.00

2012 2013 2014 2015 2016

1.51.7 1.8 2.0 2.1

0

1

1

2

2

3

2012 2013 2014 2015 2016

6.16.6

7.38.0

8.8

4.005.006.007.008.009.00

10.00

2012 2013 2014 2015 2016

Labour Distribution

48%31%

21%

AgricultureIndustryServices

1900 USD/month

between 138 and 238 USD/month

GDP by activity

19%

42%

39%

in thousand USDin thousand USD in thousand USD


Context Assessment

Source: coface

Political Assessment

Chief of State

Head of Government Prime Minister Nguyen Tan Dung

Electoral System

Low High Risk

Source: Ducroire & Delcredere

Corruption Maping

Source: transparency intl

Skilled, cheap labour Country specialises too much on competitiveness of low value-added products

Lack of infrastructure

Incomplete public sector reform

Solid agricultural potential and natural resources

Development strategy based on economic openness and diversification

Deepening inequalities

National electionevery 5 years. Upcoming elections in2016.

Vietnam is ranked 116 in

the world out of 177

STRENGTH WEAKNESS

Weak banking system

Persistent shortcomings in business environment


Risk Assessment

Slight recovery expected in 2014

Stabilisation of external accounts, persistent public deficit and still weak banking system

Persistent shortcomings in the business environment

Growth is expected to accelerate slightly in 2014 after a two-year slowdown, but will still be below its historic average. This is because the Central bank cut its key rates (by 800 basis points between 2012 and 2013). An $8-billion fiscal stimulus plan during the 2013 to 2015 period (4.7% of GDP) has been introduced, which focuses, in particular, on VAT arrears, tax on businesses and an infrastructure investment programme. Moreover, lower inflation means that private consumption is likely to rebound, thus boosting retail sales.

Meanwhile, firm industrial output in 2013, together with export recovery, is expected to continue in 2014. Vietnam will continue to benefit from the strong American economy, the US being its main client. Although the country will profit from a move upmarket in its exports, as evidenced by increased exports of electronic products, the country is still an assembly workshop for Asian industries and textiles; shoes still represent 20% of exports. Regarding the agricultural sector, Vietnam benefited from favourable weather conditions and the rice export quota in Thailand. In 2012, Vietnam became the world’s leading exporter of rice.

Moreover, incoming foreign direct investment flows remain high, due to the tendency of Asian companies to relocate and develop production units in Vietnam.

Finally, inflation slowed sharply in 2013 and is likely to remain contained in 2014, despite rising transport, electricity and housing costs. Nonetheless, if there was a move to aggressively loosen monetary policy, a substantial rise in inflation cannot be ruled out. The authorities seem, however, to be keeping a close eye on controlling inflation in their conduct of economic policy.

In the wake of substantial capital flight forcing the authorities to devalue the dong six times between 2008 and 2011, the country’s external accounts have now stabilised. Moreover, Vietnamese exports have proved resilient in the face of an adverse international economic cycle while imports have risen slowly, thus beefing up the current account surplus. In 2014, the current account surplus will fall, as imports recover in a context of stronger domestic demand, but it will still be substantial. Even though the authorities allowed the dong to depreciate by 1% in June 2013, the country’s external macroeconomic fundamentals have improved and foreign exchange reserves are expected to represent 3.5 months of imports in 2014. This level is low but trending upwards.

In 2014, the fiscal deficit and public debt will stabilise at relatively high levels. However, sovereign risk remains high. Apart from the public accounts’ lack of transparency, the public debt remains very vulnerable to exchange rate risk as over 60% of it is denominated in foreign currency. Moreover, contingent liabilities could undermine the medium-term sustainability of the public debt, if default by state-owned enterprises hits the large banks, as in the case of Vinashin.

Finally, the banking system remains precarious, as it is poorly capitalised and highly dollarized. The banks are also vulnerable to exchange rate risk. Despite the creation of a bad bank, credit risk remains significant as it is under-funded and also because numerous political obstacles hamper its effectiveness. Meanwhile, the public-owned banks’ high exposure to non-transparent state-owned enterprises is an additional fragility factor.

Governance remains the country’s Achilles heel and is a risk in terms of its appeal to foreign investors. The main shortcomings concern respect for the law and corruption, which, despite the reforms undertaken, remains widespread within political and economic circles as the Vishanin case shows. Meanwhile, the Communist Party still controls the country’s entire political, economic and social life. Finally, Japan and the United States are providing increased support to Vietnam, while relations with China continue to be strained.

Last update on May 8th, 2013Source: coface

Local Currency Evolution & Trade Balance

USD/VND

Ease of doing business - Rankings

Ranking 2014 Ranking 2013

Change in Rank

Starting a Business 109 107 -2 41 158

Dealing with Construction Permits 29 29 No change 92 185Getting Electricity 156 155 -1 42 119Registering Property 51 48 -3 149 48Getting Credit 42 40 -2 55 73Protecting Investors 157 169 12 80 98Paying Taxes 149 145 -4 52 120Trading Across Borders 65 66 1 36 74

Enforcing Contracts 46 46 No change 7 19Resolving Insolvency 149 150 1 46 78

Source: www.doingbusiness.org

Vietnam recorded a trade deficit of 550 USD Millionin February of 2014. Vietnam exports mainly crudeoil, textiles, seafood, rice, electronics andcomputers and rubber. It's main exports partnersare: United States, Japan, China, Australia andSingapore. Vietnam imports machinery tools andspare parts, petroleum, steel, fabrics and plastics.Vietnam's main imports partners are China, Japan,South Korea, Taiwan, Thailand and Singapore. Thispage provides - Vietnam Balance of Trade - actualvalues, historical data, forecast, chart, statistics,economic calendar and news

The local currency is the Dong (VND - Vietnam Dong). VND istend to lose value against USD from year to year as thegovernment stimulate exporting

USD is the common currency that is prefered by mostexporters/ importers in Vietnam.

Last update on May 8th, 2013Exports distribution

TEXTILE & GARMENT exports FOOTWEAR & LEATHER exports

Exports per Industry

11.58%

10.60%

12.08%

12.28%8.50%

3.70%

5.50%

2.07%

33.69%

Textile & garment

Footwear

Electric and Electronic

Agriculture

Mineral & petroleum

Silverware & jewelry

Furniture

Rubber & latex

Others


Garment in Vietnam … a SWOT overview

Strength Weakness

Opportunities Threats

Equipments using in the Textiles & Garments Industry have been being innovated and modernized up to 90 percent. Thus, quality of products have been highly improved to be accepted by difficult markets such as the U.S, EU and Japan.

International partners had good evaluations on the capacity of Vietnamese manufacturers;

Labour cost in Vietnam is still competitive;

Labours have highly qualified technical Skills and they are working hard;

Having a very stable political regime;

Technology is largely imported

Managerial skill is still limited;

Designing works and fashionable products are still at a early stage level;

Depending much on the imports of raw materials and accessories for its export products Weakness in marketing, building their own brand names as well as long-term development strategies for the enterprises.

There is a movement of production of garments and textiles products toward developing countries, including Vietnam.

Vietnam is a member of WTO, and free trade agreements (“FTA”) at bilateral level (with Japan) and multilateral level (with ASEAN-Australia, ASEAN-New Zealand, ASEAN-Korea, ASEAN-China);

Vietnam’s domestic market with 86 million people is another factor attracting great attention of foreign investors and international business community;

Big markets such as the U.S and EU have also been applying barriers on anti-dumping…on made-in-Vietnam products in order to protect domestic production industry.

Most of Vietnam’s Small & Medium Enterprises have not enough financial capabilities to persuade anti-dumping lawsuits, causing losses in commercial disputes for themselves.


Transport in Vietnam

ROAD NETWORK

The road network in Vietnam is 210,000 km, of which 17,300 km are national roads, 17,450 km are provincial roads, 36,400 km are district roads, and 7,000 km are urban roads. The remaining 131,500 km are rural roads.

Vietnam Transport Highways The percentage of paved national roads is a useful indicator of the quality of a country’s most important road network. 84 percent of Vietnam’s national roads are currently paved up from 61 percent in 1997. The current percentage of paved national roads is reasonable by regional standards.

The condition of the network has also improved with the percentage in good condition increasing from 37 percent in 1999 to 45percent (good and average 66 percent) in 2002. The improvement in the quality of the network appears to be largely driven by newconstruction rather than by the maintenance of the existing capital stock because expenditures on periodic and routinemaintenance of national roads between 1998 and 2002 were less than half the of the maintenance needs as estimated by theVietnam Road's Administration in its Ten-Year Strategic Maintenance Plan.

Urban TransportMotorcycles are presently the primary mode of transport in the major Vietnamese cities. In both Ha Noi and Ho Chi Minh City,motorcycles account for 60 - 65 percent of vehicular trips, with bicycles accounting for another 25 percent.

Automobiles account for less than 5 percent of trips in both cities and ownership is relatively low though growing rapidly. In HCMC,the number of registered automobiles increased from 137,000 in 2001 to about 245,000 in 2004 and 294,331 in November 2006.Buses account for about 7 percent of vehicular trips in Hanoi.

The road network is relatively limited and opportunities to increase road capacity in the urban areas is limited. Both the country'smajor cities would face serious congestion problems if private auto ownership and use continues to grow in conjunction withcurrently forecast rates of economic growth. Up to November 2006, the number of automobiles grew to 965,455 (8.3 percentincrease) and the number of motorcyles increased to 18,406,385, constituting a 14.1 percent increase.

This is well recognized by city leaders and both cities have stated policies prioritizing public transport and have plans to upgradetheir bus systems and invest in new urban rail.

Urban road safety in particular is a problem. While statistics on accidents resulting in non-serious injuries are consideredunreliable due to substantial underreporting, it appears that there are 800/900 road fatalities per annum in Ho Chi Minh City and400/500 in Hanoi, 70 percent of which are cyclists or motorcyclists.

The transport sector has contributed positively to the economic growth of Vietnam over the past decade and has helped reducepoverty directly through better linkages to markets, education and health facilities and indirectly through its contribution to growth.

Nevertheless, the transport sector faces several challenges such as the high traffic accident rates, new capacity constraints, and alarge increase in asset preservation requirements to meet the fast expansion of transport assets. Other impediments reside in thesector’s policy, planning, budgeting, regulatory, and implementation frameworks.


RAILWAY

The network consists of 7 lines with a total length of 2,632 km. All lines are single track, mostly meter gauge, with a few standard gauge and double gauge towards the Chinese border. There are over 1,800 bridges (57,044 m) and 39 tunnels (11,513 m) and 281 stations.

The Vietnam Railway Cooperation (VRC) is the sole supplier of rail services in Vietnam. Following corporatisation, VRC’s internalbusiness has been restructured into four main business groups: two passenger train operating entities (North and South), a freighttrain operating company and a looser grouping of regional infrastructure administrations. The train operating entities are quasi-independent management and accounting entities.

The Vietnam Railway Administration remains responsible for planning development of the sector, for new construction and forsecuring resources for maintenance. The VRC pays 10 percent of its gross revenues as a track access charge. These funds aregenerally used toward infrastructure maintenance.

Despite a network which is small, old and has received negligible investment for upgrading, the VRC has performed reasonablywell. Vietnam does not have the concentrated flows of bulk raw materials or the long-distances which give rise to heavy rail freightflows. However, its eight lines serve high density passenger corridors.

Taking freight and passenger traffic together, traffic density is about 2.3 million traffic units/route-km per annum, which is relativelylow compared to other countries in the region. The average passenger train load in Vietnam is around 370 passengers which arerelatively high, but average freight load of 225 tons is low, as a result of low axle-weight infrastructure, short crossing loops andpossible sub-optimal freight operating plans.

Inland Waterways

Vietnam has 41,000 km of natural waterways, of which 8,000 km are used commercially. Of these, the Vietnam Inland Waterways Administration manages about 6000 km as well as the main river ports; local governments manage the balance of the commercial waterways.

River boats and barges have rapidly developed. In 1999, there were 63,600 units with a capacity of 1.7 million dead weight tons and 197,000 passenger seats. In 2003 this had increased to 83,000 boats with a capacity of 3.7 million dead weight tons and 280,000 passenger seats. In addition there are tens of thousands of small “country” boats and ferry boats.

Despite limited investment, the waterways remain attractive for the transport of coal, rice, sand, stone, gravel, and other usuallyhigh weight low value goods; and livelihoods and personal transport depend heavily and successfully on waterway transport in thedelta regions of the Mekong and Red River.

The inland waterway system is managed by nine state waterway management companies; and river ports are managed by threeport authorities. Inland waterway transport services are provided by state-owned enterprises operating under two statecorporations attached to the Ministry of Transport Northern Waterway Transport Corporation and Southern Waterway TransportCorporation; specialized state-owned transport companies under other ministries carrying materials to cement plants, paper millsand construction material enterprises, and private for-hire operators.

Private operators have expanded their market share significantly in recent years. Foreign companies can provide transportservices on the waterways through joint ventures in which the foreigner’s share does not exceed 49 percent. Freight andpassenger transport rates are freely determined by negotiation.


Air Transports

The Civil Aviation Administration of Vietnam (CAAV) handles civil aviation and is under direct authority of the government. There are 135 airports/airstrips for civil, military and police use in the country. The CAAV is responsible for 18 airports and air navigation services. The airports in the north, central and south handled 1.7 million, 0.8 million and 3.1 million passengers in 1998, respectively, which have been increasing rapidly to 2.5 million, 1.2 million and 5.1 million in 2002, respectively.

Vietnam TransportAir traffic grew sharply during the 1990s until the region was hit by subsequent financial and economic crisis.The volume of air passenger in 1998 was 2.3 million international and 3.3 million domestic passengers. In 2002, the Ho Chi MinhCity and Hanoi airports (Tan Son Nhat and Noi Bai) reached a total of 8 million commercial passengers, of which 4.2 million wereinternational and 3.8 domestic. In 1998, approximately 60,000 and 47,000 ton of air freight were carried by international anddomestic flights respectively. In 2002, both international airports handled a total of 190,000 tons (including 2,000 tons of mail),110,000 tons of international freight and 78,000 domestic freight. As the economy further diversifies and international regionallinkages are strengthened, the demand is expected to increase sharply.

International airfares are proposed by the airlines and ratified by CAAV. There are two different domestic airfares: one isapplicable to foreign citizens and overseas Vietnamese and other is for local Vietnamese. The maximum airfare to Vietnamesepassengers on domestic flights between Hanoi and Ho Chi Minh City is decided by CAAV and the Government Pricing Committeeand approved by the Prime Minister.

Two airlines, both members of Vietnam Airlines Corporation, operate in the country. The dominant one is Vietnam Airlines, whichaccounts for 37 percent of international traffic to and from Vietnam and 94 percent of the domestic demand. The other operator is

Ports and Shipping

Vietnam has over 80 sea ports, totaling 22,000 m of wharfs with 2.2 million sq m of quays and 1 million sq m of docks. The large ports in Vietnam have traditionally been developed by the government through Vietnam Maritime Administration (Vinamarine) and turned over to Vietnam National Shipping Lines (Vinalines) for operation.

Local governments manage about 20 ports, and several national- or local-level state-owned enterprises operate specialized ports. The main ports are Hai Phong in the north and Saigon in the south, but both are estuarine ports, distant respectively 30 and 90 km from the sea, i.e. with access limited to smaller ships. The annual throughput of the ports has increased rapidly, almost doubling over the last five years, from 56 million tons in 1998 to 114 million tons in 2003. Ports in the southern Focal Economic Zone still account for two thirds of total throughput.

There has been some foreign investment in the port sector. For example, the Vietnam International Container Terminal in Ho ChiMinh City is 90 percent foreign owned, the Interflour grain port (with capacity to handle Panamax vessels) in Vung Tau is a 100percent foreign owned.

The fleet of vessels has also expanded from a total number of 679 and capacity of 1.6 million dead weight tons in 2000 to 928vessels and capacity of 1.8 million dead weight tons in 2003; an annual increase of 12 percent and 4 percent in vessel numberand capacity respectively.

Although port operations are divided among five separate companies, they are all part of Vinalines, which also operates sevenshipping companies that account for the majority of the national fleet. Port charges pertaining to vessels are set by the Ministry ofFinance and most of them do not vary from one region or port to another. Cargo handling charges are set by port operators,service providers or by negotiation.

While foreign ownership of ports is possible, there are restrictions on the provision of port and shipping services by foreignenterprises. With the exception of ship agency services which are not open to any degree of foreign participation, other servicescan be offered by joint ventures provided the foreign entities’ share in the enterprise does not exceed 49 percent.

Although still lower than in more modern ports of the region, port efficiency has increased and port costs have come down.According to Vinalines, throughput on container berths ranges from 20 to 25 units per hour in Saigon port and 30 units in the newport of Cai Lan in Quang Ninh province and general cargo throughput is 1,500 tons/gang/day. These compare very favorably withperformance in other ports of the region. An international comparison reveals that the tariff at Saigon port is quite competitive withother feeder ports in ASEAN and China.


Vietnam Exports - Industry Tree Map

Source: MIT Harvard observatory

Besides agriculture, energy, mining, minerals, Vietnam most exports products are mainly garment and footwear. Mechanic,plastic and composite are also fast developing industries. Almost one-third of manufacturing and retail activity is concentrated inHo Chi Minh City.

Two airlines, both members of Vietnam Airlines Corporation, operate in the country. The dominant one is Vietnam Airlines, whichaccounts for 37 percent of international traffic to and from Vietnam and 94 percent of the domestic demand. The other operator isPacific Airlines which operates mainly between Hanoi and Ho Chi Minh City. It was established in 1995 and is jointly owned by theVietnam Airlines Corporation and several other companies.


A few indicators …

# suppliers

# staff

DOT RPM

For more information …

http://vietnamnews.vn/ www.coface.com

http://www.vir.com.vn/ www.cia.gov/library/publications/the-world-factbook/

http://english.thesaigontimes.vn/ www.cdc.crdb.gov.kh

Working Cost/hour

$0.97 152.00

Avg Lead Time

62

pieces /capita

TO by employee

142 1,990,141 314,978

15414NQC/Million pces in EUR

86% 910

Documents

Country Book Vietnam - 2014 Updated