Sourcing and Trade with Vietnam

Vietnam, has a dynamic story, as one of the fastest growing economies in Asia.. It is well positioned to be one of the hottest manufacturing zones in the world for the next 30 years. Its also an excellent target market for import of sophisticated technologies that help with its growth, including LEED building materials, cold storage technologies, green energy tech, and renewables.

About The Country

In the mid to late 20th century, Vietnam was nearly destroyed by decades colonial degradation and war, which changed the country and set it back several decades. But that is all in past now, and there is an amazing energy in the country, building for the future. 

Vietnam  has a population of over 96 million people, in the top 15 countries for population. The country has distinct population and economic regions of the North, South, and Central Vietnam. The two largest cities, Ho Chi Minh City (12 million people) in the South, the business hub, and Hanoi (8 million) in the North, the government capital city. The Central zone hub is Da Nang at about 2 million people. 

For  the government, Vietnam is comprised of 58 provinces, with provincial governments and a parliament system at the federal Level.  Its technically a socialist communistic political system but operates a  laissez-faire  capitalistic economic model.  The country is full of entrepreneurs and free market wealth, albeit with a very large impoverished population as well, as the General Trade to Modern Trade ratio is about 70% to 30%, respectively.

One could argue that the economy of Vietnam would be equivalent to Thailand in advancement of GDP per capita, had the Vietnam/American War never happened after the first Indo China war treaty in 1954.

The Economics

Their GDP growth rate has been at about 6 to 7 percent, over the last decade, prior to the Covid pandemic.. It has recovered faster than most economies in Asia, as the pandemic has waned.. however, of recent there is a downturn due to global inflation forces that have affected factory orders, plus the ongoing Ukraine Russia War effects.. The country is also in a major real estate reset due to over extension of credit. 

Western brands are well respected for quality and safety, and established brand name products have strong pull in the country, due to brand loyalty. 

If new brands wish to enter the market, they should expect to invest in heavy channel marketing for the first 2 years, and have a local partner group to help guide them through the market nuances including cultural adaption.

Vietnam is very progressive in its export centric economics policies. It provides a somewhat easy path for doing business Vietnam, whether importing or exporting from the country. If an export to Vietnam, it is good to have key distribution partners, for first phase rollout. 

The United States is Vietnam’s largest export market, with US$28.5 billion. The EU is second with US$27.9 billion, ASEAN countries combined are 3rd, China is fourth and Japan is the fifth largest export market of Vietnam. (according to World Bank 2022).

The evolving government policies have made it very inviting to Foreign Direct Investment (FDI). Because of this, it is fast becoming a major manufacturing hub for many types of goods, and a good choice for diversification or re-location of manufacturing or contracting manufacturing, moving away from places like the China supply chain.

Vietnam has many free trade agreements in place, including the recent such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam FTA (EVFTA), UK-Vietnam FTA (UKVFTA), and most recently the RCEP, the Regional Comprehensive Economic Partnership, which is comprised of 14 countries in SE Asia, as well as China, Japan and Korea.

Key Reasons to Consider Manufacturing in Vietnam

Young Work Force: Median Age is around 26.

Highly Educated Work Force: Investment by government in good secondary education plus the university system, which is very affordable.

Good Engineering Skills: A strong base of highly trained mechanical, electric engineers, and designers of products.

Low Labor Cost for Blue Collar and White Collar jobs. (now lower than China)

Good infrastructure: Ho Chi Minh and Hanoi are both building subway systems. and the airports work well and fairly modern. Besides good port systems in Hanoi, HCMC, and Danang, the country has a good supply of Industrial parks near ports, and land leases are favorable. Many Chinese and Non-Chinese companies are in process of making the move into Vietnam, due to very favorable conditions.

Low Cost of Living: Housing and food costs are very low

Good English Comprehension In Business: Mandatory training in schools and lots of private English schools, makes Vietnam a fairly easy place for business transactions.

Low Inflation Rate: Staying at around 3 to 4%.

For many reasons Vietnam makes an opportune place to do business as a manufacturer, exporter, or  outsourcing market.