Our comprehensive assessment of Vietnam's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Vietnam, as well as the latest industry developments that could impact Vietnam's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Vietnam before your competitors.

Country Risk

Vietnam Country Risk

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Core Views

  • Vietnam will remain susceptible to maritime confrontations with China, despite the recent easing of tensions. Meanwhile, Vietnam will continue to court India and the US in a bid to counterbalance China's growing influence in the region. That said, Hanoi will seek to avoid a breakdown in relations with Beijing, given China's importance as a trade partner.

  • We expect solid growth momentum in the Vietnamese economy to be carried over to 2015, on the back of continued foreign direct investment (FDI) inflows, strong performance in the manufacturing and export sectors, and ongoing efforts by the government to address the high level of bad debts in the banking sector. We maintain our forecast for real GDP to grow at 5.7% in 2014, ahead of an acceleration to 6.4% in 2015.

  • Vietnam's external health will improve gradually over the coming...

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Vietnam Operational Risk Coverage (9)

Vietnam Operational Risk

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Vietnam offers investors a number of strategic advantages within its operational environment, including a large, predominantly youthful workforce with basic literacy and numeracy skills, increasing levels of foreign economic participation and trade, a low level of risk from its security environment, and the potential to become a regional trade hub. However, labour flexibility is limited, and corruption and heavy state intervention continue to disrupt competition and adherence to the rule of law, among other factors. BMI awards Vietnam an Operational Risk score of 55.4 out of 100, ranking 11th out of 30 states in Asia, ahead of Cambodia (20th), Laos (24th) and Myanmar (26th) but behind Thailand in 10th place in the South East Asia sub-regional comparison.

One of Vietnam's primary attractions for investors is its labour force. The country offers businesses an increasingly young and well-educated population with high...

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Vietnam Crime & Security

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BMI View: Oman's transport sector has been experiencing a significant expansion . T he government has a f ive-year spending plan (2011-2015), which foresees OMR30bn (US$78bn) of expenditure, the majority of which is allocated to social and transport infrastructure . In addition, the participation of Oman in one of the biggest infrastructure projects in the Gulf - the inter-Gulf Cooperation Council rail network - will greatly enhance the country's transport links.

Transport Infrastructure...

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Vietnam Labour Market

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Vietnam offers a number of notable advantages to firms in the national labour market. Companies enjoy access to a competitive and available workforce characterised by high rates of literacy and numeracy for Vietnam's income level and an increasingly skilled and well-educated graduate population, suiting the needs of firms engaged in a diversity of activities. However, the cost of labour represents the largest source of risk to companies due to a difficult labour-management environment, troubles in hiring foreign workers, and a high rate of labour strikes, increasing firm costs and threatening business activities. Taking these factors into account, Vietnam received a score of 49.3 out of 100 for its labour market risk, meriting a rank of 14 th regionally out of 29 Asian countries. The country therefore falls in the middle of the sub-regional pack, between Southeast Asian leaders such as Singapore (second), Malaysia (ninth) and Thailand (10 th...

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Vietnam Logistics

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While Vietnam's logistic infrastructure is basically sound, its rapid rate of economic growth, export-focused industrial base and ambitious economic goals have meant that constant improvements are required to keep pace. Logistics operations are still costly relative to key regional peers such as China, Malaysia and Thailand, primarily because of unpredictability in supply chains, which increases costs by making it necessary for businesses to carry more inventory than they would otherwise need to manage their everyday operations. We give Vietnam a score of 64.3 out of 100, in 11 th place in the 30 Asian countries and territories we assess in our Logistics Risk Index.

According to the World Economic Forum's Global Competitiveness Survey, inadequate supply of infrastructure is ranked as the fifth most problematic factor for firms doing business in Vietnam.

The key causes of supply chain unpredictability are...

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Vietnam Trade & Investment

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Vietnam falls in the middle of the regional pack for its level of Trade And Investment Risk, offering both major advantages and drawbacks to foreign investors and businesses. Firms benefit from a high level of economic openness, which has enabled an impressive expansion in both trade and foreign investment. However, firm productivity and competitiveness are hindered by a diversity of factors, including high levels of government intervention in the economy, pervasive corruption that adversely impacts the efficacy of the legal system, an underdeveloped banking system, and a limited playing field for private companies vis-à-vis public firms. Taking these factors into account, Vietnam received a score of 43.1 out of 100 for Trade And Investment Risk, placing 16 th out of 29 Asian countries, between excellent sub-regional performers such as Singapore (2 nd), Malaysia (5 th), and Thailand (9 th), and underdeveloped countries...

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Vietnam Industry Coverage (20)

Agribusiness

Vietnam Agribusiness

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BMI View: Recent developments in the country's economic and business environment outlooks add further weight to our positive view on Vietnam's agribusiness sector. The industry holds strong growth opportunities in terms of production, exports and retail sales, particularly with regard to the rice, coffee, livestock and dairy sectors. Moreover, the upcoming economic and financial integration in South East Asia will benefit Vietnam's exports of rice, dairy and coffee. However, Vietnam is facing growing competition in its key markets, and the fulfillment of its promising potential will only be achieved if the country steps up its competitiveness and improves both product quality and supply chain efficiency. Vietnam will have to significantly ramp up investments on crop productivity in order to not be left behind, and if it does, ...

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Autos

Vietnam Autos

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The Vietnam Automobile Manufacturers Association (VAMA) reported that auto sales in July rose 36.0% year-on-year (y-o-y), with passenger vehicles climbing 19.2% y-o-y, while commercial vehicles (CVs) surged 67.6% y-o-y. For the first seven months of 2014, domestic auto sales grew 28.4% to 65,130 units.

Between January and July, passenger car sales (including SUVs) recorded growth of 28.5% to 38,471 units. Passenger car sales have been lifted by the recent 50 basis point cut by the State Bank of Vietnam to its benchmark refinancing rate to 6.50% which helped to ease credit and make it more conducive for consumers to take on financing to purchase new cars. We have accounted for this in our forecast, and maintain our passenger car sales growth forecast to 13.5% in 2014.

Meanwhile, sales growth for CVs surged 67.6% y-o-y, underpinned by tightened regulations for overloaded trucks, resulting in more businesses having to...

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Commercial Banking

Vietnam Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Vietnam Consumer Electronics

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BMI View:   There is short-term downside to our consumer electronics spending outlook due to a tightening of domestic credit conditions in H214 due to a build of bad debts by Vietnamese banks. However we maintain that Vietnam's consumer electronics market has a bright outlook as rising incomes and falling average device prices in key device categories over the medium term catalyse strong growth in spending. We estimate spending grew by 17 .4% in US dollar terms in 2013 to USD 4.5bn - and we have a positive outlook for the medium term with a CAGR of 6.2% forecast 2014-2018 . The country's vast, underpenetrated rural market offers the greatest growth potential, while Hanoi and Ho Chi Minh...

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Defence & Security

Vietnam Defence & Security

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BMI View: The Vietnamese defence sector is quickly opening up to foreign companies. Rising tension with China necessitates development of new defence relationships, as well as modernisation and expansion of the national defence forces. Meanwhile, strong economic growth is increasing the financing available for procurement of new military hardware .

Vietnam is involved in territorial disputes with China in the South China Sea, most notably over the Spratly and Parcel Islands. Tensions reached a new high in May which resulted in a two month stand-off between opposing naval forces, and small scale skirmishes between vessels. Tension came to a head in August, when a Vietnamese envoy to Beijing successfully ended the stand-off. Relations remain fraught however, and China is likely to exert economic pressure on its neighbour, which could have serious consequences for...

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Food & Drink

Vietnam Food & Drink

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BMI View:   We hold a positive outlook for the Vietnamese consumer, as the government targets economic growth through public spending and promoting investment and exports. We forecast real GDPP growth to come in at 6.4% in 2015, and we continue to believe that the economy will be driven by growth supportive government policies, as well as a strong outlook for foreign investment and exports. That said , our Country Risk team has recently revised down its forecast for Vietnamese economic growth in 2015, and political risks remain in the form of Chinese tensions, which we believe will continue for some time.

Headline Industry Data

  • 2014 total food consumption (local currency) growth: +19.2%; compound annual growth rate (CAGR) 2014 to 2018: +15.5%.

  • ...

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Freight Transport

Vietnam Freight Transport

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The Vietnamese economy has gained momentum over recent quarters, growth that we expect to see reflected in the country's freight mix over the short term at least. However, in addition to the fragile banking sector, which is heavily burdened by the high level of non-performing loans, the health of Vietnam's external position has been a concern among investors and multinational companies alike. Indeed, the country has one of the highest external debts as a share of GDP among its regional peers, with the ratio at an estimated 37.6% in 2013.

Heading into 2015, we expect to see annual growth across the freight modes to remain healthy across the board with road freight being the outperformer in terms of year-on-year (y-o-y) growth - 6.00%. Both rail and air freight are set to register the same level of growth in 2015 (3.40%), while the Vietnamese ports sector will once again see strong annual growth in terms of tonnage handled.

...

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Information Technology

Vietnam Information Technology

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BMI View:   We maintain a positive outlook for the Vietnamese IT market in the Q4 update, but we highlight increased downside risk from a tightening of domestic credit conditions in H214 as a result of a build up of bad debt. Credit markets could cause short term disruption but our forecast for robust medium term growth in Vietnamese IT spending remains in place, with a forecast for a compound annual growth rate   ( CAGR ) of 12.6 % between 2014 and 2018 . We expect growth will be driven by rising...

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Infrastructure

Vietnam Infrastructure

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BMI View: While we have upgraded the real growth forecast for Vietnam's infrastructure industry to 1.8% in 2014 (from 1.3% previously), we note that this rate remains well below the potential suggested by the country's strong foreign direct investment and improving business environment. For 2015, we continue to expect a pick-up to 4.3%.

 

The major developments in Vietnam's infrastructure sector are:

  • Our relatively downbeat forecast for infrastructure sector growth in 2014 and 2015 results from the fact that the sector's recovery is taking longer than expected. Specifically, we note that there is a lack of upside in near-term spending from the domestic public and private sectors, which is brought on by the dominance and excessiveness of the country's state-owned enterprises (SOEs). While...

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Insurance

Vietnam Insurance

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BMI View: While there are still obstacles impeding the growth of the insurance sector in Vietnam there is reason to believe these obstacles can be overcome and strong premium growth can prevail in the long term. For the last few years Vietnam's insurance industry has been plagued by slow economic growth and a harsh competitive environment which has meant improving market penetration has been difficult. Recently, however, increased emphasis on innovating both insurance products and distribution channels has kick-started demand in the sector. Also, taking account of the large population of Vietnam and rising incomes, there is certainly massive potential for premium growth. Because of this we maintain our view that Vietnams insurance sector will grow at high single digit figures over the forecast period.

While Vietnam's insurance sector lags slightly behind its South East Asian counterparts there...

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Medical Devices

Vietnam Medical Devices

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Espicom Industry View : The Vietnamese medical device market is expected to remain one of the strongest in Asia, despite a moderation in import growth over the past couple of years . Continuing strong economic growth and increasing political/trade links with the outside world should boost income levels and allow for a continuation in the rapid rise in health spending seen in recent years . The country has attracted increasing interest from foreign investors and is starting to establish itself as a low-cost manufacturing base .

Headline Industry Forecasts

  • The medical device market is estimated at US$645.4mn in 2013, or US$7.0 per capita. It is expected that the device market will continue to expand strongly at a 2013-2018...

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Mining

Vietnam Mining

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BMI View: The cooling of the Chinese economy will remove the shine off mining investment in South East Asia . Frontier regions will be the first places where miners pull back their investment as brownfield projects take precedence . Nonetheless, it is certainly not all gloomy in the mining sector. Resilient demand from the power sector will continue to support growth in coal production, while the positive development of the nuclear sector in South Korea fuels uranium mining production.

Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to uncover its potential over the coming years. The cooling of Chinese economic growth will remove a crucial pillar of support for mineral prices, particularly industrial metals such as iron ore and copper. For instance, we...

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Oil & Gas

Vietnam Oil & Gas

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BMI View : We have grown increasingly bearish on Vietnam's long-term oil and gas production outlook, as new output and ongoing project expansions fail to offset severe decline at the country's major producing fields. This is particularly pertinent as a number of new projects have hit delays. Renewed exploration and several recent discoveries offer significant upside risk to our view; however, more attractive pricing terms and improvements to the regulatory environment may be needed to accelerate project developments.

...
Headline Forecasts (Vietnam 2012-2018)
2012e 2013e

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Petrochemicals

Vietnam Petrochemicals

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BMI View: T he Vietnamese petrochemicals market co ntinues to exhibit solid growth. While the domestic producers struggle to keep pace due to capacity constraint, Vietnam relies heavily on imports and we warn of project delays and heightened competition from US producers in the medium term, which could increase costs and undermine competitiveness.

Vietnam is growing rapidly in terms of chemicals and derivatives. Limited capacity leads to a reliance on imports for domestic conversion and end-product manufacturing. With refinery developments in the pipeline, Vietnam will be able to increase capacities, particularly for polypropylene and ethylene in the medium term. However, slow land clearance and financing problems delay these projects, postponing capacity increases by a number of years.

Aside from...

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Pharmaceuticals & Healthcare

Vietnam Pharmaceuticals & Healthcare

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BMI View:   The attractiveness of Vietnam's pharmaceutical market is steadily increasing. Whil e structural challenges remain, such as the country's increasingly ageing population and under-capacity in terms of healthcare infrastructure and personnel , growth in expenditure is supported by a significant disease burden, the new insurance law, introduction of new products, more corporate investments and better regulations.

Headline Expenditure Projections

  • Pharmaceuticals: VND69,297bn (USD3.30bn) in 2013 to VND80,680bn (USD3.92bn) in 2014; +16.4% in local currency terms and +19.1% in US dollar terms. ...

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Power

Vietnam Power

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BMI View : There are significant opportunities for independent power producers (IPPs), turbine manufacturers and private investors in Vietnam's thermal power generation sector - particularly the coal segment. A flurry of private sector activity in the coal sector will be supported by rapid growth in electricity demand and market deregulation, as well as delays to nuclear expansion and insuf ficient domestic gas supplies.

The thermal generation segment in Vietnam will continue to offer sizeable opportunities for investors and equipment suppliers. A number of large-scale power projects have advanced in recent months - with institutional investors and utilities entering the sector in order to benefit from the huge growth potential.

This is just a snapshot of the type of opportunities on offer to investors. Our views on the...

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Real Estate

Vietnam Real Estate

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BMI View: The international reputation of Vietnam's real estate sector is steadily building. Increasing levels of foreign direct investment (FDI) are testament to the growing demand for commercial real estate space in particular , combined with accelerating economic growth and an improving regulatory climate .

Vietnam's commercial real estate sector is strengthening as it increasingly opens itself up to foreign investment. FDI into the real estate market grew to almost USD10bn in the first half of 2014, making it one of the largest recipients of foreign capital in the Southeast Asia region. Various factors have combined to pique the interest of overseas developers and investors.

Firstly, the economy is now on a firmer footing, with growth of 5.9% forecast...

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Shipping

Vietnam Shipping

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The growth levels at Vietnam's two major ports - Ho Chi Minh City and Da Nang - are set to continue to impress in both the short and medium term. Whereas the port of Ho Chi Minh City is anticipated to lead the way in year-on-year (y-o-y) tonnage throughput terms in 2015 (y-o-y gains of 7.62%), the port of Da Nang is set to register the highest box throughput increase this year, hitting double digit growth (10.00%). Vietnam's external health will improve gradually over the coming years, as we expect a gradual narrowing of the country's fiscal deficit, which is the catalyst behind our positive forecasts for the country's shipping sector. We forecast Vietnam's external debt as a share of GDP to fall from an estimated 37.6% in 2013 to 22.0% by 2023. 

However, while the Vietnamese economy has gained momentum over recent quarters, it continues to face several structural risks that pose a threat to its long-term growth. In addition to the fragile...

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Telecommunications

Vietnam Telecommunications

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BMI View :  Owing to the rising popularity of smartphones in Vietnam, dema nd for rapid data communication has been growing strongly in the country. However, the pace of 3G adoption rate has been lukewarm, and we believe that this has mainly been due to poor network infrastructure in the country. That said, we have recentl y raised our outlook slightly for the country's broadband market, as telecom operator Viettel has made plans to roll out high speed internet service nationwide in 2014. This will help to increase Vietnam's broadband penetration from 5.6% in 2013 to 8.1% over the next 5 years.

Key Data:

  • We are forecasting 138.0mn mobile subscribers by end-2018, a 144%...

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Tourism

Vietnam Tourism

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Vietnam is rapidly growing as a popular tourism destination in the Asia Pacific region and could eventually rival more established markets such as nearby Thailand. The country is developing its transport infrastructure network in order to facilitate domestic and international travel, and a range of hotel developers are taking note of the potential for growth. With a healthy variety of tourist attractions, we expect to see a steady increase in inbound travel to Vietnam throughout the forecast period.

Vietnam offers a wealth of tourist attractions, from historical and cultural sites in Ho Chi Minh City and Hoi An to beach holiday destinations and jungle excursions. In recent years the country has relaxed visa requirements, making travel more accessible, and it was recently reported that the government was considering waiving visa requirements for more countries including key markets such as France, Germany, the UK, Spain, Italy, Australia, New...

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