This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 7/19/2018

This is a best prospect industry sector for this country. Includes a market overview and trade data.


Vietnam has seen some of the largest increases in military expenditures in Southeast Asia. Between 2005 and 2014, its military spending increased nearly 400 percent. During that time, Vietnam was narrowing its military focus to contributing to maritime security related activities. These efforts encompass air force, air defense, surface, and subsurface capabilities. Defense equipment suppliers and subcontractors can expect increased demand for naval combatants, aerial defense, intelligence systems, and surveillance and reconnaissance (ISR) equipment. Though locked out of the market for decades, U.S. firms are seeing interest in their technology as the regulatory framework has improved for exporting U.S. defense equipment and services to Vietnam, opening significant commercial opportunities for American firms. These policy changes were finalized during President Obama’s official visit to Vietnam in May 2016, when he formally announced the lifting of the decades-old arms embargo against the country.
Market Data and Demand
Per the Stockholm International Peace Research Institute in 2016, Vietnam’s military expenditures totaled $5 billion, or 8 percent of total government spending. This number was not publicized by the government in most of the past decade, but it has increased as mentioned above. Vietnam’s military spending has hovered around 4 percent but is expected to climb to $6.2 billion by the year 2020. Vietnam was number twelve on the list of top arms importers in the world between the years 2010 and 2016.
Vietnam is concentrating on modernizing its maritime capabilities. In 2011, it issued a detailed maritime strategy for 2011-2020, making the protection of maritime sovereignty and the maritime economy a key national security pillar. Because Vietnam has a 2,000-mile coastline facing the East Sea (South China Sea) and 50 percent of its population lives along the coast, the government sees maritime as its greatest security threat. In 2016, approximately $1.6 billion was earmarked for maritime defense capabilities, but this is expected to increase to $2 billion by 2020. The Vietnamese Navy and Air Force had very little capacity to protect Vietnam’s maritime interests, but over the past decade both services have undergone some modernization.
Russia is Vietnam’s main arms supplier and the major platforms acquired from it since 2011 have served to upgrade Vietnam’s capability to conduct sea operations in the East Sea.
Vietnam continues to upgrade its defensive missile systems. In 2011, Vietnam bought two batteries of K-300P Bastion coastal missile systems, followed by two batteries of S-300 PMU-2 long-range surface-to-air missile systems in 2012. In 2014, they upgraded their short-range surface-to-air missile systems and their missile systems, while also boosting the radar surveillance systems, and successfully built its first UAV in 2013, all demonstrating nascent capability.
Vietnam is gradually expanding its national defense industrial base through overseas partnerships and technology transfers. Damen Shipyard, in the Netherlands, is assisting in the design and production of both commercial and military vessels. In 2016, Vietnam successfully constructed and launched two 600-ton troop carriers for delivery to Venezuela. Because of technology transfer from Russia, Vietnam has begun the production of the KCT 15 anti-surface warfare missile. India is also emerging as a defense industry partner with Vietnam. India is currently upgrading Vietnam’s Petya-class light frigates for anti-submarine warfare and expanding existing services to upgrade the current stock of Soviet-era military equipment, including; thermal sights fire control systems for armored vehicles, T-54 and T-55 tanks, and M-17/MI-8 helicopters. The lifting of the U.S. arms embargo has opened the possibility of co-production.
Market Issues and Obstacles
Vietnam’s Ministry of National Defense (MND) limits the number of businesses that may import or export defense equipment. Per MND’s decision No. 84, in 2007, regulating the import and export of defense equipment, General Import-Export Vanxuan Corporation (VAXUCO), a military goods importer owned by MND, is the ministry’s designated importer of military goods, and is authorized to sign purchases on behalf of MND. Other importers of dual-use military goods are GAET, Viettel, Tecapro, Elinco, Hitaco and Thai Son Corporation. It is important to note that these firms are all state-owned enterprises (SOE) under MND.
The lack of private participants and transparency severely restricts their defense industry growth. In 2011, the government passed legislation that prohibits selling stakes of state-owned defense companies to the private sector. The legislation also requires that the state will hold 100 percent of the charter capital in any enterprises involving national defense, national security, and all military held commercial enterprises. This prevents any private participation and thwarts any foreign direct investment into the country’s defense sector and MND maintains 100 percent control. Furthermore, the country does not publish any data or specifics about the defense budget or procurements. This lack of transparency can be extremely discouraging to investors and can prevent market entry.

Leading Sub-Sectors

Vietnam is interested in developing its surface and submarine fleets, as well as anti-ship batteries, missiles, and other coastal defenses. They are also considering purchasing more combat aircraft and naval patrol marine craft. These changes in Vietnam’s strategy may lead to opportunities for U.S. defense equipment, but the government is likely to need some financial aid to complete these purchases. Much of the business is expected to include some form of collaboration. In recent years, Vietnam has requested and pushed for joint production or joint R&D projects to help upgrade its domestic capabilities.
The country’s limited domestic defense capability offers an opportunity for a considerable number of foreign OEM’s to venture into the Vietnamese defense market. The country’s defense industry is dominated by the Russians, but European suppliers have recently entered the market through direct commercial sales and some U.S suppliers have entered through Foreign Military Sales (FMS). It is important to note that Vietnam prefers government to government procurement when dealing with defense systems. Developing and participating in government to government relationships is an important avenue to increase business opportunities for U.S. firms.


In 2015 and 2016, the U.S. Commercial Servce office in Vietnam, working with the Office of Defense Cooperation, hosted the U.S Defense Industry Promotion Symposium, with the support of MND. This event was created to allow U.S. defense firms to promote their goods and services directly to MND, while educating MND officials about U.S. licensing requirements. There is no date currently set for the third installment of this conference, though another event in 2018 is being proposed.

Web Resources

Office of Defense Attaché – U.S. Embassy:
Vietnam Ministry of Defense:

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More Information

Vietnam Aerospace and Defense Trade Development and Promotion