Vietnam - Market OverviewVietnam Market Overview
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“The growth of the middle class and the increasing purchasing power in Vietnam are further incentives to strengthening our long-term trade and investment relationship"
Secretary of Commerce - Wilbur Ross - May 31, 2017, Washington, DC
“We have overcome many difficulties and challenges to turn from foes to friends and now a comprehensive partnership built on a strong foundation. Our economies are fully complementary and with increasing trade come stronger mutual benefits.”
Prime Minister - Nguyen Xuan Phuc - May 30, 2017, New York City
The U.S.-Vietnamese commercial relationship has grown dynamically since the United States lifted its trade embargo against Vietnam in 1994 and the two countries renewed diplomatic relations in 1995. The U.S. is now Vietnam’s largest export market and a major source of foreign direct investment, helping fuel Vietnam’s remarkable economic growth. Conversely, over the last two years, Vietnam has become the United States’ fastest growing export market, demonstrating the increasing demand for U.S. technologies and goods. This populous country of over 93 million consumers, with a positive view towards the U.S., exhibits the demographics needed for continuous growth over the next twenty years, and is a rising star among Asia’s bustling economies. U.S. firms, previously slow to take advantage of the growing opportunities that Vietnam presents, are increasingly looking towards this market as a key component to their growth strategies in Asia. This Country Commercial Guide is intended to introduce U.S. exporters to doing business in Vietnam and provide the foundation necessary for a firm to take the initial steps needed to pursue business here.
Top 5 reasons why U.S. companies should consider exporting to Vietnam:
- Strong GDP growth expected to continue for medium term.
- The fastest-growing middle and affluent class in the region, with young consumers who are among the most optimistic in the world providing the right demographics for growth and receptivity to U.S. products and services.
- Extraordinary growth in U.S. exports.
- Large population of over 93 million consumers.
- Political stability in a region known for its uncertainty.
Over the past 25 years, since economic reforms were initiated in the late 1980s, Vietnam’s annual economic growth rate of 5.3% has been second only to China in Asia. Vietnam has rebounded from the doldrums of the last decade’s global financial crisis as the country has regained its luster as an investment destination and export market. Last year closed with GDP growth of 6.2%, down from the 6.7% growth in 2015, but stronger than regional peers. Vietnam started 2017 with high expectations, as the Asian Development Outlook report forecasts Vietnam’s economy to expand by 6.5% in 2017 and 6.7% in 2018, due to rising activity in the manufacturing, construction, wholesale and retail trade, banking and tourism sectors. This has lead PriceWaterhouse Coopers to predict that: 1) Vietnam will have the strongest average GDP growth till 2050, exceeding 5.1 percent a year; and 2) Vietnam will move from the 32nd largest economy to the 20th by 2050.
This strong economic growth has resulted in a booming and optimistic middle class. In a report titled Vietnam and Myanmar: Southeast Asia’s New Growth Frontiers, the Boston Consulting group states, “by 2020, Vietnam’s middle and affluent class (MAC) population will be two-thirds the size of Thailand’s MAC population.” Per Knight Frank’s The Wealth Report, “the dramatic growth of ultra-high net worth individuals in Asia is set to be reinforced by stellar growth rates in several countries, including Vietnam, which is expected to see its ultra-wealthy population rise by 170% to 540 over the next decade – the highest rate of growth in the world. Millionaire numbers are expected to jump from 14,300 to 38,600 over the same period.” This growth rate exceeds neighboring China and India. This may be why Bloomberg’s 2017 Global Misery Index ranked Vietnam as the 12th happiest economy.
The 2001 U.S.–Vietnam Bilateral Trade Agreement (BTA) transformed the bilateral commercial relationship between our two nations and accelerated Vietnam’s entry into the global economy, with Vietnam joining the WTO in January of 2007. Since the BTA, bilateral trade increased from $2.9 billion in 2002 to over $52 billion in 2016, considerably to the benefit of Vietnam, which held a $31 billion trade surplus with the U.S.
U.S. exports to Vietnam grew by 23.3 percent to $7.1 billion in 2015, and by 43.2% in 2016, resulting in a two-year increase of 77.1%. This was by far the largest increase out of the U.S.’s top 50 export markets, and not just in percentages. Over 2015 and 2016, U.S. exports to Vietnam increased by over $4.4 billion, more than twice that of second place Ireland, which saw an increase in U.S. exports of only $1.7 billion.
U.S. export of agricultural products account for nearly half of total exports to Vietnam, and the country jumped from the 11th highest value destination for U.S. agriculture exports in the world to 8th in just one year (2015 – 2016). Industrial inputs continued to see steady growth as Vietnam continues to import machinery, chemicals, instruments and software to support its growing industrial sector.
As a December 2016 Harvard Business Review article noted, Vietnam is one of the “frontier economies” forecast to grow the fastest over the next five years. Such economies are “characterized by politically manipulated markets, weak legal systems, and low per capita income,” but are increasingly becoming targeted by multinationals seeking double-digit growth.
Vietnam Trade Development and Promotion