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Vietnam: Market Profile

Major Economic Indicators

Table: Major Economic Indicators (Vietnam)
Table: Major Economic Indicators (Vietnam)

Latest Development

  • Vietnam’s economy rose 5.7% YOY in 1H 2017 thanks to the expansion in the industry and services sectors, which grew by 5.8% and 6.9% respectively.
  • Consumer price inflation in Vietnam edged up by 3.8% YOY in August 2017, with healthcare and medicine prices rising the most.
  • Hong Kong was Vietnam’s fifth largest source of inward FDI in the first seven months of 2017, valued at about US$0.6 billion.  
  • Vietnam is part of the China-ASEAN Free Trade Area, and it has signed more than 60 double taxation agreements including those with the Chinese mainland and Hong Kong.
  • Hong Kong’s exports to Vietnam increased by 11.4% YOY to US$5.7billion in the first seven months of 2017, while imports gained 8% to US$4.3 billion over the same period.

Current Economic Situation


Vietnam is the sixth largest economy in the 10-member ASEAN bloc, trailing the Philippines yet followed by Myanmar. Its service, industry and agriculture sectors account for, respectively, 44%, 39% and 17% of GDP. Major industry and service sectors of the country include manufacturing, mining, construction, real estate and finance.

In the first six months of 2017, Vietnam’s economy rose 5.7% year-on-year (YOY) thanks in part to the expansion in the industry sector, with manufacturing and processing recording a 10.2% growth. In the same period, the service sector also showed a solid 6.9% increase, supported largely by the 7.1% growth in wholesale and retail. In August 2017, Vietnam’s average consumer price inflation rate registered a YOY rise of 3.8%, driven mainly by higher prices for healthcare and medicine services.

The Vietnamese government has increased the minimum wage between 2010 and 2015 by an annual average of 18%. The National Wage Council announced in 2016 to raise the minimum wage by 7.3% from January 2017, lower than 12.4% for 2016. Nevertheless, Vietnam’s new monthly wage in Hanoi and Ho Chi Minh City (HCMC) now stands at US$166. The Minimum Wage Adjustment Road Map to 2020 released by the Ministry of Labour expects the minimum wage in Region One (covering Hanoi and HCMC) to go up to VND4.8 million (US$213) in 2020.

Economic Restructuring

Under the Master Plan on Economic Restructuring in 2013-2020, restructuring of public investment, banks, and state-owned enterprises (SOEs) is high on government priorities. The Vietnamese authorities aim to divest 406 SOEs by 2020, with 135 scheduled for 2017 alone. SOEs targeted for divestment include the Vietnam Engine and Agricultural Machinery Corporation (VEAM) and the Airports Corporation of Vietnam (ACV).

To accelerate restructuring of the banking system, the Vietnamese government allowed foreign investors to own a bigger share in local banks, in which the equity limit for strategic foreign investors was lifted from 15% to 20% from 2014. In 2015, Vietnam further loosened its restriction on foreign ownership in public companies by allowing equity share of 100% in most public companies, with the exception of a few sensitive industries such as banking and defense.

External Trade

Vietnam’s merchandised exports surged 18.9% YOY to US$97.8 billion in 1H 2017, while imports rose 24.1% YOY to US$100.5 billion, resulting in a trade deficit of US$2.7 billion. The export surge was caused by the rise in demand of electronics, computers and components as well as machines and equipment.

Exports of electronic items accounted for 30% of total merchandise exports in 2016. In particular, exports of phones and components rose 14% YOY to US$34.5 billion, driven by the foreign-invested manufacturing sector. Vietnam’s top export markets in 2016 were the US, China and Japan. 

Major imported items in 2016 consisted of machinery, equipment and parts, and electronics, computers and accessories. A large part of Vietnam’s imported capital goods is related to export assembly. China is the largest source of Vietnam’s imports, followed by Korea and Japan. 

Investment Policy

Vietnam seeks to attract investment across a wide range of sectors, with priority given to areas such as infrastructure projects, manufacturing of high-tech products (biotechnology, IT and mechanical engineering), R&D, and education and training. Eligible projects receive investment incentives including lower corporate income tax (CIT), tax cut or exemption, land-rent reduction and import-duty exemption. More information on Vietnam’s investment environment and regulations can be found at the official website of its Foreign Investment Agency (FIA).

In July 2015, Vietnam adopted a “negative list” approach in its investment policy with the aim to further relax its FDI regulations. Under the new rules, foreign businesses are allowed to operate in all areas except for six prohibited sectors, including certain specified drugs and chemicals, and specified wild plants and animals either under local law or the Convention on International Trade in Endangered Species (CITES). Besides, the list of conditional business sectors was cut from 391 to 267. 

In the wake of the anti-Chinese riots which damaged foreign-invested factories in 2014, the Vietnamese government announced a series of remedial measures, including tax breaks and land rent exemption, to compensate the affected companies. It is reported that with security conditions enhanced in the industrial zones, firms have resumed operations. Foreign investors’ confidence, once badly affected, has gradually recovered with investors remaining positive on Vietnam’s business environment and economic potential.

Foreign Investment

Vietnam’s impressive export growth is largely driven by FDI. According to the Ministry of Planning and Investment, the FDI sector accounted for 72% of Vietnam’s total exports and nearly all of its telephones, electronics and computers and components exported in 2016.

As at 20 July 2017, Vietnam attracted a total FDI inflow of US$12.9 billion. Japan was Vietnam’s largest FDI source (US$4.8 billion), followed by Singapore and Korea. Hong Kong was Vietnam’s fifth largest source of inward FDI in the same period, valued at about US$0.6 billion. Major investment fields include manufacturing, automotive and real estate.

In May 2017, Vietnamese President Tran Dai Quang indicated that his country attaches great importance to broadening and deepening economic, trade and investment relations with China, which is pushing forward the Belt and Road Initiative, Two Corridors and One Circle Plan with Vietnam, as well as the construction of cross-border economic zone in Vietnam.

Table: Vietnam’s FDI Flows
Table: Vietnam’s FDI Flows

Trade Policy

Vietnam became a World Trade Organisation (WTO) member in 2007. While facing fewer restrictions and lower tariffs in export markets, Vietnamese manufacturers also benefit from the improving access to imports of cheaper raw materials and semi-processed inputs as Vietnam's import tariffs drop.

Upon its WTO accession, Vietnam was committed to bound tariff rates on most products ranging from zero to 50%, although tariffs on textiles, cars and motorbikes remain high, with certain sensitive products (such as eggs, tobacco, sugar and salt) subject to tariff quotas (higher duties for quantities exceeding the quotas).

Among other benefits, WTO accession allows Vietnam to take advantage of the phase-out of the Agreement on Textiles and Clothing, which eliminated quotas on textiles and clothing for WTO partners in 2005.

In 2009, Vietnam allowed foreign investors to operate 100% foreign-owned retail business as per its WTO commitments. Previously, foreign companies had to form joint ventures with local companies if they wanted to enter the retail market.

CAFTA Membership

The China-ASEAN Free Trade Area (CAFTA) was formally established in 2010. Under CAFTA, Vietnam is committed to eliminating 90% of its tariff lines for goods traded with China by 2015, with the remaining 10%, which cover items on the sensitive list such as textiles, seeing more gradual tariff reduction. ASEAN and China upgraded CAFTA in late 2015 with an aim to raise bilateral trade to US$1,000 billion and ASEAN-bound FDI to some US$150 billion by 2020. Aside from trade in goods and services, the upgraded CAFTA deal also covers technological cooperation. In 2016, bilateral trade between Vietnam and China reached US$71.9 billion, according the data from Vietnam Customs.

Free Trade Agreements

Vietnam actively pursues regional economic integration through its ASEAN membership, in particular adopting measures in the lead up to the formal launch of the ASEAN Economic Community (AEC) by end-2015. It signed free trade agreements (FTAs) with the Korea and the Eurasian Economic Union (EEU) in 2015 and completed negotiating a free trade agreement with the EU in 2016. The Vietnam-EU FTA will take effect from 2018. Vietnam is currently embarking on an FTA talk with the EFTA countries (Norway, Iceland, Liechtenstein, and Switzerland).

Vietnam is one of the four ASEAN member countries participating in the Trans-Pacific Partnership (TPP) arrangement to advance market opening and liberalisations among its 12 participating members.[1] While TPP was signed in February 2016, the agreement was abandoned by US President Donald Trump after he took office in January 2017.

Vietnam has signed more than 60 double taxation agreement (DTAs), including those with Australia, France, Germany, Japan, Korea, and China. Its Comprehensive Double Taxation Agreement with Hong Kong was concluded in 2014 to take effect in 2015. 

Hong Kong's Trade with Vietnam

In the first seven months of 2017, Vietnam was the 6th largest export market for Hong Kong (and the largest in ASEAN). Hong Kong’s total exports to Vietnam increased by 11.4% YOY to US$5.7 billion. Major export items included telecom equipment & parts (20.8% share), semi-conductors, electronic valves & tubes, etc. (9.9%), and knitted or crocheted fabrics (6.6%).

Hong Kong’s imports from Vietnam gained 8% YOY to US$4.3 billion in the same period. Major import items included semi-conductors, electronic valves & tubes, etc. (46.8% share), telecom equipment & parts (18%) and electrical apparatus for electrical circuits (4.1%). 

Table: Hong Kong Trade with Vietnam
Table: Hong Kong Trade with Vietnam

Vietnam’s involvement in Hong Kong

Vietnamese residents in Hong Kong reached 5,909 as at March 2017, according to the Immigration Department of Hong Kong. In addition, Vietnamese visitors to Hong Kong totalled 27,696 in the first six months of 2017, down by 8.4% YOY.

More Information

More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.

Related information: Vietnam business guide, Vietnam infographics

[1]  These 12 countries include: Australia, Brunei Darussalam, Chile, Japan, Malaysia, Peru, Singapore, the US, Vietnam, Mexico, Canada and New Zealand.

Content provided by Picture: Winnie Tsui