About HKTDC | Media Room | Contact HKTDC | Wish List Wish List () | My HKTDC |
繁體 简体
Save As PDF Email this page Print this page

Vietnam: Market Profile

Major Economic Indicators

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

Latest Development

  • Vietnam’s economy rose only 5.1% YOY in Q1 2017 amid a decline in mining and slower growth in agriculture and manufacturing.
  • Consumer price inflation in Vietnam edged up by 4.7% YOY in March 2017, with healthcare and medicine prices rising the most.
  • Hong Kong was Vietnam’s sixth largest source of inward FDI in 2016, valued at about US$1.6 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 10.9% YOY to US$1.5 billion in the first two months of 2017, while imports gained 6.7% to US$1.1 billion over the same period.

Current Economic Situation


Vietnam is the sixth largest economy in the 10-member ASEAN[1] 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 Q1 2017, Vietnam’s economy rose only 5.1% year-on-year (YOY), the slowest Q1 expansion in three years, mainly due to a decline in mining and sluggishness in the agriculture and manufacturing. In the same period, the service sector recorded a solid 6.5% increase, supported largely by the 7.4% growth in wholesale and retail trade. In March 2017, Vietnam’s average consumer price inflation rate registered a YOY rise of 4.7%, driven mainly by higher prices for healthcare and medicine services. For 2017, the Vietnamese economy is projected to expand by 6.5%, with growth in manufacturing and services buoyed by continued FDI and tourist inflows.

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. Through full or partial privatisation, the plan is to reduce the number of SOEs by half to 690 by 2015, and then to 200 by 2020. SOEs targeted for divestment include the country’s largest listed company Vinamilk, and leading brewers Saigon Alcohol Beer and Beverages Corporation (Sabeco) and Hanoi Beer Alcohol and Beverage Joint Stock Corp (Habeco).

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

According to Vietnam General Department of Customs, exports surged 15.1% YOY to US$44.7 billion in Q1 2017, while imports rose 24.9% YOY to US$46.6 billion, resulting in a trade deficit of US$1.9 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 May 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.

In 2016, Vietnam attracted a total FDI inflow of US$24.4 billion. Korea was Vietnam’s largest FDI source (US$7 billion), followed by Japan and Singapore. Hong Kong was Vietnam’s sixth largest source of inward FDI in the same year, valued at about US$1.6 billion. 

In 2016, the largest FDI sector in Vietnam was manufacturing and processing, accounting for some 60% of total inward FDI. Other major investment fields include production and distribution of electricity, gas, hot water and steam and real estate. 

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. 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.[2] 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 two 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 10.9% YOY to US$1.5 billion. Major export items included telecom equipment & parts (21.7% share), semi-conductors, electronic valves & tubes, etc. (8.5%), and other meat & edible meat offal (fresh, chilled or frozen) (7.1%).

Hong Kong’s imports from Vietnam gained 6.7% YOY to US$1.1 billion in the same period. Major import items included semi-conductors, electronic valves & tubes, etc. (46.7% share), telecom equipment & parts (20%) and electrical apparatus for electrical circuits (5%). 

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 59,443 in 2016, increasing by 0.8% 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 infographics

[1]  ASEAN consists of 10 members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

[2]  Theses 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