March, 2015

Contents
Vietnam Macroeconomic Indicators
Vietnam An attractive destination
Chapter 1: Business Environment
SWOT Analysis
Infrastructure
Market orientation
Calling for Investment
Chapter 2: Political Outlook
SWOT Analysis
Domestic Politics
Long-term Political Outlook
2
 Contents

Chapter 3: Economic Outlook

SWOT Analysis
Economic Activity
FDI uptick signals investment-led growth

Conclusion

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Vietnam Macroeconomic Indicators

2013* 2014* 2015f 2016f 2017f

Nominal GDP, US$bn 141.0 184.0 220.8 248.6 280.4
GDP per capita, US$ 1,900 2,028 2,364 2,639 2,952
Real GDP growth,
% change y-o-y
5.42 5.98 6.4 6.6 6.4

Population, mn 90.0 90.7 93.4 94.2 95.0

Unemployment,
4.8 2.08 3.4 3.5 3.5
% of labour force, eop
Lending rate, %, ave 9.0 8.0 7.0 7.0 7.0
Exchange rate VND/US$, ave 20,900.00 20,800.00 20,330.00 20,215.00 20,000.00
Goods and services exports,
US$bn
132.2 150 168 186.8 208.3

Notes: * General Statistics Office; f BMI- Business Monitor International forecasts.

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Vietnam Macroeconomic Indicators

According to GSO (Vietnam General Statistic Office), GDP of Vietnam in

2014 reached $ 184 billion, up 5.98% compared to 2013.
GDP per capita of Vietnam in 2014 reached $ 2,028.

US
Germany
Japan
China
India
Vietnam

GDP growth of Vietnam, comparing to some other countries.

- Source: IMF 5
Vietnam Macroeconomic Indicators
Goods and services exports of Vietnam in 2014 reached $ 150
billion, up 13.6% compared to 2013.
23.6
10 Biggest Export Group Biggest Export Markets
21.2 20.9 2013 2014
14.7
17.9
Japan 13.5

11.4
10.6 10.3 14.8
8.4
7.8
7.3
China 13.1
6.7 6.76.9
6.0 6.2
5.6 5.6
5.0
3.6
2.7
19.0 2014
ASEAN 18.4
2013
Vehicles and parts
Crude oil
Footwear

Seafood
Textiles

products and components

Wood and wood products

Phone and accessories

Rice
Machinery and spare parts
Computers, electronic

27.9
EU 23.8

28.5
US 22.9

6
- Source: General Department of Vietnam Customs
Vietnam Macroeconomic Indicators
The avarage CPI of Vietnam in 2014 was 4.09%, the lowest point in
the last 10 years.

PMI index of Vietnam has been over 50 for 14 months.

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Vietnam An attractive destination
1. Location:
- Vietnams location its proximity to China and South East Asia, and its good sea links
makes it a good base for foreign companies to export to the rest of Asia, and
beyond.
Vietnam An attractive destination
2. A low manufacturing cost but skilled workforce country:
- Vietnam has a large, skilled and low-cost workforce, which has made the country
attractive to foreign investors.
- The labor pool is increasing by up to 1.5mn a year, while wage costs are still low
compared with other countries in the region, although wage growth has picked up
pace in recent years.
- Some of costs that related to business operation:
Fuel: Gasoline A95 Diesel Labor cost:
(per liter): (per liter): First area: $150
$0.76 $0.71
Second area: $130
Electricity: Third area: $120
Updated on Mar 5 2015
per kWh (ave) Forth area: $100
$0.07
- Applied since Jan 1 2015

3. Foreign Direct Investment strongly supported by Government:

- The government is looking to fully maximize economic gains from FDI by reviewing
and establishing new standards to give priority to investment projects that are likely
to boost employment and labor productivity, allow for technological transfer, and
improve the overall efficiency of the economy.
Vietnam An attractive destination

4. Political stability:
- The Communist Party of Vietnam (CPV) remains committed to market oriented
reforms. The one-party system is generally conducive to short-term political
stability.
- Political reforms for a more balanced and democratic political system as a crucial
element in driving the country's economic growth over the long run. These limited
reforms will first come in the form of allowing for more debate within the National
Assembly (NA) on:
economic policies,
increased transparency and accountability from the government,
greater efforts to clampdown and address rampant corruption at the lower
level, and
an increased tolerance towards the impact of social media and the internet.
Vietnam An attractive destination
5. Foreign Trade Regime:
Member of the WTO in January 2007.
Bilateral trade agreement with the US in effect since December 2001.
Vietnam-Japan Economic Partnership Agreement since July 2009.
Free Trade Agreement with the EU since June 2012.
Under negotiation to be a member of Trans-Pacific Partnership (TPP).

Impact of TPP:
Contribute to Vietnams GDP growth.
Stronger trade with US.
Capturing greater exports in manufacturing industries where Chinas
comparative advantage is fading.
Overall boost to exports.
Higher income enabling re-investment and more rapid growth.
Chapter 1: BUSINESS ENVIRONMENT
SWOT ANALYSIS:
Strengths: Weaknesses:
Having a large, skilled and low-cost Vietnams infrastructure is still weak. Roads,
workforce, which has made the country railways and ports are inadequate to cope
attractive to foreign investors. with the countrys economic growth and links
Vietnams location its proximity to China with the outside world.
and South East Asia, and its good sea links Vietnam remains one of the worlds most
makes it a good base for foreign companies corrupt countries.
to export to the rest of Asia, and beyond.
Opportunities: Threats:
Increasingly attracting investment from key Trade disputes with the US, and the
Asian economies, such as Japan, South Korea general threat of American protectionism,
and Taiwan. This offers the possibility of the which will remain a concern.
transfer of high-tech skills and know-how.
Vietnam is pressing ahead with the
privatization of state-owned enterprises and
the liberalization of the banking sector. This
should offer foreign investors new entry
points.
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Chapter 1: BUSINESS ENVIRONMENT
INFRASTRUCTURE:
Physical Infrastructure:
- Vietnam's inadequate infrastructure has become a major grievance for foreign investors and may
thus impair future FDI.
- Thanks to development assistance from international donors, is investing heavily in constructing
new roads, railways, ports and power plants.
- As an example of progress already made, more than 90% of rural households now have
electricity, compared with just over 50% 10 years ago.
Labor Force:
- Vietnam's large, well-educated and inexpensive labor force remains one of the country's chief
attractions to foreign investors.
- The labor pool is increasing by up to 1.5mn a year, while wage costs are still low compared with
other countries in the region, although wage growth has picked up pace in recent years.
- Workforce by Occupation- 2014:
Agriculture Industry Services
46.6% 21.4% 32% - Source: GSO

- Vietnam does not have a bad industrial relations record. Most strikes have resulted from legal or
contractual breaches, including failure to pay wages and benefits, failure to pay social insurance
contributions, and failure to pay severance pay at termination.
- The government has raised the monthly minimum wage rate to VND 2.15 million to VND 3.1
million ($100-$145), dependent on economic zone, from January 1 2015.
Chapter 1: BUSINESS ENVIRONMENT
MARKET ORIENTATION:
Foreign Investment:
- FDI is an integral part of Vietnam's ambitious economic expansion plans; and, with ratings
agencies pushing their grades higher, the country looks like a solid investment destination,
especially for manufacturing.
- Most FDI into Vietnam comes from North East Asia, notably Taiwan, South Korea, Japan and
China/Hong Kong. Canada and the US are the largest non-Asian FDI sources. Leading sectors for
FDI are manufacturing, other industry and oil and gas.
Foreign Trade Regime:
- Vietnam has committed to bound tariff rates (or legal ceilings) on most products ranging from
zero to 35%. Reductions in most bound rates from 17.4% on average in 2007 to 13.6% are to be
phased in gradually by 2015.
- Vietnam became a member of the Association of South East Asian Nations (ASEAN) since 1997
with Brunei, the Philippines, Indonesia, Laos, Myanmar, Malaysia, Singapore, Thailand and
Cambodia as well as of the linked ASEAN Free Trade Area. Vietnam is thus party to negotiations
on free trade agreements being conducted by ASEAN, such as talks with the EU, China, Australia
and New Zealand.
- A member of the WTO in January 2007.
- A bilateral trade agreement with the US in effect since December 2001.
- Vietnam-Japan Economic Partnership Agreement since July 2009.
- A Free Trade Agreement with the EU since June 2012.
14
- Under negotiation to be a member of Trans-Pacific Partnership (TPP).
Chapter 1: BUSINESS ENVIRONMENT
TAX REGIME:
- Corporate Tax: from Jan 1 2014, the main corporate tax rate is 22%, and the rate will be reduced
to 20% from Jan 1 2016. The corporate tax is targeted to be 17% in 2020.
Firms involved in prospecting, exploration and mining of petroleum, gas and other rare and
precious natural resources are subject to rates from 32% to 50%.
Resident firms are taxed on global income.
Non-resident firms are taxed only on Vietnamese-sourced income.
- Individual Tax: The bill stipulates that personal income is to be taxed at a rate between 5% and
35%, for individuals resident in Vietnam for 183 days or more in a 12-month period.
- Indirect Tax: Main VAT rate is 10%.
COSTS RELATED TO BUSINESS OPERATION:
Fuel: Gasoline A95 Diesel Labor cost:
(per liter): (per liter): First area: $150
$0.76 $0.71
Second area: $130
Electricity: Third area: $120
Updated on Mar 5 2015
per kWh (ave) Forth area: $100
$0.07
- Applied since Jan 1 2015
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Chapter 1: BUSINESS ENVIRONMENT
CALLING FOR INVESTMENTS
Offers from State Government:
- Corporate Tax: beside the route map of reducing corporate tax which presented above, there are
some advantages for new enterprises invest in difficult areas, high-tech zones, software
developing, education training developing, vocational training, health, culture, etc. to attract and
create favorable conditions for investors interested in this sector, by reducing or exempting
corporate tax in 3 to 5 years.
- Import export tax: reducing or exempting tax for materials, supplies and components imported
to create fixed assets of the encouraging investment project; projects funded by official
development assistance (ODA); etc.
- Credit policy: interest rate ceiling for short term loans in VND 8% per year (applied since March 17
2014), for priority economic sectors: agriculture and rural development, exporting, supporting
industries, small and medium-sized enterprises and hi-tech enterprises.
CASE STUDY: INVESTMENTS OF SAMSUNG IN VIETNAM
- Samsung has been invested more than $4.0 billion for projects in Bac Ninh and Thai
Nguyen.
- Samsungs advantages:
corporate tax: 10% in 30 years.
tax exemption for 4 years since having profits
and 50% of the payable tax in the next 9 years.
Besides, Thai Nguyen province proposed Samsung to have other advantages, such as
free infrastructure renting fee, free import tax of raw materials, machinery.
Chapter 2: POLITICAL OUTLOOK
SWOT ANALYSIS:
Strengths: Weaknesses:
The CPV remains committed to market Corruption among government officials
oriented reforms. The one-party system is poses a major threat to the legitimacy of the
generally conducive to short-term political ruling Communist Party.
stability. There is increasing (albeit still limited) public
Relations with the US have witnessed a dissatisfaction with the leaderships tight
marked improvement, and Washington control over political dissent.
sees Hanoi as a potential geopolitical ally in
South East Asia.
Opportunities: Threats:
The government recognizes the threat Although strong domestic control will
corruption poses to its legitimacy, and has ensure little change to Vietnams political
acted to clamp down on graft among party scene in the next few years, over the longer
officials. term, the one-party-state will probably be
Vietnam has allowed legislators to become unsustainable.
more vocal in criticizing government Relations with China have deteriorated over
policies. This is opening up opportunities recent years due to disputing the islands in
for more checks and balances within the the South China Sea.
one-party system. 17
Chapter 2: POLITICAL OUTLOOK
DOMESTIC POLITICS:
CPV under increasing pressure for political change:
- The ruling CPV, which has fiercely defended its totalitarian stance in the past, also appears to
be slowly losing its grip on public opinion with increasing adoption of the internet, and in
particular, social media's role in promoting political discussion among the country's youth in recent
years.
- Political reforms for a more balanced and democratic political system as a crucial element in
driving the country's economic growth over the long run, and limited reforms have been
introduced gradually by the CPV.
Democratic reforms to come amid push to expand economy:
- Reforms for a more balanced and democratic political system as a crucial element in driving the
country's economic growth over the coming years, which has been forecasted for Vietnam's real
GDP growth to average a robust 6.7% from 2013-2022 (Vietnams real GDP growth in 2014 is
5.98%).
- The CPV will eventually allow for limited democratic reforms to be introduced in the coming years,
albeit gradually. These limited reforms will first come in the form of allowing for more debate
within the National Assembly (NA) on:
economic policies,
increased transparency and accountability from the government,
greater efforts to clampdown and address rampant corruption at the lower level, and
an increased tolerance towards the impact of social media and the internet.
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Chapter 2: POLITICAL OUTLOOK
LONG-TERM POLITICAL OUTLOOK:
Key political challenges over the coming decade:
1. Inflation and devaluation as drivers of discontent:
- The Vietnamese governments loose fiscal and monetary policies have led to high levels of
inflation and repeated devaluations of the VND in recent years.
2. Divisions within the Communist Party:
- High inflation and devaluation have opened schisms within the CPV leadership between
proponents of <continued economic reform> and <a more conservative wing which believes that a
deceleration or even reversal of reform policies would benefit macroeconomic stability>.
3. Demands for increased religious rights
- One of the most concerted challenges against the CPV in recent years has come from Catholics
wishing for a stronger recognition of their right to worship in what is still a nominally atheist
country.
4. Relations with China:
- Relations with China have become increasingly strained in recent years as Beijing has expanded its
economic, political and military influence southwards. The main point of contention is the
conflicting territorial claims for the Paracel and Spratly Islands in the South China Sea.
- Vietnams relations with China have also been strained by the large bilateral trade deficit it runs
with its northern neighbor, which amounts to more than 10% of GDP.
- Because of those, Vietnam will seek increasingly close relations with the US and potentially
India and Japan in the defense sphere, as a hedge against Chinas rising power in the region.
Chapter 3: ECONOMIC OUTLOOK
SWOT ANALYSIS:
Strengths: Weaknesses:
Vietnam has been one of the fastest- Vietnam still suffers from substantial trade,
growing economies in Asia in recent years, current account and fiscal deficits, leaving
with GDP growth averaging 7.1% annually the economy vulnerable to global economic
between 2000 and 2012. uncertainties in 2012.
The economic boom has lifted many The heavily-managed and weak currency
Vietnamese out of poverty, with the official reduces incentives to improve quality of
poverty rate in the country falling from 58% exports, and also keeps import costs high,
in 1993 to 14.0% in 2010. contributing to inflationary pressures.
Opportunities: Threats:
WTO membership (and TPP membership- Although inflation has subsided in 2014,
in the near future) has given Vietnam complacency by the State Bank of Vietnam
access to both foreign markets and capital, on this front could result in a decline in
while making Vietnamese enterprises investment.
stronger through increased competition. Prolonged macroeconomic instability could
The government will in spite of the current prompt the authorities to put reforms on
macroeconomic woes, continue to move hold as they struggle to stabilize the
forward with market reforms. economy.
Chapter 3: ECONOMIC OUTLOOK
ECONOMIC ACTIVITY:
Manufacturing and retailing to help support Growth
- The industrial sector, which accounts for approximately 33% of the economy and includes
manufacturing, mining, water management, and power generation accelerated by 6.1% y-o-y
in June and 5.8% for the first half of the year.
- At 21% of GDP, manufacturing accounts for the lion's share, accelerating by a robust 7.8%
y-o-y in H114, driven by textiles (21% y-o-y), leather goods (19.2%), and motored vehicles
(22.9%), a trend we expect will remain in play given the continued strength in the country's
23.6
domestic demand and export markets. 21.2 2013 2014
20.9
Exports continue to strengthen 17.9
- Vietnam's export sector continues to be a driver of
growth for the country, and we forecast this trend to 11.4
10.6 10.3
remain in play over the coming months. Exports for 8.4 7.8 7.3
6.7 6.76.9
2014 expanded by a robust 13.6% y-o-y, and saw the 6.0 5.66.2 5.05.6
3.6
accumulated. 2.7

- Moreover, we expect exports to continue driving

Computers, electronic
growth going forward given that the Viet-namese

Seafood
Textiles

Wood and wood products

Footwear
Phone and accessories

Crude oil

Vehicles and parts

Rice
Machinery and spare parts
government has been making a concerted push to
build diplomatic and trade ties with many countries
and is negotiating several free trade agreements. One
of the most important ones is the Trans-Pacific
Partnership (TPP), which could be signed by as early as
2015.
Chapter 3: ECONOMIC OUTLOOK
ECONOMIC ACTIVITY:
Investment and Infrastructure Development to Drive Growth
- The investment picture also remains very bullish in Vietnam as the country has been able to
attract both private investment as well as foreign aid, which will help underpin both short-and
long-term growth. There were a total of 1,588 investments in 2014 with a total value of
$ 20.23 billion.
- The largest source of investment this year has been from South Korea at $ 7.3 billion, followed
by Hong Kong ($ 3 billion), Singapore ($ 2.8 billion), Japan ($ 2 billion). Several companies,
such as Samsung, continue to be attracted to the country's lower labour costs, which suggests
that foreign investment will continue to flow to Vietnam.

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Chapter 3: ECONOMIC OUTLOOK

Seeing a steady inflow of FDI

- Vietnam's current stage of economic development requires significant amount of foreign
investment in transportation and logistical infrastructure to support its long-term economic
growth plans, present significant scope for investment opportunities in the infrastructure sector as
well as higher-value manufacturing industries.
- Efforts by the Vietnamese government to speed up the privatization of state-owned enterprises
(SOEs) and allow for more foreign competition in the banking sector should provide a strong
catalyst for investors to take advantage of opportunities in the financial services industry.
The government pledges more support for foreign companies
- The government is also looking to fully maximize economic gains from FDI by reviewing and
establishing new standards to give priority to investment projects that are likely to boost
employment and labor productivity, allow for technological transfer, and improve the overall
efficiency of the economy.

23
CONCLUSION

With all above data, you can see that:

Vietnam is stable and equal social-political environment.
competitive labor cost.
Foreign Direct Investment strongly supported by Government.
Main Export Markets are US, EU, Japan, etc.

Worldwide Companies are seeking new primary and secondary sources for low cost
manufacturing and supply bases;

China hasnt been the priority choice when there are many problems such as
increasing production costs, rising foreign exchange rates, restrictive government
policies, inflation and even the possibility of widespread civic disputes.

Vietnam represents a first mover opportunity for

those who want to make the investment in time, energy and money.

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THANK YOU!

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