Travel

Vietnam Country Brief - March 2009

General Information

The Socialist Republic of Vietnam extends 1,600 km from latitude 23 degrees north to 9 degrees north along the western rim of the South China Sea. Occupying 331,114 sq km and bordering China to the north, Laos to the west and Cambodia to the south-west, Vietnam is marked by two delta regions at either end of the country (the Songkoi - or Red River - in the north, the Mekong in the south) which are separated by the narrow region of the Central Highlands. Around 16 per cent of Vietnam's land mass is under cultivation, with the remaining areas either mountainous or forested. Vietnam has substantial territorial claims in the South China Sea. Its capital is Hanoi, located in the north of the country, with Ho Chi Minh City forming Vietnam’s southern metropolis.

Around 80 per cent of Vietnam's population of 86 million are ethnic Vietnamese (‘Kinh’). Buddhism is Vietnam's dominant religion, with significant religious minorities including the Cao Dai, the Hoa Hao, Hindu, Baha'i, Roman Catholic, Protestant and Muslim religions.

Vietnam is a member of the UN, ASEAN, ARF, ASEM, APEC and the Non-Aligned Movement. Vietnam took up a non-permanent seat on the United Nations Security Council in January 2008 for the first time, and will serve on the council until December 2009. Vietnam formally acceded to the WTO on 11 January 2007, becoming the body’s 150th member.

Political Overview

Vietnam is one of the world's few remaining one-party communist states. Decision-making is shared by national and provincial governments and agencies, often resulting in a slow and cautious approach to major policy issues. Political power lies with the Communist Party of Vietnam (CPV), led by General Secretary Nong Duc Manh.

The Party's peak organ, the fifteen-member Politburo, holds authority over the implementation of all major areas of policy. The Politburo is elected by the Party's Central Committee. Day-to-day policy guidance comes from the eight-member Secretariat to the Central Committee, which comprises some Politburo and Central Committee members. The Central Committee considers important policy issues several times per year, and five-yearly Party Congresses ratify major policy changes.

The Tenth Party Congress, held in April 2006, led to significant changes in the Party leadership, including a new President, Vice-President and Prime Minister, two new Deputy Prime Minister positions, and the appointment of ten new ministers or equivalent heads of agencies. This leadership includes some relatively young ministers and was considered a significant generational change.

Administration and policy implementation is the responsibility of government ministries and equivalent agencies, although these organisations are now also playing a more significant role in policy development. The principal ministries are hardworking and systematic but remain highly bureaucratic and process-driven. Decision-making can be slow and opaque. In recent years, the National Assembly has become increasingly active and influential in setting national priorities, with members prepared to criticise the Government vigorously.

The increasing role of the National Assembly in reviewing legislation and policies and a gradually more incisive media have contributed to greater transparency in Vietnam, but dissent can still be met with heavy-handed punishment. Individuals can incur long prison terms on broadly framed charges, such as espionage or undermining national security and propagandising against the state.  Notwithstanding some recent responsiveness on the part of the Vietnamese authorities on questions of religious freedom, a number of high-profile arrests and trials in the first part of 2007 and through 2008 have brought the international spotlight back onto Vietnam’s one-party political system and management of diverse political views.

Head of State and Government Ministry

State President

Nguyen Minh Triet

State Vice-President

Mme Nguyen Thi Doan

 

 

Prime Minister

Nguyen Tan Dung

First Deputy Prime Minister

Nguyen Sinh Hung

Deputy Prime Minister and Minister of Foreign Affairs

Pham Gia Khiem

Deputy Prime Minister

Truong Vinh Trong

Deputy Prime Minister

Hoang Trung Hai

Deputy Prime Minister and Minister of Education and Training

Nguyen Thien Nhan

 

 

Ministers

 

 

Minister of Defence

Sr. Lt Gen Phung Quang Thanh

Minister of Public Security

General Le Hong Anh

Minister of Industry and Trade

Vu Huy Hoang

Minister of Planning and Investment

Vo Hong Phuc

Minister of Agriculture and Rural Development

Cao Duc Phat

Minister of Finance

Vu Van Ninh

Minister of Justice

Ha Hung Cuong

Minister of Science and Technology

Hoang Van Phong

Minister of Health

Nguyen Quoc Trieu

Minister of Construction

Nguyen Hong Quan

Minister of Culture, Sports and Tourism

Hoang Tuan Anh

Minister of Labour, War Invalids and Social Affairs

Mme Nguyen Thi Kim Ngan

Minister of Transport

Ho Nghia Dung

Minister of Natural Resources and Environment

Pham Khoi Nguyen

Minister of Information and Communications

Le Doan Hop

Minister of Home Affairs

Tran Van Tuan

Politburo of the Communist Party of Vietnam

Nong Duc Manh

General Secretary

General Le Hong Anh

Minister of Public Security

Nguyen Tan Dung

Prime Minister

Nguyen Minh Triet

State President

Truong Tan Sang

Standing Member, Central Committee Secretariat

Nguyen Phu Trong

President of the National Assembly

Pham Gia Khiem

Deputy Prime Minister and Minister of Foreign Affairs

Sr. Lt Gen Phung Quang Thanh

Minister of Defence

Truong Vinh Trong

Deputy Prime Minister

Le Thanh Hai

Secretary, Ho Chi Minh City Party Committee

Nguyen Sinh Hung

First Deputy Prime Minister

Nguyen Van Chi

Chairman, CPV Inspectorate Commission

Ho Duc Viet

Chairman, CPV Organisation Commission

Pham Quang Nghi

Secretary, Hanoi Party Committee

Dr To Huy Rua

Secretary, CPV Central Committee

Secretariat of Central Committee

Nong Duc Manh

General Secretary

Truong Tan Sang

Standing Member

Truong Vinh Trong

Deputy Prime Minister

Nguyen Van Chi

Chairman, CPV Inspectorate Commission

Le Van Dung

Head of General Department of Politics, Ministry of Defence

Mrs Tong Thi Phong

Chairwoman, CPV Mass Mobilisation Commission

To Huy Rua

Chairman, CPV Culture and Ideology Commission

Ho Duc Viet

Secretary, CPV Central Committee

The Bilateral Relationship - Political and Social

2008 marked the 35th anniversary of diplomatic relations between Australia and Vietnam, established in February 1973. The opening of the Australian Consulate-General in Ho Chi Minh City in 1994 further strengthened Australia's diplomatic representation in Vietnam.

High-level Visits to Australia

High-level visits to Australia over recent years have served to maintain and deepen the bilateral relationship. Recent visits include:

These visits have been reciprocated by high-level Australian visits to Vietnam, including by Mr Stephen Smith, the Minister for Foreign Affairs, in July 2008 and by Mr Chris Evans, the Minister for Immigration and Citizenship in January 2009. The Prime Minister met President Triet during the Beijing Olympics in August 2008.

The Vietnamese Community in Australia

The Vietnam-born community in Australia is estimated at approximately 188,000. The environment in Vietnam since the advent of doi moi (renovation) has encouraged many Vietnamese expatriates to revisit their former homeland. A number of Vietnamese-Australians have successfully undertaken, or are seeking to open up, commercial opportunities in Vietnam. However, some Vietnamese-Australians remain strongly opposed to the Government in Vietnam.

Defence, Police Relations and Regional Security

Formal defence relations between Australia and Vietnam were established in February 1999, with the opening of a Defence Attaché Office at the Australian Embassy in Hanoi. Vietnam's first Defence Attaché to Australia took up his appointment in Canberra in September 2000.

The bilateral defence relationship includes: regular Australian Defence Force ship visits to Vietnamese ports; training of Vietnamese military officers in Australia under the bilateral Defence Cooperation Program; and visits between Australian and Vietnamese senior Defence Force officials.

The Australian Federal Police maintains Law Enforcement Liaison Offices in Hanoi and Ho Chi Minh City.

Australia and Vietnam have also held senior officials-level bilateral dialogues on regional security and other issues since 1998.

Education and Training

Australia is a leading study destination for Vietnamese students, with close to 16,000 student enrolments in Australian education institutions in 2008 and an estimated 10 ,000 students undertaking Australian education and training courses in Vietnam.

Australia collaborates on many education and training initiatives with Vietnam, including policy dialogue in areas such as quality assurance, qualification recognition and vocational education; facilitating institution-to-institution partnerships; and supporting vibrant Australian alumni associations.

Australia is the leading government provider of scholarships to Vietnamese students. Vietnam has been a significant beneficiary of the expanded Endeavour Program – a prestigious merit-based regional scholarship program administered by the Department of Education, Employment and Workplace Relations which supports high-achieving students, researchers and professionals. From two Endeavour awards in 2006, Vietnam received 33 awards to be taken up in 2009.

Australia's Approach to Human Rights in Vietnam

Australia and Vietnam have held formal human rights talks regularly since 2002. The most recent Human Rights Dialogue was held in Canberra in August 2008.

Vietnam and Australia introduced a program of technical cooperation on human rights in 2006. The program, administered by the Australian Human Rights Commission, provides opportunities to foster practical cooperation between institutions with human rights responsibilities and expertise.

Australia's Development Cooperation Program with Vietnam

Australia's total overseas development assistance to Vietnam in 2008-09 is estimated at $104.4 million. Amongst 40 donor countries and agencies in Vietnam, Australia consistently ranks among the top ten bilateral donors.

For further details about Australia's development assistance program in Vietnam, visit the AusAID website.

Economic Overview

Vietnam has been in transition from a centrally-planned to a ‘socialist oriented market economy’ since the introduction of the doi moi reforms in 1986. In the early-to-mid 1990s, liberalisation measures resulted in rapidly expanding exports and high economic growth, with real GDP growth averaging 9 per cent per year. Growth slowed in the late 1990s but the momentum picked up, with GDP growth averaging about 7.5 per cent per year since 2001, reaching a high of 8.5 per cent in 2007. Poverty rates are now less than 20 per cent, down from almost 60 per cent in the early 1990s.

Economic development has been patchy geographically. Ho Chi Minh City (in southern Vietnam with a population of 8.2 million) and the surrounding provinces constitute the power-house of economic development with GDP per capita of US$2,100 in 2007, as against a national average of US$818 (IMF).

Key economic indicators

Population (2008)

86 million

Exchange rate (March 2009)

11,300 dong = A$1

GDP (2008)

US$87.0 billion

GDP per capita (2008)

US$1010

Real GDP growth in 2008 (% change YOY)

6.25%

Goods and Services Exports Value in 2008 (% GDP)

80.5%

Current account balance (2007)

-US$6.7 billion

Unemployment rate (2008)

4.65% (urban areas)

Consumer Price Index inflation (2008 average)

22.97%

Performance and Outlook

Near-term forecasts for growth have been scaled down significantly in light of the global financial crisis.  The IMF predicts economic growth will fall from the 6.25 per cent seen in 2008 to 5.0 per cent in 2009.  An export-oriented economy, Vietnam is seeing demand from key export markets decline.  At the same time, FDI inflows are slowing with tightening global credit conditions.  Foreign remittances are also predicted to decline as are domestic investment and consumption.

In response to the economic slowdown, the Government has introduced a range of measures to loosen monetary policy and stimulate the economy.  This includes a 4 per cent subsidy on commercial loans.  The capacity of the Government to deliver a large fiscal stimulus to the economy, however, is limited by a large trade deficit and low foreign exchange reserves.

International trade, investment and remittances 

Goods and services exports now constitute around 80 per cent of GDP, 2.5 times higher than the 30 per cent share recorded in the mid 1990s. Crude oil accounted for 16.5  per cent of total merchandise export revenues in 2008, followed by textiles (14.5 per cent). Other major export items include footwear, seafood, timber products, rice, rubber, coffee, cashews, pepper and coal (Source: GSO). With Vietnam’s first oil refinery becoming operational in February 2009, exports of crude oil are expected to decrease.

Vietnam's major imports are machinery and spare parts, refined petroleum products, urea, steel ingots, pharmaceuticals, textile and garment inputs, plastics and chemicals. (Source: GSO). The top five sources of imports in 2008 were China, Singapore, Taiwan, Japan and Korea.

Total disbursed foreign direct investment (FDI) in 2008 topped US$11.5 billion. Total approved FDI in 2008 was US$64.0 billion, US$60.2 billion of which was from newly established projects and US$3.8 billion from expansion of operational projects. (Source: Foreign Investment Agency, MPI).  Analysts predict that disbursed investment will stall in 2009, and possibly into 2010, as global economic activity slows and investment in real estate and tourism developments slows.

The State Bank of Vietnam estimates remittances from overseas Vietnamese in 2008 exceeded US$7.8 billion.  Remittances in 2009 are predicted to fall with the global economic slowdown.

Economic and corporate reform

Since 2000, Vietnam's Enterprise Law has fostered the creation of over 200,000 registered private domestic enterprises, accounting for around 10 per cent of the economy and a smaller proportion of the labour force. Over time, the Enterprise Law (2005) and Investment Law (2005), which came into effect in 2006, are gradually contributing to an improved business environment and a more 'level playing field' in most economic sectors.  The challenge for the Government will be to maintain the pace of economic and corporate reform in the face of pressures arising from the global financial crisis.

As part of its effort to improve the competitiveness of the state corporate sector and maintain the momentum in foreign direct investment, Vietnam has undertaken a program to equitise (semi-privatise) the majority of state-owned enterprises (SOEs) by 2010.  This would leave around 550 enterprises fully in state hands. The Vietnamese Government also has an ambitious plan to extend the equitisation process to major state-owned conglomerates in sectors such as banking, insurance, aviation, cement, steel and textiles.

However, the equitisation process is proving challenging. By June 2008, a total of 3,786 SOEs had been equitised, with the vast majority of these being small and medium-sized enterprises. The state continues to maintain controlling shares in a large number of enterprises following equitisation. This, combined with the technical challenges associated with valuing a SOE’s assets to prepare for sale, has to date limited the positive impact of equitisation on FDI inflows.

The State Committee for Enterprise Reform and Development (SCERD) estimates that 68 major conglomerates and at least 1,150 SOEs will have to complete equitisation by 2010 if the Government’s target is to be met.

Financial sector

In 2006 the Vietnamese Government approved a banking development plan up to 2020. The plan includes moving the State Bank of Vietnam (SBV) towards a modern central bank, with more independence in its monetary and exchange rate policy, and improved supervision capacity over the banking system. This importantly complements the plans to equitise all five state-owned commercial banks, which the SBV currently both regulates and 'owns'. Challenges in this reform process include: addressing tensions arising from the SBV’s dual regulatory and ownership role; resolving the legacy of directed lending to SOEs, and consequential bad loans; addressing deficiencies in the banking system in such key areas as assessment of credit risk; and developing a greater understanding of international banking practices and products.

The stock market witnessed spectacular development during 2006 and most of 2007, with capitalisation of shares reaching the equivalent of over 40 per cent of GDP by December 2007. This growth was driven by more liberal foreign ownership caps, a strong increase in the number and size of listed entities and strong interest from domestic and foreign investors (Source: State Securities Commission). But the share market began to fall dramatically in October 2007 and in early 2009 hit its lowest point since January 2006.

Business operating environment

Apart from protection afforded the large number of SOEs, and a 30 per cent cap on foreign ownership in unlisted equitised SOEs, the main limits on trade and investment are: high average tariffs; a lack of transparency and consistency in the legal system; complex taxation and regulations on foreign investment; a high level of corruption, especially in infrastructure projects; the underdeveloped state of the financial system; increasingly strained infrastructure, and consequent high transport, power and telecom costs; and the emerging problem of a shortage of skilled human resources.

The Vietnamese Government is gradually loosening foreign investment limits, for example, by lifting the foreign ownership limit in listed companies to 49 per cent, and in unlisted companies to 40 per cent. The legal system is also undergoing major change to better align commercial statutes with international norms. The implementation of WTO commitments is gradually contributing to a better operating environment over the medium and longer-term as tariffs are cut, investment restrictions loosened still further, and a more transparent and predictable commercial legal and administrative system comes into place. This process will take some years to begin to show real benefits.

Vietnam has many economic strengths, not least the skills and entrepreneurial bent of its youthful workforce. It is also a member of a growing network of free trade agreements, both individually and as part of ASEAN, and is located in the most dynamic part of the globe. However, the country faces challenges in maintaining its growth and development trajectory over the longer term. Vietnam’s ability to deal with recent economic developments will be a key test for the Government. Beyond this lie other challenges, such as capacity constraints and poor public sector coordination, but most observers remain positive about Vietnam as a foreign investment destination.

More information on the business operating environment is available at Austrade or the Australian Trade Commission in Vietnam.

Vietnam's Trade Policy

Vietnam is committed to the long-term objective of global economic integration through participation in APEC, the ASEAN Free Trade Area and the WTO. Vietnam successfully hosted APEC in 2006.

Vietnam and the WTO

Vietnam became a member of the WTO on 11 January 2007 and is making progress in implementing its WTO accession commitments, including: adopting implementing legislation; improving transparency of trade regulations; and clarifying consistency of treatment for private companies and state-owned enterprises. While such changes will no doubt present challenges to Vietnam in the short term, WTO membership is expected to be accompanied by significant expansion in trading opportunities, and Australian exporters stand to benefit considerably.

The Bilateral Relationship - Economic

The Ministerial level Australia-Vietnam Joint Trade and Economic Cooperation Committee is the primary mechanism for progressing bilateral trade and investment issues.  The Committee met for the seventh time on 16-17 July 2007 in Canberra.  The meeting provided an opportunity to discuss how to build on the important gains offered by Vietnam’s accession to the WTO, particularly in the areas of financial services, education and training, and mining and related industries.

Australia and Vietnam signed the ASEAN-Australia-New Zealand Free Trade Agreement on 27 February 2009 in Thailand.

Merchandise trade

In 2007-08, two-way goods trade between Australia and Vietnam totalled A$6.9 billion. Australia's merchandise exports to Vietnam in 2007-08 totalled A$1.8 billion, representing an increase of 11.3 per cent from the previous financial year.

Australia's merchandise exports to Vietnam are diverse. In addition to strong exports in metals including gold, copper, aluminium and lead, they also include paints and pigments, plastic sheeting, wheat, dairy products, cereal preparations and live animals.

In 2007-08, Vietnam's merchandise exports to Australia totalled A$5.1 billion, a 13.9 per cent increase from the previous financial year. Vietnamese exports to Australia are less diverse, with oil exports constituting 81.6 per cent of Vietnam’s total merchandise exports in 2007-08. Other significant items were gold (A$203m), furniture, mattresses and cushions (A$95m), fruit and nuts (A$67m) and crustaceans (A$60m).

Services trade

Two-way services trade between Australia and Vietnam in 2007-08 totalled A$1.05 billion. Services exports to Vietnam in 2007-08 were worth A$481 million. Education and training remains Australia's single largest services export, worth A$365 million in 2007-08, representing an increase of over 50 per cent from the previous financial year. Services imports from Vietnam in 2007-08 were valued at A$524 million, dominated by  recreational travel (A$382m).

Australian investment in Vietnam

According to Vietnamese Government statistics, Australia ranks 20th in overall foreign direct investment in Vietnam as at December 2008. Cumulatively, to the end  of 2008, there were 193 currently valid Australian-funded projects with disbursed FDI valued at US$392 million. Over the past five years, the most significant Australian investments have involved expansions by established Australian companies, which continue to diversify their operations. Prominent examples include BlueScope Steel, ANZ Bank, QBE, Santos, Qantas and Commonwealth Bank.

Export and Investment Opportunities for Australia

Vietnam's rapid economic growth over recent years has led to large demand for imported goods, creating significant opportunities for Australian exporters of metals, wheat, dairy produce, machinery, petroleum-based products and live animals. While the global economic slowdown presents challenges, the longer term outlook for Australia-Vietnam trade and business relationships remains positive.

The continuing shift towards a more market-based economy and strong economic growth in Vietnam have increased demand for education and training services. Education sector reforms are also under way with support from the Government of Vietnam and donors including the World Bank and Asian Development Bank. The need for training in areas such as English language, business and management and information technology remains high, especially in the major urban centres of Hanoi and Ho Chi Minh City.

Vietnam has large deposits of oil and gas, and a wide range of exploitable mineral deposits. Many Australian companies have expressed interest in minerals development in Vietnam, but remain concerned by uncertainty in the regulatory environment and fiscal regime.

Australian companies are generally well received in Vietnam. Australia is regarded as a modern, technologically advanced and friendly country located within Vietnam's immediate sphere of interest. Long-term trade and investment opportunities should increase in line with Vietnam's progress in implementing its legislative and administrative reform program.

If you would like more information on specific export opportunities in Vietnam, or more information on export assistance, go to the Austrade website.

Examples of Recent Successes in Vietnam

Strategic Marine opens shipyard in Vung Tau

February 2009: Strategic Marine officially opened its US$16.3 million shipyard in the southern Vietnamese city of Vung Tau. The shipyard, which boasted $61.8 million in orders at the time of the opening, employs a workforce of over 1,100 people to produce a range of vessels for Vietnamese and international customers. The company has pioneered and funded an apprenticeship scheme which will see 55 Vietnamese undertake a two-year course in a range of specialized shipbuilding skills. The scheme has been developed under the guidance of Melbourne’s Box Hill TAFE.

ANZ Bank given licence to begin operations as a fully foreign owned, locally incorporated bank

October 2008: The announcement in October 2008 that ANZ could commence operating in Vietnam as a fully foreign-owned bank was a welcome development for Australian investment in that country. ANZ, which is progressing plans to open an additional 6 branches, can now compete on an equal footing with local banks and is expected to introduce a broad range of innovative banking services to the Vietnamese market. ANZ currently has one of the largest foreign financial services operations in Vietnam, which includes foreign bank branches in Hanoi and Ho Chi Minh City.

Arrow Energy to join other Australian players in Vietnam’s oil and gas sector

January 2008: Arrow Energy signed a major Production Sharing Contract (PSC) with the state-owned PetroVietnam. Arrow Energy announced in January 2009 that exploration drilling commenced on the first well in an initial 8 well program on its block in northern Vietnam.

Australia moves into Vietnamese energy market

September 2008: Origin Energy Australia has become the majority share-holder in a joint-venture with Vietnamese company, CN Industries, to store and distribute LPG in Vietnam. Foreign companies have been permitted to take a controlling share in companies providing distribution services in Vietnam since 1 January 2008 as a part of Vietnam’s WTO commitments package.

Commonwealth Bank opens its first branch in Vietnam 

August 2008: The Commonwealth Bank opened its first branch in Vietnam. Commonwealth Bank has had a long-standing interest in Vietnam, having established a representative office there in 1995.

English language joint venture in Danang

June 2007: The English Language Institute, a joint initiative of the University of Danang, Vietnam, and the University of Queensland opened in Danang.

QANTAS invests in Pacific Airlines

April 2007: QANTAS signed an investment agreement with the State Capital Investment Corporation, the investment holding arm of the Vietnamese Government, to purchase a 30 per cent share in Vietnam’s second largest airline, Pacific Airlines.  The Airline now operates as Jetstar Pacific, with plans to extend both domestic and international services to its customers.

Tradeinfo Contacts

If you would like more information on the trade and economic conditions in Vietnam, please email the Department of Foreign Affairs and Trade.