Business Monitor International


Vietnam Country Risk Report

Published 19 November 2014 | Quarterly

  • 49 pages
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$1,195.00
Vietnam Country Risk Report

Core Views

  • Vietnam will remain susceptible to maritime confrontations with China, despite the recent easing of tensions. Meanwhile, Vietnam will continue to court India and the US in a bid to counterbalance China's growing influence in the region. That said, Hanoi will seek to avoid a breakdown in relations with Beijing, given China's importance as a trade partner.

  • We expect solid growth momentum in the Vietnamese economy to be carried over to 2015, on the back of continued foreign direct investment (FDI) inflows, strong performance in the manufacturing and export sectors, and ongoing efforts by the government to address the high level of bad debts in the banking sector. We maintain our forecast for real GDP to grow at 5.7% in 2014, ahead of an acceleration to 6.4% in 2015.

  • Vietnam's external health will improve gradually over the coming years, as we expect a gradual narrowing of the country's fiscal deficit. We forecast for Vietnam's external debt as a share of GDP to fall from an estimated 37.6% in 2013 to 22.0% by 2023.

  • While Vietnam is enjoying strong economic growth and low inflation, we expect the State Bank of Vietnam (SBV) to cut its benchmark interest rate by 50 basis points (bps) to 6.00% in 2015 to support flagging local businesses and spur credit growth. This would push government bond yields lower. However, further yield compression thereafter will be limited owing to expected strong GDP growth.

  • On the back of an improving Vietnamese economy, fiscal reform efforts by Hanoi should lead to an improvement in the country's fiscal health and limit growth in public debt. We forecast the country's budget deficit to narrow from 4.7% in 2013 to 3.8% in 2014 and 3.0% in 2015.

Key Risks To Outlook

  • The potential for renewed maritime dispute with China poses downside risks to our 2015 real GDP growth forecast of 6.4%.

  • Should the US economic recovery hit a standstill, this would pose a salient risk to Vietnam's export sector, and consequently...

Table of Contents

Executive Summary
5
Core Views
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Risk Of Renewed Maritime Tensions Remains
8
TABLE: Political Overview
8
Long-Term Political Outlook
10
Key Political Challenges Over The Coming Decade
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Expecting Sustained Growth Momentum In 2015
14
TABLE: Eco nomic Activit y
14
Fiscal Policy
15
Gradual Fiscal Recovery Amid Positive Growth Outlook
15
TABLE: Fiscal Policy
16
Monetary Policy
17
Rate Cuts In 2015 To Spur Further Yield Compression
17
TABLE: Moneta ry Polic y
17
External Position To See A Gradual Improvement
19
TABLE: Current Account
19
Chapter 3: 10-Year Forecast
21
The Vietnamese Economy to 2023
21
2014-2023: A New Focus On Quality Growth
21
TABLE: Long-Term Mac roeco nomic Forecasts
21
Chapter 4: Operational Risk
25
Operational Risk Index
25
Operational Risk
26
TABLE: Operational Risk
26
Transport Network
28
TABLE: Asia-Transport Network Risk
28
Economic Openness
31
TABLE: Asia -Eco nomic Ope nness
31
TABLE: Top 5 Products Impo rted (USDmn)
32
TABLE: Top 5 Trade Partners Product Expo rts (USDmn)
33
Chapter 5: Key Sectors
35
Infrastructure
35
TABLE: Construction & Infrastructure Industry Data
36
table: Construction & Infrastructure Industry Data
37
Oil & Gas
38
TABLE: Oil Production
39
TABLE: Oil Production
39
TABLE: Gas Production
40
TABLE: Gas Production
40
Other Key Sectors
43
Table: Food & Drink Sector Key Indicators
43
Table: Autos Sector Key Indicators
43
Table: Defence & Security Sector Key Indicators
43
Table : Pha rma Sector Key Indicators
44
Table : Telecoms Sector Key Indicators
44
Table : Freight Key Indicators
44
Chapter 6: BMI Global Assumptions
45
Global Outlook
45
Reality Check: Uncertainty Reigns
45
Table : Global Assumptions
45
Table : Developed States , Real GDP Growth, %
46
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
46
Table : Eme rging Markets , Real GDP Growth , %
47

The Vietnam Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Vietnam. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Vietnam's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Vietnam's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Vietnam's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Vietnam, including currency volatility, the commodity price boom and protectionist policies.

The Vietnam Country Risk Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Vietnam' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Vietnam through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Vietnam Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Vietnam and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Vietnam, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Vietnam over the next 5-years?

BMI's Vietnam country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Vietnam Market - Political Strengths, Weaknesses, Opportunities and Threats facing Vietnam.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Vietnam's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Vietnam’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Vietnam's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Vietnam?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Vietnam against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Vietnam’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Vietnam will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Vietnam's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express