The 30th April 2015 marks the 40th anniversary of the end of the Vietnam War. Today the country’s young population and rising incomes make the consumer market attractive for multinationals. Two-thirds of the population were born after the war and per capita disposable income is set to grow by 4.6% per annum to 2020.
40 years on from the end of the war, Vietnam has:
- A US$186 billion economy;
- 2.5 million households earning US$10,000+;
- 60.6 million inhabitants under the age of 40.
Vietnam is an export-oriented economy, with 81% of GDP coming from exports in 2014. In that year exports totalled US$150 billion, with 18.7% destined for the USA. Low labour costs are attracting an increasing number of foreign investors and Vietnam’s position as a low-cost manufacturing base has strengthened. Multinationals such as Samsung Electronics, Intel, Nike, Toyota and Siemens have operations in the country. According to fDi Markets, Vietnam was the second most popular investment destination in the Asia-Pacific region in 2014 based on capital investment received, behind only China.
Although the business environment can be challenging, with corruption a particular issue, at 78th out of 189 countries, Vietnam ranks more highly in the World Bank’s 2015 Doing Business report than China. It also ranks better than neighbouring low-cost countries such as Indonesia, Cambodia and Laos.
The country is also increasingly seen as a consumer market in its own right and for many this is its main draw. With a population of 91.6 million in 2015, it is larger than Germany. Consumer expenditure totalled US$118 billion in 2014 and it is expected to reach US$264 billion in 2030 (in 2014 prices). All categories of consumer expenditure are expected to more than double in real terms between 2014 and 2030, with communications and health goods and medical services amongst the most dynamic.
Consumer Expenditure in Vietnam: 2014 and 2030
Source: Euromonitor International from national statistics/UN
Note: Data are in constant 2014 prices
Of course, not all is plain sailing for business in Vietnam. Tensions with China cloud the outlook as does the infrastructure deficit and an energy shortfall. In addition much of the country’s wealth is concentrated in the South East, specifically around Ho Chi Minh City, meaning that a large proportion of the population outside of this region lives in poverty, or is vulnerable to falling into poverty. Nationally, two thirds of households had a disposable income of less than US$5,000 in 2014. Nevertheless, Vietnam has seen significant change in the past forty years and has many strengths, strengths which more and more multinationals are seeking to capitalise on.