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By: An Hodgson

Vietnam is predicted to be among the world’s top ten tourist destinations by 2016. The expansion of the tourism industry will generate jobs, boost incomes and consumer spending as well as accelerate economic transition towards services and drive economic growth.

Issue

Vietnam’s tourism sector is striving to attract 6 million foreign visitors by 2010, compared to 3.6 million in 2006. Future development of the tourism industry will generate jobs, increase incomes, and contribute to overall economic growth. Businesses in a wide range of sectors can also expect to benefit from rising international tourist arrivals.

Importance

Thanks to economic reforms and the opening up of the country, Vietnam has enjoyed strong economic growth since the mid-1990s and rising international tourist arrivals:

  • Real GDP growth averaged 7.5% per year during 2000-2006. This is among the best economic performances in Asia;
  • The total number of international tourist arrivals in 2006 was 3.6 million, up from 2.1 million in 2000;
  • In 2006, incoming tourism receipts reached US$2.4 billion (3.9% of total GDP), up from US$1.2 billion in 2000;
  • The tourism sector employs around 250,000 people directly whilst an additional 500,000 people work in tourism-related businesses and industries;
  • Vietnam’s major markets include China, Japan, South Korea and Southeast Asian countries. The government has waived visa requirements for visitors from these key markets as well as a number of European countries;
  • Compared with other Southeast Asian countries, however, the Vietnamese tourism sector is relatively young and small. In 2006, Malaysia recorded a total 18.1 million international tourist arrivals whilst Thailand and Singapore received 13.4 million and 9.4 million international visitors, respectively.
International tourist arrivals in selected Southeast Asian countries: 2006
Million

Source: Euromonitor International from national statistics.

Implications

Vietnam aims to become a favourite tourist destination in Asia, and the growth of the tourism industry will impact many businesses and consumers:

  • An expanding tourism industry will generate many jobs in services. This provides crucial opportunities for the labour force to shift away from the unproductive agricultural sector towards services. The agricultural sector in Vietnam employs over 55% of the employed population but only contributes 20% of GDP;
  • As more people move from agriculture to the higher value-added services, this will lead to higher disposable incomes, reduce poverty and boost consumer spending. Per capita disposable income rose from VND3.7 million to VND 5.5 million during 2000-2006;

 

Annual disposable income (in 2000 prices) and real GDP growth: 2000-2006

Source: Euromonitor International from the IMF and national statistics.

  • The hotel industry will benefit from rising overnight stays. However, whilst Hanoi and Ho Chi Minh City have plenty of quality hotels and adequate infrastructure, smaller towns and provinces still experience shortages of good quality accommodation and a poor transport network;
  • In an effort to upgrade tourism infrastructure especially outside big cities, the government is encouraging foreign investment in the provinces with projects ranging from luxury hotels, beach resorts, golf courses, and airports. In 2006, FDI inflows into Vietnam reached a record US$10.2 billion;
  • The construction sector will benefit from the large range of FDI and tourism infrastructure projects. In 2006, construction accounted for 6.5% of total GDP, which is already a larger share in the economy as compared to 5.4% of GDP in 2000;
  • In addition to hotels, businesses such as restaurants, spas, retail and souvenir shops, and transport services can expect increased business in line with rising tourist arrivals;
  • The tourism insurance market has great potential for growth not only due to a larger number of Vietnamese tourists but also thanks to rising international tourist arrivals. Many tourists often buy insurance only when arriving in the country, but domestic insurers have been largely abandoning this market to foreign competitors;
  • Following the country’s entry into the World Trade Organisation (WTO) in January 2007, local tour operators will be under greater competitive pressures since foreign tour operators are also allowed to operate locally. Meanwhile, international marketing activities for Vietnam’s tourism (and thus Vietnamese tour operators abroad) are still limited since there are only 25 tourism offices worldwide.

Future scenarios

The tourism sector is striving to receive 6 million foreign visitors by 2010 to earn US$4.0 billion in total incoming tourism receipts. It also aims to attract US$5.5 billion in foreign direct investment for the industry’s development during this period. Also by 2010, the total number of workers in the tourism sector is expected to reach 1.4 million, of which some 308,000 will be receptionists, tourist guides and hotel workers.

Vietnam’s travel and tourism sector is projected to have the world’s sixth-highest growth rate between 2007 and 2016 (based on a projected growth of 7.5% per year). The World Travel and Tourism Council (WTTC) predicts that Vietnam will be among the top ten major tourist destinations in the world by 2016.

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