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Vietnam IB Group 3

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Jonathan Stockman

on 13 April 2011

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Transcript of Vietnam IB Group 3

Vietnam Colin Flannigan, Alex Hewitt, Mike Jenkins, Brooke Koehler,
Eric Pabst, Scotty Stockman Country Facts Capital City - Hanoi
Language - Vietnamese/English
Currency - Dong
Population - 90,549,390 (2011) Rank 14th in the world
Labor Workforce - 46.21 million people
Location: Southeastern Asia, bordering the Gulf of Thailand, Gulf of Tonkin, and South China Sea, alongside China, Laos, and Cambodia
History 1858 - French conquest of Vietnam
1885 - Become part of French-Indo China
1945 - Occupied Japan, WWII
Ho Chi Mihn organized the Viet Mihn to take control Hanoi and much of Northern Vietnam
Ho Chi Mihn announced the independence of Democratic Republic of Vietnam
1961 - Kennedy sent US forces to Southern Vietnam, beginning US influence in the Vietnam War
1973 - Paris Accords, a peace treaty ending Vietnam War
1976 - became the Socialist Republic of Vietnam
1986 - "Doi Moi" or renovations, economic reforms which dramatically improved Vietnam business climate
1994 – America lifts trade embargo with Vietnam
2000 – Vietnam creates stockmarket and legally recognizes private enterprises Population Facts Population - 90,549,390 (2011) Rank: 14th
Growth Rate - 1.077% (2011) Rank: 111th
10.6 % population below poverty line
280,000 people living with HIV/AIDS
Religions: Buddhist 9.3%, Catholic 6.7%, Hoa Hao 1.5%, Cao Dai 1.1%, Protestant 0.5%, Muslim 0.1%, none 80.8%
Ethnic Groups: Vietnamese 86.2%, Tay 1.9%, Muong 1.7%, Khome 1.4%, Hoa 1.1%, Nun 1.1%, Hmong 1%, other 4.1%
90.3% Literacy Rate
1/3 the cost of China's labor force
20.8 million internet users Major Diseases food or waterborne diseases: bacterial diarrhea, hepatitis A, and typhoid fever
vectorborne diseases: dengue fever, malaria, Japanese encephalitis, and plague
water contact disease: leptospirosis Economy GDP (PPP) - $278.1 billion (2010) Ranked 42
GDP Per Capita (PPP) - $3,100 (2010) Ranked 166
Real Growth Rate - 6.8% (2010) Ranked 32
By Sector: agriculture: 20.6%, industry: 41.1%, services: 38.3% GDP
Unemployment Rate: 2.9% Ranked 23rd
Inflation - 11.8% Ranked 205th
Agricultural Products - paddy rice, coffee, rubber, cotton, tea, pepper, soybeans, cashews, sugar cane, peanuts, bananas; poultry; fish, seafood
Industries - food processing, garments, shoes, machine-building; mining, coal, steel; cement, chemical fertilizer, glass, tires, oil, paper
Industrial Growth Rate - 14% Ranked 10th
External Debt - $33.45 billion Ranked 62nd Trade Regulations Vietnam’s standards system consists of over 5,000 standards.
7 ministries in industry which help control quality and safety standards.
Restricted exports/imports: explosive material, military equipment, toxic chemicals. encryption software
Imports can only be used to make a product within the country
Petroleum subject to annual licensing and price regulation
Goods imported or exported as samples for advertising are subject to export to import duty
Goods exported or imported must be inspected before being cleared at customs, except pharmaceuticals (exported)
Imported pharmaceuticals are subject to random lab tests Financial Environment Exchange Rate - 19,902 dongs = 1 US dollar
Repatriation of Profits - Full repatriation after federal taxes.
Stability of Currency - Has devalued the currency 4 times over the past 3 years, most recently in 2010 by 3.3%.
Trade Deficit - $12.2 Billion
Import Tariffs - 19%
Banks are vulnerable to exchange rate risks due to devaluation of the dong
Recent banks problems due to openness to foreigners and privatization of state banks. Labor Climate Large labor force (over 46 million people).
Labor force by occupation - Agriculture: 53.9%, Industry: 20.3%, services: 25.8%
Labor Freedom Score - 68.2 (difficult to fire employees).
Employers are required to establish labor unions within 6 months of establishment of any company.
All labor unions must be members of the Vietnam General Confederation of Labor.
Shortage of people with higher skills, inability to fill managerial and professional jobs. Trade Organizations 1995 - Joined ASEAN, AFTA
1998 - Joined APEC
2001 - US-Vietnam Bilateral Trade Agreement
2007 - Joined WTO
2009 - Joined Transpacific Partnership "Associate Member" Ethical Issues Corruption Rating - 2.7 (116th of 178)
Corruption is widespread due to lack of transparency, accountability, and media freedom
Dividing line between Communist Party, government, and the courts
Pro-democracy campaigners called “terrorist” and put in jail
Payments and transfers are required to go through government approval.
This climate gives high incentive for bribery.
Vietnamese farmers focus so much on quantity, the quality of agricultural products has lead to disease.
Infringement of intellectual property rights is common, contracts are weakly enforced, and disputes take years to resolve. Legal Environment US has exchanged Normal Trade Relations (NTR) with Vietnam, making it a preferential trading partner.
15 different regulatory agencies.
The US- Vietnam Bilateral Trade Agreement went into effect December 10, 2001, reducing tariff rates for imported US goods.
Foreign invested enterprises can import materials for establishing production lines, but not for any trading purposes. Imports Partners (Imports) - China 23.8%, South Korea 11.6%, Japan 10.8%. Taiwan 8.4% Thailand 6.7%, Singapore 4.9%
Commodities (Imports) - machinery / equipment, petroleum products, steel products, electronics, plastics, automobiles
Ordinary tariffs are 50-70% higher than preferential tariffs, but can be reduced by same percentage
Exemptions are granted for goods in special cases
Goods imported for foreign-invested projects qualify for exemptions in special cases Exports Partners (Exports) - US 20%, Japan 10.7%, China 9.8%, South Korea 4.3%
Commodities (Exports) - clothes, shoes, marine products, crude oil, electronics, wooden products, rice, machinery
US is second largest trading partner. Tax Special consumption taxes apply to the import and production of certain goods, range from 10-80% sales tax.
Value Added Tax
3 rates of value added tax Pro’s for FDI UN Conference on Trade and Development named Vietnam 6th for foreign investment
Growing economy due to country development
Large low wage labor force
Growing economic liberalization
Tariff exemptions
Con’s for FDI Large lead times for construction
Poor health system
Weak property rights
High government corruption
Import/Export restrictions
Low educated workforce (pharmaceutical)
Recomendations for FDI Manufacturing Construction Equipment
Financial Services
Pharmaceutical Research Sources 1. GlobalEdge
2. Index Economic Freedom
3. Country Watch
4. CIA World Factbook
5. MSU CIBER (GlobalEdge)
6. Country Commercial Guide
7. The Economist
8. Us Department of State
9. Transperency.org
10. DoingBuisness.org
11. Wall Street Journal
12.geert-hofstede.com/ 3,4 1,5,11 1,3,4,5 4 4 1,5,6 6 4 6 2,7,9 1,3,8 2,4,6,7 4,6 1,4 6 10 Culture Comparison Doing Business 10 12 Economic Freedoms 2 Country Comparison 2
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