Good trading Vietnam
A wave of change is sweeping over the developing nation of Vietnam. While still a single-party state, power continuing to lie with the Communist Party of Vietnam, the appointment of relatively young politicians into newly created ministries is considered a significant generational change and a sign of the reformationist culture bringing the country into the 21st century.
With an astounding 60 percent of the population under 30 years of age, the masses have never been so well educated, well connected or well travelled. The demand for brand names and luxury items is exploding, as awareness and wealth accumulate, providing Australian exporters a willing consumer market filled with repression-based desire for all things western.
Senior manager and international growth specialist at the NSW Business Chamber Ian Bennett says, “Australian exporters are not giving Vietnam sufficient consideration. Most people are still thinking of Vietnam under the old cadre system; they don’t realise that the technocrats and modernists have taken over.”
Vietnam is one of the 10 members of the Association of South East Asian Nations (ASEAN), and Australian exporters looking to build relationships have never had easier conditions in which to do so now that the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) is in force. The agreement provides a progressive reduction or, in most cases, elimination of tariffs on Australian goods exports, and an elimination of all Australian tariffs from AANZFTA parties. This advantage over other countries that are yet to sign an FTA with Vietnam is substantial, yet fleeting, as it is in negotiation with many other countries for FTAs.
The economy, once centrally planned but now market-based, withstood the global financial crisis relatively well. Tony Burchill, senior trade commissioner at Austrade, says the market is expecting growth of around six percent this calendar year.
Bennett continues: “Vietnam wasn’t really affected, simply because they don’t have hedge funds and derivatives like other, more sophisticated, markets.”
Current Australian exports to Vietnam are worth almost $1.25 billion, with wheat, copper, aluminium and cereal preparations the major Australian exports. While trade relations with Vietnam appear to be at an all-time high, exporters must be aware of remaining obstacles.
“It’s a good complementary market for Australian exporters on a number of fronts,” Burchill says. “Where Vietnam offers a lot of scope, particularly for new exporters, is in the services area. Vietnam needs technology and advanced skills, so we’re seeing a lot of companies coming over to work in the energy sector, and in the building and property sector: for instance, engineers, architects and surveyors.”
The growth of the middle class has created a desire for premium brands and labels, especially clothing, food and wine. “A lot of Vietnamese people have travelled widely overseas and seen what’s available in other markets, and they want those things. They can also see the health benefits of eating and drinking well,” Bennett explains. “With the evolution of the Vietnamese economy, there’s increasing wealth at various levels and now they can afford these products,” he adds.
Grain is a particular area of focus in the food industry, as it is required to make the increasingly popular noodles eaten around the country, while luxury automobiles have become a must-have status symbol in recent times.
Cold storage systems for food were once an issue, but it’s now less difficult because of the entry of German hypermarket, Metro, into the community. Bringing their own cold storage supply chains with them, they have helped to improve the overall market by making it more competitive.
AANZFTA has paved the way for the professional services sector to become a growth market, due to the relaxation of many of the requirements that practitioners previously had to meet. “The nation’s rapid commercial and industrial growth has led to an increase in the demand for international legal services firms, human resources and accounting practices. There are increasing opportunities for an array of business consulting firms through the many multilateral project activities that occur in Vietnam, including those of the Asian Development Bank and World Bank,” Burchill says.