Good trading Vietnam
Existing exporters
The financial services sector has seen a lot of growth in Vietnam, particularly Australian products and institutions. ANZ won a licence to open a fully owned bank in Vietnam, only the third foreign-owned entity to do so; HSBC and Commonwealth Bank have also established presences in the region. Education services are also growing exponentially; Vietnam’s increased demand for quality higher education and vocational training makes it one of the fastest-growing international student markets for Australia, growing at a year-on-year rate of over 50 percent in 2009.
Vietnam is entering an energy crunch, according to Burchill. He predicts the oil industry, while already well developed, will change tack and increase its downstream petrochemical activity due to the country’s first oil refinery opening in Quang Ngai Province last year. Natural gas also appears to be a promising industry for skills and technology transfer, thanks to the large untapped gas reserves off Vietnam’s coast, which will drive further exploration and energy-resource production.
Mining is not as much of a lucrative sector for foreign entities, due to the monopoly the state-owned entities have over the mines, however equipment and service providers are doing and will continue to do quite well. “Bigger companies who want to invest in mineral resources in Vietnam are finding that mining laws are insufficient for foreign investors, and that the state-owned enterprises tend to be pretty territorial; the key is to work with the big Vietnamese companies,” Burchill notes.
Advanced exporters
Infrastructure is predominantly seen as the strongest growth sector in Vietnam. Exporters entering the sector are finding a burgeoning nation that cannot keep up with its own growth, and our skills and technology are highly valued.
“There’s an increasing number of infrastructure bottlenecks, which signifies clear opportunities for Australian exporters [in development and implementation]. Vietnam needs to streamline its infrastructure, particularly ports, rail, roads, power stations and telecommunication systems,” Burchill says.
Infrastructure is more of a complex export market, however. “To enter this sector, you’d need to have a relationship with the state-owned enterprise,” he explains.
Barriers
The Vietnamese government’s reputation as difficult and controlling has not really abated, according to Burchill. “Government regulations can be quite opaque,” he says. “Exporters have to get a good sense of the industry being entered, and a sense of the white elephants in the room, particularly when it comes to state-owned enterprises.”
He commends the legal system for supporting foreign entities, but says that the law isn’t really the main issue to keep in mind. “The problem is more the enforcement of the law. It’s not unusual in developing countries to have discord between the judiciary and the executive, especially when it comes to commercial codes. There have been commercial judgements in favour of foreign firms, but actually getting the local police or commercial officials in far-off provinces to enforce that judgement is a different issue. You’re better off not having to go to court in the first place. You must be certain of who you’re dealing with from the outset.”
The cost of freight to Vietnam is a key issue, as is the customs department once goods arrive to the shore, according to Bennett. “The customs department are still pretty tough at the front door,” he says. “If you haven’t got all your pieces of paper in the right folder in the right format, it will be tough to gain entry. In other countries you can sit down, have a chat and iron out the problem, whereas in Vietnam you have to go back to the beginning and start all over again.”
Language is still a problem, however less so as time goes by. “It’s improving and becoming more widespread, simply as a matter of necessity for business,” notes Bennett.
The future
The landscape of this developing country has changed significantly as the middle class has grown and the young population accumulates wealth. Calling the people of Vietnam “homogenous” and “aspirational”, Burchill says: “There’ll be an increase in the number of foreign players, simply because the middle class is growing so quickly. There’s a lot of suppressed demand that’s just bursting to get out of there and that’s going to take the economy a long way.
Got something to say? Join the export forum here at DynamicExport.com.au.
