THE FUTURE OF ASEAN: VIET NAM PERSPECTIVE - PWC
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The Future of ASEAN: Viet Nam Perspective
2 The Future of ASEAN: Viet Nam Perspective 3 The Future of ASEAN: Viet Nam Perspective
Foreword
Once among the smaller
economies in ASEAN, Viet Nam
has emerged as a country poised
for economic modernisation
and is participating actively in Viet Nam offers promising prospects for the investment
competitive, export-oriented community. Its economic priorities are closely aligned with
and service industries. business interests. Economic reforms pursued by the government
are set to accelerate growth and open up new business
Since joining ASEAN, Viet opportunities in this digital age. These include digital financial
Nam has enjoyed years services, the key driver for financial institutions, as well as new
of robust growth and opportunities for e-commerce to exploit Viet Nam’s thriving
macroeconomic stability, a consumer goods sector.
relatively stable exchange rate,
and strengthening external Companies stand to gain by leveraging on Viet Nam’s fast
trade relations. Foreign direct growing economy. This publication will explore what makes this
investments (FDI) reached a country an attractive investment destination and how it compares
record high in 2017 and are against other markets in the region. It will also highlight some
now among the strongest in the key sectors of opportunity as well as discuss the challenges the
region. country faces and steps to address them.
F
The region is expected to outperform average The country’s geographical Come and explore Viet Nam’s potential and find out what the
ifty years after its establishment, the global growth, and is estimated to expand by 5.3% position near global supply country, its market and its people have to offer.
Association of Southeast Asian Nations in 2018. This growth is led by emerging economies chains, coupled with a fast
(ASEAN) has become a strong community with such as Viet Nam, which is projected to grow growing consumer market
a growing role and stature globally. ASEAN by 6.9% in 2018 according to the Organisation and competitive labour
today is one of the fastest growing and most for Economic Co-operation and Development’s market adds to its appeal as an Dinh Thi Quynh Van
dynamic regions in the world. (OECD) statistics1. attractive business location for General Director
companies. PwC Viet Nam
4 The Future of ASEAN: Viet Nam Perspective 5 The Future of ASEAN: Viet Nam Perspective
In this report
Chapter 1: Chapter 2: Chapter 3: Chapter 4: Chapter 5:
ASEAN and Financial Consumer Infrastructure - Challenges and
Viet Nam’s services goods transportation ways to win
growth
journey Viet Nam is Viet Nam’s A focus on To sustain Viet Nam’s
an untapped strong consumer investment growth trajectory, the
market, with confidence has in transport government needs to
Viet Nam posts
double-digit propelled spending infrastructure is address critical issues
strong track
credit growth, on consumer vital to Viet Nam’s like external trade
records across
a rising middle goods especially in competitiveness. risk, fiscal stability,
three areas: the
class and the areas of food institutional voids and
economy, foreign
increasing and beverages, technology readiness.
direct investments
digital adoption. premium goods
and demographics
and apparel.
Page 7 Page 23 Page 35 Page 45 Page 59
This report includes information obtained or derived from a variety of publicly available sources. PwC has not sought to establish the reliability of these sources
or verified such information. The information contained in this document is of a general nature only. It is not meant to be comprehensive and does not constitute
financial, legal, tax or other professional advice. You should not act upon the information contained in this publication without obtaining specific professional
advice. Whilst every care has been taken in preparing this document, PwC makes no guarantee, representation or warranty (expressed or implied) as to its
accuracy or completeness, and under no circumstances will PwC be liable for any loss caused by reliance on any opinion or statement made in this document.
Except as specifically indicated, the expressions or opinion are those of PwC only and are subject to change without notice. This document shall not be copied,
reproduced, transmitted or further distributed by any recipient. The materials contained in this document were assembled in June 2018 and were based on Contacts Abbreviations PwC publications References
information available at the time.
6 The Future of ASEAN: Viet Nam Perspective 7 The Future of ASEAN: Viet Nam Perspective
Chapter 1
ASEAN and Viet Nam's growth journey
8 The Future of ASEAN: Viet Nam Perspective 9 The Future of ASEAN: Viet Nam Perspective
Figure 1.1: Top 10 markets worldwide by GDP size in 2022
C h apte r 1 : ASE A N an d Vi et Nam's g rowth jour ne y Collectively, ASEAN is the fifth-largest economy in the world
1.1 ASEAN, a top 5 global economy GDP at current prices, US$ billions
23,505
I n 2017, the Association of Southeast Asian
Nations (ASEAN) celebrated 50 years of peace
to become the fifth-largest economy worldwide.
Over the next five years, the region’s economy is
18,383
and prosperity, and continues to grow strongly. expected to expand by just under 50%, a short-
Its gross domestic production (GDP) is projected term growth phase that is unprecedented in
to reach US$4 trillion by 2022, when it is forecast ASEAN’s history.2
5,482
4,452 4,090
3,924 3,162
2,961 2,629 2,244
U.S. Japan ASEAN France Brazil
China Germany India U.K. Italy
ASEAN GDP projections
GDP at current prices, US$ billions
Phase 1: Phase 2: Phase 3:
~40 years ~10 years ~5 years
4,090
3,764
3,179 3,449
2,938
2,720
1,163
23
1967 2006 2017 2018 2019 2020 2021 2022
Source: International Monetary Fund (IMF) World Economic Outlook (WEO) Database, cited in PwC’s “The Future of ASEAN - Time to Act,” 2018
10 The Future of ASEAN: Viet Nam Perspective 11 The Future of ASEAN: Viet Nam Perspective
C h apte r 1 : ASE A N an d Vi et Nam's g rowth jour ne y
A diversified group
Although ASEAN as a group has made some Among the ASEAN member countries, Viet Nam
impressive progress, variations remain between together with countries such as Cambodia, Lao
individual markets, due to their different economic PDR and Myanmar (CLMV) are well poised for
lifecycles. Having a strong understanding of robust growth, having recorded some of the Resilient growth outlook
the differences between the ASEAN markets is region’s strongest GDP growth rates (between
essential for companies to be able to identify and 6% and 7%) in 2016.3 The emerging ASEAN 5 markets (Indonesia, Nevertheless, these markets are expected to
proritise target markets to achieve further growth. Malaysia, the Philippines, Thailand and Viet regain some momentum in the coming years.
Nam) have not been immune to the slowdown Growth is projected to hover at 5.3% per year
resulting from ongoing global uncertainties until 2022 and this will still outstrip global
Figure 1.2: Size and growth of ASEAN economies since the 2008 economic crisis. Growth dropped growth levels and those of developed ASEAN
ASEAN nations are at different stages of economic development to 4.9% in 2016, after reaching a high of 6.9% in nations.
2010.4
V
C LM
10%
Median: 249
Lao PDR Figure 1.3: Real GDP growth trends - Viet Nam, ASEAN and the World
8% (2,394) Cambodia
Real GDP growth (2016)
Philippines
(1,278) (2,927)
6% 16%
Myanmar Viet Malaysia
(1,232) Nam (9,374)
Thailand Average: 4.8%
4% (2,172)
Indonesia 14%
(5,902) (3,604)
2% Singapore 12%
(52,961)
10%
0%
(100) 0 100 200 300 400 500 600 700 800 900 1,000 8%
Viet Nam
-2%
Brunei Darussalam 6%
(26,935) ASEAN 5
-4% 4%
GDP at current prices (US$ billion, 2016) World
2% Developed
ASEAN
Bubble size and figures in brackets indicate GDP per capita (US$, current prices, 2016) 0%
(Singapore)
GDP per capita greater than ASEAN average (US$4,021) -2%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
GDP per capita less than ASEAN average (US$4,021)
Sources: ASEAN Secretariat, IMF WEO Database, World Bank, cited in PwC’s “The Future of ASEAN - Time to Act,” 2018 Source: IMF WEO Database, June 2018
12 The Future of ASEAN: Viet Nam Perspective 13 The Future of ASEAN: Viet Nam Perspective
1.2 A leading destination for FDI
C h apte r 1 : ASE A N an d Vi et Nam's g rowth jour ne y
Strong growth momentum for Viet Nam
Viet Nam, the largest economy in the CLMV
group, is projected to reach US$327 billion
manufacturing exports over the coming years.6
For example, 2017 marked a successful year for
A SEAN has been on the receiving end of
FDI despite rising volatility in capital flows
Singapore and Viet Nam attracted the most
investments in ASEAN in 2016.8 Intra-ASEAN
in GDP by 2022, recording growth of 6.2% trade with export turnover reaching $214 billion, worldwide. It has managed to attract significant investment also rose significantly (14% year-
annually between 2016 and 2022. While this is up 21% from 2016 - the highest ever year-on- investments to enable it to record seven-fold over-year in 2016), representing the largest
slightly lower than the average growth of 6.4% year increase. growth between 1990 and 2016. This has enabled source of investment for the agriculture and
achieved over the last 20 years from 1997 to it to become the fourth most popular investment mining sectors.
2017 5 , it is noticeably higher than projected In terms of economic structure, services destination globally, and the second-largest FDI
growth for the ASEAN 5 group as a whole and accounted for the largest part of GDP in 2017 destination in Asia.7
Singapore. at 41.3%, followed by manufacturing and
construction at 33.3%, while agriculture,
Growth is expected to be driven by forestry and the fishing sectors contributed
improvements in domestic consumption, rising 15.4%.
foreign direct investments (FDI), and growth in
Figure 1.4: Viet Nam’s economy and GDP growth
2016 GDP: 2022 GDP: Real GDP growth (2016-2022)
6.2%
US$201 billion US$327 billion
Source: IMF WEO Database, cited in PwC’s “The Future of ASEAN - Time to Act,” 2018
14 The Future of ASEAN: Viet Nam Perspective 15 The Future of ASEAN: Viet Nam Perspective
C h apte r 1 : ASE A N an d Vi et Nam's g rowth jour ne y
U.S. 391
Figure 1.5: FDI in ASEAN U.K. 254
Viet Nam’s share of ASEAN FDI China 242
jumped to second position in 2016 ASEAN 101
Top 10 markets by FDI inflows, 2016 Netherlands 92
US$ billions British Virgin Islands 59
Brazil 59
Australia 48
Cayman Islands 45
India 45
ASEAN FDI inflows, 1990-2016 Share of ASEAN FDI, 2016
1990 13 Singapore
1995 29 Malaysia
Indonesia
2000 23 50%
Thailand
8% 61%
2005 43 Viet Nam
12% 10% 3%
2010 111 13% 2% Philippines Figure 1.6: Top 2 FDI destinations in ASEAN - Singapore and Viet Nam
12% Viet Nam consistently posts positive growth in FDI inflows
1% 7% Others
2016 101 9% 8% 4%
Year-on-year growth in FDI inflows
US$ billions 2010 2016
Source: United Nations Conference on Trade and Development (UNCTAD), cited in PwC’s “The Future of ASEAN - Time to Act”, 2018 28%
17%
15% 14%
14%
Viet Nam is among the to finance growth in the future, Going forward, Viet Nam needs
few countries in ASEAN to especially in sectors such as to balance its overdependence 11% 7%
consistently record positive infrastructure and manufacturing on global value chains by 6% 3% -3%
FDI growth in recent years, where productivity is a concern building up ASEAN as a major -5% -13% Viet Nam
mainly led by growing - shifting focus over time from source of demand for exports -20%
Singapore
investments in manufacturing. labour-intensive production to in sectors such as agri-products
Policy reforms designed to higher value-add segments such and electronics.9 ASEAN
attract further FDI will be key as electronics and automotive. 2012 2013 2014 2015 2016
Sources: U.N. Population Division, IMF, ASEAN stats, UNCTAD, cited in PwC’s “The Future of ASEAN - Time to Act,” 2018
16 The Future of ASEAN: Viet Nam Perspective 17 The Future of ASEAN: Viet Nam Perspective
C h apte r 1 : ASE A N an d Vi et Nam's g rowth jour ne y
1.3 Promising demographics
Expanding labour force
A SEAN’s impressive growth and
investments are underpinned by the region’s
The International Labour Organisation
estimates that ASEAN will record the second-
formidable labour force and the emergence largest growth in labour force worldwide
of a wealthier middle class. The expansion between now and 2030. Another 59 million
of the region’s labour force has been a major people are projected to enter the ASEAN
contributor to ASEAN’s growth story, with workforce between 2015 and 2030. This
more than 100 million people estimated to would represent the third-largest labour force
have joined ASEAN’s workforce over the past worldwide, behind only China and India,
20 years.10 accounting for a total of 10% of the global
labour force by 2030.11
Figure 1.7: Labour force in ASEAN, in millions
ASEAN to maintain the 3rd largest labour force
worldwide by 2030
1995 224
2000 252 Viet Nam’s current population is 15 – 59 years old and for females: As more than a million people
2005 277 over 94 million and is expected 15 – 54 years old)13. are added to the workforce
to grow at an annual rate of 1.3% annually, these factors create
2010 302 to around 110 million by 205012. Viet Nam has a growing educated an ideal population structure
2015 326 With a median age of 30.7 years, workforce and approximately that ensures a steady labour
Viet Nam has a relatively young 22% of the labour force is force.
2020 348
population with around 52% of considered trained or skilled,
2025 367 the population falling within the with either diplomas or
385 working age bracket (for males: certificates14.
2030
Sources: International Labour Organisation (ILO) estimates, Quarterly
Global Outlook, UOB Global Economics & Markets Research, cited in PwC’s
“The Future of ASEAN - Time to Act,” 2018
18 The Future of ASEAN: Viet Nam Perspective 19 The Future of ASEAN: Viet Nam Perspective
C h apte r 1 : ASE A N an d Vi et Nam's g rowth jour ne y
79%
Figure 1.8: Viet Nam’s labour force, in millions Figure 1.9: Share of middle-
65%
income class in overall
population
53%
50.8 51.7 52.3 53.2 54.4 54.6 54.6 54.8 55
47%
60 49.2
41.3
40
29%
2010
20
19%
2030
-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F ASEAN China Latin America
Source: General Statistics Office of Viet Nam Source: ILO estimates, UOB Global Economics & Markets Research, cited in PwC’s “The Future of ASEAN - Time to Act,” 2018
Rising middle class
There are already some 87 million
middle class ASEAN households
with incomes exceeding the level
at which they can begin to make
significant discretionary purchases.
Fuelled by increased urbanisation and
subsequent rising consumption levels,
this middle class is set to reach 120
million households by 2025, making
it a pivotal consumer market of the
future.15
ASEAN’s middle-income segment
(defined as US$10 to US$100 in daily
expenditure) is projected to represent
two-thirds of the overall population by
2030, compared with 29% in 2010.1620 The Future of ASEAN: Viet Nam Perspective 21 The Future of ASEAN: Viet Nam Perspective
C h apte r 1 : ASE A N an d Vi et Nam's g rowth jour ne y
potential for growth and investments. This report examines the opportunity for
The sectors are: growth in each sector as well as strategies
Viet Nam leads ASEAN in terms of growth of per capita spending by the middle 60% of the • Financial services companies can adopt to postition themselves
population from 2016 to 2021, with a compound annual growth rate (CAGR) of 10.1%. This • Consumer goods for success in Viet Nam.
growth rate puts it ahead of other major ASEAN markets such as Singapore and Malaysia.17 • Infrastructure - transportation
Figure 1.10: Middle income population* in ASEAN Key takeaways on Viet Nam
Disposable income projections, US$ per capita, 2016-2021
The rapidly growing middle class Among the fastest growing economies in ASEAN, in terms of:
population in Viet Nam makes
the country a very attractive
6.4% FDI
CAGR market for foreign brands. It is
29,856 2016
estimated that the number of US$17.5
middle class Vietnamese will billion
2021
VIET
reach 44 million by 2020 and 95
22,812 million by 2030.18
As Viet Nam’s middle class
GDP growth
6.2%
8.3% 5.5% 7.5% 10.1% grows and disposable incomes 2017
NAM
rise across all segments of the
population, greater spending
5,149 power is spurring a demand for
3,593 (2016-2022)
1,769 2,418 1,204 1,797 837 1,352
services and higher value-added
products. Disposable income per
capita for Viet Nam is estimated
Singapore Malaysia Indonesia Philippines Viet Nam
2nd
to reach US$2,009 by 2020.
* Middle 60% of the population
Middle income population growth
largest labour
Source: Business Monitor International (BMI) Database, cited in PwC’s “The Future of ASEAN - Time to Act”, 2018
market in ASEAN
1.4 Growth market opportunities 55 million (2018)
10.1%
T
2016-2021
here are significant growth opportunities dynamics of the country’s business environment.
for the private sector across a number of
industries in Viet Nam. However, some sectors This publication will explore some of the
are more developed than others given the untapped domestic sectors that might have great22 The Future of ASEAN: Viet Nam Perspective 23 The Future of ASEAN: Viet Nam Perspective
Chapter 2
Financial services24 The Future of ASEAN: Viet Nam Perspective 25 The Future of ASEAN: Viet Nam Perspective
C h apte r 2 : Fi n an ci al se r vi ce s
According to the World Bank, also has significant infrastructure gaps, including a very low
2.1 An untapped market just 30.9% of Vietnamese people number of banking branches and ATMs, especially outside the
above 15 years of age had an major urban areas.
account at a financial institution
S ince the Asian financial crisis in 1997–98,
ASEAN has been building a strong foundation
Singapore, Thailand, Philippines, Malaysia,
Viet Nam) exceeded US$20 billion in 2016.
in 2015, compared to a regional
average of 61.7%. It is however,
generally accepted that the
With only 3.8 bank branches per 100,000 people, Viet Nam has
one of the lowest numbers of banks in East and Southeast Asia
and the majority are state-run institutions.
for growth. The financial services sector in banking penetration among
most ASEAN countries has shown steady However, for Viet Nam the figure is relatively young Vietnamese has increased The situation is also relatively similar for Viet Nam’s total
growth from 2005 to 2016. low and can be attributed to the country’s since 2015. insurance penetration which stands at 1.7% (life and non-life
low banking penetration rate.19 gross premiums as a % of GDP) and retail customer investment
The financial gross value add for most of Viet Nam together with other market penetration. Whilst Viet Nam's low financial market
the ASEAN-6 leading economies (Indonesia, emerging ASEAN countries like penetration presents challenges, it also presents an array of
the Philippines and Indonesia opportunities.
Figure 2.1: Financial gross value add of selected Southeast Asian
Figure 2.2: Total banking penetration, 2014 Figure 2.3: Total insurance* penetration, 2015
countries, US$ billions
(population with bank accounts) (premium percentage of GDP)
(measures the financial sector contribution to the economy)
United 98.9% United 10.5%
US$ billions Kingdom Kingdom
40 Japan 98.6% Singapore 10.5%
35
Singapore 96.4% Japan 8.8%
30
25 Malaysia 81.0% Thailand 5.4%
ap
20
tio e
tra nc
ng
Thailand 78.0% Malaysia 4.1%
ne ra
15
pe Insu
10 Philippines 1.9%
Indonesia 36.0%
tion
5
gap netra
0 Philippines 31.0% Viet Nam 1.7%
pe
ng
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Indonesia
nki
Viet Nam 31.0% 1.6%
Ba
Cambodia 22.0% Cambodia 0.3%
Indonesia Singapore Thailand Philippines Malaysia Viet Nam
* Life and non-life insurance combined
Source: Asian Development Bank, BMI Sources: World Bank, BMI, PwC analysis, cited in PwC’s “The Future of ASEAN – Time to Act,” 201826 The Future of ASEAN: Viet Nam Perspective 27 The Future of ASEAN: Viet Nam Perspective
C h apte r 2 : Fi n an ci al se r vi ce s
Figure 2.4: Retail customer investment penetration, 2015
(number of retail customers invested in financial markets, % of population)
Figure 2.5: Viet Nam – total outstanding credit and credit growth
Japan 39.1%
10,000 18.7% 20%
Singapore* 28.9% Total credit (VND tn)
17.5%
17.3%
9,000 17.1% 18% YoY Growth (%)
United States 28.0% 15.8%
8,000 16%
United Kingdom 18.4% 14.2%
7,000 12.5%
14%
Malaysia 5.9%
6,000 12%
Thailand 2.7% 5,000 10%
4,000 9.2% 8%
Viet Nam 1.6%
Philippines 0.7% 3,000 6%
2,000 4%
Indonesia 0.2%
1,000 2%
Sources: World Bank, BMI, PwC analysis, cited in PwC’s “The Future of ASEAN – Time to Act,” 2018.
- 0%
2012 2013 2014 2015 2016 2017 2018E 2019E
2.2 Double-digit credit growth
V iet Nam’s banking sector
has achieved strong credit
affluence as well as an increase in
urbanisation, with more people
Because Viet Nam is still a
heavily cash-based society
Figure 2.6: Viet Nam – credit to GDP ratio
growth since emerging from exposed to financial service with close to 99% of financial 160%
147%
its banking crisis in 2012. offerings. transactions conducted in cash, 139%
Credit growth hit a high of 130% 140%
the demand for other types of
121%
18.7% in 2016 and is among With about 60% of its nearly banking products is also set to 111% 120%
the highest in the region20. 100 million-strong population grow; in particular demand 101%
95% 97%
Analysts forecast sustained under the age of 35, the working for payment cards and wealth 100%
credit growth of 15% to 17% class population will continue to management services.
over the 2018 and 2019 periods expand over the next twenty years 80%
driven by a growing labour and bring about greater demand
force, rising income levels and for consumer banking services. 2012 2013 2014 2015 2016 2017E 2018E 2019E
Sources: State Bank of Viet Nam (SBV), Credit Suisse estimates, 201728 The Future of ASEAN: Viet Nam Perspective 29 The Future of ASEAN: Viet Nam Perspective
C h apte r 2 : Fi n an ci al se r vi ce s
Figure 2.7: Viet Nam - Banking assets by sector, 2017
2.3 Dominated by local players
5%
T he Vietnamese banking
industry consists of a wide
In terms of chartered capital,
the JSCBs are better capitalised
Joint-venture and 100% foreign-
owned banks account for a
10%
Operating in Viet Nam as
range of players, from large than the state-owned banks, relatively small market share of at 31 December 2017
state-owned and joint-stock with the former accounting for 10% of total assets, but a higher
commercial banks to small
privately held banks. State-
owned commercial banks
around 41% of the total industry
charter capital, while the latter
has a share of roughly 30%.
market share of 22% in terms of
charter capital.21
40% 45%
04 State-owned
banks 16 Finance
companies
maintained 45% of market
share in terms of total
assets as at December 2017,
Vietnamese banks are open for
foreign investments but foreign
31 Joint-stock
banks 11 Leasing
companies
11
followed closely by joint-stock ownership is limited to 20%. State-owned banks Joint ventures
commercial banks (JSCBs) Joint stock commercial banks and wholly owned
with a market share of 40%. Joint venture, foreign banks foreign banks
Others
Source: BMI and SBV, 201730 The Future of ASEAN: Viet Nam Perspective 31 The Future of ASEAN: Viet Nam Perspective
C h a pte r 2 : Fi n an ci al se r vi ce s
2.4 Rising digital adoption
G rowing internet
penetration and the
digital community in the region.22 CAGR of 16% over 2013 to 2015.
The country’s mobile internet
Figure 2.9: E-wallet penetration trend among mobile internet users, %
proliferation of affordable Among the notable digital users are expected to expand
smartphones, coupled with banking services making their further from 29 million in 2017
lower data costs and higher mark in ASEAN and Viet Nam is to 40 million by 2021, thereby CAGR 2013-15
bandwidth (speed) are the usage of digital wallets in line increasing the market reach of 4.4 130%
Singapore
accelerating the growth of with the increasing smartphone digital wallets in the country. 23.3
digital banking services across penetration rate. This could be
ASEAN. a stepping stone to providing a Digital banking penetration 11.4 -18%
broader range of digital banking could continue to rise as devices Thailand 7.6
The digital banking market services as well as increased evolve to store biometric data,
could potentially service financial inclusion among the which will significantly improve 11.8
Viet Nam 16%
483 million internet users in underbanked segment. security for digital financing, 15.9
ASEAN-6 countries by 2020. further accelerating the growth
Viet Nam alone is expected to In Viet Nam, just under 16% of of digital banking. 10.8
have 82 million internet users, its mobile internet users used Philippines 25%
17.0 2013
accounting for the third largest e-wallets in 2015, which grew at a
Indonesia 9.8 2015
6%
11.1
215
Figure 2.8: Internet users among ASEAN-6 countries, in millions Source: Statista, cited in PwC’s “The Future of ASEAN - Time to Act,” 2018
To support banking digitalisation Corporation of Viet Nam to electronic money transfer
initiatives, the State Bank of encourage the development of services, and e-wallet
92 93 Viet Nam’s (SBV) Steering FinTechs. services with permission
82
Committee on FinTech was from SBV. So far, more than
59 55 set up in 2017. The Steering Non-bank organisations are also 20 e-wallets have been
44 2015 Committee brings together the allowed to offer intermediary licensed to operate in Viet
38
22
28 State Bank, representatives from payment services such as Nam.23
2020 departments within the central electronic payment portals, cash
5 6
bank, and the National Payment collection and payment services,
Thailand Indonesia Viet Nam Philippines Malaysia Singapore
Source: World Bank, Google32 The Future of ASEAN: Viet Nam Perspective 33 The Future of ASEAN: Viet Nam Perspective
C h a pte r 2 : Fi n an ci al se r vi ce s
2.5 Key opportunities
Partnerships
Partnerships provide banks with an opportunity to bridge the gaps
they are experiencing in servicing the country’s new middle class,
Digital financial services such as in bancassurance. Partnering with non-banking institutions
will enable synergies in driving financial access and usage of digital
Digital financial services financial services.
remain the key driver for
financial institutions, in • Access to a new customer • Last mile coverage:
addressing the low banking Bancassurance Consumer lending base: Telecommunications, Postal services and
penetration rate and limited postal services, and social telecommunications have
use of digital payments. Viet Nam has one of the fastest growing middle income When it comes to individual needs, media have larger customer established merchant
It is essential for financial groups in the region, growing at 10% CAGR between use of credit cards and personal bases than banked customers. outlets which can cover the
institutions seeking growth in 2016 and 2021. There is also a change in the awareness of loans is still nascent in Viet Nam. By collaborating with or last mile in rural and small
Viet Nam to embrace the digital middle income class individuals, among whom increasing Credit cards account for just a leveraging these platforms, city locations, enabling
mindset. importance is placed on protection and insurance. This modest proportion of the total banks can gain access to this banks to service customers
promotes the growth of bancassurance — the selling of number of bank cards in Viet Nam. new customer pool quickly. at a lower cost.
One of the key advantages of insurance products and services by banking institutions. This presents a relatively untapped
digital technology is its low-cost market for banks to invest in. • Innovative technology • Cashless payments:
scalability, bearing in mind that This is a key opportunity for financial institutions as the platforms: FinTech Banks need to also
Viet Nam has one of the lowest bancassurance market in Viet Nam is very underdeveloped In 2017 alone, consumer lending companies are able to offer consider partnering with
numbers of bank networks in compared to other countries. grew at three times the average innovative technologies more government agencies,
Southeast Asia. credit growth rate, reaching rapidly than banks. Banks can social media companies,
Expanding customer needs, increasing demand for life 65% growth and amounting to leverage existing platforms FinTech companies, and
Banks which are looking to coverage and the growing need for medical protection US$51.54 billion, according to without building a new e-commerce providers
serve the country need to and long-term savings for education and retirement offer Viet Nam’s National Financial solution thanks to the FinTech to drive the cashless
consider how best to adopt ample opportunities for players to provide a diverse and Supervision Committee. This companies’ lean, independent payments agenda.
digital solutions to reach this sophisticated range of market-leading life insurance was driven in part by a rise in nature.
market at a lower cost and from solutions. The partnership with banks in delivering this consumption and the standard of
any location. product is, and will continue to be, a significant trend. living.34 The Future of ASEAN: Viet Nam Perspective 35 The Future of ASEAN: Viet Nam Perspective
Chapter 3
Consumer goods36 The Future of ASEAN: Viet Nam Perspective 37 The Future of ASEAN: Viet Nam Perspective
C h a pte r 3 : Co nsu me r g ood s
3.1 Third largest consumer goods market
T he consumer goods sector has been one of the
early benefactors of ASEAN’s growth and economic
Consumer goods expenditure among the
leading ASEAN-6 countries is expected to
prosperity, which have led to increased expenditure expand with a CAGR of 7.7% from 2016 to
by its growing middle class. 2021. Viet Nam is forecast to lead in terms
of growth, with a CAGR of 10.2% from 2016
ASEAN is now the third-largest consumer goods to 2030, followed by the Philippines with a
market globally, in terms of consumer expenditure's CAGR of 9.7%.25
share of GDP at 26.3%, after the Middle East and
Africa region and Eastern Europe24. The leading
consumer good markets in the region are the
Philippines (42.1%) and Viet Nam (37.5%).
Figure 3.1: Consumer expenditure as % of GDP, 2010 - 2030
Growth segments
Philippines and Viet Nam are the leading consumer goods markets in ASEAN The food and drink, apparel and footwear, and consumer electronics segments continue
to remain the main subsectors of growth within ASEAN’s consumer goods sector.
41.1
42.1
40.2
Food and drink: Apparel and footwear: Consumer electronics:
36.1
37.5
36.6
Growth has been fuelled by Apparel and footwear retailers, The growing connectivity
changing lifestyles and consumer particularly “fast fashion”, and rise of e-commerce
preferences. The presence of continue to expand in the region. across ASEAN underpins the
foreign companies in ASEAN The arrival of international rising demand for consumer
25.1
26.3
26.9
26.3
26.4
25.4
25.7
25.6
24.3 markets is expanding, led by: fashion retailers, the rising electronics such as laptops,
20.0
22.2
23.1
rising consumer awareness; popularity of sports inspired smartphones, wearable
partnerships between local and apparel as well as the increasing technologies and gaming
foreign companies; an increase online retail trend are driving devices.
in government health and growth in clothing and footwear
8.5
7.7
7.2
wellness programmes; and new sales in ASEAN.
legal frameworks, which allow
foreign companies to expand
ASEAN Indonesia Malaysia Philippines Singapore Thailand Viet Nam
local productions with imported
products.
2010 2016 2030
Note: Consumer expenditure refers to consumer expenditure on consumer goods only
Source: Euromonitor, cited in PwC’s “The Future of ASEAN - Time to Act,” 201838 The Future of ASEAN: Viet Nam Perspective 39 The Future of ASEAN: Viet Nam Perspective
C h a pte r 3 : Co nsu me r g ood s
3.2 Viet Nam in the fast lane
5th
Viet Nam’s strong consumer confidence and rising household income levels have contributed
to an overall increase in consumer spending. The median disposable income rose by 46% to
an estimated US$3,822 per household in 2016, from US$2,613 in 201026. Meanwhile, total
household spending is forecast to grow by 47% from US$122 billion in 2017 to US$179 billion in
most optimistic 2021.
46%
country globally
Among the key spending trends in Viet Nam:
rise in median disposal
income from 2010 - 2016 • Food and beverage - the largest portion of on new clothes (49%) and holidays (44%).
household spending in Viet Nam is on food and Around two in five spent on new technology
non-alcoholic drinks, followed by housing and products (40%), out of home entertainment
utilities and transport spending. (41%) and home improvements (42%).27
10.2% 47%
rise in household
• Premium goods (including health goods) -
in recent years, Viet Nam consumers have
increasingly become more willing to purchase
• Foreign brand presence - due to the rising
appetite for foreign goods coupled with
higher disposable income, many global
premium items to enhance their quality of life, brands are increasingly distributing their
CAGR of consumer goods spending expected notably healthcare and organic products. products via dealers or even using their own
expenditure over 2016 - 2030 between 2017 channels. In major cities such as Ho Chi Minh
and 2021 • Product quality - consumers are becoming City, Hanoi and Da Nang, consumers have a
more conscious about the quality of products wide range of fashionable products from both
and their potential health impact. This has local and foreign brands to choose from.
resulted largely from scandals involving poor
City dwellers
quality foodstuffs, toys and personal care • High propensity to save - Vietnamese
products. Such concerns extend to other consumers have a strong habit for saving,
products such as clothing, footwear, electrical with 72% saying they would put their
appliances and household items. additional income into savings.
to increase consumption on consumer goods by the
greatest amount • Other consumer goods - nearly half of
consumers were willing to spend their income
Source: Euromonitor and Nielsen cited in PwC’s “The Future of ASEAN - Time to Act,” 2018 and BMI 201740 The Future of ASEAN: Viet Nam Perspective 41 The Future of ASEAN: Viet Nam Perspective
C h apte r 3 : C on sume r g ood s
3.3 Key opportunities
A
Figure: 3.2: Spending on consumer goods – the fastest growing items, US$ billion
CAGR 6% CAGR 5.5% CAGR 6% gainst the backdrop of rising consumer spending and disposable
income in Viet Nam, a number of opportunities emerge for consumer
43.2 5.9 4.0 goods and these include:
56.7 7.1 5.3
80.6 9.9 7.5 • Regional sourcing and manufacturing of goods
• E-commerce business
• Partnerships
Sourcing in Viet Nam
Food and non-alcoholic Health goods and Clothing and Viet Nam and Thailand are the two largest agricultural exporters in
beverages medical services footwear ASEAN, with their agricultural exports valued at US$15 billion and
US$13 billion respectively in 2016.28
2012 2016 2022
However, Viet Nam’s food product sector has huge room for growth, with
Source: Business Sweden analysis, 2018
exports worth US$4 billion in 2016. Thailand in comparison exported
US$18 billion worth of food products in the same year.
Figure 3.3: Spending and saving patterns of Vietnamese consumers, 4th quarter 2017
How do Vietnamese consumers spend their spare cash? Viet Nam’s large agriculture base provides considerable opportunities to
advance the country’s food processing and manufacturing capabilities
to supply higher value added food products to the region and global
72% 44% 49% 40%
markets.
Figure 3.4: Export of agricultural and food products in Viet
SAVINGS Holiday/vacations New clothes New technology products
Nam and Thailand in 2016
Viet Nam has a large agricultural base, however its food product
42% 41% 29%
sector is still relatively untapped
Export items Viet Nam Thailand
Agricultural products US$15 bn US$13 bn
Q4'17 Home improvements Out of home Pay medical
Food products US$4 bn US$18 bn
entertainment insurance premiums
Source: Nielsen, 2017 Source: The Observatory of Economic Complexity, 201842 The Future of ASEAN: Viet Nam Perspective 43 The Future of ASEAN: Viet Nam Perspective
C h apte r 3 : C on sume r g ood s
Rapid adoption of e-commerce Partnerships
One of the fundamental growth drivers for However, online retail makes up only 1% of the total Although Viet Nam’s e-commerce potential players. Consumer goods companies stand
the consumer sector in ASEAN is the adoption retail market in Viet Nam, compared with 14% in is exciting, consumer goods companies are to differentiate themselves and are able to
of digital technologies for consumption. The the US and China31. Although there is still a long finding it challenging to enter and expand compete more effectively through better
total e-commerce market in Southeast Asia is way to go for the Vietnamese e-commerce market on their own. Seeking partnerships with customer insights, tailored products and
estimated to reach around US$88 billion in to develop, foreign companies have invested in the e-commerce platforms can ease entry into marketing campaigns. They are also able to
2025, with a CAGR of 32% between 2015 and country early to get ahead in the market. e-commerce for consumer goods companies. test new products, prices and positioning
2025.29 among a targeted group of pilot customers
Viet Nam’s e-commerce prospects still look attractive There are a number of cross-functional via soft product launches on e-commerce
Viet Nam is rapidly developing its online for the consumer product market. Based on PwC’s benefits for consumer goods companies if they platforms.
marketplace, but its e-commerce sector is still Global Consumer Insights Survey 2018, the leverage on partnership with e-commerce
relatively nascent. The Vietnamese e-commerce Vietnamese ave a strong propensity to buy groceries
market is expected to grow in revenue from online than the consumers in other ASEAN markets.
$1 billion in 2016 to $2.3 billion in 2020, with
CAGR of 23%.30 In comparison, the retail Figure 3.6: Benefits of partnership between a
market is only expected to grow at a CAGR of consumer goods company and an e-commerce platform
6% between 2010 and 2020.
Data
analytics
Figure 3.5: Buying behaviours - the likelihood of purchasing Technology
groceries online
Viet Nam consumers likely to shop for groceries online over Product testing Sales
the next 12 months
Consumer
goods
Cross border companies &
e-commerce e-commerce Customer
platform Logistics insights
59% 54% 35% 25% 23% 21% 20% partnership
Market Online marketing Social
Talent insights and brand
China Viet Nam Thailand Singapore Indonesia Malaysia Philippines awareness
Source: PwC’s Global Consumer Insights Survey 2018 Source: PwC analysis, cited in PwC’s “The Future of ASEAN - Time to Act,” 201844 The Future of ASEAN: Viet Nam Perspective 45 The Future of ASEAN: Viet Nam Perspective
Chapter 4
Infrastructure - transportation46 The Future of ASEAN: Viet Nam Perspective 47 The Future of ASEAN: Viet Nam Perspective
C h a pte r 4 : I n frast r uct ure - t ran spor tat ion
Recognising the infrastructure The government is also investments by 2040. 35
4.1 A boost in infrastructure spending gap, Viet Nam is increasing speeding up plans to attract Energy is expected to
investment in this area. From more private investment for account for the largest
A SEAN governments
have identified transport
Given rising demand for more
efficient transport networks,
Developing economies in ASEAN
such as Viet Nam lag behind
2012 to 2016, Viet Nam’s
infrastructure spending growth
was among the fastest in
infrastructure as the state can
currently only meet a third
of its infrastructure costs.34
portion of its infrastructure
investments with a
44% share, followed by
infrastructure to be of strategic this has placed pressure on the on transport infrastructure ASEAN, at 11.5% p.a., nearly According to the G20 Global transportation (28%),
importance for their economic region’s governments to renew spending. Nevertheless, Viet double its GDP growth. Infrastructure Outlook 2017 telecommunications (16%)
development and increasing their commitment to spending Nam ranks slightly ahead of report, Viet Nam will require and water (12%). 36
trade competitiveness. The on transport infrastructure Indonesia and the Philippines US$605 billion in infrastructure
total infrastructure investment to reduce logistics costs. For in terms of quality of logistics
needs in ASEAN from 2016 example, the logistics costs infrastructure.
to 2030, according to Asian represented about 9% of GDP in
Germany and 12% in Brazil in Figure 4.2: ASEAN-6 infrastructure spending and
Development Bank (ADB),
2016, while they stood at 21% GDP growth
is forecast to reach US$2.8
trillion (baseline estimate), of GDP in Viet Nam and 26% in Average growth rates from 2012-2016
or an annual investment of Indonesia.33 Infrastructure
US$184 billion.32 spending
14% growth (%)
12.6%
12% 11.5% GDP growth (%)
Figure 4.1: ASEAN-6 infrastructure position and spending 10.3%
10%
100 8.7% 8.6%
2,049 8%
82
74 6.6%
5.9% 5.3%
64 63 61 6% 5.1%
4.3%
State of logistics Infra 3.4% 3.3%
4%
(Indexed to rank 1 -
705
522 Singapore)
284 2%
314
Infrastructure spending per
115
capita (US$) 0%
Singapore Malaysia Thailand Viet Nam Indonesia Philippines Philippines Viet Nam Thailand Malaysia Indonesia Singapore
Sources: World Bank — LPI, PwC analysis and International Monetary Fund, 2017 Source: Oxford Economics, World Bank Data, cited in PwC’s “Understanding infrastructure opportunities in ASEAN,” 201748 The Future of ASEAN: Viet Nam Perspective 49 The Future of ASEAN: Viet Nam Perspective
C h a pte r 4 : I n f rast r u ct ure - t ran spor tat ion
4.2 Transportation infrastructure vital to Viet Nam’s competitiveness
A mong the ASEAN countries, Viet Nam
has the second highest spending on transport
an integral strategy to position the country as
a regional manufacturing hub. This is critical
infrastructure and it is projected to increase in cutting down travel time and cost across
to US$11 billion in 2020 and US$17 billion by the supply chain from the industrial centres
2025. The government sees transportation as to the ports.
Figure 4.3: ASEAN-6 transport infrastructure spending (road, rail, sea and airports)
40
In US$ billlions (2015 prices)
Figure 4.4: Breakdown of Viet Nam’s transport infrastructure
31 investment needs, forecast 2016-2040
24 Emphasis is on roads followed by railways
7
6
6 6
134
4 4
3 5 5
4 4
6 17
11 21
6
2015 2020 2025
8.5
5.2
Indonesia Singapore Calculated investment
Malaysia Thailand demand, US$ billions
Philippines Viet Nam
Air Sea port Railway Road
Source: Oxford Economics, cited in PwC “Understanding
infrastructure opportunities in ASEAN,” 2017 Source: G20 Global Infrastructure Outlook 2017, cited in Viet Nam Briefing50 The Future of ASEAN: Viet Nam Perspective 51 The Future of ASEAN: Viet Nam Perspective
C h a pte r 4 : I n frast r uct ure - t ran spor tat ion
Viet Nam’s Socio-Economic Development Plan
(SEDP) 2016-2020 important road projects:
Roads
The SEDP is Viet Nam’s medium-term development
In Viet Nam, roads are the The Vietnamese government From 2018 to 2020, the
plan which identifies key objectives for the country.
dominant mode of freight intends to continue improving country plans to complete the
Under the SEDP 2016-2020, investments identified
transport supporting the its road infrastructure, as construction of 654 kilometres
include:
country’s development as a observed from its development out of 1,300 kilometres of
regional manufacturing hub. plans. North-South Expressway
Statistics show that roads under the public-private • US$48 billion • US$13 billion
served about 77% of all Amongst ASEAN countries, partnership (PPP) model. The for transport for a 10-lane road
freight transport and 94% of Viet Nam has the highest state will contribute some infrastructure spanning 1,800km
all passengers transported in number of pipeline road and 40% of the total investment projects between between Hanoi and
2016. 37 bridge projects in the region. capital. 38 2015 and 2020 Ho Chi Minh City
Figure 4.5: ASEAN-6 road and bridge projects by country
97
Indonesia
46
20
Malaysia
16
28
Philippines
43
3 Past
Singapore
3 Pipeline
4
Thailand
8
97
Viet Nam
85
0 20 40 60 80 100
Number of projects
Source: BMI, cited in PwC’s “Seizing greenfield infrastructure opportunities in ASEAN,” 201752 The Future of ASEAN: Viet Nam Perspective 53 The Future of ASEAN: Viet Nam Perspective
4.3 Opportunities in transportation infrastructure
C h a pte r 4 : I n frast r uct ure - t ran spor tat ion
Public Private Partnership (PPP)
Rail
Viet Nam is also stepping
up to upgrade its rail
among the ASEAN countries,
just behind Indonesia and
South High Speed Rail
line linking major cities
P PPs are partnerships
between the government and
infrastructure sector. The new
decree outlines the sectors,
foreign investors would
like to see better project
infrastructure, which is over just ahead of Thailand. The and economic zones across private-sector companies to investment conditions for PPP preparation and processes
136 years old. The country’s rail projects include the Viet Nam. In addition, the finance, build and operate projects including a significant by the government. Investors
rail network is centred on modernisation and expansion Ministry of Transportation projects. They are expected to increase in the investor equity are also not granted the
a 1,726km single-track of the national railway network and the Korea International provide a significant source ratio. necessary flexibility
mainline running from Hanoi and the construction of subway Cooperation Agency are of financing for infrastructure regarding these projects.
to Ho Chi Minh City. (MRT) lines in Hanoi and Ho also currently studying the projects in Viet Nam. Like any emerging economies, Consequently, most PPPs to
Chi Minh City. feasibility of a 500km39 railway there are still challenges in date have been between the
Currently Viet Nam has 29 link to Laos. Two of Viet Nam's largest the implementation of PPPs. government and state-owned
rail projects in the pipeline, On the horizon, the government road projects, the 235km Nha Although a number of decrees enterprises (SOE) or related
which places it second is looking to build a North- Trang-Phan Thiet Expressway have been put forward to local entities.
(worth US$2.16 billion) and the facilitate PPP investment,
200km Dau Giay-Lien Khuong
Figure 4.6: ASEAN-6 rail projects by country Expressway (worth US$3
billion) are currently under
construction as PPP schemes
31 and are due for completion by
Indonesia
43 2020. 40
Malaysia 6
The country also has a
10
relatively well established
Philippines
PPP environment and is
5
ranked among the highest in
11
ASEAN according to the World
Singapore 51 Bank’s 2017 PPP Procurement
13 Benchmark report. The
Vietnamese government
Thailand 17
recently adopted a PPP
28 Past
framework aimed at attracting
5 Pipeline private capital to the country’s
Viet Nam
29
0 10 20 30 40 50 60
Number of projects
Source: BMI, cited in PwC’s “Seizing greenfield infrastructure opportunities in ASEAN,” 201754 The Future of ASEAN: Viet Nam Perspective 55 The Future of ASEAN: Viet Nam Perspective
C h a pte r 4 : I n f rast r u ct ure - t ran spor tat ion
Table 4.7: ASEAN-6 PPP benchmarking scores
PPP Unsolicited PPP Contract
PPP Preparation
Country Procurement Proposals Management
(Score)
(Score) (Score) (Score)
Indonesia 50 70 58 61
Malaysia 46 43 NA 24
Philippines 96 85 67 84
Singapore 58 75 NA 64
Thailand 54 63 NA 57
Viet Nam 75 85 42 58
Countries are scored between 1 and 100, with 100 being the highest score
Source: World Bank and Public-Private Infrastructure Advisory Facility, cited in PwC “Seizing greenfield infrastructure opportunities in ASEAN,” 2017
Figure 4.8: Transport PPP projects within ASEAN by sub-sector
Viet Nam has 13 PPP projects in the pipeline, with nine in transportation
Smart city infrastructure
9 Airport
Projects 7 Port
Projects
Many countries in the world
are looking to smart cities
billions into infrastructure every
year, the key is to make these
Deploying smart cities will require
collaboration with multiple
Myanmar 3 Port Myanmar 1 to elevate the pressure investments as smart as possible stakeholders, from transport
rt placed by rapid urbanisation to allow Viet Nam to compete in authorities, technology firms,
Philippines 4 po Philippines 2
on infrastructure, public the global landscape. telco companies, real-estate firms
r
Ai
Indonesia 1 Indonesia 2
Total number amenities, and living and to engineering and construction
Viet Nam 1 Viet Nam 2
of projects working spaces. In the case of transportation, companies. This cross sectorial
72 this could involve developing collaboration in setting up smart
Road
27 Rail
Projects 29 Road
Projects
Viet Nam’s urban population a roadmap for intelligent cities opens up opportunities
l
is forecast to rise rapidly transport systems, with sensors for non-construction players to
ai
R
Myanmar 1 Myanmar 1
from 33 million in 2016 to 54 at public transport interchanges invest in urban infrastructure
Philippines 9 Philippines 9
million by 2035, with around to help enhance people’s developments.
Indonesia 5 Indonesia 4
1 million people migrating to mobility through better traffic
Viet Nam 2 Viet Nam 4
the cities every year41. With control systems or public
Thailand 10 Thailand 6
the government investing transportation scheduling.
Malaysia 2
Lao PDR 8
Source: IntraPPP World, cited in PwC “Seizing greenfield infrastructure opportunities in ASEAN,” 201756 The Future of ASEAN: Viet Nam Perspective 57 The Future of ASEAN: Viet Nam Perspective
C h apte r 4 : I n f rast r u ct ure - t ran spo r tat ion
Figure 4.9: Example smart transport solutions for smart cities
Traffic control/smart roads: Smart parking: Monitoring Smart toll: Dynamic pricing of Fast lane: Intelligent, adaptive
Monitoring vehicle and pedestrian availability of parking space across toll roads based on time, distance fast and slow lane for walking and
levels to optimise or divert traffic the city and parking metres adjust travelled and use of tunnels and cycling.
according to conditions. rates dynamically. bridges.
Real-time updates: Instant traffic Smart lighting: Intelligent and Connected vehicles: Vehicles Electric transport: Electric
updates sent to smartphones to weather adaptive street lights to with integrated internet access to vehicles and public transport, with
help route planning and avoid boost energy efficiency. various transport systems. charging stations across the city.
congestion.
Source: Visual Capitalist and PwC’s “Report of Consultancy Study on Smart City Blueprint for Hong Kong,” 2017
Example of private sector providers
• Robots and drones solution providers • Toll operators
• Mobile app developers • Parking lot providers
• Telecom providers • Construction industry
• Autonomous vehicles and connected • Delivery service providers
vehicle technology and solution
providers
• Public transport operators58 The Future of ASEAN: Viet Nam Perspective 59 The Future of ASEAN: Viet Nam Perspective
Chapter 5
Challenges and ways to win60 The Future of ASEAN: Viet Nam Perspective 61 The Future of ASEAN: Viet Nam Perspective
C h a pte r 5 : Ch al l e n ge s an d wa ys to win
5.1 Sustaining the growth journey 5.2 Trade at risk
A SEAN has enjoyed
remarkable growth over the
growth and rising economic
uncertainties and protectionism
• Over-dependence on external
trade
T he importance of trade to
ASEAN’s economy has increased
Figure 5.1). Viet Nam’s reliance
on external trade is significantly
last 50 years, emerging as the in the developed parts of the • Fiscal vulnerability significantly since 1967. The higher at 185% of GDP.
third largest economy in Asia world. In the first six months of • Institutional voids region’s share of global exports
with the third largest labour 2018, Viet Nam has seen slower • Low technology readiness has also risen, from 2% in 1967 However, global trade growth
force in the world. Viet Nam growth in FDIs to 5.7%, down to 7% by 2016. has been on a downward
has been a key beneficiary of from 54.8% growth in the same trajectory since 2012,
this trend, moving from its period last year.42 Meanwhile, the region’s trade- threatening growth in trade-
position as the 5th largest FDI to-GDP ratio has doubled from dependent economies such as
recipient in ASEAN in 2010 to For ASEAN to fulfill its 43% in 1967 to 87% in 2016 (see ASEAN.43
the 2nd largest in 2017. potential, member countries,
including Viet Nam, need to
However, questions have been become more proactive in their
raised about the sustainability bid for growth by addressing a
of the region and growth story number of challenges including:
in the face of sluggish global62 The Future of ASEAN: Viet Nam Perspective 63 The Future of ASEAN: Viet Nam Perspective
Ways
to
C h a pte r 5 : Ch al l e n ge s an d wa ys to win win
Rebalancing trade to intra-ASEAN
Figure 5.1: ASEAN dependence on global trade
Trade is an important aspect of ASEAN’s economy, however, its position ASEAN will need to take more measures to on external partners, especially China and
is threatened by slower global growth increase its intra-ASEAN trade flows, not the U.S. 45
only to serve the fast-growing domestic
140% 8% consumer base, but to counterbalance risks Amongst ASEAN countries, Viet Nam is one
that can arise from over dependence on of the most trade dependent. It will need to
Share of ASEAN in world
120% 7%
Trade-to-GDP ratio
6% external trade partners (extra-ASEAN trade). balance its overdependence on global value
100% chains by building up ASEAN as a major
5%
80% Trade-to- Extra-ASEAN trade continues to dominate source of demand for exports in sectors such
4%
GDP ratio ASEAN exports, accounting for 75% of as agri-products, and electronics. 46
3%
60% exports in 2016. There is a significant risk
2% Share of associated with a high level of dependence
exports
40% 1% ASEAN in
world
20% 0%
exports
1967 1984 1995 1997 1999 2005 2010 2016
Source: ASEAN Secretariat, 2017
Figure 5.2: Intra-ASEAN trade, 2005-16
Intra-ASEAN trade has remained stagnant and untapped
Intra- ASEAN exports of goods (US$ billlion)
350 30%
Rising protectionist 300 25%
Share of intra-ASEAN in overall
sentiments in Western
markets including the U.S. 250
20%
ASEAN exports of goods
could further threaten
ASEAN’s trade growth. In 200
15%
fact, a recent study by the
150
World Bank pointed out
10%
growing policy uncertainties
100
emanating from such
protectionist sentiments as 5%
50
the major factor behind the
slowdown in global trade in 0 0%
2005 2011 2013 2015
2016. 44
2010 2012 2014 2016
Source: ASEANstats, ASEAN Statistics Web Portal, 2017, cited in PwC’s “The Future of ASEAN - Time to Act,” 201864 The Future of ASEAN: Viet Nam Perspective 65 The Future of ASEAN: Viet Nam Perspective
C h a pte r 5 : Ch al l e n ge s an d wa ys to win
5.3 Fiscal stability
Figure 5.3: Viet Nam’s high dependence on extra-ASEAN trade
E merging ASEAN markets
as a whole have relatively low
There are however, a number
of ASEAN countries with high
Trade as a % of GDP, 2016
levels of government debt. debt levels. In Viet Nam, the
This puts the region in a much state continues to maintain a
stronger position to combat stronghold on the economy’s
185%
growth risks and volatility by investment capital. This has
improving the government’s crowded out private sector
ability to make investments in investments and developments
priority sectors or adopt fiscal and diminished national
87%
policies that boost economic competitiveness.
expansion.
56%
World ASEAN Viet Nam
Share of intra/extra-ASEAN trade in exports of goods, 2016
Opportunity to expand Viet Nam’s share of intra-ASEAN trade to
24%* from 10%
24% 10%
Extra -
ASEAN
Intra -
ASEAN
76% 90%
ASEAN Viet Nam
* The average share of inter-ASEAN exports amongst ASEAN countries in 2016
Source: International Monetary Fund, ASEANstatsYou can also read
