Vietnam has emerged as a global manufacturing hub and a prime destination for businesses seeking to diversify their supply chains through the China+1 strategy. As the global economy recovers, Vietnam’s import and export industries are poised for impressive growth. This article provides an overview of the sectors that present excellent opportunities for import and export activities in Vietnam.
Vietnam’s Rising Competitiveness
With rising costs in China, many businesses turn to Vietnam as an attractive alternative. We have witnessed a significant orders shift from China to Vietnam due to cost considerations and a complex regulatory environment. Vietnam’s strategic position in Southeast Asia makes it an ideal export hub to reach other ASEAN markets. The country’s manufacturing sector, accounting for 25 percent of the total GDP in 2021, drives its rising competitiveness.
Factors Driving Vietnam’s Import and Export Growth
Vietnam offers competitive labor costs, approximately 50 percent lower than China. Low-labour cost makes the country an attractive destination for manufacturing and sourcing. Furthermore, Vietnam boasts a young and increasingly skilled workforce, further enhancing its competitiveness.
Free Trade Agreements
Vietnam’s participation in free trade agreements such as the RCEP, EVFTA, and UKVFTA has opened doors to international trade and investment. These agreements improve market access and streamline customs procedures, creating favorable conditions for import and export activities.
Vietnam has taken significant steps to enhance its regulatory and financial incentives. These include financial sector reforms, streamlined business regulations, and a low corporate income tax rate of 20 percent. These measures have positioned Vietnam as a premier “sourcing economy” for many companies.
Key Industries for Import and Export in Vietnam
Textiles and Garments
Vietnam’s textile industry, with over 6,000 manufacturing companies employing over 2.5 million workers, consistently ranks among the country’s leading export sectors. Its low-cost manufacturing capabilities and increasing market share make it a strong competitor in the region. In 2020, Vietnam’s textile exports reached US$39 billion, accounting for 11 percent of the global market share. The country is expected to benefit from the RCEP and EVFTA agreements, which will reduce tariffs and increase quotas for textile products.
Vietnam has become a major exporter of electrical and electronic products, surpassing traditional exports like coffee and textiles. Prominent companies such as Samsung, LG Electronics, Nokia, and Intel have invested substantially in high-technology manufacturing, contributing to Vietnam’s trade surplus. In 2019, Vietnam’s electronics exports amounted to US$96 billion, making it the fourth-largest exporter of electronics in the world. The country is also developing its domestic electronics industry by supporting local firms and attracting foreign suppliers.
Vietnam’s pharmaceutical market is projected to experience significant growth, driven by the government’s goal of achieving universal health coverage and a growing consumer market. The country has numerous manufacturing factories, import-export units, wholesalers, and retailers supporting the pharmaceutical industry. In 2019, Vietnam’s pharmaceutical imports reached US$3.7 billion, while its exports reached US$78 million. The country aims to increase its self-reliance on pharmaceutical production by encouraging foreign investment and technology transfer.
Although Vietnam’s car ownership per capita is relatively low compared to other countries in the region, the automotive market is rapidly growing. The government’s efforts to build a domestic auto industry and tax reductions on imported cars contribute to the sector’s growth, with an increasing number of Vietnamese households expected to own a car in the coming years. In 2019, Vietnam’s automotive imports reached US$8.5 billion, while its exports reached US$7.5 billion. The country is also developing its electric vehicle industry by offering incentives and supporting infrastructure development.
Vietnam’s coffee industry is vital to its agricultural economy, making it the world’s second-largest coffee exporter after Brazil. With favorable climate conditions and a focus on processed coffee exports such as instant coffee and roasted coffee beans, Vietnam has the potential to surpass Brazil in the future. In 2019, Vietnam’s coffee exports amounted to US$3 billion, accounting for 19 percent of the global market share. The country is also diversifying its coffee products by introducing specialty varieties such as Arabica and organic coffee.
Vietnam’s e-commerce market is experiencing significant growth, driven by a growing economy, expanding middle class, and increased disposable income. The COVID-19 pandemic has further accelerated the demand for electronic retail, making Vietnam an attractive market for foreign investment in e-commerce activities. In 2020, Vietnam’s e-commerce revenue reached US$11.8 billion, growing by 18 percent year-on-year. The country is also improving its e-commerce infrastructure by developing digital payment systems, logistics networks, and online platforms.
Source: OEC World
Our Recommendations for Engaging in Trade with Vietnam
If your business is considering trade with Vietnam, we have key recommendations to help you navigate this dynamic market successfully. These suggestions will assist you in maximizing opportunities and minimizing potential challenges:
- Conduct thorough market research and due diligence: Before entering the Vietnamese market, it is essential to gather comprehensive information about the country’s business environment, market trends, consumer preferences, and competition. By conducting thorough market research and due diligence, you can identify the best products or services, understand the target audience, and determine your business’s most suitable suppliers, customers, and partners.
- Understand legal and regulatory requirements: Vietnam has specific legal and regulatory frameworks governing import and export activities. Familiarizing yourself with these requirements is crucial to ensure compliance and avoid potential legal issues. This includes understanding tariffs, quotas, licenses, certificates, product standards, and customs procedures. By having a solid grasp of the legal and regulatory landscape, you can streamline your import and export processes and minimize disruptions to your operations.
- Leverage free trade agreements: Vietnam has actively pursued free trade agreements (FTAs) with various countries and regions, providing significant advantages for international traders. Take advantage of these FTAs to access preferential tariffs, reduced trade barriers, and increased market access. Stay updated on the latest developments in these agreements and identify how they can benefit your business. This could involve exploring opportunities for tariff savings, expanding export markets, or establishing strategic partnerships with businesses in countries with FTAs with Vietnam.
- Seek professional advice and assistance: Navigating Vietnam’s import and export landscape can be complex, especially for those unfamiliar with local business practices and regulations. To ensure a smooth and efficient trading experience, seek professional advice and assistance from local experts and service providers. They possess in-depth knowledge of the Vietnamese market, including customs procedures, logistics, legal requirements, and cultural nuances. Working with professionals can help you overcome language barriers, understand local business etiquette, and streamline your import and export operations.
Conclusion: Vietnam’s Import and Export Landscape: An Overview
Vietnam’s import and export industries thrive, driven by cost advantages, free trade agreements, and an investor-friendly environment. The country’s leading sectors, including textiles and garments, electronics, pharmaceuticals, automotive, coffee, and e-commerce, offer lucrative opportunities for businesses interested in trade with Vietnam. As Vietnam continues to evolve as a global manufacturing hub, its import and export landscape will remain dynamic and attractive for investors and businesses seeking new market opportunities.