Emerging Market Analysis
QWE123IOP
DoingBusinessinVietnam1.pptxDoing Business in Vietnam
The Political Climate, Business Opportunities,
Currency Volatility, and Culture
By: Duong
At a glance
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |
| °F | 63 | 63 | 70 | 75 | 82 | 84 | 84 | 84 | 82 | 77 | 72 | 64 |
Climate
Tropical
Natural Disasters
POLITICAL CLIMATE
Full name: The Socialist Republic of Viet Nam
A Communist state
One party
The National Assembly: the highest-level representative body of the people
Head of State: the president
Head of Government: the prime minister
Political Structure
Political Issues
Vietnam's Anti-Corruption Law 2005: One of the best anti-corruption legal frameworks in Asia (World Bank)
Very problematic to implement.
Example: All Government officials have to declare their assets and income annually.
Vietnam ranked 113 (out of 176) on the 2016 Corruption Perceptions Index (by Transparency International)
Political challenges to doing business
Corruption and bureaucracy hinders foreign business
Project timelines often exceed initial projections.
Ineffective protection of intellectual property
Piracy rates for software were estimated to be 78 percent in 2015, signaling a steady decline.
High tariffs
Agricultural products, processed foods and nutritional supplements
State-owned enterprises make up 35 percent of GDP
While Vietnam has reduced tariffs on many products in line with its WTO commitments, high tariffs on selected products remain. The U.S. industry has identified a range of products, which includes agricultural products, processed foods and nutritional supplements, which has significant export growth potential if Vietnam’s tariffs could be reduced further.
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Business Opportunities
U.S.-Vietnamese commercial relationship has grown dynamically since the renewed diplomatic ties in 1995
The U.S. is now Vietnam’s largest export market
Conversely, over the last two years, Vietnam has become the United States’ fastest growing export market (up over 23% from 2014) (World Bank)
have combined to create a dynamic and quickly evolving commercial environment in Vietnam.
demonstrating the increasing demand for U.S. technologies and goods.
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Business Opportunities (Cont’d)
Strong GDP growth expected to continue for medium term – PwC:
1) Strongest average GDP growth till 2050, exceeding 5.1 percent a year
2) Move from the 32nd largest economy to the 20th by 2050
A large population of 93 million
Half of which are under the age of 30
Fastest-growing middle and affluent classes in the region
Opportunities for U.S. Companies
Transportation infrastructure construction
Information technology
Oil and gas exploration
Power generation
Agriculture
Aviation
Education
Health care
Telecommunications
Environmental project management and technology
Currency Volatility
US $1 = VND22,726
Vietnam Dong’s official rate has been pegged by the State Bank against the U.S dollar since 1989
Vietnamese await McDonald’s official presence in Vietnam not only because they want to taste its hamburger, but also because they want to know if the Vietnam dong is undervalued or overvalued in the eyes of The Economist.
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First McDonnald’s Store in Vietnam - 2014
A Big Mac hamburger in Vietnam is sold at VND60,000, or $2.84 with the current exchange rate. Meanwhile, a similar hamburger is priced at $4.62 in the US.
Referring to the purchasing power parity (PPP) theory, the Vietnam Dong is undervalued by 39% if compared with the US dollar.
The Big Mac hamburger is the only item in the basket of goods for The Economist to make the comparison.
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USD/VND Exchange Rate
Business Implications of Undervalued Currency
Makes Vietnamese exports cheaper in the U.S.
Makes imported goods in Vietnam more expensive in the local market
Culture: Vietnamese Festivals
Vietnamese New Year: Tet
Transportation
Vietnamese Food
Assignment
What are the primary strengths and weaknesses with doing business in Vietnam?
THANK YOU!
Bibliography
Trading Economics – Vietnam Currency, Retrieved 27 Sep 2017 from https://tradingeconomics.com/vietnam/currency
Vietnam - Market Overview, Retrieved 27 Sep 2017 from https://www.export.gov/apex/article2?id=Vietnam-Market-Overview
R.L.W, (2014) Beefed up, The Economist, Retrieved 27 Sep 2017 from https://www.economist.com/blogs/graphicdetail/2014/02/big-mac-index
