Vietnam by Emily Whelan

VIETNAM

Emily Whelan Country Report FASM 420 Spring 2017 Professor Don Levy

Table of Contents In the News Traits Country Stability: Political + Economic History State of Apparel + Textile Industry Trade Agreements Transportation Main Suppliers Business Etiquette Risks + Benefits

2 3-4 5-10 11 13 15-16 17 18 19 22

In the News Experts Warn Risky Loans in Vietnam Could Seriously Threaten Its Booming Economy May, 11 2017 Forbes Vietnam is becoming an export powerhouse. The countries economy is rising 6% per year. This upward turn has allowed for investments in local firms that then support exports and employ more Vietnamese. This has resulted in a rising middle class. However, in a country that is already heavy with debt, with private debt hovering about 100% GDP, if companies continue to take risky loans that Vietnam will experience a possible downturn in their economy. A lot of loans that have been taken out, will reportedly only be repaid if a project is successful and it is unsure if they will be.

China Says Has ‘Positive’ Talks on South China Sea

May, 11 2017 U.S. News For many years, there has been tension between China and Vietnam over the South China Sea. The Sea is allegedly resource rich and valued for its oil. In 2014, protests broke out across Vietnam when China placed an oil rig in disputed waters. Furthermore, China has increased military buildup on man-made islands in the Sea. It seems however, the two nations were able to come to a consensus at their latest meeting and have agreed to continue ‘talks’ in regards to claims of the Sea.

New Opportunities for Vietnam-Hong Kong Collaboration

May, 12 2017 Asia One Hong Kong has presented plans for infrastructure development in Vietnam. This collaboration between Hong Kong and Vietnam is part of a growth of intra-regional cooperation in Asia. The Prime Minster of Vietnam Nguyen Xuan Phuc, accepted the infrastructure plans on May 10. The plans would involve implementing rail and road networks, and new port systems for sea, air and river throughout Vietnam.

Traits

Export Volume: $169.2 billion Clothes, shoes, electronics, seafood, crude oil, rice, coffee, wooden products, machinery

Socialist Republic of Vietnam

Industrial Growth Rate: 7%

Location: Southeast Asia

Labor Force: 54.93 million

Capital: Hanoi

Unemployment Rate: 3.7%

Type of Government: Communist State

Main Industries: food processing, garments, machine-building; mining, coal

Head of State: President Tran Dai Quang

Budget Deficit: -4.6% of GDP

Population: 95,261,021

Budget Revenue: $48.04 billion

Geographic Size: 331,210 sq km

Inflation Rate: 2.8%

Education Level: 94.5% literacy

Religion: Buddhist

Language: Vietnamese (official), English, some French, Chinese, and Khmer

National Holidays: Tet January 28,

Ethnic Composition: Kinh (Viet) 85.7%, Tay 1.9%, Muong 1.5%, Khmer 1.5%, Mong

International Labor Day May 1, Reunification Day May 2, National Day September 4

Hung Kings Temple Festival April 6,

1.2%, Nung 1.1%, Hoa 1%, other 4.3% Gender Breakdown: 1 male/female Median Age: 30.1 years Import Volume: $161 billion Machinery and equipment, petroleum products, steel products, raw materials for the

clothing and shoe industries, electronics, plastics, automobiles

Country Stability

Political

Vietnam has seen great progess in development in the past 30 years. It has been transformed from one of the worldâ&#x20AC;&#x2122;s poorest nations to a lower middle-income country. The population in general is more educated and healthier. Moreover, 99% of the rural population has access to electricity and more than 67% can gain use of sanitation facilities. Despite this increase in development and greater access to basic services, the poverty line is looming and much of the rural population is at risk for falling back into poverty.

Past Wars + Conflicts

Communist Party leadership Control over media, state, military

Environmental

Improved relationship with rest of Asia Weak currency exchange rate

More access to basic infrastructure Socio-Economic Development Strategy (SEDS)- 10 year strategy that highlights sustainability Private property rights are not strongly respected

GDP per capita growth rate one of the fastest in the world State-owned enterprises still account for about 40 percent of GDP

Social

Efficient labor force Focus on nationwide economic development Significant decrease in poverty 94.5% literacy rate

Significant contribution by private organisations

Hard working entrepreneurs 50% of population < 21 years old

Technological

Major industrial growth in oil, gas, power, real estate, hotels and telecommunication Lack of distribution network Lack of efficient communication channels (telephone, television, etc.)

Political Stability

Vietnam is a one-party state ruled by the Communist Party of Vietnam (CPV) which provides strategic direction and decides all major policy issues. The country is led by the so-called â&#x20AC;&#x153;four royal pillarsâ&#x20AC;?: CPV General Secretary, State President, Prime Minister and National Assembly Chair. Vietnam is one of the more politically stable countries in South East Asia. Its leadership does not welcome dissent. Internal conflict is rare although recently there have been a small number of high-profile protests including in relation to an environment disaster in Central Vietnam. There are restrictions on freedom of speech which can affect internet usage, particularly the use of social media and personal blogs, access to which can be blocked without notice. With the US

Relations with the US have improved greatly. The future is likely to include ever-closer ties between Vietnam and the US, a former enemy combatant. The strive of the Vietnam War has been left in the past, as the two countires become unlikely allies. Today, U.S. leaders see Vietnam and its neighbors in Southeast Asia as a way to blunt the ambitions of a rising China, from its aggressive economic nationalism to military expansion into the South China Sea.

Economic Stability Currency: Dong, VND Exchange Rate: 22,691 VND 1 VND = 0.000044 USD In 1986, Vietnam initiated economic reforms aimed at moving from a planned economy to a market economy. Dramatic progress has since been made in economic development, and the countryâ&#x20AC;&#x2122;s economy has become one of the fastest-growing in the world. Reforms have included partial privatization of stateowned enterprises, liberalization of the trade regime, and increasing recognition of private property rights. Trade is extremely important to Vietnamâ&#x20AC;&#x2122;s economy; the value of exports and imports taken together equals 179 percent of GDP.

A majority of Vietnamâ&#x20AC;&#x2122;s economic improvement has been due to international investment. Barriers to foreign investment remain significant, but they have been liberalized.

History

1858: French colonial rule begins 1930: Ho Chi Minh founds the Indochinese Communist Party (ICP) 1954: Vietnam is split into North and South at Geneva Conference 1957: Beginning of Communist insurgency in the South 1959: Weapons and men from North Vietnam begin infiltrating the South 1963: US enters the War 1975: North Vietnamese troops invade South Vietnam and take control of the whole country after South Vietnamese President Duong Van Minh surrenders 1976: Socialist Republic of Vietnam proclaimed. Saigon is re-named Ho Chi Minh City. Hundreds of thousands flee abroad, including many â&#x20AC;&#x153;boat peopleâ&#x20AC;? 1992: New constitution adopted allowing certain economic freedoms. The Communist Party remains the leading force in Vietnamese society 1994: US lifts its 30-year trade embargo 2007: After 12 years of talks, Vietnam becomes the 150th member of the World Trade

Organization 2011: China and Vietnam sign an agreement to manage the South China Sea dispute

Apparel + Textile Industry

Vietnamâ&#x20AC;&#x2122;s textile and apparel industry is growing faster than that of many of its regional competitors, and foreign companies are starting to pour money into Vietnam to take advantage of potential economic opportunities from future free trade agreements. sIt is expected that once these agreements are completed, signed and entered into force, U.S. companies will have the chance to increase their exports of technical textiles to more consumers and businesses in Vietnam. With government involvement however, doing business can be difficult. On May 28, 2010, Vietnamâ&#x20AC;&#x2122;s Ministry of Industry and Trade published Circular 24, which extended the list of products for which licenses that were required, including textile and apparel products. This requires local importers to obtain an automatic import license (AIL) before shipments can be unloaded at a Vietnamese port. Number of Textile Companies in Vietnam: 3,800 Worldwide Textile + Apparel Export Ranking: 5 Labor Force: 2 million Labor costs: $1.57 / hr Key Exports to US: Jackets, pants, shirts, shoes Export Volume: $17.9 billion Apparel + Textile Industry Strengths: Jackets, pants, shirts, shoes Brands Made in Vietnam:

Trade Agreements

The United States and Vietnam concluded a Bilateral Trade Agreement (BTA) in 2000, which entered into force in 2001. Vietnam is a member of the Association of South East Asian Nations (ASEAN) and subsequently, a member of ASEAN Free Trade Area (AFTA). Together with the ASEAN countries, Vietnam has also signed trade pacts with China, the Republic of Korea, Australia and New Zealand, India, Chile and Japan. It signed a bilateral trade agreement with Korea in 2015, as well as a trade agreement with the Russian-led Customs Union block. In February 2016, Vietnam completed negotiating a free trade agreement with the EU and is waiting for the Council of Ministers for their ratification. Vietnam is currently negotiating a Free Trade Agreement with the EFTA countries (Norway, Iceland, Liechtenstein, and Switzerland). Vietnam also is participating in the Trans-Pacific Partnership and the 16-member Regional Comprehensive Economic Partnership negotiations.

Transportation

Airports: 45 Railways: 2,600 km Roadways: 148,338 km (paved), 47,130 km (unpaved) Waterways: 47,130 km

*The International Maritime Bureau reports the territorial and offshore waters in the South China Sea as high risk for piracy and armed robbery against ships; numerous commercial vessels have been attacked and hijacked both at anchor and while underway.

Main Suppliers 9mode Clothing Manufacturer 504/12 TX13th Street, Thanh Xuan Ward, Dist 12, Ho Chi Minh (Saigon), Vietnam +84 - 8 - 6657 2005 9mode@live.com Vietnam Ho Chi Minh/ Saigon

Apparel Sourcing Vietnam Co. Ltd 236 Đien Biên Phu, phuong 17, Bình Thanh, Ho Chí Minh, Vietnam +84 94 232 49 35 http://www.apparel-sourcing-vietnam.com

Da Nang Port, Saigon Port, Hai Phong Port, Quy Nhon Port

Esquel Garment Manufacturing (Vietnam) Co Khu công nghiep Vietnam-Singapore, 8 Đuong so 5, Ap Thuan Giao, Huyen Thuan An, Vietnam +84 650 3757 629 http://www.esquel.com/en/

*The Saigon Port is the closest to the highest concentration of apparel factories in Ho Chi Minh City.

Shipping Resources:

International Ports:

Shipping Companies that Service the US: ZIM - 1 month lead time from Saigon Port to LA Port MSC- 1 month lead time from Quy Njon Port to LA Port Cost to transport a full 40” container to LA + Savannah: Saigon Port To LA: Saigon Port To Savannah: Sea $3,254.14 Sea $864 Air $249 Air $226 Land $4,016.46

MSC Vietnam Company Ltd. 10th Floor, Saigon Paragon Buil., Phu My Hung 03 Nguyen Luong Bang St, Tan Phu Ward, Dist 7 Ho chi minh City Vietnam Call: +84 8 5413 5253 Email: VN339-mscvnsgninfo@msc.com https://www.msc.com/vnm/contact-us

ZIM Unit 16.02 - 16 Fl, Pearl Plaza Building, 561a Dien Bien Phu St, Ward 25, Binh Thanh Dist., Ho Chi Minh City, S.R. Vietnam (84)8-38998505 http://www.zim.com/countrysites/asia/vietnam/en-us/pages/contacts.aspx?countrycode=VNM&countrycodetext=Vietnam

*Vietnam is one of the most hazard-prone areas in the East Asia and Pacific area. About 70 percent of its population is exposed to risks, such as typhoons, floods, droughts, sea water intrusion, landslides, forest fires and occasional earthquakes.

Business Etiquette Proper Greeting A handshake is an acceptable form of greeting between persons of the same age, but it is customary to bow to those who are older or of high social rank. Remove shoes before entering a private home or place of worship. Do not cross your index finger with the middle finger as a gesture of good luck. Business Attire Normal business attire consists of a suit and tie for men and suit or dress for women. During the hotter months, formal dress for men is a shirt and tie. Open collar shirts and slacks may be worn to more informal meetings depending on the situation. The trend in the South is to be more casual; suit jackets are worn only on very formal occasions and first meetings.

Show Respect There is a great respect given to elders. They are always greeted first. Never use direct eye contact when speaking to an elder. Never insult an elder, it will be a poor reflection on you and will damage personal and business relationships.

Risks + Benefits

Risks to sourcing in Vietnam include political intervention from the Communist Party, poor working conditions with weak basic infrastructures, natural disasters, long and insufficient trasnportation process, weak production management, and quality of assembly. Benefits to sourcing in Vietnam include that it is a fast-growing economy, has a large labor force, and a large young population, The countryâ&#x20AC;&#x2122;s political environment is stable, there is an overall stong work ethic and the US-Vietnam Bilateral Trade Agreement has allowed for a positive relationship between the two nations.

Conclusion

Vietnam has seen an extremely impressive upturn in terms of its economical development. A country destroyed by decades of war, the resilient country has been able to pick itself up and establish itself as a top competitor in the export industry of apparels and textiles. Nevertheless, it is still a country ruled by a Communist Party. There are social, political, and environmental restrictions over the Vietnamese. Business can be tricky with insufficient infrastructures and inefficient processes. Despite any setbacks, low costs have made Vietnamese production the future.

Works Cited

https://www.usatoday.com/story/news/politics/2016/05/22/obama-vietnam-five-oclock-follies-hanoi-ho-chi-minhcity/84727928/ https://www.usatoday.com/story/news/politics/2016/05/22/obama-vietnam-five-oclock-follies-hanoi-ho-chi-minhcity/84727928/ https://www.gov.uk/government/publications/overseas-business-risk-vietnam/overseas-business-risk-vietnam https://www.bloomberg.com/quote/USDVND:CUR http://www.heritage.org/index/country/vietnam https://www.msc.com/country-guides/vietnam http://www.zim.com/countrysites/asia/vietnam/en-us/pages/aboutzim.aspx https://www.searates.com/reference/portdistance/?K=ChIJWQbyePx1-4gRvCBgA1FnDE4&A=ChIJE9on3F3HwoAR9AhGJW_ fL-I&B=3484&I=3613&shipment=4&wagon=CP&product=0&weight=1&volume=1&weight_unit=MT&volume_unit=CBM& http://www.vietnamadvisors.com/logistics-still-adolescent-but-growing-up-fast/ http://www.worldbank.org/en/news/video/2012/08/02/vietnam-disaster-2 http://www.countrywatch.com/Content/pdfs/reviews/B4838389.01c.pdf http://www.worldbank.org/en/country/vietnam/overview http://www.officeholidays.com/countries/vietnam/ http://www.asiaone.com/corporate-news-media-outreach/new-opportunities-for-vietnamhong-kong-collaboration https://www.usnews.com/news/world/articles/2017-05-11/china-says-has-positive-talks-with-vietnam-on-south-chinasea https://www.forbes.com/sites/ralphjennings/2017/05/11/corporate-debt-is-threatening-the-superstar-economy-of-vietnam/#47735cdf5ebe https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html https://ustr.gov/countries-regions/southeast-asia-pacific/vietnam https://theprotagonist5.wordpress.com/2007/08/21/where-are-my-clothes-manufactured-china-part-2/