Viet Nam

Market overview

Viet Nam’s enviably success in managing the COVID-19 outbreak and subsequent ability to lift movement restrictions well ahead of most East Asian nations has reached a hurdle after local transmission was confirmed in Danang in late July, and the first deaths recorded.

The new outbreak has reached at least 10 locations in the country, including Hanoi and Ho Chi Minh City. There are plans to test Danang's entire population of 1.1 million people, part of "unprecedented measures" to fight the outbreak.

There are concerns that the new strain found in Danang is a more contagious one, and that each infected person can infect 5-6 others, compared to 1.8-2.2 in the previous wave.

Social distancing measures have been reinstated in the city until further notice, more than three months since the last case was reported in the country. Non-essential businesses such as bars and nightclubs in Hanoi and Ho Chi Minh City have also been closed until further notice. Gatherings of more than 30 people have also been banned.

Viet Nam reported 1.81% GDP growth in the first half of 2020 – its lowest since 2011, due to the pandemic as per the General Statistics Office (GSO). Government economic advisors have stated that economic growth is slowing down to 3% to 4% this year due to the impact of the pandemic, and the Government will consider cutting policy rates to stimulate growth.

A World Bank report, ‘What will be the new normal for Vietnam? The economic impact of Covid-19’, outlines the potential trajectory for the Vietnamese economy in the post-COVID world. It suggests that if the global situation gradually improves, economic activity should rebound in the second semester of 2020 so that Viet Nam’s economy will grow at around 2.8% for the entire year, and by 6.8% in 2021. With less favorable external conditions, it predicts the economy will expand by only 1.5% in 2020 and 4.5% in 2021.

Viet Nam was already a favoured location for foreign investors looking for an alternative manufacturing hub to China following escalating trade tensions between it and the United State, and the Vietnamese Government is already looking to continue building on that momentum. Under a scheme in which the Japanese government will fund a production shift from China, 15 Japanese firms have registered to move to Viet Nam.

New Zealand and Viet Nam bilateral relationship elevated

New Zealand’s bilateral relationship with Viet Nam was formally elevated in July 2020 with the strengthening of the 2009 Comprehensive Partnership to that of a Strategic Partnership; focussing on trade, agriculture, education, and development.

New Zealand and Viet Nam have committed to individual and joint actions to open markets and reduce barriers to bilateral trade, especially for agricultural, seafood, and timber products through enhancing market access, trade facilitation, information exchange, and collaboration between customs, and agriculture, food safety, and animal health agencies.

New Zealand and Viet Nam have also committed to promoting investment in both directions and encouraging inclusive growth,including cooperation in the development of micro, small and medium enterprises (MSMEs), indigenous or ethnic minorities businesses, women entrepreneurs and other important areas.

In order to take the full advantage of opportunities, it is crucial for New Zealand businesses to invest in market research now to understand market insights and consumer insights, especially when we are seeing changes in consumer lifestyles and behaviours in adapting to the new normal during and post-pandemic.

For more information on doing business in Viet Nam, visit myNZTE - our free online portal for curated, in-depth information and guidance.

COVID-19 Market Realities: Viet Nam

Export support
Video
10:13
Last updated: 10 Jun 2020
COVID-19 Market Realities: Viet Nam market overview, 29 May

NZTE Trade Commissioner Karlene Davis talks to PwC Viet Nam Chairman Grant Dennis, and NZTE BDM Giang Nguyen, about the situation in Viet Nam.

Watch now

Economy and trade

Up until the outbreak of the pandemic, New Zealand’s trade with Viet Nam had grown from strength to strength. Bilateral trade in goods and services reached a new record of NZ$2.05 billion for the year ending March 2020.

However, all sectors of the Vietnamese economy have been severely hit and disrupted due to the country’s level of economic openness and export-reliance.

Many key export products such as textiles, footwear, wood products and aquaculture saw severe drops in orders, while the service sector was hit the hardest by plummeting demand, especially tourism, food and beverages, and transport. In addition, five million labourers in the country were estimated to have been impacted by the pandemic.

Consequently, the Vietnamese Government has asked the National Assembly to approve a lower GDP growth figure than the original target of 6.9% set last year by Parliament.

A recent forecast by the IMF projects Viet Nam’s GDP growth at 2.7% this year, a decrease that would impact on disposable income and consumer spending, but still achieve the highest growth in Asia.

According to a survey by the Viet Nam Chamber of Commerce (VCCI), the impact of the pandemic on business production and activities is very serious. Nearly 85% of businesses said that the disease had narrowed their consumption markets, nearly 60% were short of capital and cut business cash flow. Around 40% said that there was a shortage of raw materials and 43% had to narrow the labor scale due to lack of jobs.

Approximately 82% think their 2020 revenue will be reduced compared to 2019, of which 30% of businesses forecast a decline to 30-50% and 22% will drop over 50%. According to VCCI, if the economic situation remains complicated, nearly 30% of businesses surveyed can only operate for no more than three months and 50% of businesses can only survive for half a year.

Over 75% of businesses report that they will have to reduce the size of their labour force and nearly 10% of businesses will have to reduce their labour force by 50% compared to today.

A survey from Viet Nam's General Statistics Office (GSO) released in early July revealed that in the first six months of 2020, nearly 31 million workers aged 15 and over in Viet Nam have been impacted by the pandemic. Notably, 17.6 million people received less income than before the outbreak. The monthly income of workers in the second quarter was down by 10% against the previous quarter. This is also the first decline in monthly income over the last five years.

Large and medium-sized companies were considered more vulnerable to the current pandemic than small and very small businesses. 67% of the surveyed enterprises said they had resorted to lay-offs, furloughs and wage cuts to cope with the impacts of the COVID-19 pandemic. This implies that it would be more difficult for New Zealand companies selling automation solutions for manufacturing companies to compete with more abundant labour forces and low labour cost in Viet Nam.

Another recent survey result from May shows that about 86% of enterprises have been negatively affected by COVID-19. Enterprises face "double problems" with both disrupted supply of input materials and a sharp decline in the market demand globally. Nearly 58% of enterprises reported a sharp decline in orders. Among enterprises with export activities, the proportion of enterprises not being able to fulfil orders was up to 56.9%, while 46.2% of large and medium-sized enterprises reported issues. FDI enterprises have been most affected, with 53.8% of enterprises that handle export orders experiencing weak market demand.

In the first six months of 2020, Viet Nam’s GDP grew by 1.81%, the slowest pace since 2011. Export fell 2% in June year-on-year, while imports climbed 5.3%. Viet Nam’s Prime Minister said the economy this year could sustain growth of 4 to 5% as the Government looks to attract more foreign direct investment.

Nearly 90% of Vietnamese labourers taking part in a survey conducted by market research company Ipsos said they have received less income than before due to the COVID-19 outbreak. Notably, half of the respondents have their income reduced by at least 20%. Seventeen percent of respondents with low incomes – under VND7.5 million (NZ$323) a month – said their family had to cut down on spending on tourism, eating out, clothes, and electronics.

Though many industries including tourism, aviation, manufacturing, services, (especially SMEs) are highly affected by the pandemic, Viet Nam is seen by many economists as an economy that can quickly bounce back. Leadership of the central Government and key cities recently started discussion in the media about the economic recovery plan. According to a Global Consumer Confidence Survey by market research company Nielsen, Viet Nam ranked fourth in the world for having consumers with the most positive outlook at the end of Q1 2020, despite the adverse pandemic impacts. Advice to exporters

In order to take the full advantage of the opportunities, it is crucial for New Zealand businesses now to invest in market research to understand market insights, consumer insights, especially when we are seeing changes in consumer lifestyle and behaviours in their adapting to the new normal during and post-pandemic.

Supply chain, logistics & freight

Sea freight

Viet Nam port operations and customs clearance has resumed normal operational status and is no longer experiencing delays in unloading and processing upon arrival. Logistics firms in Viet Nam have advised NZTE that there is no change in the frequency of sea freight departure from New Zealand to Viet Nam since the start of COVID-19, however pricing has increased by 15%.

Air freight

Challenges remain with air freight. Due to the scarcity of flights (a few cargo flights or repatriation flights on an ad-hoc basis) the cost of air freight has increased significantly. New Zealand to Viet Nam air freight costs are reported to have increased in some instances by 320%. In addition, the scarcity and unexpected cancellation of flights mean that cargo may have to be put in storage for some days before it can be uplifted, thereby incurring more costs. The frequency of air freight from New Zealand to Viet Nam has reduced from daily to two or less than two trips per week. Some logistics companies are operating on non-commitment terms in relation to delivery times.

Air freight from New Zealand to Viet Nam may take 3-4 days, or in some cases more than 6-7 days for cargo to arrive. Time, fees and procedure requirements for customs clearance are the same as pre-COVID-19 for non-food goods, however it may take slightly longer for animal-based foodstuffs.

Advice to exporters

Exporters are advised to explore a wider range of route options and carriers than what they have used in the past and to consult logistics companies on the available combinations of carriers and route options. At this stage, logistics providers in Viet Nam have advised that one of the most frequent and competitively priced cargo flight options from New Zealand to Viet Nam is Turkish Airlines and Malaysia Airlines cargo flights, which transit through Singapore.

There is a challenge for large suppliers finding fewer available shipments to be booked to Viet Nam. This requires considerable planning and management to avoid interruption in the supply chain and to meet market demands.

Furniture manufacturers are experiencing logistics cost increases due to the lack of empty containers.

Importers dealing with Ho Chi Minh City (South) and Danang (Central) ports are less challenged by customs holding up shipment arrival than in Haiphong port (North).

A Nielsen Viet Nam webinar on 'Post COVID-19: Preparing for the New Normal of Viet Nam', advised FMCG and F&B companies to consider the following: "Your biggest competitor is not your competitor. Your biggest competitor is running out of your own stock".

This highlighted the importance of keeping a smooth supply chain for goods and managing the flow-on effects of COVID-19 to ensure it does not interrupt the supply chain to international markets, and to not let products become unavailable and replaced by competitors.

Cold storage is in high demand and is in short supply; partly because demand for imported meats and fruits have plateaued at the same time as there is a surplus in seafood export stock. Businesses are warned to forecast accordingly and to manage supply chain sufficiently as to not incur additional costs by keeping stock in cold storage for more time than expected.

NZTE has not been made aware of any issues at ports with customs or logistics for New Zealand exporters.

Government support

On 8 April the Government issued Decree 41/2020/ND-CP (Decree 41), which will provide a variety of incentives to dampen the economic impact of the COVID-19 outbreak. The incentives include providing tax breaks, delaying tax payments, and delaying land-use fees for businesses, costing the government US$1.16 billion (VND 27 trillion).

Subjects of the decree include: businesses in agro-forestry-fishery, food processing, textile, garment, construction, transportation, warehouse, accommodation and catering, education, medical services and part-supply industry; small and micro-sized enterprises and credit institutions and branches of foreign banks providing support to their customers who were hit by the pandemic.

According to the Ministry of Finance, more than 700,000 enterprises or 98% of firms in Viet Nam will benefit from the extension and a total of VND180 trillion worth of taxes and fees would be extended. The taxes and fees will still be collected within this year.

The credit support package of US$12.68 billion (VND 300 trillion) is provided to postpone/reschedule debts and cut loan procedures for enterprises directly affected by the epidemic.

Travel

Viet Nam suspended the entry of all foreigners from March 22 until further notice to limit the spread of COVID-19. The measure does not apply to diplomats and officials.

Only Vietnamese nationals, foreigners on diplomatic or official business, and highly skilled workers are allowed to enter the country at this time. Anyone entering Viet Nam must undergo medical checks and 14-day quarantine upon arrival.

Viet Nam’s Immigration Department has announced another automatic stay extension for foreigners stranded in Viet Nam due to the pandemic until 31 July. The measure applies to those who entered from 1 March, allowing them to leave the country without any penalty or official procedures. Those that entered prior to 1 March are also eligible provided they show documents from their embassies or from Vietnamese authorities to confirm they were quarantined or treated for COVID-19.

Domestic travel by all modes of transport has fully resumed. Vietnamese carriers were allowed to remove social distancing restrictions on aircraft and limitations on the number of passengers from 7 May. Passengers on planes are no longer required to sit one seat apart, but they must keep a distance of one metre from each other while going through the airport until boarding.

To prevent a second wave of the pandemic, Viet Nam’s borders remain closed to international tourists as per Prime Minister Nguyen Xuan Phuc’s orders.

Consumer behaviour

Based on Worldpanel data, Viet Nam's FMCG market growth shows a slowdown in the first two months of 2020 despite 2019's optimistic picture.

Dairy, packaged foods and personal care sectors have managed to sustain growth while the beverage sector has suffered a decline despite the current high season due to Lunar New Year (Tet). This is possibly explained by the lower numbers of parties and celebrations as Vietnamese people avoid socialising and gathering in a bid to reduce their exposure amid the pandemic.

Vietnamese consumers in key cities show a tendency to stock up on three groups of categories. Firstly, personal hygiene – hand wash, bar soap and household cleaning products are all seeing double- and even triple-digit rises.

Secondly, convenience foods and cooking aids have surged during the outbreak, probably due to fear and anxiety as well as the extended home stay of children who aren't at school. Frozen food, canned food, instant noodles and cooking oil are a few categories enjoying impressive growth.

The other group of categories that consumers seek for during this time is immune-boosting and nutrition products, especially for seniors and kids who are at higher risk. Therefore, specialty milk powder and drinking yogurt are in demand.

Some associations are now hosting virtual events, with DIY facial clinics used as a lucky draw present. New Zealand natural skin-care brands can tap into this new trend for branding and marketing as it is targeting the right high-income consumers.

Natural skin-care is on-trend, and this week Watson's Health Foods featured New Zealand's Antipodes skincare on its front banner. It seems when premium consumers have time, they stop, research and shift their behaviour toward a more natural and healthy lifestyle.

Brands that have health benefits as a unique selling proposition should highlight them to their in-market partners and consumers, with statements such as;

  • Made to the highest safety standards

  • Keeps immune system strong

  • Keeps families protected against gems/bacteria

  • Keep families safe from disease

  • Has essential antibacterial properties

Since Modern Trade Retailers and supermarkets have suspended all below the line promotion, including all product sampling activities, leading F&B players are re-allocating their marketing budget to invest more in digital marketing, key opinion leader endorsements, and consumer online campaigns.

Advice to exporters

Utilise technology, social platforms and e-commerce to tap into the potential to grow the market. Digital marketing is not only cost efficient, but it allows New Zealand food and beverage companies to be very focused and target their market. It also helps companies and brands to thrive in the face of adversity during this time.

Research reveals a 32% increase in online shopping across the market over the past two months, as people avoid crowded supermarkets or use e-commerce channels to get their hands on items that are out of stock in physical stores. Shopping in retail outlets has reduced by 35% over the same period. Research also shows that the retention of new shoppers online will be high going forward, making shopping online the new normal for those post COVID-19. Companies need to capitalise on this trend and get their products listed online if they are not already.

Best practice in the Vietnamese market is to deal with e-commerce platforms to establish flagship stores on the platform, and not simply 'get listed'. Shoppers trust flagship stores' authenticity over individual New Zealand SKUs listed in generic categories.

Grant Dennis, NZTE Beachhead Advisor for Viet Nam, says:

"I think it is just a matter of time before consumer e-commerce becomes pervasive and an established channel in Viet Nam post COVID-19; in about 6-9 months time."

"Companies should understand logistics in e-commerce is not only about 'manufacturer to consumers' but more about the 'last mile' from the distribution centre to consumers. The final distribution mile is what makes the difference for fast delivery."

"In Viet Nam, a number of e-commerce and logistics companies are building 'last mile' logistic centres in Hanoi, Ho Chi Minh, and Da Nang. The infrastructure will enable e-commerce to meet demands they believe are building in Viet Nam. Some logistics providers are also planning technology to support fast e-commerce supply chains and building 'hub and spoke' warehousing and facilities."

"New Zealand companies are advised to understand the e-commerce logistics capabilities and e-commerce aggregators to ensure they meet changing consumer demands and to ensure they, or their partners, can provide better customer service."

Tradeshow and event information

Numerous international tradeshows and events are being postponed or cancelled in response to the COVID-19 pandemic.

Make sure you proactively check with organisers for any tradeshow or event you're scheduled to attend – conditions and regulations are changing rapidly overseas, and events may be postponed or cancelled at short notice.

Below is the status of major Viet Nam tradeshows and events that NZTE's teams are aware of.

If you have questions about an event not listed here, please contact the organisers in the first instance or get in touch with NZTE for further advice.

  • The 36th ASEAN Summit, originally scheduled to take place between 8-9 April in Danang, was held via video conferencing in Hanoi, with the main focus on the COVID-19 epidemic response and post-pandemic recovery.

  • Viet Nam's first Formula 1 Grand Prix has been postponed. A new date has not been announced.

  • The Viet Nam International Furniture & Home Accessories Expo was postponed. A new date has not been announced.

  • Automechanika Expo was postponed. A new date has not been announced.

  • Ho Chi Minh City ENZRA Fair has been postponed to 26 –27 September 2020.

  • Food & Hotel Hanoi (FHH) Exhibition and Conference is still set to take place 25 — 27 November 2020 in Hanoi.

  • Vietnam International Exhibition on Food & Beverage 2020 has been re-scheduled to 6 to 9 August 2020.

  • Vietnam International Medi-Pharm Expo 2020 is scheduled for 6 to 9 August 2020 and the 15th Vietnam International Pharmed & Healthcare is scheduled for 16 to 19 September 2020.

  • Vietnam Beautycare Expo 2020 is expected to take place from 16 to 19 September 2020.

  • The 20th Vietnam International Plastics & Rubber Industry Exhibition is planned to take place from 23 to 26 September 2020.

  • Vietnam International Electrical Technology & Equipment and Energy Technology (ETE & Enertec) Expo 2020 has been re-scheduled to 5 to 7 November 2020.

  • Vietnam International Exhibition on Processing, Packaging and Preserving Food & Agricultural Products (Vietnam PFA) 2020 is scheduled for 5 to 7 November 2020.

  • Vietnam FoodExpo & FoodTech 2020 is planned for 18 to 21 November 2020.


Sector insights

As is to be expected, numerous sectors have been impacted by the COVID-19 pandemic. Below you'll find information on any COVID-19 effects across important sectors and industries in Viet Nam.

Agritech

Agriculture has been one of the most hard-hit sectors, facing challenges from decreased world demand, inability to export to high-value markets by air, and difficulties at the border for exports to China. Given the immediate issues, long-term investment in R&D is no longer a priority, and therefore the industry is generally not considering projects that require investment in equipment or consultancy services.

Additional resources

Below you can find information and contact details for other New Zealand government and international agencies regarding their response to COVID-19.

New Zealand Government agencies

Covid19.govt.nz
COVID-19 helpline for businesses
Business.govt.nz
New Zealand Customs
Ministry for Primary Industries (MPI)
New Zealand Export Credit (NZEC)
MFAT Export Helpline
MFAT Safetravel
Callaghan Innovation
Immigration
Ministry of Health
WorkSafe New Zealand
myNZTE

Global agencies

World Health Organization (WHO)
Centers for Disease Control and Prevention (CDC)

Contact NZTE

We're available to talk to you about any issues your export business is facing due to COVID-19.

For existing NZTE customers, please contact your New Zealand-based Customer Manager.

If you're unsure who to contact or haven't worked with us before, you can call NZTE on 0800 555 888 or email below and one of our Customer Advisors will help you.