Viet Nam

Market overview

Viet Nam’s management of the COVID-19 pandemic is a global success story. Early action and robust testing has helped the country to avoid a major outbreak, resulting in a very low per capita death rate. 

Domestic travel and retail businesses have reopened. Danang City has eased its social distancing measures, while Ho Chi Minh City authority has allowed the reopening of bars and clubs, and the Government is considering a plan to resume international air routes with China, Korea, Japan, Taiwan, Cambodia and Laos with certain quarantine conditions.

Viet Nam reported 1.81% GDP growth in the first half of 2020 – its lowest since 2011, according to the country's General Statistics Office. The International Monetary Fund (IMF) has also revised its 2020 GDP growth forecast for Viet Nam downwards to 1.6%, from a previous estimate of 2.7% in June. However, this would still see Viet Nam remain the only one of ASEAN's five major economies to grow at all during 2020, and growth is predicted to further rebound to 6.7% 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.

There have been other trade negotiation developments that may affect exporters. The European Union Viet Nam Free Trade Agreement (EVFTA) came into force on 1 August 2020, while the Government of Viet Nam has also recently adjusted its Most Favoured Nation (MFN) tariff rate for a wide range of products imported into Viet Nam. These changes will increase competition in the market, including for agricultural products and other sectors traditionally of interest to New Zealand exporters. Read more about these in a report prepared by the NZ Embassy in Ha Noi here.

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 maintained an upwards trend by 6.9% YOY in the year ending June 2020. 

Total export value from New Zealand to Viet Nam for the first six months of 2020 increased by 10.55% in the same period in 2019. Export of dairy products increased by 4.7%, and export of fruit increased by 38.94% while export of timber decreased by 11.23%.  

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

Services have been the most vulnerable to social distancing measures and border closures. The tourism sector is estimated to be losing about US$1 billion per month even if the rebound in domestic tourism during May and June partially compensated those losses. 

The passenger transport industry has also suffered financially, with the national airline, Vietnam Airlines, reporting a 68% revenue decline and consolidated losses of US$463.7 million in the first nine months of the year. By contrast, some subsectors – communication and health – have increased their activities since the beginning of the crisis. Several niches have also emerged, including the acceleration of e-commerce, which was already on the rise in Viet Nam over the past few years.

The economic fallout from COVID-19 has negatively impacted about 31 million workers in Viet Nam, with 900,000 out of work and nearly 18 million people receiving less income than prior to the pandemic, according to the Ministry of Labour, Invalids and Social Affairs (MOLISA). Viet Nam's General Statistics Office (GSO) has predicted there could be 5 million more people out of work by the end of the year. However, the labour and employment situation in the third quarter of 2020 showed signs of recovery, and the income of wage workers has gradually improved.

Large and medium-sized companies were considered more vulnerable to the current pandemic than small and very small businesses. 67% of the enterprises surveyed by the Vietnam Chamber of Commerce and Industry (VCCI) 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. 

Though being hurt by the pandemic, Viet Nam’s economy has been seen as one of the most resilient economies in the world. This economic resilience can be explained by two factors: merchandise (net) exports continued to grow and domestic activities have rebounded since April 2020 when the authorities started to ease most mobility restrictions.

The International Monetary Fund (IMF) has revised its 2020 GDP forecast for Viet Nam downwards to 1.6%, following a previous estimate of 2.7% in June. This would still see Viet Nam remain the only country with positive growth among the five major economies in ASEAN. It is predicted to have economic growth rebound to 6.7% in 2021.

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 5% - 10%.

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 40% - 50% compared with pre-COVID-19 times. 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. 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, however clearance may take slightly longer for animal-based foodstuffs (which require inspection) due to social distancing regulations that need to be observed during inspections.   

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 available cargo flight options from New Zealand to Viet Nam are Malaysia Airlines, Singapore Airlines, and Cathay Pacific cargo flights.

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

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

Government support

The State Bank of Vietnam (SBV) adopted a series of measures to encourage banks to extend credit to businesses, including successive cuts in its major rates (refinance, repurchase, and discount) and specific directives. However, monetary policy has limited impact in an environment where real interest rates are already very low. In Viet Nam, effectiveness is even further restricted by the small proportion of businesses and households that have access to bank credit or that even own an account in a financial institution.

On 8 April the Government issued Decree 41/2020/ND-CP (Decree 41), which provides 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.

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 has recently announced a waiver of the 14-day quarantine requirement for foreign experts, investors, managers, and diplomats entering the country for less than 14 days.  These visitors must test negative for COVID-19 from a real time-PCR test by certified laboratories in their countries 3-5 days prior to the date of entry to Viet Nam. 

The organisation that invites them to Viet Nam will need to declare that they will cover all medical and other expenses if the visitor were to contract the disease in Viet Nam. People from the inviting organisation in Viet Nam who have contact with these experts will be required to self-isolate upon the completion of the trip. The procedure for applying to enter Viet Nam under this option is under development by the authorities and not yet available.

Viet Nam’s Immigration Department has announced another automatic stay extension for foreigners stranded in Viet Nam due to the pandemic until 30 September. The measure applies to those who entered after 1 March, allowing them to leave the country without any penalty or official procedures.

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.

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.

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:

"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.


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.