Viet Nam

Market overview

Viet Nam has lifted the movement restrictions imposed on citizens to contain the COVID-19 lockdown, way ahead of most of Southeast Asia. With the resumption of key economic sectors' activities, such as manufacturing, services and retail, Viet Nam’s economy is accelerating to get back to its normal state.

Domestic tourism is resuming as well, as airlines increase flight schedules, other public transport is allowed, and hotels re-open throughout the country.

On 7 May, the Government permitted the resumption of all non-essential services, including schools and kindergartens, with preventive measures - but excluding clubs and karaoke parlours.

The Ministry of Transport relaxed social distancing guidelines on planes, buses, taxis and ships; providing a glimmer of a life life to tourism operators who may be able to capitalise, at least in part, on domestic tourism.

Prime Minister Nguyen urged people to continue practicing social distancing measures by wearing masks, keeping their distance from others and avoiding crowds. The wearing of face masks, which were made mandatory in crowded places such as in supermarkets and public transport, will be enforced.

Many industries, including tourism, aviation, manufacturing, and services, have been highly affected by the pandemic; especially amongst SMEs. Many international experts consider Viet Nam an economy that can quickly bounce back, and both central and local government agencies have started discussion in the media about their economic recovery plans.

The International Monetary Fund (IMF) has stated that Viet Nam’s economic growth may slow down to 2.7% this year due to the pandemic, but may pick up to 7% in 2021. Vietnamese Prime Minister, Nguyen Xuan Phuc, has stated that his Government would not accept an economic expansion of 2.7% and has called on all sectors to focus on restarting the economy, striving for 5% GDP growth this year.

In order to achieve such goals, five important tasks must be completed, namely attracting FDI, boosting exports, enhancing public investment, attracting private investment, and promoting domestic consumption.

Given the optimistic outlook, New Zealand exporters can consider Viet Nam a strategic market both in the recovery phase, and the long-term diversification of markets and reduced dependence on China.

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.

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.


Economy and trade

All sectors of the 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.

Viet Nam's GDP growth hit roughly 3.82% in the first quarter of 2020; the lowest since 2010, according to the General Statistics Office. This is lower than the earlier worst case scenario forecast of 5.96% for the whole year by the Ministry of Planning and Investment.

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.

In the short term, the COVID-19 outbreak could create stronger adverse impacts on Viet Nam's economy, especially manufacturing and tourism sectors, which are highly dependent on the global economy.

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.

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.

The General Statistics Office (GSO) of Viet Nam completed a survey on 131,000 businesses in 59 provinces and cities in Viet Nam. It found that nearly five million wage earners in Viet Nam had either lost their jobs or been temporarily laid off in Q1 2020 because of the COVID-19 pandemic. Among them, 1.2 million people were in the manufacturing and processing industry, 1.1 million worked in retail and commerce, and 740,000 were in hospitality. 84.8 percent of the surveyed businesses said they are suffering due to COVID-19.

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. Despite this, the Vietnamese Government believes the country has moved on to a new phase of long-term and radical pandemic prevention and control, while ensuring socio-economic development. According to recent research by Nielsen, over 80% of Vietnamese consumers think the economy will go back to normal by Q3 2020. 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

All sea freight and air freight ports in Viet Nam remain open for the time being.

The port clearance process in Ho Chi Minh City is experiencing some slow down due to issues with heavy equipment struggling without maintenance (which is not considered an essential service) causing hundreds of containers to be stuck at arrival. There have also been reports of truck traffic jams on Hanoi highway close to Cat Lai port.

Earlier, a border 'land road' with Cambodia and Lao was closed with no advance notice, causing trucks to return to export destinations or to park at the border.

Logistics firms in touch with NZTE have indicated that they have business continuity plans, except in a situation where main ports are locked down. They believe that authorities would still allow sufficient manpower to unload shipments in the worst case, or give them advance notice of shutdowns.

Due to worker shortages, New Zealand exporters may need to consider changing fresh produce pack-formats away from trays and towards loose pack, or in smaller boxes for a retailer-ready format.

A few New Zealand suppliers have rolled out customer communications to their distributors and retail buyers ensuring RSE is met and detailing their management of supply chain, quality and safety. This type of communication is what the market needs to hear at the right time.

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.

On 22 April, NZTE's BDM met with Eton - a 3PL logistics provider and e-commerce enabler. Eton was founded by a former Amazon executive and is now expanding its business, including helping fresh produce suppliers to store, pack, and fulfill "fresh" orders at the cost of approximately VND29,000 per delivery within Ho Chi Minh and Hanoi cities.

A few leading gourmet markets and New Zealand fruit suppliers are exploring Eton's offer to join e-commerce marketplace platforms like Lazada or Tiki. According to Elton's Business Development Manager, Elton also does fresh orders fulfillment for Vinmart on the VNshop ecosystem at an average of 200 orders per day in Ho Chi Minh City only.

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.

During the week commencing 13 April, major Vietnamese retailers Vinmart and Bach Hoa Xanh successfully received many containers of New Zealand Royal Gala apples without logistical challenges.

During the week commencing 20 April, Zespri distributors cleared its first season arrival of New Zealand kiwifruit.

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 extended deadlines for tax and land use fee payments to support businesses suffering from the COVID-19 pandemic, taking effect immediately. Decree 41/2020/ND-CP (Decree 41) 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.

According to the State Bank of Viet Nam, credit institutions have cut interest rates by 0.5-3% and scrapped transaction fees from February 2020 for businesses and individuals mainly in agriculture, import-export, and SMEs. Credit institutions have provided new loans to 47,000 clients at the value of nearly VND 80 trillion. However, many Vietnamese businesses have reported difficulties in accessing this package because banks still assess the credibility of businesses under normal criteria and require collateral for renewing loans.

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 will grant e-visa to citizens of 80 countries from 1 July, 2020 as per Resolution No. 79/NQ-CP. List of countries can be accessed here and it includes New Zealand. While this is a positive sign, Viet Nam’s borders remain closed to foreign visitors.

Vietnam’s Immigration Department has announced that it will extend temporary residence permits for those that have entered before 1 March 1 until 30 June. Foreigners that entered on visa-free policies, e-visas, or tourist visas since 1 March will also be entitled to the same automatic extension program until 30 June.

Foreigners that have entered for work or other purposes can contact their embassies and sponsors for further guidance.

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.

The government has not provided any insight into how or when international travel will resume.

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 was originally scheduled to take place between 8-9 April, but is now expected to take place between June 15, 2020 and June 30, 2020.

  • 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.


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

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.