Business environment in Vietnam 2013

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Recap of business environment in Vietnam 2013

Euromonitor has issued report on business environment in Vietnam 2013.  According to Euromonitor, business and consumer confidence in Vietnam has weakened since 2009 amid the country’s economic slowdown, high inflation and worsening corruption. Foreign direct investment inflows remained relatively strong in 2011 but the economy is losing its competitive advantage due to rising labour costs and a shortage of skilled labour. Consumer businesses will continue to benefit from Vietnam’s large and youthful market with a growing middle class and rising incomes.

Vietnam ranked 99th out of 185 countries in the World Bank’s Ease of Doing Business 2013 report, the same ranking as in the 2012 report. Due to growing macroeconomic uncertainties, however, the country’s ranking in the World Economic Forum’s Global Competitiveness Index was downgraded from 65th position (out of 142 economies) in 2011 to 75th position in 2012. Also, as the corruption situation is worsening, Vietnam ranked joint 123rd out of 176 countries in the Transparency International’s Corruption Perceptions Index 2012, down from 112th place (out of 183 countries) in the 2011 rankings.

Vietnam continues to attract foreign investors thanks to its various investment incentives, a growing labour force and a flexible labour market. The total economically active population stood at 45.6 million in 2011, 10.0% higher than in 2006 as a result of steady population growth. Foreign direct investment (FDI) inflows to Vietnam reached VND152 trillion (US$7.4 billion) in 2011, down by 13.8% in real terms compared to 2010 amid the country’s economic slowdown. The level of FDI intensity was 6.0% of total GDP in 2011, remaining higher than in some other regional economies including Thailand and Indonesia. Rising labour costs, poor infrastructure, skills shortages and red tape, however, continue to be factors which undermine business confidence in the country.

Given its sizable market (total population of 88.8 million as of 2011) and rising income levels, the consumer landscape in Vietnam is attractive to businesses. Per capita consumer expenditure rose to VND17.7 million (US$863) in 2011, representing a growth of 38.9% in real terms since 2006. As the middle class is expanding, consumer spending on discretionary items (everything except spending on food and non-alcoholic beverages and housing) is set to increase from 56.5% of total consumer expenditure in 2011 to 58.1% by 2020.

(Source: Euromonitor International’s Country Briefing, ANT Consulting)

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