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Vietnam 2035: A growing global middle class from 11% of the 90 million population market in 2015 to more than 50% in 2035

 

middle class

 

With Vietnam’s aspirations to be a modern and industrial nation moving toward becoming a prosperous, creative, equitable, and democratic society, five specific quantitative criteria were set forth in the joint Vietnam – World Bank report “Vietnam 2035” in relation to that objective:

§ A GDP per capita of at least $18,000 (in 2011 PPP) with a growth rate of 6% year
§ An urbanization of the Vietnamese population > 50%
§ A share of industry and services in GDP at more than 90% and in employment at more than 70%.
§ A private-sector share in GDP of at least 80%.
§ A score of at least 0.70 on the UN’s Human Development Index.

Such a realization which will not be straighforward, will require i) a strong-willed economic government with enhanced capacity and clear accountability by the State and ii) an acceleration of the needed transformations particularly in the building of a competitive and leading private sector and in the acquisition and transfer of technological and innovative capacity.

Vietnam however is well placed for the challenge:

§ with its political stability and the higher integration into world trade
§ having achieved a GDP per capita fastest growth rate (behind China only) over 1991-2014 . Continuing with the high growth pace to 2035 and so for more than a 50 year period, will create conditions for the country to reach the high come rank and avoid the risk of middle income trap,
§ with a large domestic market of 90 millions people, of which more than half is global middle class (note).

and so Vietnam is and should be clearly a country of first choice for your now and long term investments

Note:
Global middle class consumer is defined as consumer with a daily consumption of $15 a day or more in 2011 purchasing power parity (PPP) terms.

Join force to transform Vietnam SMEs into Global Champions on world market

 

engineer

 

Vietnam is a market of 90 million people. It succeeds to establish itself as a global manufacturing hub thanks to a high skilled but low wages workforce, a favorable geographic position close to China, a stable and business-oriented government and being the member of a large free trade zone.

In terms of industrial achievement however, Vietnam’s success is limited.

It has leading position on world market for some farm products (rice, pepper, rubber, coffee …) or seafoods . Its products however are still not part of the best quality or price in the marketplace.

For industrial products, Vietnam is a world exporter for garments, footwear, leather, electronics and telephone. It is however mainly a labor provider to foreign-direct-investment companies established in Vietnam (FDIs).

So there is still a lot to be done for Vietnam to be at the level in comparison to other countries in the region (particularly Malaysia, Taiwan, Korea) and to be able to build global champion positions under its own brands, with products and services created and engineered by its own people, with most added value kept in the country.

Small and medium enterprises (SMEs) are the main force in this battle. Taking into account Vietnamese SMEs’ main recognized weaknesses :

  • working mostly in isolation
  • unsufficient access to up-to-date technology
  • lack of funding for growth investment,
  • focus mainly on domestic market and low cost product
  • lack of concrete and sufficient support from the state,
  • unfair competition from state-owned enterprises and FDIs

At ATTP Capital, we believe important to provide the SMEs with the facilities to easily join force through cooperation and partnership, within the business community at large, Vietnamese and foreign enterprises, in the key areas of business development: technology transfer, marketing and distribution, manufacturing, supply chain, equity funding, in view to accelerate growth .

This is also the objective of our service, free of charge, of Business Cooperation Search & Offering. ATTP Capital can assist you in the negotiation of the contractual agreement between the parties.

Vietnam SMEs and Growth strategy

 

prelim overview

 

 

Vietnam now is at the center of a free trade zone covering a major part of world economy thank to the free trade agreements already signed and implemented ( Asean, Japan, Korea, China, India, Australia, New Zealand, Chile, Customs Union of Russia, Belarus and Kazakhstan) or being finalized ( Trans-Pacific Partnership which has a much larger scope than just tax and customs, signed in October 2015 and pending ratification, European Union, negotiation concluded and to be signed in beginning 2016).

With its lower wages but educated workforce, its relatively good infrastructure and easy business environment and the State’s volontarist industrial policy, Vietnam will benefit a significant competitive advantage, not only on cost, to attract foreign investments to become a stronger world manufacturing hub compared to its most direct competitors (China, India, Thailand, Philippines) and to increase its export power particularly within its large free trade zone.

Meantime, the local business, particularly SMEs, will face in its domestic market with tougher competition from other countries as a result of a long time priority given to export at the detriment of home market and of unsufficient funding and so investments in product quality, innovation and marketing compared to competitive products from other countries.

Overall however, being part of large free trade zone, which includes the most important consumer markets such as the US, Europe, China, Russia, India, Mexico and Asean countries, provides the historic opportunity for Vietnam’s enterprises to enter and develop and grow market share, not only on labor contribution but more importantly on value added products and services. To make this happens requires :

- A clear understanding of the business current status
- A careful thinking , planning and execution by business leaders in respect of market and product offering, business organization, profitability and funding over a period of 3 to 5 years.

At ATTP Capital, we work together with our clients in this critical process through the preparation of the preliminary Business Overview in the first stage and then the building of the Growth Strategy in the second stage.

 

 

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