While the global pandemic continues to disrupt travel and international trade around the world, Vietnam’s economy has remained resilient. In fact, in 2020, Vietnam’s economy grew by 2.9 percent, one of the highest growth rates in the world. This year, Vietnam businesses are set to support the country further, and growth is projected to reach 6.5 percent in 2021, thanks to government support and the country’s fast response to COVID-19. So, if you’re an international manufacturer hoping to move into this healthy market, get ready to learn how to export to Vietnam and five products in demand by Vietnam businesses.
An in-depth look into the Vietnamese trade economy
Vietnam is a vibrant Asian economy, with a large market for capital goods and a growing domestic demand for consumer goods. A member of the World Trade Organization or WTO, Vietnam has great ambition to develop major infrastructure including a new international airport and urban railway network.
Vietnam is conveniently close-by to Thailand, Philippines, Singapore, China, India and Malaysia, making it an ideal export hub to reach ASEAN markets. The port of Ho Chi Minh City is located on the Saigon River and features a network of ports, creating a lucrative import and export hub in the south of the country. As the country’s most valuable economic center, it contributes to over two-thirds of Vietnam’s economy and supports a wide range of industries.
In 2020, goods exports rose by 23.8 percent, which helped give the economy a significant boost, while the rest of the world struggled to prevent the spread of COVID-19. Vietnam also benefits from new trade agreements, like the EU-Vietnam Free Trade Agreement and the Regional Comprehensive Economic Partnership, which helps keep Vietname businesses competitive.
Vietnam mainly imports electrical machinery, computers, mobile devices, plastic, mineral fuels, iron and steel, and optical, technical, and medical equipment. However, new opportunities are emerging for manufacturers to export to Vietnam. It has recently been named as one of the most promising Southeast Asia countries for the Australian wine industry. Since Australian wine is currently subject to tariffs in some countries, Vietnam offers an exciting destination for manufacturers to distribute and sell Australian wine to ASEAN markets.
But, that’s not all! Vietnam is also at the beginning of becoming a digitalized society, with a young population that loves technology, according to Ralf Matthaes, managing director of Ho Chi Minh City-based Infocus Mekong Research. There are over 49,063,762 internet users in Vietnam and 25,162,000 smartphone users. With the rise of online shopping, smartphones are becoming essential for economies to thrive and are therefore in high demand. Manufacturers able to provide smartphones and gadgets should certainly seize this opportunity and establish a presence within the Vietnam e-commerce market selling high-quality electronic devices.
Know the regulations when exporting to Vietnam
If you want to start exporting goods to Vietnam, you’ll first need to understand the rules and regulations currently in place for manufacturers when trading with Vietnamese businesses. From import duties and export control to FTAs, read on to learn everything you need to know before selling your products to customers in Vietnam.
Trading company license
Vietnam doesn’t require a manufacturer to have an import or export license to set up a trading company, but a foreign investor must register with the Department of Planning and Investment to start trading, as well as obtain an Investment Certificate to import and export to and from Vietnam.
Tax & export control
If you’re a UK manufacturer, you should know that the UK and Vietnam have signed a double taxation agreement, to prevent income from being taxed twice when exporting goods to Vietnam. Most regulations on the Vietnamese VAT regimes are included in the Law on Value Added Tax. Importers are required to pay tax in full including VAT.
Also, note that drop shipping is not subject to tax exemptions or reductions. However, VAT is not charged when goods cross the Vietnamese border and are temporarily imported to then be re-exported at a later stage.
You will be charged import tax on almost every type of product you import into the country, but the fee will depend on what you are importing. This could be 0% up to 10%. There may also be a Special Consumption Tax added for certain goods such as cigarettes.
There is also export control in place to prevent some goods from being imported into the country and to protect the country’s free trade agreements.
- Goods exported must be in accordance with international treaties, to which Vietnam is a contracting party.
- Import control will prevent the import of chemicals, explosive pre-substances, and industrial explosives.
- Goods exported should not exceed quotas set by foreign countries.
5 products to export to Vietnam 2021
China is still the largest import market of Vietnam, with a turnover of $9.6 billion, followed by Korea at $5.2 billion and ASEAN with USD $3.4 billion. 7With a population of over 95 million and Southeast Asia’s fastest-growing middle class, Vietnam clearly represents a key market for foreign goods. So, here are five products worth exporting to Vietnam from abroad in 2021.
1: Medical equipment
The demand for high-quality medical equipment in Vietnam is on the rise, and this particular industry is one of the most promising sectors for foreign investors. The pharmaceutical industry in Vietnam has grown significantly from $5.2 billion in 2018 to $6.6 billion in 2020. In fact, the local government has also offered tax incentives to promote the industry and encourage foreign manufacturers to meet the growing demand in the country. 6Technological developments in cosmetic plastic surgery are also fueling the need for medical equipment, including x-ray machines and orthopedic appliances.
2: Australian wine
Helping Australia to cope with the great losses incurred due to the global pandemic, Vietnam’s wine market is a key opportunity for foreign import-export companies. Since China is no longer buying Australian wine in bulk, Vietnam’s thriving drinking culture is presenting Australia with a new and exciting market to supply. The South Australian Wine Industry Association announced in 2020 its plan to secure ASEAN partners and diversify exports, with Vietnam emerging as a top trading partner. While cheap local beer has been highly popular over the years, now middle-class consumers are demanding high-quality wine from overseas. And this wealthy middle class is expected to reach 101 million by 2025. Even New Zealand can benefit from exporting wine to Vietnam.
3: Smartphones & gadgets
Quickly becoming a prime market for international investment, e-commerce activities are growing across the country, triggering a growing need for high-quality electronics, smartphones, and gadgets. Samsung has turned Vietnam into a global manufacturing base for its products, investing over $17 billion into the country. Plus, as the middle class grows year on year, more people will have higher levels of disposable income, increasing their buying power, which can be spent on electronics and gadgets.
4: European chocolate & confectionery
A major importer of U.S processed food and snacks, totaling $774 million in 2019, manufacturers of high-quality chocolate and confectionery should consider Vietnam as a new and exciting market to move into this year. As the country’s tourist industry enjoys around 18 million international visitors per year, more money is being invested into the hospitality industry to offer more fine-dining restaurants, coffee shops, and luxury hotels. It’s true, Vietnam is developing a sweet tooth. A big player in the global chocolate landscape, as the country’s purchasing power increases, consumers are starting to buy candy on a regular basis and prefer brands such as KitKat, Mars, and Hershey’s. According to market research from Euromonitor International, chocolate sales and the demand for sweet consumer goods in Vietnam have increased by a massive 80 percent since 2011.
5: Machinery to support the country’s growth
As Vietnam steps up its infrastructure plans and aims to build a new international airport and rail network, machinery including air conditioners, computer parts, lifting and loading machinery, and solar panels all need to be imported from overseas. Vietnam imported $1.1 billion of air conditioner units in 2020, $640.1 million worth of loading machinery, and $2.4 billion in computer parts and accessories. 9International manufacturers able to provide such machinery should consider Vietnam as the next market to expand into and help support the country’s business sector, hospitality and tourism industry, and public transport services.