Posted: March 18th, 2022

Doing Business with Vietnam Executive Summary The Vietnam economy

Doing Business with Vietnam Executive Summary The Vietnam economy is a growing economy. The government has pledged its commitment towards market-oriented reforms, which represents a bold move away from the planned economy.
Moreover, it has demonstrated its commitment towards international integration and economic liberalization through implementation of structural reform programs with the intent of modernizing the economy (Trà̂n, 2002). This essay will attempt to delve into the trade approach of Vietnam using a Political, Economic, Social and Technological (PEST) analysis.
Towards this end, the paper will evaluate the country for FDI and international trade. The essay will also carry out a firm and industry analysis with the intent of examining the country’s major economic activities as well as the chief export industries.
It will also identify the major companies that are involved with generation of export turnover and the function of government in enhancing the International Competitiveness of the industries and firms. The economy of Vietnam has been on a rapid expansion especially with the shift from a planned economy to a market economy.
During the 1980s, the Vietnam Communist Party moved away from the socialist economic policies. This saw a sustained economic growth rate of about 5% for close to 15 years. Additionally, the number of foreign investors has been on the rise.
In 2007 for instance, Vietnam received approximately US$20 billion worth of FDI. In the same year, it joined the World Trade Organization (WTO). The enterprises and investment laws govern FDI activities in Vietnam.
The country has embarked on a journey to institute an all-inclusive legal framework tin conformity with the international standards to regulate FDI activities (Glewwe, Agrawal & Dollar, 2014). The government signed and then acceded to varied multilateral and bilateral agreements relating to investment.
Towards this end, such agreements with forty-six territories and countries aim at protecting and promoting of investments. A PEST Analysis A PEST analysis is the analysis of an organization’s external macro-environment – political, economic, and socio-cultural as well as technological factors, which affect organizational activities. A PEST analysis is important for environmental scanning purposes. It is a significant strategic tool. It bolsters comprehension of market growth and decline, potential of economic activities and business position. Again, it also helps in determining business prospects. For analysis purposes, it is overly significant to examine the attractiveness and other external macro-environmental factors of the Vietnam economy. A PEST analysis is important in showing that indeed, the economy has a huge growth potential and an emerging economic giant in the Southeast Asia and even across the world.
Political Environment Vietnam has a single party – Communist Party. The party has embarked on a Doi Moi policy in 1986, which marked the impressive transformation from a planned economy towards a market-oriented economy. The policy culminated to a high economic growth and lower inflation. It also gave incentives towards attracting FDIs and promoting international trade. Moreover, it saw a reduction in tariffs and lowered trade restriction barriers as well as decreasing the surrender rates of foreign currency. Continually, Vietnam has been relatively politically stable bereft of violence. The movement away from the centralized economy has given organizations some sense of autonomy (Hayton, 2014).
In terms of political stability, Vietnam had a 0.32 index in terms of absence of political stability. This saw the country rank 92nd out of the 210 countries studied in 2008. More importantly, the country faces no serious risks in terms of political stability. This has contributed to enhanced FDI attractiveness and improved international trade. Government policies and political factors encourage FDI and international trade (Fforde & De, 2013). However, investors must understand that there are some considerable limits in terms of free speech and political activities. For an organization to reduce political risk, it is important to establish and cultivate good relationship with the government to ease business operations.
Source: World Bank (2012) Economic Environment The country has emerged as a recent Southeast Asia economic success story. Throughout the Southeast Asia region, Vietnam has the highest Gross Domestic Product (GDP) growth.
Globally, it is the third in this category, behind India and 论文帮助/论文写作服务/负担得起我及时提交我最好的质量 – China. Courtesy of the economic reforms, the country has transformed to a very vibrant economy. Towards this end, the country is growing its economic powers.
Due to the positive effect of the Doi Moi economic policy since 1986, the FDI in Vietnam has risen considerably to almost US$11 billion by 2010 from a measly US$0.32 billion in 1988.
The annual economic growth has risen to 8% in the 2006-2013 periods. The inflation rate has also lowered in the last decade despite some fluctuations between 2003 and 2011. The chief export industries in Vietnam are petroleum, crude, coal, tea, rubber and peanut industries.
The major economic activities are forestry, fishing, mining and agriculture. Also prevalent are the tourism and other service sectors. Through the Doi Moi, the free market economic system is the greatest visible attempt by the Vietnam government to increase International Competitiveness (Engholm, 2013).
Source: Lim (2014) As an export-oriented economy, Vietnam’s economy account for close to 90% of its total GDP. In 2010, the major exports yielded US$ 71.6 billion. This represented a 25.5% increase.
By the turn of 2010, Vietnam’s exports to the European Union (EU) and the U.S. were 13.9% and 17.9% respectively. In 2010, Vietnam imported products worth US$84 billion from the EU, ASEAN, Korea, Japan and 论文帮助/论文写作服务/负担得起我及时提交我最好的质量 – China.
Joining the WTO enabled Vietnam open its doors to more Multinational Corporations (MNCs) retail investment through permitting unhampered tax cuts and free trade (Lockhart, Duiker, & Duiker, 2013). These policies demonstrate the Vietnam government’s attempt to enhance its International Competitiveness.
The laissez faire economic system enabled MNCs start subsidiaries without corporation with any domestic partners. Such policies made Vietnam very profitable retail market. There are many unexploited economic opportunities in Vietnam.
The country’s economic power has skyrocketed to emerge a top priority for international trade. Social Environment Currently, Vietnam has a young population and increasing household incomes that forms a huge consumer base.
With a 90 million population, Vietnam has a 70% of its people below 35 years. The literacy levels stand at 90%. This only serves to show that education is an important aspect for the populace.
This, combined with the work ethics rooted in Confucianism creates a very capable workforce. An ordinary Vietnamese has a 71 years life expectancy (Vietnam & IMF, 2004). Vietnamese and English are the two widely spoken languages.
The universality of the English provides foreign investors with a convenient mode of communication. In the rural areas, there are some Vietnamese traditional cultures such as the family role as well as the Face saving perception within the society.
However, with globalization, traditional cultures have been eroding. The increasing per capita income has increased the consumer demand for products and travel. Vietnam share socio-cultural factors with Malaysia and Thailand as its neighbors.
Daoism, Confucianism and Mahayana Buddhism are the most dominant religions. The Vietnamese love their food, which they consider as a source of enhance harmony and bolster family relationships. Technological Environment With the advent of technology, the number of internet users as at 2010 was 24 million.
This was a roughly 27% of the 86 million population in 2010 (World Bank, 2013). Globally, Vietnam was seventh in the world rankings in terms of internet usage. Huge investments on infrastructure coupled with huge tax cuts as well as a reduction of service and electricity prices as well as land lease, which is an incentive to both foreign and domestic investors.
In telecommunication systems terms, Vietnam has over 60 million mobile subscribers. The infrastructure in the country has developed to attract huge FDIs. The well-developed rail and road infrastructure has also facilitated international trade and increased FDIs.
The technological growth of Vietnam provides a business opportunity for investors. Such a conducive technological environmental provides viable economic prospects for both domestic and international investors. Conclusion The Vietnam economic success story is a product of political goodwill, economic reforms, positive socio-cultural factors and enhanced technological developments.
As such, the poverty index has been reducing significantly since the 1980s. There are many Vietnam nations getting jobs due to FDI and international trade. This has immense and beneficial multiplier effects.
The improved literacy rate provides investors with skilled and semi-skilled labor. Local managers can permit a foreign investor market his/her products effectively. Investing in Vietnam provides investors with an opportunity to reap colossal profits.
The policy reforms discussed in this research paper represents the deliberate and concerted efforts by the Vietnam government to bolster its International Competitiveness. This is definitely going to increase FDI and the level of international trade.
The Doi Moi coupled with the entry of Vietnam in the WTO among other changes implemented by the government only allays any doubt that the country will not become an economic giant, not only in Southeast Asia but also across the world.

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