amfori Focus Vietnam

A Blossoming Country Blooms

CapitalHanoi

CurrencyVietnamese Dong

Independence2 September 1945

LanguageVietnamese (with modified Latin alphabet)

Total area331,212 km²

Population96 million*

Population growth1%*

Middle class growth34%*

Labour market55 million*

GDP245 billion USD*

GDP Growth7.1%*

(*2018 data)

Vietnam: An Overview

Laos

Thailand

Vietnam

Cambodia

Hanoi

amfori Focus Vietnam2

Vietnam – Star on the Rise

Christian Ewertamfori President

Over the past number of years, I have been lucky to regularly visit Vietnam. With great pleasure, I have seen how much economic progress the country has made between each visit. What is really impressive is that some of these visits have only been a few months apart. The commitment shown by the Vietnamese people to rebuilding their country and subsequently positioning it as a regional leader has been inspirational.

In 2019, amfori organised two important events in Vietnam. These included the 2nd amfori Asia Sustainability Forum in Ho Chi Minh City followed by the EU-Vietnam FTA Round Table, both in October 2019. These events showed that Vietnam is actively engaging in sustainable value chains. This commitment will ensure long-term progress on economic, social and environmental fronts for the country and the wider South-East Asian region.

Since the enactment of Vietnam’s Đoi Moi (renovation) policy in 1986, the country’s economic development has been impressive. The GDP has multiplied by ten in the past 30 years, rising from 24 billion USD in 1986 to 245 billion USD in 2018. Vietnam’s economy continues to show fundamental strength, supported by robust domestic demand and export-oriented manufacturing.

amfori and myself personally have been active supporters of the EU-Vietnam Free Trade Agreement. This agreement will ensure that the EU and Vietnam deepen their economic links in a sustainable way, which will lead to lasting growth, increased jobs and long-lasting benefits for both its people and their environment.

EU-Vietnam Free Trade Agreement (EVFTA)

The EU and Vietnam concluded negotiations for a free trade agreement in 2015. It is expected that the agreement will bring many benefits for business, consumers and the two trading partners.

According to estimates, the EVFTA will add 15% to the GDP of Vietnam, while the EU will benefit from solidifying its presence in the rapidly growing South-East Asian region.

The EVFTA is an important agreement for Vietnam as it links the country with the world’s largest economy. In addition, the EU trading bloc represents the highest international standards and norms in production, sustainability and governance.

The trade agreement also includes a significant and in-depth chapter on trade and sustainable development. It includes commitments by Vietnam on important issues, such as labour and environmental standards. This will ensure that the country’s future growth path will be beneficial for society and the environment.

Since the conclusion of the EU-Vietnam Free Trade Agreement (EVFTA), there have been many opposing voices in Europe on the EU’s engagement with Vietnam. The aim of this publication is to show the many positive aspects of the country’s development and progress since its independence. In this way, we can guide a more balanced debate about the economic, social and environmental benefits of engaging with this young, vibrant and forward-looking country.

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One of Asia’s Most Youthful Countries

Vietnam has a young population, a quickly growing middle-class, strong foreign direct investment inflows and a robust manufacturing sector. These factors provide a healthy base for long-term growth in the future. Vietnam’s population is one of the youngest in the region, with a median age of 26 years. This places over 57 million people below the age of 34.

A Growing and Increasingly Prosperous Working Population

Most recent figures for Vietnam's workforce underline strong growth: between 2012-2018, it had increased by 3 million to 55 million. Female participation in the workforce is almost at equal levels to men, where women make up 48.05% of the workforce. Wages have also increased consistently from 3.7 million Vietnamese Dong (VND) per month (approx. 162 USD) in 2012 to 5.3 million VND (approx. 245 USD) per month in 2018. Its middle class is growing rapidly and a further 34% joined it between 2017 to 2018. The number of middle-class Vietnamese is expected to reach 44 million by 2020 and 95 million by 2030.

A Dynamic and Expanding Economy

In 2018, the World Bank ranked Vietnam as the 10th fastest growing economy globally with 7.1% annual GDP growth, in front of both India (7.0%) and China (6.6%). Moreover, Vietnam is expected to be one of the world’s fastest growing economies for the next 30 years. Its GDP is projected to increase by an annual rate of 5.1%, which would make it the world’s 20th largest economy in 2050.

In addition, the country is committed to continuing its global economic integration. Namely, Vietnam joined the WTO in January 2007 and concluded several free trade agreements in the past number of years, including with the EU (pending ratification), South Korea and the Eurasian Economic Union . In addition, Vietnam is also a signatory to the Comprehensive and Progressive Agreement for the Transpacific Partnership . Currently, Vietnam is actively participating in the negotiations for the Regional Comprehensive Economic Partnership Agreement.

Overall, Vietnam’s vibrant economic growth has contributed to the remarkable reduction of the country’s poverty headcount ratio from 20.7% of the population in 2010 to 9.8% in 2016.

Spotlight on Trade: Vietnam

A key sourcing and consumer market in the FMCG sector

There are significant growth opportunities for the private sector in Vietnam and especially for amfori’s members active in the Fast-Moving Consumer Goods (FMCG) sector.

Vietnam is a highly important sourcing market for amfori’s Members. Today, it is the second most important sourcing market for our sector in terms of food products, clothing and footwear, as well as consumer electronics. According to our statistics, 8% of all imports into Europe of fast-moving consumer goods come from Vietnam in 2018. This translates to food and merchandise worth almost €24 billion.

Vietnam has doubled in attractiveness for global business as the second most important consumer goods market in the ASEAN region, just after the Philippines. Vietnam is also forecast to lead ASEAN in terms of growth, with a compound annual growth rate of 10.2% from 2016 to 2030.

The growing importance of Vietnam as a consumer market is underpinned by its rising household income levels which have contributed to an overall increase in consumer spending. The median disposable income rose by 46% to an estimated US$ 3,822 per household in 2016, from US$ 2,613 in 2010.

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A Prominent Example in Women’s Empowerment

Women’s economic empowerment has steadily improved in Vietnam over the past decade. Women’s labour force participation rate is within 10% of that of men, a smaller gap than that found in most other countries. In addition, there has been an upward trend in the share of women in wage work, mostly driven by increased employment opportunities for women in foreign-owned export-oriented factories. According to the World Bank, the share of female workers in these factories increased from 20.5% to 26.3%.

In 2015, the International Labour Organisation found that female-headed households in Vietnam were less likely to be poor than male-headed households. In terms of educational attainment, primary and junior secondary school net enrolment rates are almost equal for boys and girls.

Overcoming Environmental and Resource Sustainability Challenges

Vietnam’s growth model has driven a rapid reduction of poverty. However, its handsome progress economically has had unintended effects due to a high reliance on natural resources. This in turn has dramatically increased pollution. The Vietnamese government has undertaken numerous initiatives and programs to adapt the economy to climate change risks. Moreover, this will then transform the country’s growth model to promote an environmentally-friendly economy, but significant challenges remain.

One of the most important initiatives committed to by the Vietnamese government is its National Green Growth Strategy (2011-2020). This aims to reduce greenhouse gas emissions by 20% in 2020. In addition, it will remove subsidies for fossil fuels and reduce energy consumption in industry, transport and commerce.

Social and labour improvements

Vietnam commands a leading role in Asia on labour rights. In 2019, the country ratified one of three outstanding International Labour Organization conventions to which it committed to under the EU-Vietnam Free Trade Agreement. The conventions in question are no 98, no 105 and 87.

In June 2019, there was also a positive report by the Business and Human Rights Resource Centre on the increasing number of garment, footwear, and electronics firms adopting voluntary business initiatives on respecting core human rights policy commitments.

Despite these positive changes, challenges remain and can also arise unexpectedly. In this respect, the EU-Vietnam free trade agreement will provide a platform for the two parties to drive important and exchange best practices.

amfori in Vietnam

In total, 326 amfori members source products from Vietnam. Their main sourcing sectors are textiles, clothing, leather, accessories and forestry, wood, pulp and paper.amfori has also conducted over 1,500 amfori BSCI audits in Vietnam between 2012 and 2018.

Vietnam is today the second most important sourcing market for the FMCG sector. According to amfori’s statistics, it currently stands for over 8% of all imports of fast-moving consumer goods. At the EU level, this translates to food and merchandise worth almost €24 billion. We are sure that its importance will rise even further once the EU-Vietnam free trade agreement enters into force.