Tag Archives: Vietnam imports

Conquering Health-Conscious Vietnam

Vietnam is quietly emerging as a center of health-conscious consumption — with surging marketing and manufacture of so-called functional foods: products intended to provide both nutritional and health benefits.

Local media report 1,800 functional food makers and distributors — including American companies Amway, NuSkin, Unicity and Herbalife — are selling 10,000 products in Vietnam, and business is booming.

Herbalife says the Vietnamese market contributed significantly to its $4.8 billion in global sales last year.  Unicity reports its success in Vietnam is above expectations.  NuSkin reported 30% growth last year in Vietnam and projects 33% this year by conquering the central Danang market.

Amway’s second factory in Vietnam is expected to produce 24,000 products valued at $200 million starting early next year.  The company began cultivating the Vietnam market in 2008 and last year generated $90 million in revenue, a one-year increase of 14%.

Vietnam is a lucrative and growing market for functional food because its consumers tend to be educated, health conscious, and concerned about obesity, cardiovascular health and physical beauty.  The Vietnam Supplement Food Association reports 56% of Hanoi residents and 48% in Ho Chi Minh City use functional food.

Even more important to American companies, the ASEAN free trade agreement that takes effect next year will facilitate the export of products they make in Vietnam to Southeast Asia’s 600 million consumers.

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The Cost of Living with Big Macs in Vietnam

Now that McDonalds opened its first restaurant in Vietnam this month, it will take a while to measure the effect on Vietnamese consumers — hungry for all things American but leery of the potential health consequences.  But the fast food giant already has made a significant contribution to anyone considering living in or visiting Vietnam — thanks to Big Macs.

The entry of the company’s trademark oversized hamburgers on the streets of Saigon has immediately made Vietnam a member of The Economist’s Big Mac Index.  The index is an elegant (though obviously imprecise) measurement of purchasing power in countries where McDonalds sells Big Macs.

So now we know that the Big Mac sells for the equivalent of $2.84 in Ho Chi Minh City, considerably less than the $4.62 price in the US.  By comparison, the extremes in Big Mac pricing are $7.80 in Norway and $1.54 in India.  The Economist arrives at those numbers by dividing the price charged at McDonald’s by the official exchange rate of the country; In Vietnam, consumers pay 60,000 Vietnamese dong for a Big Mac, and the Economist used 21,090 as the exchange rate.

What’s interesting about this is that the index indicates the actual cost of living in Vietnam — as opposed to the implied cost you get from the official exchange rate.  In this case, it suggests Vietnam is much cheaper than you’d expect.  In fact, if a Big Mac (and presumably everything else) cost as much in Vietnam as in the US, we’d be getting 12,975 VND for our dollar rather than the 21,090 the bank offers.

Purchasing Power Parity is a relatively good way of understanding the true cost of living in a foreign country, but it is tends to be subject to the biases of whoever calculates it.  The Big Mac Index is a convenient way to demonstrate that Vietnam is an inexpensive place to live — at least until McDonald’s raises its prices there.

Vietnam Rewards Patient Investors

American news organizations like the Wall Street Journal and Bloomberg are reporting this week that Vietnam ended up with a better year economically than international analysts had expected.  Meanwhile, investors who had more confidence in Vietnam have been rewarded with a 23% gain in stocks so far this year and 35% since last Dec. 1 — plus double-digit dividends for typical publicly traded companies.

With the focus on China and other challenged emerging markets, Vietnam has quietly strengthened its global economic positioning over the past few years. This year its stock index has outperformed all others in Southeast Asia as its GDP rose slightly more than 6% in the fourth quarter and 5.4% for the year — ahead of last year’s 5.25% and Bloomberg’s 5.3% projection.

The main drivers of Vietnam’s recovery are exports — up 15% and now equivalent to 75% of GDP — and foreign investment, up 10% to $11.5 billion this year.  Pledged foreign direct investment was reported at $22 billion, up 55%.

Vietnam is expected to have a trade surplus of $863 million this year, up from $747 million last year.  Government statisticians also say Vietnam’s inflation rate is down from 7% last year to 6% this year.

All of this suggests Vietnam is in a strong position to continue its determined and persistent  march toward full economic development.  The government aims for a modest and achievable GDP growth of 5.8%, which will likely reward foreign investors for a third straight year.

Vietnam’s Most Treasured Import: Cash

More than five million Vietnamese people do not live in Vietnam.  They migrated to 100 nations around the globe, and include 500,000 Vietnamese guest workers in other countries.  Together, at year’s end, they will have sent $11 billion in cash back to relatives in their native country.  That includes nearly $5 billion sent to Ho Chi Minh City alone.

Most of the money comes from the West — especially Europe and the US, top_site_international_businesshome to 1.5 million Vietnamese Americans, many of whom are affluent.  The cash is transferred through banks, such as Dong A Money Transfer (that received $1.5 billion in 2013) and Sacomrex, which expects the total to be $1.7 billion, (15% more than it had expected).

World Bank says Vietnam is one of the top ten countries receiving remittances from overseas.  Others include India ($71 billion), China ($60 billion), and the Philippines ($26 billion).

The cash remittances are a cultural statement about the intensity of Vietnamese family connections.  The money significantly raises the standard of living of relatives in Vietnam.  And it helps build Vietnam’s social infrastructure — such as access to education and health — family by family.

The $11 billion inflow represents nearly 8% of Vietnam’s GDP.  It strengthens and widens the bridge between Vietnam and the US.  It helps explain the warm reception that often surprises first-time American visitors to Vietnam.

Vietnam’s Out-of-Balance Trade Balance

Vietnam’s love-hate relationship with China has been centuries in the making, and now is embodied by fierce tempers over disputed islands and soaring trade between the two countries.

Vietnam and China announced this month they aim to achieve $100 billion in two-way trade by 2017 and $60 billion in 2015.  Voice of Vietnam reports $36 billion so far this year in China-Vietnam trade — which has increased more than 20% annually in recent years.

There are at least two problems with this phenomenal growth: (1) Vietnamese consumers tend to be skeptical of Chinese products, and (2) The trade is increasingly one-way — China-to Vietnam.  

In the first nine months of this year, 80% of the trade was China exports to Vietnam.  Moreover, Vietnam’s  imports from China increased 25% over the previous year while Vietnam exports to China rose less than 3%.  

The products traded aren’t favorable to Vietnam either.  Vietnam imported more than $1 billion each in machinery, telephones, computers, electronics, cotton, and steel — while Vietnam’s exports to China are mostly raw materials.

Even even though Vietnam is a major exporter of agricultural products (mostly to Europe and the US), China’s domination in Vietnam’s domestic market is growing in export of potatoes, ginger, lemon, grapefruit, pear, apple and garlic.  Because some retailers know their Vietnamese customers don’t trust Chinese products, they’re often disguised as grown in Vietnam, Thailand, the US and Australia.

Overall, Vietnam has achieved a reasonably healthy trade balance in recent years.   How did it accomplish that?  By trade with Europe and the Americas that is as imbalanced as China’s trade with Vietnam — in reverse.  So far this year, for example, the value of US-Vietnam trade was nearly $25 billion, 82% of which was Vietnamese exports to the US.  

The out-of-balance trade balances may not be sustainable.  If nothing else, it creates a diplomatic challenge for Vietnam, which wants the West’s help in fending off China’s most aggressive export of all: military might in the South China Sea.  

The New American Invasion Into Vietnam

Twenty Thirteen is shaping up to be the year the USA overwhelms Vietnamese culture as McDonalds, Starbucks, and (probably) Harley Davidson join already established soft drink, pizza, and fried chicken conglomerates in an onslaught of American consumerism.

The invasion is just beginning.  Vietnamese consumers are wholeheartedly embracing US products, but this isn’t welcome news to those who think about the well-being of Vietnam’s environment and its nearly 100 million people.

Before Starbucks opened its first outlet in Saigon this spring, the makers of Coke, Pizza Hut, and Pepsi announced major expansion plans.  This summer McDonalds joined the crowd after years of speculation that its entry into Vietnam was not a matter of if but rather when and where; resentful speculation included the rumor that Hanoi’s immensely popular Bobby Chinn restaurant had to move and ultimately close because McDonald’s muscled the owner out of his prime real estate.

This fall US-based Harley Davidson is said to be recruiting staff for its first official showroom in Ho Chi Minh City after “unofficial’ dealers have been importing and selling the motorcycles for up to $40,000 apiece (including 100% import tax) for years.

Starbucks plans hundreds of cafes.  McDonalds can have as many as it wants because the company selected the prime minister’s son-in-law to run its Vietnam operations.  Harley Davidson is already popular in one of the world’s biggest two-wheel cultures even though the company doesn’t officially operate there.

The American companies are latecomers to the Vietnam market, and they will find enormous success there, as Kentucky Fried Chicken and Coca Cola have before them.

But skeptics will raise the question of just how good (or bad) the news is for Vietnam and its consumers.  Vietnamese health researchers already have linked the country’s rising incidence of childhood obesity to American soft drinks.  How good can American fast food be for a population accustomed to fresh produce, seafood and chicken soup made from chickens that were alive yesterday morning?  And what will be the impact of ear-shattering, bulky, macho, born-to-be-wild American motorcycles on a quiet culture that thrives on bicycles and modest motorbikes?

The last American invasion of the Vietnam countryside escalated exactly 50 years ago and did a lot of damage.  Will history judge the 2013 invasion as harshly?

 

 

 

Vietnam’s Growing Partnerships Worldwide

Diplomats and business executives worldwide are scrambling to strengthen strategic partnerships with an eager Vietnam.  But one country seems less active than others as the competition heats up to win over the promising frontier market and capitalize on its young, educated, and entrepreneurial workforce: the USA.

Examples this month of how other countries are cooperating with Vietnam:

  • Indonesia is hosting  the Vietnam Festival in Jakarta this weekend, underscoring a transformative year that brought the first direct flights between Saigon and Jakarta, a bilateral meeting in Hanoi to cement a strategic partnership, a $5 billion bilateral trade target for 2015 (which has nearly been achieved already), and corporate partnerships such as the sale of the majority of Vietnam’s biggest cement company to Indonesia’s counterpart and Indonesia Ciputra Group’s $2 billion new city in Hanoi.
  • Uruguay has been cleared to export beef and lamb to Vietnam from 12 processing plants after the country recognized the high demand for meat in Vietnam; last year Uruguay exported nearly $1.6 billion of meat — but just $2 million to Vietnam — and that’s going to change.
  • Europe is lifting a year-old ban on the import of Vietnamese basil, sweet pepper, celery, bitter gourd and coriander as Vietnam expands its growing role as a global food supplier.
  • Russia and Belarus hosted Vietnam’s Prime Minister Dung to promote strategic partnerships, especially trade and  scientific/technological cooperation.  Two-way trade with Russia was $2.5 billion last year and with Belarus is expected to reach $1 billion by 2015.  Russia has 93 projects in Vietnam valued at $2 billion.
  • Italy hosted a Vietnamese delegation to celebrate the opening of a trade office in Tuscany, the latest in a bilateral 40-year diplomatic and trade relationship.

Every month, Vietnam continues to expand and refine its global network.  Nations and corporations that want to position themselves for the Southeast Asia market need to get and stay connected with Vietnam.