Coming in for a landing in Ho Chi Minh City
Author: Edgar Lacker, CEO, AVIAREPS
We pride ourselves on having a network of owned offices that spans the globe but are always looking for ways to bring out clients closer to the markets they need to grow. We especially keep an eye on emerging markets that offer a unique opportunity for our clients, and recently, one, in particular, has caught our eye: Vietnam.
With a rapidly growing economy, modern infrastructure and significant foreign investment, Vietnam is one of the most dynamic emerging countries in East Asia – and a significant potential market for the tourism and aviation industries. This is just one of the reasons we decided to create AVIAREPS Vietnam, which we recently announced.
Over the past three decades, Vietnam has seen a complete economic and social transformation. Once one of the world’s poorest countries, it has quickly developed into a lower-middle-income nation. In 1986, the government launched a series of economic and political reforms as part of the so-called “Renovation” policy, known as Doi Moi, which freed the economy from the rigidity of a centrally planned economy to one based on the free market. In 2007, Vietnam followed this trajectory to become a member of the World Trade Organization (WTO) and has since signed several free trade agreements. Thanks to these and other reforms, the economy has been rapidly growing. In 2018, Vietnam’s GDP grew by 7.1 percent and is expected to nearly maintain that rate in 2019 with projections estimating growth of about 6.6 percent.
TOURISM IN VIETNAM
Vietnam is the easternmost country on the Indochina Peninsula in Southeast Asia, bordered by China, Laos, Cambodia and Thailand. It is the world's 14th most populous country and is home to more than 3000 kilometers of coastline and beaches, mountainous highlands, growing cities, and diverse cultural and historic sites. Due to these natural and urban attractions, Vietnam currently ranks among the fastest-growing tourist destinations in the world with tourism making up nearly 10 percent of its GDP. In 2018, the country was awarded the title of “Asia’s Leading Destination” by the World Travel Awards, and in that same year, tourism revenue reached USD $26.75 billion, up USD $4.75 billion from 2017.
The international harbors and airports created for inbound tourism also encourage outbound tourism. It is now easier than ever for Vietnamese citizens to explore the world beyond their borders and more and more Vietnamese citizens are open to spending their income on both material goods and experiences. According to Nielsen and the Conference Board’s most recent Global Consumer Confidence Survey, which measures consumers’ trust in the market and willingness to spend, Vietnamese consumers’ confidence is the highest it has been in a decade with 128 points. Globally, the country ranks 3rd, behind only India and the Philippines. When consumers were asked about their willingness to spend, 82% predict their personal finances will likely be good or excellent over the next 12 months and they are optimistic and ready to spend their disposable income.
Source: Conference Board
Mastercard’s Future of Outbound Travel in Asia Pacific (2016 to 2021) Report, underlines the fact that many Vietnamese citizens are choosing to spend their money on international travel. Through 2021, the outbound travel market in Vietnam is expected to grow by 9.5 percent – the second-highest rate in the region. This trend is already presenting itself: In 2017 outbound trips reached 7.5 million. While these trips tended to focus on the nearby destinations of China, Cambodia and Thailand, Vietnam’s growing middle class is also interested in trips to Europe and the United States.
INVESTING IN VIETNAM
Vietnam has evolved into a very attractive beneficiary for foreign investment.
Due to the country’s free trade agreements, low labor costs and young working population, many foreign investors have already found good reason to invest. In the first five months of 2019, the Foreign Investment Agency (FIA) reported a record amount of foreign investment totaling USD $16.74 billion, making for a YoY increase of nearly 70 percent. While current geopolitical conditions triggered by the US-China trade war definitely make Vietnam a more attractive investment opportunity, there are many more long-term incentives for investment.
The government is also encouraging such investment by bolstering its infrastructure to improve shipping routes and general accessibility, and is putting a strong focus on education and vocational training to ensure the workforce can support a variety of new industries, like advanced technology and manufacturing, tourism, and high-tech farming.
As domestic and foreign investment continue to increase and the empowered middle class becomes more confident, Vietnam will become an even more attractive place to invest.
Sources: Vietnam Briefing
We would be honored to help you grow your presence in this emerging market. Talk to our team about the opportunities for you in Vietnam. Giang Ha, Deputy General Manager of AVIAREPS Vietnam, is looking forward to hearing from you!
Photo by Quang Nguyen vinh