The Vietnamese market is beckoning and Kiwi export businesses should be responding in greater numbers, writes Ronald Ainsbury. And he has the evidence.
Vietnam is an attractive, large growing, emerging market and recently-signed trade agreements have opened the door for Kiwi businesses.
There are more than 96 million people living in Vietnam, of whom 65 percent are under the age of 40. GDP is growing at more than six percent per annum and there is a growing urban middle class. While predominantly an agricultural country, industrialisation and urbanisation are transforming the Vietnam economy.
There are similarities between Vietnam and New Zealand too. Agriculture plays a major role in each economy – but Vietnam has a significant manufacturing base as many Western and North Asian companies have located manufacturing there.
Both economies are dominated by small businesses: SMEs account for 97 percent of all New Zealand and Vietnamese businesses, employ 29 percent of all New Zealand employees (50 percent in Vietnam), and account for 28 percent of New Zealand GDP (40 percent in Vietnam).
New Zealand sends around $730 million of exports to Vietnam per year, mostly dairy and timber products, with another $100 million being earned from education and tourism (Vietnamese coming to New Zealand). But are Kiwi businesses really exploring the opportunities?
Vietnam has been investing in technology. E-commerce is growing rapidly; 85 percent of adults own a smartphone; the local version of WhatsApp – Zalo – has 72 million users, Facebook 65 million. Vietnam’s Internet economy is US$9 billion or 3.8 percent of GDP.
Uber sold its Asian business to Grab of Singapore and now there are three other competitors (Go-Jek, FastGo, and Be Group) snapping at Grab’s heels.
Vietnam is encouraging innovation and startups and now boasts the third largest startup ecosystem in Asia. On the 2017 Global Innovation Index Vietnam has climbed steadily from 59 in 2016 to 42 in 2019.
One Kiwi who has seen the opportunity up close is Mitchell Pham, a Vietnamese-New Zealand business, technology and social entrepreneur. In 2016 he reported that “the Vietnam tech sector is moving extremely fast, and may well leave New Zealand behind if Kiwi companies don’t start engaging soon”. His own company has followed his advice and he has recently been honoured by the Ho Chi Minh City government, recognising his contribution to entrepreneurial leadership and international impact in the city’s booming hi-tech industry.
Under the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA) many of Vietnam’s tariffs on goods trade with New Zealand have already been eliminated or are on their way to being eliminated by 2020.
Another FTA to note has been recently signed with the European Union. This provides greater access to EU markets for Vietnamese goods and services. On a recent visit to Hanoi I spoke with a director of a successful Vietnamese manufacturer of automotive components for Japanese and European companies. They are keen to develop their design engineering capability – to be better able to seize the opportunities opened up by the European Union FTA. The director was planning to visit Japan to seek a potential partner.
Why not a New Zealand design partner?
The New Zealand government has invested over $8 million financing New Zealand’s Plant and Food Research to work with Vietnamese farmers – helping them to develop improved dragonfruit varieties to help Vietnam SMEs expand exports of this exotic fruit. Could there be opportunities for Kiwi horticultural companies to build JV partnerships based on Kiwi taxpayer’s largesse?
A new agreement – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – builds on the AANZFTA and will eliminate all outstanding tariffs on New Zealand exports to Vietnam over a decade starting in 2021.
But Kiwi business shouldn’t wait – business in Asia depends on relationships. There’s no time like now to start developing contacts and building relationships.
Ron Ainsbury (pictured) is an internationally-experienced executive, consultant and coach. After some 20 years abroad he is now based in the Wairarapa from where he consults to business. He continues research as a Senior Fellow at the Rotterdam Business School Innovation Research Centre focused on how to encourage business to use ESG issues as spurs to innovation and new business opportunity creation. Ron is also a regular visitor to Vietnam where he advises SMEs, coaches entrepreneurs and lectures MBA students.