[Vnbiz] EIU Vietnam Market Indicators

[Craig Stevenson]

Vietnam economy: Market opportunities
   September 12th 2006
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   COUNTRY BRIEFING

FROM THE ECONOMIST INTELLIGENCE UNIT

    2005 2006 2007 2008 2009 2010 Population (m) 83.1 84.2 85.3 86.4 87.4
88.5 GDP (US$ bn at market exchange rates) 52.8 60.9 67.1 72.7 79.3 85.7 GDP
per head (US$ at market exchange rates) 640 720 790 840 910 970 GDP (US$ bn
at purchasing power parity) 250.8 278.3 308.0 341.7 379.2 418.3 GDP per head
(US$ at purchasing power parity) 3,020 3,310 3,610 3,960 4,340 4,720 Private
consumption (US$ bn) 33.6 37.0 41.5 45.3 49.6 53.8 Private consumption per
head (US$) 400 440 490 520 570 610 Exports of goods & services (% of GDP)
69.0 72.6 74.3 74.5 72.0 71.7 Imports of goods & services (% of GDP) 73.3
74.4 79.1 81.4 80.5 82.3

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Vietnam's economy is forecast to grow at a fairly rapid pace in 2006-10,
averaging around 7.4% a year in real terms, and annual population growth is
expected to remain steady at around 1.3%. Annual GDP per head (at market
exchange rates) will therefore pick up from around US$640 in 2005 to US$970
in 2010. However, reflecting the relatively low cost of living in the
country, income at purchasing power parity (PPP) exchange rates is
significantly higher, rising from US$3,020 in 2005 to US$4,720 by 2010.
Despite this expansion in purchasing power, Vietnam will remain relatively
poor on a regional basis, with annual income per head at PPP set to reach
US$6,505 in the Philippines in 2010, US$11,215 in China and US$11,984 in
Thailand. Estimates of official income levels per head, however, may not
fully reflect actual purchasing power. There is a large informal sector in
Vietnam, and the economy remains largely cash-based, with much saving taking
place outside the banking system.

Most market opportunities are limited to main urban areas

Although income levels are rising, there is a fairly high degree of income
inequality, and poverty will remain a serious problem in many parts of the
country. According to the General Statistics Office, the percentage of
people living in poverty (the poverty line is based on the cost of
purchasing 2,100 calories of food per person per day, plus a modest quantity
of non-food items) stood at about 24% in 2004. This was down from 28.9% in
2001-02. However, some areas suffer a much higher rate of poverty than the
national average. In the north-west, for example, the poverty rate stood at
54% in 2004, and in the Central Highlands it was 32.7%, whereas in the
south-east region it was only 6.7%.

The government will make progress in reducing the incidence of poverty
during the forecast period. However, in most parts of the country market
opportunities will still mainly be limited to the lower end of the market.
Opportunities at the higher end of the market will be limited to the main
urban areas, particularly the capital, Hanoi, and in Ho Chi Minh City, which
is significantly richer than the rest of the country. Other relatively
wealthy cities include Da Nang, Haiphong and Can Tho.
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