The Vietnamese Defense Industry â€“ Market Opportunities and Entry Strategies, Analyses and

The Vietnamese Defense Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2015 Published August 2011

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The Vietnamese Defense Industry –

Market Opportunities and Entry

Strategies, Analyses and Forecasts to

2015

Market Intelligence Report

Reference code: DF0051MR

Published: August 2011

www.icd-research.com

www.strategicdefenceintelligence.com

ICD Research

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TABLE OF CONTENTS



LIST OF TABLES .................................................................................................................. 6

LIST OF FIGURES ................................................................................................................ 7

1. Introduction ................................................................................................................... 9

1.1 About this Report ................................................................................................................... 9

1.2 Definitions .............................................................................................................................. 9

1.3 Methodology ......................................................................................................................... 11

1.3.1 Secondary research ................................................................................................................................. 11

1.3.2 Primary research...................................................................................................................................... 11

1.3.3 Conventions ............................................................................................................................................. 12

1.4 ICD Research Terrorism Index ............................................................................................ 12

1.5 About ICD Research............................................................................................................. 12

1.6 About Strategic Defence Intelligence (www.strategicdefenceintelligence.com) ............. 12

2. Executive Summary .................................................................................................... 14

3. Market Attractiveness and Emerging Opportunities ................................................ 16

3.1 Defense Market Size and Forecast ...................................................................................... 17

3.1.1 Defense expenditure is projected to grow at a CAGR of 14.32% during the forecast period ................. 17

3.1.2 Territorial dispute and acquisition of advanced defense systems is expected to drive military spending18

3.1.3 Military expenditure as a percentage of GDP is expected to achieve modest growth during the forecast

period ....................................................................................................................................................... 19

3.2 Analysis of Defense Budget Allocation .............................................................................. 20

3.2.1 Share of capital expenditure in the overall defense budget is expected to increase .............................. 20

3.2.2 Vietnam’s capital expenditure is expected to grow at a CAGR of 12.79% during the forecast period.... 21

3.2.3 Vietnam is expected to spend US$12.1 billion on revenue expenses over the forecast period ............. 22

3.2.4 Defense expenditure is expected to correspond with national economic growth .................................... 23

3.3 Homeland Security Market Size and Forecast ................................................................... 24

3.3.1 Homeland security expenditure is expected to grow at a CAGR of 12.90% during the forecast period . 24

3.3.2 Human trafficking, drugs trade and maritime security to drive homeland security spending .................. 25

3.3.3 Vietnam faces a minimal threat from foreign terrorist organizations ....................................................... 26

3.4 Benchmarking with Key Global Markets ............................................................................ 28

3.4.1 Vietnamese defense expenditure expected to remain modest compared to leading spenders .............. 28

3.4.2 The country will continue to be a significant player in the global arms market ....................................... 29

3.4.3 Vietnam’s defense expenditure as a percentage of GDP is higher than some leading defense spenders30

3.4.4 Vietnam has a moderate per-capita defense expenditure ....................................................................... 31

3.4.5 Vietnam faces negligible threat from foreign terrorist organizations ....................................................... 32

3.5 Market Opportunities: Key Trends and Growth Stimulators ............................................. 35

3.5.1 Demand for aircraft is expected to increase ............................................................................................ 35

3.5.2 Investment in naval defense systems is anticipated to increase ............................................................. 35

3.5.3 Maintenance repair and overhaul activities to provide excellent market opportunities ........................... 35

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4. Defense Procurement Market Dynamics ................................................................... 37

4.1.1 Limited domestic defense capabilities drives the country’s defense imports .......................................... 37

4.1.2 Defense imports are expected to increase during the forecast period .................................................... 38

4.1.3 Russia is a significant defense trade partner of the country .................................................................... 39

4.1.4 Ships and aircraft account for the majority of defense imports during the review period ........................ 40

4.2 Export Market Dynamics ..................................................................................................... 41

4.2.1 The country has been unable to access the global defense market ....................................................... 41

5. Industry Dynamics ...................................................................................................... 42

5.1 Five Forces Analysis............................................................................................................ 42

5.1.1 Bargaining power of supplier: low ............................................................................................................ 43

5.1.2 Bargaining power of buyer: medium ........................................................................................................ 43

5.1.3 Barrier to entry: medium .......................................................................................................................... 43

5.1.4 Intensity of rivalry: low ............................................................................................................................. 43

5.1.5 Threat of substitution: low to medium ...................................................................................................... 43

6. Market Entry Strategy ................................................................................................. 44

6.1 Market Regulation ................................................................................................................ 44

6.1.1 Vietnam has not disclosed any offset obligation ...................................................................................... 44

6.2 Market Entry Route .............................................................................................................. 45

6.2.1 Foreign equipment manufacturers can enter the market through direct commercial sales .................... 45

6.2.2 Government to government deals are an attractive entry route to the country’s defense market .......... 45

6.3 Key Challenges .................................................................................................................... 46

6.3.1 Lack of private participants and foreign direct investment may restrict domestic defense industry growth46

6.3.2 Lack of transparency impedes the growth of Vietnam’s defense industry .............................................. 46

7. Competitive Landscape and Strategic Insights ........................................................ 47

7.1 Competitive Landscape Overview ...................................................................................... 47

7.2 Key Domestic Companies ................................................................................................... 47

7.2.1 Vietnam Shipbuilding Industry Corporation (VINASHIN): overview ........................................................ 47

7.2.2 Vietnam Shipbuilding Industry Corporation (VINASHIN): products ......................................................... 47

7.2.3 Vietnam Shipbuilding Industry Corporation (VINASHIN): recent announcements and strategic initiatives47

7.2.4 Vietnam Shipbuilding Industry Corporation (VINASHIN): alliances ......................................................... 48

7.2.5 Vietnam Shipbuilding Industry Corporation (VINASHIN): recent contract awards .................................. 48

7.2.6 Vietnam Shipbuilding Industry Corporation (VINASHIN): financial analysis ........................................... 48

8. Business Environment and Country Risk ................................................................. 49

8.1 Economic Performance ....................................................................................................... 49

8.1.1 Gross domestic product (GDP) at constant prices (US dollars) .............................................................. 49

8.1.2 GDP per-capita at constant prices (US dollars) ....................................................................................... 50

8.1.3 GDP at current prices (US dollars) .......................................................................................................... 51

8.1.4 GDP per-capita at current prices (US dollars) ......................................................................................... 52

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8.1.5 GDP split by key segments ...................................................................................................................... 53

8.1.6 Agriculture net output at current prices (Vietnamese dong) .................................................................... 54

8.1.7 Agriculture net output at current prices (US dollars)................................................................................ 55

8.1.8 Agriculture net output at current prices as percentage of GDP ............................................................... 56

8.1.9 Manufacturing net output at current prices (Vietnamese dong) .............................................................. 57

8.1.10 Manufacturing net output at current prices (US dollars) .......................................................................... 58

8.1.11 Manufacturing net output at current prices as percentage of GDP ......................................................... 59

8.1.12 Mining, manufacturing and utilities net output at current prices (Vietnamese dong) ............................... 60

8.1.13 Mining, manufacturing and utilities at current prices (US dollars) ........................................................... 61

8.1.14 Mining, manufacturing and utilities at current prices, as percentage of GDP ......................................... 62

8.1.15 Construction net output at current prices (Vietnamese dong) ................................................................. 63

8.1.16 Construction net output at current prices, (US dollars)............................................................................ 64

8.1.17 Construction net output at current prices as a percentage of GDP ......................................................... 65

8.1.18 Crude steel production ............................................................................................................................. 66

8.1.19 Inflation rate ............................................................................................................................................. 67

8.1.20 Fiscal balance as a percentage of GDP .................................................................................................. 68

8.1.21 Current account balance as a percentage of GDP .................................................................................. 69

8.1.22 Exports as a percentage of GDP ............................................................................................................. 70

8.1.23 Imports as a percentage of GDP ............................................................................................................. 71

8.1.24 Exports growth ......................................................................................................................................... 72

8.1.25 Imports growth ......................................................................................................................................... 73

8.1.26 External debt as a percentage of GDP .................................................................................................... 74

8.1.27 Annual average exchange rate US$–VND .............................................................................................. 75

8.2 Infrastructure Quality and Availability ................................................................................ 76

8.2.1 Railways and roadways ........................................................................................................................... 76

8.2.2 Automotive products exports trend .......................................................................................................... 77

8.2.3 Automotive products imports trend .......................................................................................................... 78

8.2.4 Total installed capacity for electricity generation ..................................................................................... 79

8.2.5 Installed capacity for the generation of conventional thermal electricity ................................................. 80

8.2.6 Electricity production ................................................................................................................................ 81

8.2.7 Installed capacity for hydro-electricity generation .................................................................................... 82

8.2.8 Electricity consumption ............................................................................................................................ 83

8.2.9 Healthcare expenditure ............................................................................................................................ 84

8.2.10 Healthcare expenditure as percentage of GDP ....................................................................................... 85

8.2.11 Healthcare expenditure per-capita........................................................................................................... 86

8.2.12 Total internet subscribers ........................................................................................................................ 87

8.2.13 Broadband internet subscribers ............................................................................................................... 88

8.2.14 Mobile phone penetration rate ................................................................................................................. 89

8.3 Labor Force .......................................................................................................................... 90

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8.3.1 Labor force ............................................................................................................................................... 90

8.3.2 Unemployment rate ................................................................................................................................. 91

8.4 Demographics ...................................................................................................................... 92

8.4.1 Total population ....................................................................................................................................... 92

8.4.2 Urban and rural population ...................................................................................................................... 93

8.4.3 Female percentage of population ............................................................................................................ 94

8.4.4 Male percentage of population ................................................................................................................ 95

8.4.5 Mean age of population ........................................................................................................................... 96

8.4.6 Median age of population ........................................................................................................................ 97

8.4.7 Population density ................................................................................................................................... 98

8.4.8 Age distribution of the total population .................................................................................................... 99

8.4.9 Age distribution of the male population ................................................................................................. 100

8.4.10 Age distribution of the female population .............................................................................................. 101

8.4.11 Number of households ........................................................................................................................... 102

9. Appendix .................................................................................................................... 103

9.1 Contact Us .......................................................................................................................... 103

9.2 About ICD Research........................................................................................................... 103

9.3 Disclaimer ........................................................................................................................... 103

TABLE OF CONTENTS



LIST OF TABLES Table 1: ICD Research Intelligence Terrorism Index .................................................................................................................................. 32

TABLE OF CONTENTS



LIST OF FIGURES Figure 1: Vietnamese Defense Market Size (US$ billion), 2006–2015 ....................................................................................................... 17 Figure 2: Vietnamese Defense Expenditure as a Percentage of GDP (%), 2006–2015 .............................................................................. 19 Figure 3: Vietnamese Defense Budget Allocation for Capital and Revenue Expenditure (%), 2006–2015 .................................................. 20 Figure 4: Vietnamese Capital Budget Allocation (US$ billion), 2006–2015 ................................................................................................. 21 Figure 5: Vietnamese Revenue Budget Allocation, (US$ billion) 2006–2015.............................................................................................. 22 Figure 6: Vietnamese Defense Expenditure Growth and GDP Growth, 2006–2015 ................................................................................... 23 Figure 7: Vietnamese Homeland Security Budget (US$ billion), 2006–2015 .............................................................................................. 24 Figure 8: ICD Research Terrorism Heat Map, 2010 ................................................................................................................................... 26 Figure 9: ICD Research Defense Terrorism Index, 2010............................................................................................................................ 27 Figure 10: Benchmarking with Key Global Markets: Historical vs. Expected Defense Budget Growth (%), 2006–2015 .............................. 28 Figure 11: Defense Expenditure of Countries with the Largest Defense Expenditure (US$ billion), 2010 and 2015 ................................... 29 Figure 12: Defense Spending as a Percentage of GDP of Countries with the Largest Defense Expenditures (%), 2010 ............................ 30 Figure 13: Per-Capita Defense Expenditures of the Largest Military Spenders in the World (US$), 2010................................................... 31 Figure 14: Vietnamese Defense Import Trend, 2006–2010 (TIV values) .................................................................................................... 38 Figure 15: Vietnamese Defense Imports by Country (%), 2006–2010 and 2010 ........................................................................................ 39 Figure 16: Vietnamese Defense Imports by Category (%), 2006–2010 ...................................................................................................... 40 Figure 17: Industry Dynamics Porter’s Five Forces Analysis ...................................................................................................................... 42 Figure 18: Vietnamese GDP at Constant Prices (US$ billion), 2003–2015 ................................................................................................. 49 Figure 19: Vietnamese GDP Per-Capita at Constant Prices (US$), 2003–2015 ......................................................................................... 50 Figure 20: Vietnamese GDP at Current Prices (US$ billion), 2003–2015 ................................................................................................... 51 Figure 21: Vietnamese GDP Per-Capita at Current Prices (US$), 2003–2015 ........................................................................................... 52 Figure 22: Vietnamese GDP Split by Key Segments (%) 2003 v/s 2009 .................................................................................................... 53 Figure 23: Vietnamese Agriculture Net Output at Current Prices (VND billion), 2003–2015 ....................................................................... 54 Figure 24: Vietnamese Agriculture Net Output at Current Prices (US$ billion), 2003–2015 ........................................................................ 55 Figure 25: Vietnamese Agriculture Net Output at Current Prices as a Percentage of GDP (%), 2003–2015 .............................................. 56 Figure 26: Vietnamese Manufacturing Net Output at Current Prices (VND billion), 2003–2015 .................................................................. 57 Figure 27: Vietnamese Manufacturing Net Output at Current Prices (US$ billion), 2003–2015 .................................................................. 58 Figure 28: Vietnamese Manufacturing Net Output at Current Prices as a Percentage of GDP (%), 2003–2015 ......................................... 59 Figure 29: Vietnamese Mining, Manufacturing and Utilities Net Output at Current Prices (VND billion), 2003–2015 .................................. 60 Figure 30: Vietnamese Mining, Manufacturing and Utilities Net Output at Current Prices (US$ billion), 2003–2015 ................................... 61 Figure 31: Vietnamese Mining, Manufacturing and Utilities Net Output at Current Prices as a percentage of GDP (%), 2003–2015 .......... 62 Figure 32: Vietnamese Construction Net Output at Current Prices (VND billion), 2003–2015 .................................................................... 63 Figure 33: Vietnamese Construction Net Output at Current Prices (US$ billion), 2003–2015 ..................................................................... 64 Figure 34: Vietnamese Construction Output at Current Prices as a Percentage of GDP (%), 2003–2015 .................................................. 65 Figure 35: Vietnamese Crude Steel Production (Million Metric Tons), 2003–2015 ..................................................................................... 66 Figure 36: Vietnamese Inflation Rate (%), 2003–2015 ............................................................................................................................... 67 Figure 37: Vietnamese Fiscal Balance as a Percentage of GDP (%), 2003–2009 ...................................................................................... 68 Figure 38: Vietnamese Current Account Balance as a Percentage of GDP (%), 2003–2009...................................................................... 69 Figure 39: Vietnamese Exports as a Percentage of GDP (%), 2003–2015 ................................................................................................. 70 Figure 40: Vietnamese Imports as a Percentage of GDP (%), 2003–2015 ................................................................................................. 71 Figure 41: Vietnamese Exports Growth (%), 2003–2015 ........................................................................................................................... 72 Figure 42: Vietnamese Imports Growth (%), 2003–2015............................................................................................................................ 73 Figure 43: Vietnamese External Debt as a Percentage of GDP (%), 2003–2009 ....................................................................................... 74 Figure 44: Vietnamese Annual Average Exchange Rate US$–VND, 2003–2009 ....................................................................................... 75 Figure 45: Vietnamese Railways and Roadways (kilometers), 2009 ......................................................................................................... 76 Figure 46: Vietnamese Automotive Products Exports (US$ million), 2003–2015 ........................................................................................ 77 Figure 47: Vietnamese Automotive Components Imports (US$ billion), 2003–2015 ................................................................................... 78 Figure 48: Vietnamese Total Installed Capacity for Electricity Generation (million kilowatts), 2003–2015 .................................................. 79 Figure 49: Vietnamese Installed Capacity for the Generation of Conventional Thermal Electricity (million kilowatts), 2003–2015 .............. 80 Figure 50: Vietnamese Electricity Production (billion kilowatts hours), 2003–2015 .................................................................................... 81 Figure 51: Vietnamese Installed Capacity for the Generation of Hydro-electricity (million kilowatts), 2003–2015 ...................................... 82 Figure 52: Vietnamese Electricity Consumption (billion kilowatt hours), 2003–2015 .................................................................................. 83 Figure 53: Vietnamese Healthcare Expenditure (US$ billion), 2003–2015 ................................................................................................. 84 Figure 54: Vietnamese Healthcare Expenditure as a Percentage of GDP (%), 2003–2015 ........................................................................ 85 Figure 55: Vietnamese Per-Capita Healthcare Expenditure (US$), 2003–2015 ........................................................................................ 86 Figure 56: Vietnamese Internet Subscriptions (millions), 2003–2015 ......................................................................................................... 87 Figure 57: Vietnamese Broadband Internet Subscriptions (millions), 2003–2015 ....................................................................................... 88 Figure 58: Vietnamese Mobile Phone Penetration (%), 2003–2015 .......................................................................................................... 89

TABLE OF CONTENTS



Figure 59: Vietnamese Size of Labor Force in 15–59 Age Group (million), 2003–2015 .............................................................................. 90 Figure 60: Vietnamese Unemployment Rate (%), 2003–2015.................................................................................................................... 91 Figure 61: Vietnamese Total Population (million), 2003–2015 ................................................................................................................... 92 Figure 62: Vietnamese Urban and Rural Population (%), 2003–2015 ........................................................................................................ 93 Figure 63: Vietnamese Female as a Percentage of Population (%), 2003–2015 ........................................................................................ 94 Figure 64: Vietnamese Male as Percentage of Population (%), 2003–2015 ............................................................................................... 95 Figure 65: Vietnamese Mean Age of Population (years), 2003–2015 ......................................................................................................... 96 Figure 66: Vietnamese Median Age of Population (years), 2003–2015 ...................................................................................................... 97 Figure 67: Vietnamese Population Density (per square kilometer), 2003–2015 ......................................................................................... 98 Figure 68: Vietnamese Population Distribution by Age (%), 2003–2015..................................................................................................... 99 Figure 69: Vietnamese Male Population Distribution by Age (%), 2003–2015 .......................................................................................... 100 Figure 70: Vietnamese Female Population Distribution by Age (%), 2003–2015 ...................................................................................... 101 Figure 71: Number of Vietnamese Households (million), 2003–2015 ....................................................................................................... 102

INTRODUCTION



1. Introduction

1.1 About this Report

This report offers insights into the market opportunities and entry strategies adopted by foreign original

equipment manufacturers (OEMs) to gain a market share in the Vietnamese defense industry. In

particular, it offers in-depth analysis of the following:

Market opportunity and attractiveness: detailed analysis of the current industry size and

growth expectations during 2011–2015, including details of the key growth stimulators. It also

benchmarks the industry against key global markets and provides a detailed understanding of

specific areas where there are emerging opportunities.

Procurement dynamics: trend analysis of imports and exports, together with their impact and

implications on the Vietnamese defense industry.

Industry structure: five forces analysis to identify the various power centers in the industry and

how these are expected to develop in the future.

Market entry strategy: analysis of possible ways to enter the market, together with detailed

descriptions of how existing players have achieved this, including key contracts, alliances and

strategic initiatives.

Competitive landscape and strategic insights: analysis of the competitive landscape of the

defense industry in Vietnam. It provides an overview of key defense companies both

domestically and internationally, together with insights such as key alliances, strategic initiatives

and a brief financial analysis.

Business environment and country risk: a range of drivers at country level, assessing

business environment and country risk. It covers historical and forecast values for a range of

indicators, evaluating business confidence, economic performance, infrastructure quality and

availability, labor force, demographics, and political and social risk.

1.2 Definitions

For the purposes of this report, the following timeframes apply:

Review period: 2006–2010

Forecast Period: 2011–2015

The following are definitions of military expenditure:

Revenue expenditure includes troop training, institutional education, construction and

maintenance of various undertakings. It also covers the salaries, allowances, pensions,

transportation, food, insurance, welfare benefits and miscellaneous expenditures pertaining to

all unit allowances for training, contingency and other grants for officers, non-commissioned

officers, enlisted men and contracted civilians.

Capital expenditure (capex) covers research and development (R&D), procurement,

maintenance, transportation and storage of weaponry and other equipment. It also includes

expenditure on aircraft and aero engines, heavy and medium vehicles, naval equipment and

expenditure on the purchase of land, construction, plant and machinery.

INTRODUCTION



The following are definitions of defense categories:

Military hardware refers to the broad range of machinery, systems, equipment and weapons

used by defense forces.

Air defense systems are defined as all measures designed to nullify or reduce the

effectiveness of hostile air action. They include ground-based and air-based weapon systems,

associated sensor systems, command and control arrangements and passive measures. This

may be to protect naval, ground and air forces wherever they are positioned, but does not

include missile defense systems.

Missile defense systems are systems, weapons, or technologies involved in the detection,

tracking, interception and destruction of attacking missiles.

Naval defense systems are used to protect sea lanes, ferry troops or attack other navies, ports

or shore installations. It includes surface ships, amphibious ships, submarines and seaborne

aviation.

Homeland security (HLS) involves the protection of a country’s civilians and critical

infrastructure from natural or man-made disasters. Its margins extend to border and maritime

patrol, customs checks in ports and airports, search and rescue operations, disaster recovery,

combating terrorism and cyber attacks.

The following are miscellaneous definitions:

Indirect offsets involve both barter and counter-trade deals, investment in the buying country,

or the transfer of technology unrelated to the weapons being sold.

Direct offsets is defined as an arrangement wherein the purchaser receives work or technology

directly related to the weapons sale, typically by producing the weapon system or its

components under license.

Multipliers are additional credits assigned over and above the market value provided to offsets

for a technology, product or service being offered.

Command, control and communications and intelligence system (C3I) refers to an

information system employed by a military’s top command to direct its forces. This system

provides the military with information on various parameters associated with executing a

strategy during a military exercise. The parameters include reconnaissance and surveillance,

troop positions, inventory levels and weather conditions. The communication system enables

the transfer of images and videos which are captured by surveillance systems and data and

voice between the command and control center. The system also aids in joint operations

between the army, navy and air force.

Maintenance, repair and overhaul (MRO) involves the servicing of a defense system with the

objective of restoring it to a state where it can perform its intended function. This could be

routine maintenance, replacement of faulty spare parts or checking the entire system to ensure

smooth functioning.

Airborne early warning and control systems (AEW&C) are airborne radar systems used by

the military to detect the movement of aircraft in its airspace. Used at high altitudes, they are

INTRODUCTION



used in both defensive and offensive air operations and have the ability to help distinguish

between civilian and military aircraft.

1.3 Methodology

ICD Research’s dedicated research and analysis teams consist of experienced professionals with a

background in industry research and consulting in the defense sector. The following research

methodology is followed for all databases and reports.

1.3.1 Secondary research

The research process begins with exhaustive secondary research to source reliable qualitative and

quantitative information related to the defense market. The secondary research sources that are typically

referred to include, but are not limited to:

Industry associations

National government documents and statistical databases

Company websites, annual reports, financial reports, broker reports, investor presentations

Industry trade journals and other literature

Internal and external proprietary databases

News articles, press releases and webcasts specific to the companies operating in the market

1.3.2 Primary research

ICD Research conducts hundreds of primary interviews a year with industry participants and

commentators in order to validate its data and analysis. A typical research interview fulfils the following

functions:

Provides first-hand information on market size, market trends, growth trends, competitive

landscape and future outlook.

Helps to validate and strengthen secondary research findings.

Further develops the analysis team’s expertise and market understanding.

Primary research involves e-mail interactions, telephonic interviews and face-to-face interviews

for each market category, division and sub-division across different geographies.

The participants who typically take part in such a process include, but are not limited to:

Industry participants: CEOs, VPs, business development managers, market intelligence

managers and national sales managers.

External experts: investment bankers, valuation experts, research analysts and key opinion

leaders specializing in defense markets.

INTRODUCTION



1.3.3 Conventions

Currency conversions are performed on the basis of average annual conversion rate format

calculations.

All the values in tables, with the exception of compounded annual growth rate (CAGR) and

compounded annual rate of change (CARC) are displayed to one decimal place; therefore,

growth rates may appear inconsistent with absolute values due to this rounding method.

1.4 ICD Research Terrorism Index

The ICD Research Terrorism Index classifies countries across the world into one of the following

categories based on the risk of terrorism:

Worst affected

Highly affected

Moderately affected

Some risk

Low risk

It takes into account the total number of terrorist incidents, the total number of people affected by these

attacks, and the presence of foreign terrorist organizations in a country. Based on these parameters, the

terrorism index is developed using a weighted average scorecard.

1.5 About ICD Research

ICD Research is a full-service market research agency and premium business information provider,

specializing in industry analysis in a broad set of B2B and B2C markets. Our products and services help

companies make better decisions, win business and position themselves more effectively.

ICD Research’s areas of expertise include online research, qualitative and quantitative research,

industry analysis, custom approaches, and actionable insights.

ICD Research has access to over 500 in-house analysts and journalists, and a global media presence in

over 30 professional markets, enabling us to conduct unique and insightful research via our trusted

business communities.

1.6 About Strategic Defence Intelligence (www.strategicdefenceintelligence.com)

This report is one of a series that is available to subscribers of our premium research platform: Strategic

Defence Intelligence. Strategic Defence Intelligence provides a stream of continuously updated customer

and competitor intelligence as well as detailed research reports providing an unrivalled source of global

information on the latest developments in the defence industry.

Strategic Defence Intelligence's unique monitoring platform tracks global defence activity for over 2,500

companies and 65 product categories in real-time in a highly structured manner, giving a comprehensive

and easily searchable picture of all defence industry activity. The site features: daily updated analysis,

comment and news; company and customer profiles; defence spending, tenders and contracts; product

and technology intelligence; a research and analysis database giving access to industry and competitor

INTRODUCTION



reports to inform business and market planning, as well as fully customisable tools, including instant

personalised report generation and custom alerts.

For a free demonstration please contact us at [email protected].

EXECUTIVE SUMMARY



2. Executive Summary

Vietnam’s defense expenditure expected to increase at a CAGR of 14.32% during the forecast

period

Vietnamese defense expenditure, estimated to be US$2.8 billion in 2011, registered a CAGR of 19.13%

during the review period and is expected to grow at a CAGR of 14.32% during the forecast period to

reach an estimated US$4.7 billion in 2015. Defense expenditure growth is accompanied by a modest

growth in defense expenditure as a percentage of GDP from 2.5% in 2011 to 2.8% in 2015. Overall, the

country is expected to spend an estimated US$18.6 billion on its armed forces during the forecast

period, of which approximately US$6.4 billion will be allocated for capital expenditure.

During the review period, the country allocated an average of 31% of its defense budget for capital

expenditure and 69% for revenue expenditure. However, during the forecast period, the share of capital

expenditure in the overall defense budget is predicted to increase to an average of 35%. This growth is

fuelled by the country’s modernization of its armed forces and has a number of procurement programs

planned for the forecast period. In 2009, Vietnam’s capital expenditure increased slightly after deals for

the procurement of six Kilo class submarines and 12 Su-30 aircrafts were signed with Russia. Deliveries

of these and other weapons platforms are scheduled during the forecast period, which is expected to

raise the capital expenditure to 35%.

The country’s homeland security spending is expected to increase at a CAGR of 12.90% during

the forecast period

Vietnamese homeland security expenditure registered a CAGR of 19.27% during the review period and

is expected to grow at a CAGR of 12.90% during the forecast period to reach an estimated US$2.25

billion in 2015. With the country sharing borders with several other countries, and enjoying a strategic

location near the maritime trade route, the chances of illicit drug trafficking and smuggling are

heightened. Over the forecast period, homeland security equipment manufacturers will experience

increased demand for equipment capable of enhancing seaport and airport security to prevent drug

trafficking and smuggling. In addition to these, the country will also invest in border surveillance

equipment such as CCTV technology and biometric identification systems. Increased demand is also

expected for equipment for the protection of critical infrastructure, borders and maritime security.

Russia accounts for the majority of arms supply to the country

Vietnam’s domestic defense production capabilities are relatively underdeveloped, as a result of which

the country relies on foreign OEMs to fulfill its military requirements. Traditionally the country has been

an importer of weapon systems as domestic military production is small-scale and technologically

inferior. During the review period, Russia emerged as the largest supplier of military hardware to

Vietnam with a share of 93% of Vietnam’s imports, followed by Ukraine with 6% and Romania and Israel

sharing less than 1% each. In 2010, Russia accounted for 98% of the country’s defense imports. The

main equipment which Russia supplies to Vietnam consists of surface combat vessels, submarines and

aircraft.

EXECUTIVE SUMMARY



Foreign OEMs venture into the market through government to government deals and direct

commercial sales

The country’s limited domestic defense industrial capability offers an opportunity for a considerable

number of foreign OEMs to venture into the Vietnamese defense market. The country’s defense industry

is largely dominated by Russian defense equipment suppliers, but European suppliers have recently

entered Vietnam’s defense market thorough the direct commercial sale of advanced defense systems.

Moreover, Vietnam prefers government to government deals in procuring defense systems. The General

Import-Export Vanxuan Corporation (VAXUCO), a military goods importer owned by the Vietnamese

Ministry of Defense (MOD), is the only designated importer for the MOD for non dual-use military goods,

and is authorized to sign purchases on behalf of the MOD. Hence developing government to government

relationships is expected to open up business opportunities in the forecast period.

Lack of private participants and a lack of transparency restrict domestic defense industry growth

In March 2011, the Vietnamese government passed legislation that prohibits selling stakes of state-

owned defense companies to the private sector. The legislation also requires that the state will hold

100% of the charter capital in enterprises involving national defense and security, and military held

commercial enterprises. This legislation prevents private participation and thwarts any foreign direct

investment into the country’s defense sector. Furthermore the country does not give any specifics about

the defense budget breakdown or the amount spent on procurement. This lack of transparency within

the government budget allocation and procurement plans can discourage investors from entering the

country’s defense market.

MARKET ATTRACTIVENESS AND EMERGING OPPORTUNITIES



3. Market Attractiveness and Emerging Opportunities

Vietnam is one of the world’s fastest-growing defense markets. The country is expected to spend

US$18.6 billion on its armed forces during the forecast period. As a result of years of underfunding in the

Vietnamese defense budget, the country’s armed forces are expected to undergo an extensive

modernization program. This, coupled with economic recovery, is expected to increase Vietnam’s

defense expenditure to 2015. Vietnamese defense expenditure is also expected to be driven by factors

such as modernization plans, territorial disputes with China and China’s growing military capability.

Defense equipment suppliers and subcontractors can expect increased demand for naval combatants,

aerial defense systems and intelligence, surveillance and reconnaissance (ISR) equipment. Additionally,

the country is increasing its HLS spending in order to counter threats posed by pirates, illegal trade and

human trafficking. Moreover, the HLS market is expected to see increased demand for surveillance and

riot and crowd control equipment.




3.1 Defense Market Size and Forecast

3.1.1 Defense expenditure is projected to grow at a CAGR of 14.32% during the forecast

period

Vietnamese defense expenditure, estimated at US$2.8 billion in 2011, registered a CAGR of 19.13%

during the review period and is expected to grow at a CAGR of 14.32% during the forecast period to

reach an estimated US$4.7 billion in 2015. Defense expenditure growth is expected to be accompanied

by a modest growth in defense expenditure as a percentage of GDP from 2.5% in 2011 to 2.8% in 2015.

Overall, the country is expected to spend an estimated US$18.6 billion on its armed forces during the

forecast period, of which approximately US$6.4 billion will be allocated for capital expenditure.

The following figure displays Vietnamese defense expenditure during 2006–2015:

Figure 1: Vietnamese Defense Market Size (US$ billion), 2006–2015

Source: Directorate-General of Budget, Vietnam and ICD Research Analysis © ICD Research

0.4 0.5 0.50.8 0.8 0.9 1.1 1.3 1.5 1.60.9

1.2 1.1

1.7 1.71.8

2.1

2.4

2.7

3.1

0

1

2

3

4

5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Defe

nse E

xp

en

dit

ure

(U

S$ b

n)

Capital Expenditure Revenue Expenditure

CAGR: 14.32% (2011–2015)




3.1.2 Territorial dispute and acquisition of advanced defense systems is expected to drive

military spending

Vietnam is expected to spend US$6.4 billion on the acquisition of weapons systems during the forecast

period. Factors such as territorial claims in the South China Sea, Chinese naval build-up and the

acquisition of modern military hardware systems to replace outdated and aging equipment are

anticipated to drive the country’s military spending in the forecast period.

China’s increasing naval power: China has greatly increased its naval capability during the review

period by acquiring new class of submarines and surface vessels. The country has also launched its first

aircraft carrier for sea trials in August. These new capability developments are in-line with China’s

ambitions to possess power projection and blue-water capability and to protect its sea lanes of interest.

Moreover China also has expressed claims over the entire South China Sea and especially the Paracel

and Spratly Islands over which China, Vietnam and other nations who share the Sea claim in part or full.

This has triggered Vietnam to strengthen its naval defense capabilities.

The need to replace outdated and aging equipment: At present, the country lacks both naval and

aerial defense capabilities to counter modern-day threats from pirates, maritime terrorists and hostile

neighbors. In order to counter the threats posed by China, the country needs to procure sophisticated

missile defense systems capable of destroying Chinese missiles. The country is also in the process of

replacing its existing fleet of surface ships with frigates, and is looking to procure anti-submarine warfare

technology which will enable its naval defense force to counter the threat posed by Chinese submarines

operating in the Vietnam Strait. Additionally, fighter aircraft currently being used by the country, such as

the F-5, Mirage 2000 and F-16, are nearing the end of their operational lives and will need to be

replaced or upgraded. With its unstable security situation, the country will focus on enhancing its military

capabilities, and in order to modernize its defense forces it is expected to spend an estimated US$6.9

billion on advanced defense systems during the forecast period.




3.1.3 Military expenditure as a percentage of GDP is expected to achieve modest growth

during the forecast period

During the review period, Vietnam allocated an average of 2.4% of its GDP towards its defense budget,

but, as a consequence of financial constraints, the military expenditure as a percentage of GDP is

expected to be reduced to 2.0% in 2011. However, with the country’s economy projected to grow at an

average of 10.0% during the forecast period, the country’s defense budget as a percentage of GDP is

expected to increase to 2.8% by 2015.

The following figure shows the Vietnamese defense expenditure trend as a percentage of GDP:

Figure 2: Vietnamese Defense Expenditure as a Percentage of GDP (%), 2006–2015


2.1%

2.5%

1.8%

2.5%2.6%

2.5%2.6%

2.7%2.8%

2.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Defe

nse E

xp

en

dit

ure

as a

% o

f G

DP




3.2 Analysis of Defense Budget Allocation

3.2.1 Share of capital expenditure in the overall defense budget is expected to increase

During the review period, Vietnam allocated an average of 31% of its defense budget for capital

expenditure and 69% for revenue expenditure. However, the share of capital expenditure in the overall

defense budget is predicted to increase to an average of 35% during the forecast period. This is

predominantly due to Vietnam’s armed forces modernization program and procurement programs

planned for the forecast period. In 2009, capital expenditure increased slightly after deals for the

procurement of six Kilo class submarines and 12 Su-30 aircraft were signed with Russia that year.

Deliveries of these and other weapon platforms are scheduled during the forecast period, which is

expected to raise the capital expenditure to an average of 35%.

The following figure displays the defense budget allocation of capital and revenue expenditure during

2006–2015:

Figure 3: Vietnamese Defense Budget Allocation for Capital and Revenue Expenditure (%), 2006–2015


30% 30% 30% 32% 33% 33% 35% 35% 35% 35%

70% 70% 70% 68% 67% 67% 65% 65% 65% 65%

0%

25%

50%

75%

100%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Defe

nse E

xp

en

dit

ure

Sp

lit

(%)

Capital expenditure Revenue expenditure




3.2.2 Vietnam’s capital expenditure is expected to grow at a CAGR of 12.79% during the

forecast period

The defense capital expenditure of Vietnam, estimated at US$370 million in 2011, grew at a CAGR of

22.01% during the review period and is projected to increase at a CAGR of 16.01% during the forecast

period, to reach an estimated US$1.6 billion by 2015. Cumulatively, Vietnam is expected to spend

US$6.4 billion on the acquisition of military hardware as well as on the maintenance of its existing fleet of

defense systems. The country also has a tense relationship with China, and perceives the modernization

of Chinese armed forces, and its territorial claims to the South China Sea and the Spratly Islands, as a

threat to its sovereignty. All these factors are predicted to increase Vietnam’s capital expenditure during

the forecast period.

The following figure displays the defense budget’s allocation for capital expenditure during 2006–2015:

Figure 4: Vietnamese Capital Budget Allocation (US$ billion), 2006–2015


0.40.5 0.5

0.8 0.80.9

1.11.3

1.5

1.6

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Defe

nse E

xp

en

dit

ure

(U

S$ b

n)

CAGR: 16.01% (2011–2015)




3.2.3 Vietnam is expected to spend US$12.1 billion on revenue expenses over the forecast

period

Although the share of revenue expenditure in the overall defense budget is projected to decrease during

the forecast period, revenue expenses are still expected to account for the majority of defense

expenditure in Vietnam. Vietnam’s revenue expenditure, estimated at US$1.8 billion in 2011, recorded a

CAGR of 17.84% during the review period, and is expected to grow at a CAGR of 13.46% during the

forecast period to reach an estimated US$3.1 billion in 2015.

The following figure displays the defense budget’s allocation for revenue expenditure during 2006–2015:

Figure 5: Vietnamese Revenue Budget Allocation, (US$ billion) 2006–2015

Source: Directorate-General of Budget Vietnam and ICD Research Analysis © ICD Research

0.9

1.2 1.1

1.7 1.71.8

2.12.4

2.73.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Defe

nse E

xp

en

dit

ure

(U

S$ b

n)

CAGR: 13.46% (2011–2015)




3.2.4 Defense expenditure is expected to correspond with national economic growth

During the review period, the country’s defense expenditure and its overall economic growth developed

at different rates. Over the forecast period, however, the country’s defense spending growth is expected

to correlate more strongly with its GDP growth. Consequently, Vietnam’s economy is expected to grow

at a CAGR of 13.74% during the forecast period and the country’s defense expenditure is expected to

grow at a CAGR of 14.32%.

The following figure shows the relationship between Vietnam’s defense expenditure and economic

growth during 2006–2015:

Figure 6: Vietnamese Defense Expenditure Growth and GDP Growth, 2006–2015

Source: Directorate-General of Budget, Vietnam and ICD Research Analysis ©ICD Research

40.6%

-6.6%

51.6%

1.1% 10.8%

16.8%15.0%

9.0% 12.5%

17.4%

29.8%

11.7%

16.7% 16.0%

13.7% 13.3%13.1%

12.9%

-20%

0%

20%

40%

60%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Defence Expenditure Growth Rate GDP Growth Rate




3.3 Homeland Security Market Size and Forecast

3.3.1 Homeland security expenditure is expected to grow at a CAGR of 12.90% during the

forecast period

Vietnamese homeland security expenditure registered a CAGR of 19.27% during the review period and

is expected to grow at a CAGR of 12.90% during the forecast period to reach an estimated US$2.25

billion in 2015. With the country sharing borders with several other countries, and enjoying a strategic

location near maritime trade routes, the chances of illicit drug trafficking and smuggling are heightened.

Over the forecast period, homeland security equipment manufacturers expect increased demand for

equipment capable of enhancing seaport and airport security. In addition to these, the country will also

invest in border surveillance equipment such as CCTV technology and biometric identification systems.

Increased demand is also expected for equipment for the protection of critical infrastructure, borders and

maritime security.

Below is the homeland security budget allocation for the period 2006–2015

Figure 7: Vietnamese Homeland Security Budget (US$ billion), 2006–2015

Source: Directorate-General of Budget, Vietnam and ICD Research Analysis ©ICD Research

0.60 0.630.79

1.16 1.211.38

1.551.76

1.99

2.25

0.0

0.5

1.0

1.5

2.0

2.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ho

mela

nd

Secu

rity

Exp

en

dit

ure

(US

$ b

n)

CAGR: 12.90% (2011–2015)




3.3.2 Human trafficking, drugs trade and maritime security to drive homeland security

spending

The country’s homeland security spending over the forecast period is expected to be driven by its efforts

to counter internal, cross-border and maritime security threats.

Human trafficking: Vietnam is both a source of, and a destination for, human trafficking, with

Vietnamese men, women and children trafficked to Cambodia, China, Thailand, Hong Kong, Macau,

Malaysia, Taiwan, South Korea, the UK and the Czech Republic for commercial and sexual exploitation.

Children are also trafficked into Vietnam from Cambodia for forced labor and sexual exploitation. The

main causes for these problems are socio-economic, such as a lack of employment in rural and remote

areas, a lack of awareness of fraudulent activities and low education levels. In an effort to combat this

problem, Vietnam has created awareness-raising projects and provides training to women and girls in

trafficking-prone areas. The country has also passed laws which criminalize human trafficking and

strengthened the judicial system to prosecute the convicted. To further prevent such activities, Vietnam

will have to invest significantly in surveillance and intelligence technologies such as electronic

identification documents, e-passports, automated border crossing systems and CCTV (closed circuit

television) systems during the forecast period.

Illicit drug trade: With its long coastline of 3,444 kilometers, a large container port at Saigon and

strategic location between major South East Asian countries, Vietnam is an attractive destination for the

illicit drug trade. The country is also a key producer of opium. In order to control the illicit smuggling of

drugs, the country has strengthened bilateral cooperation with Cambodia and other countries in the

region and has enhanced international cooperation against drug trafficking through cooperation in

criminal investigation, personnel training and information exchange with other regional countries. The

Vietnamese government has also intensified cooperation with UN anti-drug agencies, Interpol and

ASEAN (Association of South East Asian Nations) police in this regard. During the forecast period the

government is expected to invest in trace chemical detectors (TCD) capable of tracing drug residue, and

machines with the capability to screen suspects using X-rays or millimetric wave imaging.

Maritime security threats: A vast 3,444 kilometer coastline makes the country highly prone to maritime

security threats posed by pirates, illicit maritime trade, hostile neighbors with territorial claims and illegal

immigrants. The country is projected to invest in strengthening its maritime borders through the

acquisition of surveillance systems, high-speed patrol boats, fast attack boats and digital communication

systems.




3.3.3 Vietnam faces a minimal threat from foreign terrorist organizations

Vietnam falls under the ‘low risk’ category under the ICD Research Intelligence Defense Terrorism Heat

Map, offering a non-threatening environment with minimal terrorist activity.

The following figure displays a heat map based on the ICD Research Intelligence Terrorism Index, which

indicates the threat level faced by countries across the world:

Figure 8: ICD Research Terrorism Heat Map, 2010

Source: ICD Research Defense Terrorism Index © ICD Research

Vietnam




The ICD Research Terrorism Index is calculated on the basis of the number of terrorist attacks in a given

country, and the existence of a designated foreign terrorist organization within the country itself. Vietnam

has an index score of 0.0, which makes it least susceptible to a terrorist attack.

The following figure displays the terrorism index score of the top 15 countries in the ICD Research

Terrorism Index:

Figure 9: ICD Research Defense Terrorism Index, 2010

Index score classification: >4 – Worst affected, between 4 and 1 – Highly affected, between 1 and 0.5 – Moderately affected,

between 0.5 and 0.1 – Some risk, and <0.1 – Low risk

Source: ICD Research Defense Terrorism Index © ICD Research

34.8

9.4

8.4

5.6

4.8

3.2

2.4

2.4

2.3

2.2

2.2

2.1

2.1

1.6

1.5

0.0

0 5 10 15 20 25 30 35 40

Iraq

Pakistan

Afghanistan

Somalia

India

Congo

Lebanon

Israel

Gaza Strip

Russia

Colombia

Philippines

Thailand

Sri Lanka

Iran

Vietnam

ICD Research Terrorism Index Score




3.4 Benchmarking with Key Global Markets

3.4.1 Vietnamese defense expenditure expected to remain modest compared to leading

spenders

With an estimated defense expenditure of US$2.8 billion in 2011, Vietnam’s military expenditure is low

when compared to leading defense spenders such as the US, China, France, Germany and Italy.

Although the country is seeking to increase its military budget to counter perceived security threats from

its hostile neighbor China, its defense budget is very small compared to the leading spenders. However,

Vietnamese defense spending is anticipated to grow at a CAGR of 14.32% during the forecast period,

much higher than significant spenders such as the US, China, UK, Germany, France and Italy.

The chart below benchmarks Vietnam’s defense expenditure growth with key global markets:

Figure 10: Benchmarking with Key Global Markets: Historical vs. Expected Defense Budget Growth (%), 2006–2015

Note: Bubble size represents 2010 defense expenditure (US$ billion)

Source: National Defense Agencies and ICD Research Analysis © ICD Research

US

China

UK

FranceJapan

Germany

Saudi Arabia

Russia

Italy

India

Brazil

South Korea

Israel

Vietnam

-5%

0%

5%

10%

15%

20%

-10% -5% 0% 5% 10% 15% 20% 25%

De

fen

se

ex

pe

nd

itu

re -

CA

GR

20

11

-15

Defense expenditure - CAGR 2006-10




3.4.2 The country will continue to be a significant player in the global arms market

The global defense market is dominated by the US and China, while Vietnam remains a relatively

modest contributor. The country’s strained relationship with China and the need to replace outdated

equipment are the main reasons behind its defense budget increase. Moreover, approximately 35% of

the country’s defense budget is allocated for capital expenditure, making it a significant participant in the

international defense market.

The figure below benchmarks Vietnamese defense expenditure with countries with the largest global

defense expenditure:

Figure 11: Defense Expenditure of Countries with the Largest Defense Expenditure (US$ billion), 2010 and 2015

Note: Figures are rounded off to zero decimal places

Source: ICD Research Analysis © ICD Research

2.5

27

31

50

42

42

53

51

56

78

722

4.7

26

43

81

55

43

62

56

61

125

698

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0

Vietnam

Italy

India

Russia

Saudi Arabia

Germany

Japan

UK

France

China

US

Figures in US$ billion2015 2010




3.4.3 Vietnam’s defense expenditure as a percentage of GDP is higher than some leading

defense spenders

Vietnam’s defense budget as a percentage of GDP was 2.6% in 2010, much higher than some leading

defense spenders such as France, India, Turkey, Brazil, Italy, and China. The country has expressed an

interest in maintaining its defense spending at 2.5% of its GDP during the forecast period which would

continue to be higher than those of some of the world’s significant defense spenders.

The chart below benchmarks Vietnamese defense expenditure as a percentage of GDP with countries

with leading defense expenditure:

Figure 12: Defense Spending as a Percentage of GDP of Countries with the Largest Defense Expenditures (%), 2010


9.5%

6.8%

4.9%

2.9%

2.7%

2.5%

2.3%

2.2%

2.1%

1.9%

1.8%

1.5%

1.3%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Saudi Arabia

Israel

United States

Russia

South Korea

Vietnam

UK

India

France

Turkey

Brazil

China

Italy




3.4.4 Vietnam has a moderate per-capita defense expenditure

Vietnam’s per-capita defense expenditure, which was US$28.18 during 2010, is much lower than that of

significant spenders such as Russia, Italy, Turkey and China, mostly due to Vietnam’s relatively small

population and GDP. The country’s per-capita military spending is projected to register a CAGR of

12.96% to reach US$50.23 in 2015, this figure, however, remains lower than some of the world’s leading

defense spenders.

The following figure shows the per-capita defense expenditures of the world’s highest military spenders:

Figure 13: Per-Capita Defense Expenditures of the Largest Military Spenders in the World (US$), 2010

Note: Figures are rounded off to zero decimal places

Source: ICD Research Intelligence Analysis © ICD Research

2,327

1,773

1,608

894

817

467

356

312

192

169

58

28

0 500 1000 1500 2000 2500

US

Israel

Saudi Arabia

France

UK

South Korea

Russia

Italy

Turkey

Brazil

China

Vietnam




3.4.5 Vietnam faces negligible threat from foreign terrorist organizations

According to the ICD Research Intelligence Terrorism Index, Iraq, Pakistan, Afghanistan, Somalia and

India are the countries worst affected by terrorism. Based on the index score, Vietnam has a ranking of

204, which indicates minimal threat from foreign terrorist organizations when compared to other

countries throughout the world.

The terrorism index is calculated on the basis of the following factors:

The number of terror attacks that the country has faced

Total number of people victimized

The number of foreign terrorist organizations operating in the country

The table below shows the ICD Research Terrorism Index score of the top 50 terror-prone countries in

the world:

Table 1: ICD Research Intelligence Terrorism Index

Rank Country Terrorism index score

1 Iraq 34.8

2 Pakistan 9.4

3 Afghanistan 8.4

4 Somalia 5.6

5 India 4.8

6 Democratic Republic of Congo 3.2

7 Lebanon 2.4

8 Israel 2.4

9 Gaza Strip 2.3

10 Russia 2.2

11 Colombia 2.2

12 Philippines 2.1

13 Thailand 2.1

14 Sri Lanka 1.6

15 Iran 1.5




16 Turkey 1.4

17 West Bank 1.3

18 Syria 1.2

19 Algeria 1.1

20 Sudan 1.1

21 Yemen 1.1

22 Indonesia 0.9

23 Nigeria 0.8

24 United Kingdom 0.7

25 Uzbekistan 0.7

26 Greece 0.7

27 Spain 0.6

28 Bangladesh 0.6

29 Central Korean Republic 0.5

30 Saudi Arabia 0.5

31 Mali 0.5

32 Tajikistan 0.5

33 France 0.5

34 Jordan 0.5

35 Malaysia 0.5

36 Morocco 0.5

37 Tunisia 0.5

38 Singapore 0.5

39 Ireland 0.3

40 Ethiopia 0.3




41 Senegal 0.3

42 Georgia 0.3

43 Moldova 0.3

44 Niger 0.3

45 Egypt 0.3

46 Peru 0.3

47 Burma 0.3

48 Nepal 0.3

49 Mauritania 0.3

50 Eritrea 0.2

204 Vietnam 0.0

Source: ICD Research Intelligence Terrorism Index / © ICD Research




3.5 Market Opportunities: Key Trends and Growth Stimulators

3.5.1 Demand for aircraft is expected to increase

The Vietnamese Air Force mainly consists of outdated aircraft, most of which are nearing the end of their

serviceable life. As a result of a lack of modernization during the past two decades, the strength of

Vietnam’s air force has declined considerably and now lags behind those of neighboring countries’ such

as Thailand and Singapore. Moreover, as the country faces no strategic air threat near its borders, it is

not expected to significantly modernize its aircraft fleet in the forecast period. Vietnam will, however,

need to spend a considerable amount just to maintain its current fleet and procure some new aircraft.

Over the forecast period, the country is expected to procure the following categories of military aircraft:

SU30MKV fighter aircraft

Airbus military C212

Unmanned aerial vehicles (UAV)

Medium transport aircraft

Trainer aircraft

Maritime patrol aircraft

3.5.2 Investment in naval defense systems is anticipated to increase

Vietnam is seeking to acquire naval defense systems such as submarines and stealth frigates, to provide

the Vietnamese naval defense force with a modest capability against the threat posed by China’s

growing naval power. The country is also expected to procure coastal patrol vessels, fast missile craft,

supply and transport ships, and coastal surveillance equipment to secure its sea lanes from pirates,

terrorists, illegal immigrants and hostile neighbors. In 2009, Vietnam also signed an US$1.8 billion deal

with Russia for the procurement of six Kilo class diesel electric submarines. The deal is reportedly worth

US$3.2 billion and includes support, training, weapon systems and the building of a submarine base and

repair facility.

Diesel electric submarine

Gepard class frigates

Coastal patrol vessels

Supply and transport ships

3.5.3 Maintenance repair and overhaul activities to provide excellent market opportunities

As a result of the mostly out-of-date equipment that makes up the country’s inventory, it has become

imperative for Vietnam to modernize its current fleet to maintain operation readiness. Vietnam’s

predominantly Soviet inventory has encouraged the country to strike deals with countries such as India,

Ukraine and Belarus that can perform repair and overhaul activities and supply spare parts as a result of

their Soviet inventories. Moreover, Vietnam’s national defense industry encourages and prioritizes

international cooperation in repair and personnel training. As such, countries that are willing to help in

repairing, overhauling and providing spares for Vietnam’s aging Soviet-era fleet may be able to

penetrate the market.

DEFENSE PROCUREMENT DYNAMICS



4. Defense Procurement Market Dynamics

Vietnam is highly dependent on foreign suppliers to meet its demand for advanced military hardware.

Limited domestic defense capabilities — along with factors such as strained relations with its neighboring

nations, outdated military hardware and territorial disputes — compel Vietnam to procure defense

equipment from foreign suppliers. During the review period, the nation imported the majority of its

defense equipment from Russia, and Russia is expected to remain dominant in the country’s arms

industry over the forecast period. However, given the need to modernize its existing inventory, which is

mostly outdated, the country is expected to place significant orders with western defense firms. Due to

the continued threat from China, Vietnam has recently invested in building relationships with western

countries and Vietnam’s neighbors to act as a balance against the Chinese military. This move has

opened up the country’s market to western participants.

Ships accounted for the largest category of imported defense equipment during the review period. Given

the Chinese naval build up and the two countries’ overlapping claim over the South China Sea, Vietnam

is expected to increase its naval capabilities and, as such, ships and submarines should account for the

largest share of imported equipment during the forecast period. Moreover, investment in fighter aircraft,

support and maritime patrol aircraft is projected to increase during the forecast period. The country has

an outdated defense industrial base and, as a result of this, the country does not cater to defense

exports.

The following figures are based on trend indicator values (TIV) expressed in US$ million at constant

(1990) prices. Although figures are expressed in US$, TIVs do not represent the financial value of goods

transferred, but are an indication of the volume of arms transferred.

4.1 Import Market Dynamics

4.1.1 Limited domestic defense capabilities drives the country’s defense imports

Vietnam’s domestic defense capabilities are relatively underdeveloped and, as such, the country relies

on foreign OEMs to fulfill its military requirements. Traditionally the country has been an importer of

weapon systems as their internal military production is small-scale and technologically limited. Russia

was the country’s largest defense supplier during the review period, followed by Ukraine, Romania and

Israel. Although the 11th national congress of the Vietnam communist party acknowledged that the

development of the country’s armed forces and defense industry would be one of the key tasks to be

undertaken in the forecast period, a real growth in military production is not set to be achieved during the

forecast period. This will continue to drive defense imports in the country during the forecast period. An

interesting development is that the Vietnamese defense market is expected to be opened up to OEMs

from countries other than Russia, since Vietnam has progressively developed good political and military

to military relations with a variety of countries. Furthermore, relaxation of defense export policies over

Vietnam by the US and other European nations are expected to encourage and increase defense

imports to the country.




4.1.2 Defense imports are expected to increase during the forecast period

Despite relying on foreign arms sources, defense imports to Vietnam registered a steep decline from

2006–2007. Arms imports began to rise in 2008, mainly due to the need to counter China’s increasing

naval capabilities. During the review period, Vietnam imported arms worth US$166 million in 2008 and

an estimated US$515 million worth of equipment in 2010. The country’s arms imports are projected to

remain at 2010 levels during the forecast period as the country focuses on replacing outdated defense

systems and strengthening its Navy and Air Force. Moreover Vietnam’s domestic defense industrial

base is underdeveloped and is unable to meet the requirements of its armed forces, which is expected to

lead to an significant increase in the overall arms supplies to the country by foreign OEMs during the

forecast period.

The following figure shows Vietnamese defense import trends during 2006–2010:

Figure 14: Vietnamese Defense Import Trend, 2006–2010 (TIV values)

Source: SIPRI and ICD Research Analysis / © ICD Research

44 2

166

66

515

0

100

200

300

400

500

600

2006 2007 2008 2009 2010

Defe

nse I

mp

ort

s (

US

$ m

n)




4.1.3 Russia is a significant defense trade partner of the country

During the review period, Russia emerged as the largest supplier of military hardware to Vietnam with a

share of 93% of Vietnamese defense imports, followed by Ukraine with 6%, and Romania and Israel

sharing less than 1% each. In 2010 Russia accounted for 98% of the country’s defense imports. Russia

has mostly sold surface combat vessels, submarines and aircraft to Vietnam. Russia is Vietnam’s most

important defense partner and this is expected to remain unchanged throughout the forecast period.

Vietnam has however started to widen its supplier base and has begun procuring equipment from the

west. However, due to the deals in place with Russia and its dependence on the country as its traditional

defense supplier, its defense market is expected to be dominated by Russia during the forecast period.

The following figure displays the Vietnamese arms import trends during 2006–2010 and 2010:

Figure 15: Vietnamese Defense Imports by Country (%), 2006–2010 and 2010

Source: SIPRI and ICD Research Analysis © ICD Research

Israel0%

Romania1%

Russia93%

Ukraine6% Russia

98%

Ukraine2%

2006–2010 2010




4.1.4 Ships and aircraft account for the majority of defense imports during the review period

During the review period, ships, aircraft and missiles, with shares of 40%, 31% and 22% respectively,

collectively accounted for the majority of the country’s defense imports. During 2010, aircraft, ships and

missiles, had shares of 43%, 37% and 15% respectively. During the forecast period, the country is

expected to invest in the acquisition of new aircraft and submarines, as well as surface and support

ships, in order to enhance its response capabilities and defend itself against an assertive China. The

country is also expected to modernize its ground equipment, since much of its current inventory is made

up of Soviet and captured US equipment which are becoming outdated and need to be replaced with

more modern systems.

The following figure displays Vietnamese defense imports by category during 2006–2010 and 2010:

Figure 16: Vietnamese Defense Imports by Category (%), 2006–2010

Source: SIPRI and ICD Research Analysis © ICD Research

Aircraft31%

Engines3%

Missiles22%

Sensors4%

Ships40%

Aircraft43%

Engines2%

Missiles15%

Sensors3%

Ships37%

2006–2010 2010




4.2 Export Market Dynamics

4.2.1 The country has been unable to access the global defense market

Vietnam’s military industrial base is still in a nascent stage of development. The country’s defense

companies are predominantly government-owned and are operated by the military, which has prevented

foreign investment into the defense sector and limited technological innovation. As such, the country’s

domestic companies are unable to develop and manufacture technologically advanced defense systems,

which has effectively prevented Vietnam from producing any significant defense exports during the

review period. Despite the projected increase in arms imports and emphasis on technology transfer, it is

not expected that Vietnam will have any significant defense exports in the forecast period.

INDUSTRY DYNAMICS



5. Industry Dynamics

5.1 Five Forces Analysis

Russia accounted for 93% of Vietnam’s defense imports during the review period and Russia is

expected to be Vietnam’s predominant arms supplier both during and after the forecast period. Vietnam

has limited capital budget and modest defense requirements However; its close ties with Russia and the

mostly government to government deals conducted do not encourage suppliers to exert much bargaining

power. Moreover the western OEMs perceive the current foreign policy of Vietnam to be conducive to

enter and expand their business. Hence, western participants who are hoping to utilize the current

market entry opportunity to enter the Vietnamese defense industry are not expected to exert much

bargaining power either, partly due to the fear of losing contracts to Russia, Vietnam’s largest defense

trading partner. On the other hand, despite being the sole buyer of defense goods, the Vietnamese

government does not possess very high negotiating power, which is mostly due to its significant reliance

on Russia for the procurement of advanced defense systems. Overall, competition among foreign

equipment manufacturers is low as the Vietnamese defense market has just started to open up for

western OEMs and there is a lack of domestic suppliers catering to the country’s defense sector.

The following subsections provide a Porter’s five forces analysis of the Vietnamese defense industry:

Figure 17: Industry Dynamics Porter’s Five Forces Analysis


Intensity of Rivalry

Low

Bargaining Power of

Supplier

Low

Bargaining Power of Buyer

Medium

Barriers to Entry

Medium

Threat of Substitution

Low to Medium

INDUSTRY DYNAMICS



5.1.1 Bargaining power of supplier: low

Bargaining power of the supplier is expected to be low during the forecast period. This is because the

country has traditionally imported weaponry from Russia and has recently started seeking advanced

weaponry from western countries. Cost and concerns over compatibility with existing Russian inventory

has influenced Vietnam’s decisions on defense procurements. Now that the country is developing good

relations with the west and has opened its arms market to western firms for the first time, these firms are

eager to enter the market. However, given the realities of austerity measures at home, these OEMs are

not expected to exert considerable bargaining power either.

5.1.2 Bargaining power of buyer: medium

Although the government is the sole buyer of military hardware in the country, its bargaining power is

medium owing to its high dependence on imported defense systems. A lack of domestic defense

capabilities, coupled with a limited number of foreign suppliers willing to supply defense equipment to

Vietnam, brings down overall buyer bargaining power in Vietnam’s defense industry to medium.

5.1.3 Barrier to entry: medium

To enhance the capabilities of the domestic arms industry, the government is encouraging foreign

investors to enter the market by providing technology transfer deals and promoting co-production and

service agreements. Vietnam’s limited financial resources, coupled with the priority given for

compatibility with traditional Russian weapons systems and training, makes it a tough market to

penetrate. Consequently, entry barriers into Vietnam’s defense industry are medium.

5.1.4 Intensity of rivalry: low

Russia is Vietnam’s largest defense trading partner and supplied 93% of its defense imports during the

review period. Ukraine is the next largest arms exporter to the country. Vietnam has relied mostly on

former Soviet states for its military needs and on China to a certain extent. The recent tension between

China and Vietnam over territorial claims has, however, ruled out China as a supplier. Furthermore, the

US national security legislation that prevented the sale of equipment that contained US technology to

Vietnam was lifted in November 1998 and a December 2006 US policy on arms transfer now permits the

sale, lease or export of non-lethal defense equipment to Vietnam, albeit on a case to case basis. Even

European defense firms are seeking to establish a foothold in the market as a result of strengthening

political ties. Vietnam has recently opened its weapons market to western firms, however, given its

requirements and limited budget, the intensity of rivalry is expected to be low during the forecast period.

5.1.5 Threat of substitution: low to medium

Vietnam’s defense market has been dominated primarily by Russia, although western defense

organizations have recently ventured into the Vietnamese defense market. During the forecast period,

Vietnam is expected to follow the policy of procuring high-end equipment such as submarines, ships and

aircraft from its tried and tested partner Russia while at the same time procuring low-end, yet important

and advanced defense electronics as well as ISR platforms from western countries. As such, the threat

of substitution is expected to be low in case of high-end equipment providers and medium in the latter

case.

MARKET ENTRY STRATEGY



6. Market Entry Strategy

6.1 Market Regulation

6.1.1 Vietnam has not disclosed any offset obligation

Vietnam has not disclosed any offset obligations imposed on its arms procurement. Vietnam’s failure to

modernize its defense industrial base and its undeveloped domestic defense market has reduced its

bargaining power with regard to offsets. Vietnam does, however, give preference to countries offering

technology transfers and encourages cooperation for co-production of weapons systems, setting up

repair facilities and personnel and crew training.




6.2 Market Entry Route

6.2.1 Foreign equipment manufacturers can enter the market through direct commercial sales

As a consequence of its limited domestic defense capabilities, Vietnam depends on foreign defense

suppliers to fulfill the majority of its military requirements. This offers an opportunity for a considerable

number of foreign OEMs to venture into the Vietnamese defense market. The country’s defense industry

is largely dominated by Russian defense equipment suppliers; however European suppliers have

recently entered Vietnam’s military market through the direct sale of advanced defense systems. For

example EADS entered the Vietnamese market by the sale of 3 of its Airbus Military C212-400 aircraft to

the Vietnamese Coast Guard.

6.2.2 Government to government deals are an attractive entry route to the country’s defense

market

The country prefers government to government deals in procuring defense systems. Almost all of the

country’s weapons deals with Russia, for example, are through government to government deals signed

between the respective head of states during state visits or signed between the Vietnamese government

and Rosoboronexport, the Russian agency for arms export, following approval from their respective

governments. Also the Ministry of Defense’s decision No. 84, dated May 18, 2007, which regulates the

import and export of defense equipment, limits the number of businesses involved in the import and

export of defense equipment. As such, the General Import-Export Vanxuan Corporation (VAXUCO),

which is a military goods importer owned by the MOD, is the only designated importer for the MOD for

non dual-use military goods, and is authorized to sign purchases on behalf of the MOD. Given the

strengthening of the country’s political relations with western nations it would be prudent for these

nations and their OEMs to enter into deals on a government to government basis which would increase

the probability of succeeding in the Vietnamese defense market




6.3 Key Challenges

6.3.1 Lack of private participants and foreign direct investment may restrict domestic defense

industry growth

In March 2011, the Vietnamese government passed legislation that prohibits selling stakes of state-

owned defense companies to the private sector. The legislation further stipulates that the state will hold

100% of the charter capital in enterprises which involve national defense, as well as security and

military-held commercial enterprises. This legislation prevents private participation and thwarts any

foreign direct investment into the country’s defense sector.

6.3.2 Lack of transparency impedes the growth of Vietnam’s defense industry

Vietnam released its third defense whitepaper in 2009 which revealed the country’s defense expenditure

for the first time during 2004–2008. This was seen by many as a step towards building confidence with

both its neighbors and countries in the west, which is in line with its foreign policy of building cordial

relations with other countries. However the whitepaper does not give any specifics about the budget

break-down nor on is the amount spent on procurement. This lack of transparency within the

government budget allocation and procurement process may discourage investors from entering the

country’s defense market.

COMPETITIVE LANDSCAPE AND STRATEGIC INSIGHTS



7. Competitive Landscape and Strategic Insights

7.1 Competitive Landscape Overview

Vietnam’s defense market is completely dominated by state-owned enterprises handled by the Ministry

of National Defense and the Ministry of Economic Affairs. The Army, through the Ministry of National

Defense, owns 140 companies and has shares in another 20 firms. Vietnam’s national defense industry

is being developed mainly in the direction of self-reliance. However, little progress has been made in this

direction due to a lack of private participation and foreign direct investment. To achieve this objective the

government announced a plan to privatize its defense industries by 2012. However, the poor financial

performance of these state-owned firms and opposition from the armed forces has impeded this

privatization. Hence in March 2011, the Vietnamese government implemented legislation that effectively

ended the plans to sell stakes of state-owned defense companies to private investors. At the same time,

co-operation with defense industries of friendly countries is being nurtured so as to absorb advanced

technologies with a view to raising the level of science and technology development and consequently

reduce Vietnam’s reliance on defense imports.

7.2 Key Domestic Companies

7.2.1 Vietnam Shipbuilding Industry Corporation (VINASHIN): overview

The Vietnam Shipbuilding Industry Corporation (VINASHIN) was established in 1996. Apart from building

commercial vessels, VINASHIN is involved in the production of supply and transport ships as well as

coastal patrol vessels, and is also involved in the repair and overhaul of navy ships. The company has

around 30 factories and seven shipyards. It has grown considerably since it received its first export order

in 2000 and has continued to receive several international orders from international shipping companies.

VINASHIN is currently in collaboration with other foreign shipbuilders for transfer of advanced

shipbuilding technologies and is now constructing new ships with a higher level of complexity.

7.2.2 Vietnam Shipbuilding Industry Corporation (VINASHIN): products

Products and services in the company's portfolio include:

Surface Ships

Supply and transport ships

Truong Sa class ship

Coastal patrol vessels

Search and rescue ship

Repair and overhaul

7.2.3 Vietnam Shipbuilding Industry Corporation (VINASHIN): recent announcements and

strategic initiatives

December 2008: Vietnam Maritime University (VIMARU), the Vietnam Shipbuilding Industry Group

(VINASHIN), and Norway’s Marintek and DNV have agreed to collaborate in a co-operative project to

enhance Vietnam’s shipbuilding capabilities. As part of this co-operation the Norwegian firms will assist

in the development of Vietnam’s shipbuilding industry through a 3-year training program for VINASHIN

shipyard management and staff.

COMPETITIVE LANDSCAPE AND STRATEGIC INSIGHTS



March 2008: The Company signed a memorandum of understanding (MoU) with Rolls-Royce to develop

its rapidly growing shipbuilding industry. The scope of the partnership will include identifying potential

strategic partners for development of shared business interests.

November 2006: Vinashin and FPT Corporation (FPT) signed a 3-year strategic alliance agreement to

build on each company's strengths to enhance competitiveness. The deal materialized following the

country's WTO accession.

7.2.4 Vietnam Shipbuilding Industry Corporation (VINASHIN): alliances

Not available

7.2.5 Vietnam Shipbuilding Industry Corporation (VINASHIN): recent contract awards

Not available.

7.2.6 Vietnam Shipbuilding Industry Corporation (VINASHIN): financial analysis

Not available.

BUSINESS ENVIRONMENT AND COUNTRY RISK



8. Business Environment and Country Risk

The following sub-sections detail a range of indicators, which assess the business environment and

Vietnam’s country risks.

8.1 Economic Performance

8.1.1 Gross domestic product (GDP) at constant prices (US dollars)

Gross Domestic Product (GDP) at constant prices stood at US$58.8 billion in 2009, recording a CAGR

of 7.42% during 2003–2009. During 2010–2015, GDP at constant prices is expected to grow at a CAGR

of 5.28% to reach US$80 billion by 2015.

Figure 18: Vietnamese GDP at Constant Prices (US$ billion), 2003–2015


38.341.3

44.848.5

52.655.9

58.861.8

65.168.6

72.376.0

80.0

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

25

50

75

100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GD

P a

t C

on

sta

nt

Pri

ces (

US

$b

n)

GDP Constant Prices (US$ bn) GDP Growth Rate (%)




8.1.2 GDP per-capita at constant prices (US dollars)

GDP per-capita at constant prices stood at US$669.2 in 2009, recording a CAGR of 6.09% during 2003–

2009. It is expected to grow at a CAGR of 4.19% during 2010–2015 to reach US$853.8 by 2015.

Figure 19: Vietnamese GDP Per-Capita at Constant Prices (US$), 2003–2015


469.4499.2

534.5571.4

612.2643.0

669.2695.5

723.7754.7

787.2819.7

853.8

0

200

400

600

800

1,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GD

P P

er

Cap

ita a

t C

on

sta

nt

Pri

ces

(US

$)




8.1.3 GDP at current prices (US dollars)

GDP at current prices stood at US$9.2 billion in 2009, recording a CAGR of 15.34% during 2003–2009.

It is expected to grow at a CAGR of 11.23% during 2010–2015 to reach US$176.3 billion by 2015.

Figure 20: Vietnamese GDP at Current Prices (US$ billion), 2003–2015

Source: ICD Research Analysis / © ICD Research

39.645.5

52.960.9

71.1

90.3 93.2103.6

118.6128.5

143.3

159.3

176.3

0%

5%

10%

15%

20%

25%

30%

0

25

50

75

100

125

150

175

200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GD

P a

t C

urr

en

t P

rices (

US

$b

n)

GDP Current Prices (US$ bn) GDP Growth Rate (%)




8.1.4 GDP per-capita at current prices (US dollars)

GDP per-capita at current prices stood at US$1,060 in 2009, registering a CAGR of 13.92% during

2003–2009. It is expected to grow at a CAGR of 10.07% during 2010–2015 to reach US$1,882 by 2015.

Figure 21: Vietnamese GDP Per-Capita at Current Prices (US$), 2003–2015


485550

632719

828

1,0391,060

1,165

1,3191,414

1,561

1,718

1,882

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GD

P P

er

Cap

ita a

t C

urr

en

t P

rices

(US

$)




8.1.5 GDP split by key segments

The service sector’s contribution to the GDP marginally increased from 73.1% in 2003 to 76.6% in 2009.

The industrial sector’s contribution to the GDP decreased from 25% in 2003 to 22.5% in 2009. The

agriculture sector’s contribution to the GDP decreased from 2% in 2003 to 0.9% in 2009.

Figure 22: Vietnamese GDP Split by Key Segments (%) 2003 v/s 2009

Source: Ministry of Economic Development, Vietnam and ICD Research Analysis © ICD Research

Service output73.1%

Agricultural output

2.0%

Industrial output

25.0%

2003

Service output76.6%

Agricultural output

0.9%

Industrial output

22.5%

2009




8.1.6 Agriculture net output at current prices (Vietnamese dong)

The agricultural net output at current prices stood at VND138284.5 billion in 2003. It registered a CAGR

of 17.40% during 2003–2009 and reached VND362149.0 billion in 2009. This sector is expected to grow

at a CAGR of 15.14% during 2010–2015 to reach VND854571.6 billion by 2015.

Figure 23: Vietnamese Agriculture Net Output at Current Prices (VND billion), 2003–2015


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ag

ricu

ltu

ral

Net

Ou

tpu

t at

Cu

rren

t P

rices (

VN

D b

n)

Agriculture Net Output,Current Prices, VND bn Growth Rate (%)




8.1.7 Agriculture net output at current prices (US dollars)

The agriculture net output at current prices stood at US$8.8 billion in 2003. Growing at a CAGR of

14.78% during 2003–2009, the sector reached US$20.2 billion in 2009. This sector is expected to grow

at a CAGR of 12% during 2010–2015 to reach US$39.3 billion by 2015.

Figure 24: Vietnamese Agriculture Net Output at Current Prices (US$ billion), 2003–2015


8.89.9

11.112.4

14.5

20.0 20.222.3

25.0

27.9

31.1

35.0

39.3

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ag

ricu

ltu

ral

Net

Ou

tpu

t at

Cu

rren

t P

rices (

US

$ b

n)

Agriculture Net Output,Current Prices, US$ bn Growth Rate (%)




8.1.8 Agriculture net output at current prices as percentage of GDP

The agriculture net output as a percentage of GDP marginally decreased from 22.5% in 2003 to 21.8%

in 2009. It is expected to reach 20.7% by 2015.

Figure 25: Vietnamese Agriculture Net Output at Current Prices as a Percentage of GDP (%), 2003–2015


22.5%21.8%

21.0% 20.4% 20.3%

22.0% 21.8% 21.3%20.7% 20.9% 20.7% 20.6% 20.7%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

24.0%

28.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ag

ricu

ltu

ral

Net

Ou

tpu

t (%

of

GD

P)




8.1.9 Manufacturing net output at current prices (Vietnamese dong)

The manufacturing net output at current prices stood at VND125476 billion in 2003. Growing at a CAGR

of 17.80% during 2003–2009, the sector reached VND335237 billion in 2009. The sector is expected to

grow at a CAGR of 14.66% during 2010–2015 to reach VND812574.8 billion by 2015.

Figure 26: Vietnamese Manufacturing Net Output at Current Prices (VND billion), 2003–2015


0%

5%

10%

15%

20%

25%

30%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Man

ufa

ctu

rin

g N

et

Ou

tpu

t at

Cu

rren

t P

rices (

VN

D b

n)

Manufacturing Net Output, Current Prices, VND bn Growth Rate (%)




8.1.10 Manufacturing net output at current prices (US dollars)

The manufacturing net output at current prices stood at US$8.1 billion in 2003. The sector registered a

CAGR of 16.26% during 2003–2009, to reach US$20 billion in 2009. During 2010–2015, the sector is

expected to grow at a CAGR of 11.80% to reach US$39.1 billion by 2015.

Figure 27: Vietnamese Manufacturing Net Output at Current Prices (US$ billion), 2003–2015


8.19.2

10.912.9

15.1

19.1 20.0

22.4

25.1

28.0

31.2

34.9

39.1

-15%

-5%

5%

15%

25%

35%

0

10

20

30

40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Man

ufa

ctu

rin

g N

et

Ou

tpu

tat

Cu

rren

t P

rices (

US

$ b

n)

Manufacturing Net Output, Current Prices, US$ bn Growth Rate (%)




8.1.11 Manufacturing net output at current prices as percentage of GDP

The manufacturing net output at current prices as a percentage of GDP decreased from 20.5% in 2003

to 20.2% in 2009. This is expected to further decrease during 2010–2015 to reach 19.7% in 2015.

Figure 28: Vietnamese Manufacturing Net Output at Current Prices as a Percentage of GDP (%), 2003–2015


20.5% 20.3% 20.6% 21.2% 21.3% 21.0%20.2% 20.7% 20.0% 20.1% 19.9% 19.7% 19.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Man

ufa

ctu

rin

g N

et

Ou

tpu

t (%

of

GD

P)




8.1.12 Mining, manufacturing and utilities net output at current prices (Vietnamese dong)

The combined net output of mining, manufacturing and utilities at current prices stood at VND205025.9

billion in 2003. The sector valued VND560271 billion in 2009, registering a CAGR of 18.24%

during 2003–2009. The sector is likely to grow at a CAGR of 14.54% during 2010–2015 to reach

VND1315485.3 billion in 2015.

Figure 29: Vietnamese Mining, Manufacturing and Utilities Net Output at Current Prices (VND billion), 2003–2015

Source: United Nations Statistics Division and ICD Research Analysis / © ICD Research

0%

5%

10%

15%

20%

25%

30%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Min

ing

, M

an

ufa

ctu

rin

g a

nd

Uti

liti

es

Net

Ou

tpu

t at

Cu

rren

t P

rices

(VN

D b

n)

Mining, Manufacturing, Utilities Current Prices, VND bn Growth Rate (%)




8.1.13 Mining, manufacturing and utilities at current prices (US dollars)

The combined net output of mining, manufacturing and utilities at current prices stood at US$13.2 billion

in 2003. The sector registered a CAGR of 15.80% during 2003–2009 to reach US$31.9 billion in 2009.

The sector is expected to register a CAGR of 11.28% during 2010–2015 to reach US$60.8 billion in

2015.

Figure 30: Vietnamese Mining, Manufacturing and Utilities Net Output at Current Prices (US$ billion), 2003–2015


13.215.4

18.321.3

24.5

30.131.9

35.639.8

44.0

48.7

54.3

60.8

0%

5%

10%

15%

20%

25%

0

10

20

30

40

50

60

70

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Min

ing

, M

an

ufa

ctu

rin

g a

nd

Uti

liti

es

Net

Ou

tpu

t at

Cu

rren

t P

rices

(US

$ b

n)

Mining, Manufacturing, Utilities, Current Prices, US$ bn Growth Rate (%)




8.1.14 Mining, manufacturing and utilities at current prices, as percentage of GDP

The combined net output of mining, manufacturing and utilities at current prices as a percentage of GDP

increased from 33.4% in 2003 to 33.8% in 2009. This is expected to decrease to 31.9% in 2015.

Figure 31: Vietnamese Mining, Manufacturing and Utilities Net Output at Current Prices as a percentage of GDP (%), 2003–2015


33.4% 34.0% 34.7% 34.9% 34.5%33.1% 33.8% 33.7%

32.6% 32.6% 32.1% 31.8% 31.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Min

ing

, M

an

ufa

ctu

rin

g a

nd

Uti

liti

es

Net

Ou

tpu

t (%

of

GD

P)




8.1.15 Construction net output at current prices (Vietnamese dong)

The construction net output at current prices stood at VND37099.8 billion in 2003. The sector valued

VND110794.4 billion in 2009, registering a CAGR of 20% during 2003–2009. The sector is expected to

grow at a CAGR of 14.98% during 2010–2015 to reach VND267599.3 billion by 2015.

Figure 32: Vietnamese Construction Net Output at Current Prices (VND billion), 2003–2015


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

50,000

100,000

150,000

200,000

250,000

300,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Co

nstr

ucti

on

Net

Ou

tpu

t at

Cu

rren

t P

rices (

VN

D b

n)

Construction Net Output, Current Prices, VND bn Growth Rate (%)




8.1.16 Construction net output at current prices, (US dollars)

The construction net output at current prices stood at US$2.4 billion in 2003. Growing at a CAGR of

17.47% during 2003–2009, the sector reached US$6.3 billion in 2009. It is expected to grow at a CAGR

of 11.69% during 2010–2015 to reach US$12.3 billion by 2015.

Figure 33: Vietnamese Construction Net Output at Current Prices (US$ billion), 2003–2015

Source: United Nations Statistics Division and ICD Research Analysis © ICD Research

2.42.8

3.44.0

4.9

5.96.3

7.1

8.0

8.9

9.8

11.0

12.3

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

2

4

6

8

10

12

14

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Co

nstr

ucti

on

Net

Ou

tpu

t at

Cu

rren

t P

rices (

US

$ b

n)

Construction Net Output, Current Prices, US$ bn Growth Rate (%)




8.1.17 Construction net output at current prices as a percentage of GDP

The construction net output at current prices as a percentage of GDP increased from 6.0% in 2003 to

6.7% in 2009. It is expected to reach 6.5% in 2015.

Figure 34: Vietnamese Construction Output at Current Prices as a Percentage of GDP (%), 2003–2015


6.0%6.2% 6.3%

6.6%7.0%

6.4%6.7% 6.7%

6.5% 6.6% 6.5% 6.5% 6.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Co

nstr

ucti

on

Net

Ou

tpu

t (%

of

GD

P)




8.1.18 Crude steel production

The crude steel production increased from 544 thousand metric tons in 2003 to 2048 thousand metric

tons in 2009, registering a CAGR of 24.72% during 2003–2009. It is expected to register a CAGR of

7.23% during 2010–2015 to reach 3835 thousand metric tons by 2015.

Figure 35: Vietnamese Crude Steel Production (Million Metric Tons), 2003–2015

Source: World Steel Association and ICD Research Analysis / © ICD Research

544689

890

18692024

22502048

2705

30243248

34593645

3835

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cru

de S

teel

Pro

du

cti

on

(Th

. m

etr

ic t

on

s)

Crude Steel Production (Th. metric tons) Growth Rate (%)




8.1.19 Inflation rate

The rate of inflation in Vietnam increased from 3.3% in 2003 to 23.1% in 2008. The inflationary pressure

in the economy is expected to ease during 2010–2015 and the inflation rate is expected to decline

continuously and reach 5% in 2015.

Figure 36: Vietnamese Inflation Rate (%), 2003–2015

Source: International Monetary Fund and ICD Research Analysis / © ICD Research

3.3%

7.9% 8.4%7.5%

8.3%

23.1%

6.7%

8.4% 8.0%

6.1%5.0% 5.0% 5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Infl

ati

on

(%

)




8.1.20 Fiscal balance as a percentage of GDP

The fiscal balance has deteriorated during the period 2003–2009. The fiscal deficit declined from its

2003 level of -3.3 to -6.1 in 2009. It is expected to reach -5% in 2015.

Figure 37: Vietnamese Fiscal Balance as a Percentage of GDP (%), 2003–2009

Source: Central Bank of Vietnam and ICD Research Analysis © ICD Research

-3.3%

-4.4% -4.5%

-1.1%

-5.3%

-4.7%

-6.1% -6%-6%

-6%-5%

-5%

-5%

-8%

-6%

-4%

-2%

0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fis

cal

Bala

nce (

% o

f G

DP

)




8.1.21 Current account balance as a percentage of GDP

The current account balance as a percentage of GDP increased from -4.9% in 2003 to -0.3% in 2006

and deteriorated since then to reach -6.6% in 2009.

Figure 38: Vietnamese Current Account Balance as a Percentage of GDP (%), 2003–2009

Source: International Monetary Fund and ICD Research Analysis / © ICD Research

-4.9%

-3.5%

-1.1%-0.3%

-9.8%

-11.9%

-6.6%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2003 2004 2005 2006 2007 2008 2009

Cu

rren

t A

cco

un

t B

ala

nce

(% o

f G

DP

)




8.1.22 Exports as a percentage of GDP

The total export of goods and services as a percentage of GDP stood at 59.3% in 2003. It increased to

77.9% in 2008 before falling to 68.3% in 2009. Exports as a percentage of the GDP are expected to

increase to reach 75.4% by 2015.

Figure 39: Vietnamese Exports as a Percentage of GDP (%), 2003–2015


59.3%

65.7%

69.0%

73.6%

76.9%77.9%

68.3%69.4%

70.4%71.5%

72.8%74.2%

75.4%

40%

45%

50%

55%

60%

65%

70%

75%

80%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

To

tal

Exp

ort

s (

% o

f G

DP

)




8.1.23 Imports as a percentage of GDP

The total imports of goods and services as a percentage of GDP stood at 67.7% in 2003. It increased to

93.1% in 2008 before falling to 78.7% in 2009. Imports as a percentage of GDP are expected to

increase to 80.5% by 2015.

Figure 40: Vietnamese Imports as a Percentage of GDP (%), 2003–2015


67.7%

73.3% 73.2%78.2%

92.7% 93.1%

78.7% 77.5% 78.4% 79.5% 79.8% 80.4% 80.5%

0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

To

tal

Imp

ort

s (

% o

f G

DP

)




8.1.24 Exports growth

The annual growth of Vietnamese exports of goods and services increased from 29.3% in 2004 to

31.6% in 2008. In 2009 it fell to -2.1% due to the global economic slowdown. During 2010–2015, exports

growth is likely to fluctuate between a low of 8.2% and a high of 14.7% and reach 14.7% by 2015.

Figure 41: Vietnamese Exports Growth (%), 2003–2015


29.3%

23.2% 23.8%22.6%

31.6%

-2.1%

8.2%

11.6%

8.4%

12.4%13.9% 14.7%

-10%

0%

10%

20%

30%

40%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Exp

ort

s G

row

th R

ate

(%

)




8.1.25 Imports growth

The annual growth of total imports increased from 26.3% in 2004 to 39.3% in 2007 before registering a

negative growth of -5.7% in 2009. During 2010–2015, imports growth is expected to fluctuate between a

low of 7% and a high of 13.9% to reach 13.9% by 2015.

Figure 42: Vietnamese Imports Growth (%), 2003–2015


26.3%

17.2%

23.9%

39.3%

30.4%

-5.7%

7.0%

12.7%

9.2%

12.2%13.7% 13.9%

-10%

0%

10%

20%

30%

40%

50%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Imp

ort

s G

row

th R

ate

(%

)




8.1.26 External debt as a percentage of GDP

The external debt as a percentage of the GDP declined from 37.2% in 2003 to 31.9% in 2009.

Figure 43: Vietnamese External Debt as a Percentage of GDP (%), 2003–2009


37.2%

32.2%

31.4%

32.5%

29.8%

31.9%

25%

28%

31%

34%

37%

40%

2004 2005 2006 2007 2008 2009

Exte

rnal

Deb

t (%

of

GD

P)




8.1.27 Annual average exchange rate US$–VND

The annual average exchange rate in 2003 was 15510 Vietnamese dongs against the US dollar. It

appreciated to 18549 Vietnamese dongs against the US dollar in 2009.

Figure 44: Vietnamese Annual Average Exchange Rate US$–VND, 2003–2009


15,51015,746 15,859

15,994 16,105

17,065

18,549

0%

4%

8%

12%

13,000

14,000

15,000

16,000

17,000

18,000

19,000

2003 2004 2005 2006 2007 2008 2009

US

$ t

o V

ND

Exch

an

ge R

ate

(An

nu

al

Avera

ge)

US$-VND Exchange Rate (Annual Average) Annual Change (%)




8.2 Infrastructure Quality and Availability

8.2.1 Railways and roadways

The total length of railways and roadways in the country was 2,667.0 and 179,309.1 kilometers

respectively, as of 2009.

Figure 45: Vietnamese Railways and Roadways (kilometers), 2009

Source: World Data Bank and ICD Research Analysis © ICD Research

179,309.1

2667.0

0 50,000 100,000 150,000 200,000

2009

Total Length of Railways (km) Total Length of Road (km)




8.2.2 Automotive products exports trend

Vietnam’s automotive products exports valued US$280 million in 2009, recording a CAGR of 40.19%

during 2003–2009. Exports from this sector are expected to increase at a CAGR of 7.57% in 2010–2015

to reach US$479 million by 2015.

Figure 46: Vietnamese Automotive Products Exports (US$ million), 2003–2015

Source: World Trade Organization and ICD Research Analysis / © ICD Research

37

94

161

303

424

456

280

332

373

405432

455479

-60%

-30%

0%

30%

60%

90%

120%

150%

180%

0

50

100

150

200

250

300

350

400

450

500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Au

tom

oti

ve P

rod

ucts

Exp

ort

s(U

S$ m

n)

Automotive Products, Exports, Total Value(US$ mn) Growth Rate (%)




8.2.3 Automotive products imports trend

Vietnam’s automotive products imports valued US$904 million in 2009, registering a CAGR of 24.17%

during 2003–2009. Imports from this sector are expected to increase at a CAGR of 9.98% during 2010–

2015 to reach US$6366 million by 2015.

Figure 47: Vietnamese Automotive Components Imports (US$ billion), 2003–2015

Source: World Trade Organization and ICD Research Analysis / © ICD Research

904 9941,177

837

1,578

2,448

3,314

3,957

4,598

5,168

5,6285,994

6,366

-40%

-20%

0%

20%

40%

60%

80%

100%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Au

tom

oti

ve P

rod

ucts

Im

po

rts

(US

$ m

n)

Automotive Products, Imports, Total Value(US$ mn) Growth Rate (%)




8.2.4 Total installed capacity for electricity generation

The total installed capacity for the generation of electricity stood at 14.7 million kW at the end of 2009,

registering a CAGR of 8.48% during 2003–2009. It is expected to increase at a CAGR of 5.25% during

2010–2015 to reach 20.3 million kW by 2015.

Figure 48: Vietnamese Total Installed Capacity for Electricity Generation (million kilowatts), 2003–2015

Source: US Energy Information Administration and ICD Research Analysis / © ICD Research

9.0

11.612.3

12.813.9 13.9

14.715.7

16.717.6

18.519.4

20.3

0%

5%

10%

15%

20%

25%

30%

0

3

6

9

12

15

18

21

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

To

tal

Insta

lled

Cap

acit

y fo

r E

lectr

icit

y G

en

era

tio

n (m

n k

ilo

watt

s)

Electricity Installed Capacity (mn kilowatts) Growth Rate (%)




8.2.5 Installed capacity for the generation of conventional thermal electricity

The total installed conventional thermal electricity capacity stood at 8.4 million kW at the end of 2009,

registering a CAGR of 9.50% during 2003–2009. It is expected to register a CAGR of 0.35%

during 2010–2015 to reach 8.6 million kW by 2015.

Figure 49: Vietnamese Installed Capacity for the Generation of Conventional Thermal Electricity (million kilowatts), 2003–2015


4.9

7.4

8.1 8.3 8.4 8.4 8.4 8.5 8.5 8.5 8.5 8.6 8.6

0%

10%

20%

30%

40%

50%

60%

0

1

2

3

4

5

6

7

8

9

10

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Insta

lled

Cap

acit

y f

or

Co

nven

tio

nal

Th

erm

al

Ele

ctr

icit

y G

en

era

tio

n(m

n k

ilo

watt

s)

Conventional Thermal Electricity Installed Capacity (mn kilowatts) Growth Rate (%)




8.2.6 Electricity production

The electricity production was 77 billion kWh in 2009, recording at CAGR of 11.81% during 2003–2009.

It is expected to grow at a CAGR of 10.76% during 2010–2015 to reach 145.3 billion kWh by 2015.

Figure 50: Vietnamese Electricity Production (billion kilowatts hours), 2003–2015


39.444.2

51.359.3

66.859.1

77.0

87.2

97.9

108.1

118.6

130.8

145.3

-16%

-8%

0%

8%

16%

24%

32%

40%

0

30

60

90

120

150

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

To

tal

Ele

ctr

icit

y P

rod

ucti

on

(b

n k

Wh

)

Electricity Production (bn kWh) Growth Rate (%)




8.2.7 Installed capacity for hydro-electricity generation

The hydro-electricity installed capacity stood at 6.2 million kW in 2009, growing at a CAGR of 6.99%

during 2003–2009. It is expected to grow at a CAGR of 7.98% during 2010–2015 to reach 9.7 million kW

by 2015.

Figure 51: Vietnamese Installed Capacity for the Generation of Hydro-electricity (million kilowatts), 2003–2015


4.2 4.2 4.24.6

5.55.9

6.26.6

7.17.6

8.3

9.09.7

0%

5%

10%

15%

20%

25%

0

2

4

6

8

10

12

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Insta

lled

Cap

acit

y f

or

Hyd

roele

ctr

icit

y G

en

era

tio

n(m

n k

ilo

watt

s)

Hydroelectricity Installed Capacity (mn kilowatts) Growth Rate (%)




8.2.8 Electricity consumption

The electricity power consumption stood at 79.9 billion kWh in 2009, growing at a CAGR of 15.23%

during 2003–2009. It is expected to grow at a CAGR of 15.30% during 2010–2015 to reach 187.9 billion

kWh by 2015.

Figure 52: Vietnamese Electricity Consumption (billion kilowatt hours), 2003–2015


34.139.3

45.452.1

59.368.3

79.9

92.2

106.4

122.7

141.4

163.0

187.9

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

30

60

90

120

150

180

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

To

tal

Ele

ctr

ic P

ow

er

Co

nsu

mp

tio

n

(bn

kW

h)

Electric Power Consumption (bn kWh) Growth Rate (%)




8.2.9 Healthcare expenditure

The healthcare expenditure stood at US$6.3 billion in 2009, growing at a CAGR of 19.98% during 2003–

2009. Healthcare expenditure is expected to grow at a CAGR of 11.40% during 2010–2015 to reach

US$12.2 billion in 2015.

Figure 53: Vietnamese Healthcare Expenditure (US$ billion), 2003–2015

Source: The World Bank and ICD Research Analysis © ICD Research

2.12.6

3.24.0

5.0

5.96.3

7.17.8

8.7

9.7

10.8

12.2

0%

5%

10%

15%

20%

25%

30%

0

2

4

6

8

10

12

14

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Healt

hcare

Exp

en

dit

ure

(U

S$ b

n)

Healthcare expenditure (US$ bn) Growth Rate (%)




8.2.10 Healthcare expenditure as percentage of GDP

The healthcare expenditure as a percentage of GDP was 5.3% in 2003 and increased to 6.7% in 2009.

It is expected to reach 6.9% by 2015.

Figure 54: Vietnamese Healthcare Expenditure as a Percentage of GDP (%), 2003–2015


5.3%5.7%

6.0%

6.5%7.0%

6.5% 6.7% 6.8%6.6%

6.8% 6.8% 6.8% 6.9%

0%

2%

4%

6%

8%

10%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Healt

hcare

Exp

en

dit

ure

(%

of

GD

P)




8.2.11 Healthcare expenditure per-capita

The healthcare expenditure per-capita stood at US$71.3 in 2009, growing at CAGR of 18.49% during

2003–2009. Healthcare expenditure per-capita is forecast to increase at a CAGR of 10.25% during

2010–2015 to reach US$129.8 in 2015.

Figure 55: Vietnamese Per-Capita Healthcare Expenditure (US$), 2003–2015


25.831.1

37.7

46.8

58.2

68.171.3

79.786.9

96.1

105.6

116.8

129.8

0%

5%

10%

15%

20%

25%

30%

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Healt

hcare

Sp

en

d p

er-

cap

ita (U

S$)

Healthcare spend per-capita (Current US$) Growth Rate (%)




8.2.12 Total internet subscribers

The total internet subscribers stood at 7.4 million in 2009, registering a CAGR of 44.75% during 2003–

2009. It is forecast to grow at a CAGR of 9.63% during 2010–2015 to reach 13.3 million in 2015.

Figure 56: Vietnamese Internet Subscriptions (millions), 2003–2015

Source: International Telecommunication Union and ICD Research Analysis © ICD Research

0.8

1.7

2.9

4.1

5.2

6.77.4

8.4

9.4

10.4

11.4

12.4

13.3

0%

20%

40%

60%

80%

100%

120%

0

2

4

6

8

10

12

14

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

To

tal

Inte

rnet

Su

bscri

bers

(m

n)

Internet subscribers (mn) Growth Rate (%)




8.2.13 Broadband internet subscribers

The broadband internet subscriber base stood at 2,649 thousand in 2009, growing at a CAGR of

156.97% during 2003–2009. Broadband internet subscribers are forecast to grow at a CAGR of 14.35%

during 2010–2015 to reach 6,204 thousand in 2015.

Figure 57: Vietnamese Broadband Internet Subscriptions (millions), 2003–2015

Source: International Telecommunication Union and ICD Research Analysis © ICD Research

9 53 210517

1,294

2,049

2,649

3,174

3,866

4,440

5,008

5,622

6,204

0%

100%

200%

300%

400%

500%

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bro

ad

ban

d I

nte

rnet

Su

bscri

bers

('000)

Broadband Internet Subscribers ('000) Growth Rate (%)




8.2.14 Mobile phone penetration rate

The mobile phone penetration rate in the country stood at 113% in 2009. This is forecasted to reach

201.7% in 2015.

Figure 58: Vietnamese Mobile Phone Penetration (%), 2003–2015

Source: International Telecommunication Union and ICD Research Analysis / © ICD Research

3.4 6.011.5

22.5

53.0

87.1

113.0

175.3182.3

188.5193.6 197.8 201.7

0

30

60

90

120

150

180

210

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mo

bil

e P

ho

nes P

en

etr

ati

on

Rate

(%

)




8.3 Labor Force

8.3.1 Labor force

The labor force count stood at 47.7 million in 2009, registering a CAGR of 2.82% during 2003–2009.

During 2010–2015, the labor force is expected to register a CAGR of 2.58% to reach 55.6 million by

2015.

Figure 59: Vietnamese Size of Labor Force in 15–59 Age Group (million), 2003–2015

Source: International Labor Organization and ICD Research Analysis / © ICD Research

40.4 41.6 42.8 44.0 45.2 46.5 47.7 49.0 50.2 51.5 52.9 54.2 55.6

0.0%

1.0%

2.0%

3.0%

4.0%

0

10

20

30

40

50

60

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Siz

e o

f L

ab

or

Fo

rce (

mn

)

Size of Labor Force - working age population (15–59 years) (mn) Growth Rate (%)




8.3.2 Unemployment rate

The Vietnamese unemployment rate increased from 2.3% in 2003 to 2.4% in 2009. During 2010–2015,

the unemployment rate is expected to remain constant at 2.4%.

Figure 60: Vietnamese Unemployment Rate (%), 2003–2015

Source: International Monetary Fund and ICD Research Analysis © ICD Research

2.3%2.1% 2.2% 2.3%

2.3%2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Un

em

plo

ym

en

t R

ate

(%

)




8.4 Demographics

8.4.1 Total population

The country’s total population increased from 81.6 million in 2003 to 87.9 million in 2009, registering a

CAGR of 1.25% during 2003–2009. The total population is expected to increase at a CAGR of 1.05%

during 2010–2015 to reach 93.7 million in 2015.

Figure 61: Vietnamese Total Population (million), 2003–2015

Source: US Census Bureau and ICD Research Analysis © ICD Research

81.682.7

83.884.8

85.886.9

87.988.9

89.990.9

91.892.8

93.7

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

75

79

83

87

91

95

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mid

-Year

Po

pu

lati

on

, T

ota

l (m

n)

Mid-Year Population, Total (mn) Growth Rate (%)




8.4.2 Urban and rural population

The urban population as a percentage of total population increased from 25.6% in 2003 to 28.3% in

2009. It is expected to increase to 31% by 2015.

Figure 62: Vietnamese Urban and Rural Population (%), 2003–2015


25.6% 26.0% 26.4% 26.9% 27.4% 27.8% 28.3% 28.7% 29.2% 29.7% 30.1% 30.6% 31.0%

74.4% 74.0% 73.6% 73.1% 72.6% 72.2% 71.7% 71.3% 70.8% 70.3% 69.9% 69.4% 69.0%

0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Urb

an

-R

ura

l P

op

ula

tio

n (

%)

Urban Population % Rural Population %




8.4.3 Female percentage of population

The amount of females as a percentage of the population decreased from 50.7% in 2003 to 50.4%

2009. It is expected to decrease further to 50.2% by 2015.

Figure 63: Vietnamese Female as a Percentage of Population (%), 2003–2015

Source: US Census Bureau and ICD Research Analysis / © ICD Research

50.7%

50.6% 50.6%

50.5% 50.5%

50.4% 50.4% 50.4%

50.3% 50.3%

50.2% 50.2% 50.2%

50.00%

50.25%

50.50%

50.75%

51.00%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fem

ale

s (

% o

f p

op

ula

tio

n)




8.4.4 Male percentage of population

The amount of males as a percentage of the population increased from 49.3% in 2003 to 49.6% in 2009.

During 2010–2015 it is expected to increase further to reach 49.8% in 2015.

Figure 64: Vietnamese Male as Percentage of Population (%), 2003–2015


49.3%

49.4% 49.4%

49.5% 49.5%

49.6% 49.6% 49.6%

49.7% 49.7%

49.8% 49.8% 49.8%

49.00%

49.20%

49.40%

49.60%

49.80%

50.00%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Male

s (

% o

f p

op

ula

tio

n)




8.4.5 Mean age of population

The mean age of the population increased from 27.5 years in 2003 to 29.2 years in 2009. It is expected

to increase further during 2010–2015 to reach 31.1 years in 2015.

Figure 65: Vietnamese Mean Age of Population (years), 2003–2015


27.527.8

28.128.4

28.628.9

29.229.6

29.930.1

30.530.8

31.1

25

27

29

31

33

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mean

Ag

e o

f P

op

ula

tio

n




8.4.6 Median age of population

The median age of the population increased from 24.5 years in 2003 to 27 years in 2009. It is expected

to increase further during 2010–2015 to reach 29.6 years in 2015.

Figure 66: Vietnamese Median Age of Population (years), 2003–2015


24.5

24.925.2

25.6

26

26.5

27

27.4

27.8

28.2

28.6

29.1

29.6

23

24

25

26

27

28

29

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Med

ian

Ag

e o

f P

op

ula

tio

n




8.4.7 Population density

The population density increased from 251.4 in 2003 to 267.3 in 2009. It is expected to reach 283.1 by

2015.

Figure 67: Vietnamese Population Density (per square kilometer), 2003–2015


251.4254.1

256.7259.4

262.1264.7

267.3269.9

272.5275.1

277.8280.5

283.1

200

220

240

260

280

300

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Po

pu

lati

on

Den

sit

y (

per

sq

.km

)




8.4.8 Age distribution of the total population

The people in the age group of 0–14 years formed the largest age group with a share of 26.1% of the

total population in 2009. This group is expected to take a share of 24.1% in 2015. During 2003–2009,

people in the age group of 25–39 registered a CAGR of 1.91%. During 2010–2015, the amount of

people in the age group of 40-64 is expected to grow at the highest rate with a CAGR of 3.5%.

Figure 68: Vietnamese Population Distribution by Age (%), 2003–2015


0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Ag

e D

istr

ibu

tio

n (

% o

f p

op

ula

tio

n)

Age Distribution, total 0-14 Age Distribution, total 15-24 Age Distribution, total 25-39

Age Distribution, total 40-64 Age Distribution, total 64+




8.4.9 Age distribution of the male population

Figure 69: Vietnamese Male Population Distribution by Age (%), 2003–2015


0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ag

e D

istr

ibu

tio

n

(% o

f m

ale

po

pu

lati

on

)

Age Distribution, Male 0-14 Age Distribution, Male 15-24 Age Distribution, Male 25-39

Age Distribution, Male 40-64 Age Distribution, Male 64+




8.4.10 Age distribution of the female population

Figure 70: Vietnamese Female Population Distribution by Age (%), 2003–2015


0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ag

e D

istr

ibu

tio

n

(% o

f fe

male

po

pu

lati

on

)

Age Distribution, Female 0-14 Age Distribution, Female 15-24 Age Distribution, Female 25-39

Age Distribution, Female 40-64 Age Distribution, Female 64+




8.4.11 Number of households

The number of households in the country stood at 22.1 million by the end of 2009, growing at a CAGR of

2.51% during 2003–2009. This is expected grow at the same rate during 2010–2015 to reach 25.6

million by 2015.

Figure 71: Number of Vietnamese Households (million), 2003–2015

Source: UN Habitat and ICD Research Analysis / © ICD Research

19.019.5

20.020.5

21.021.6

22.122.7

23.223.8

24.425.0

25.6

15

18

21

24

27

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Nu

mb

er

of

Ho

useh

old

s (

mn

)

APPENDIX



9. Appendix

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