Vietnam: A market of pho-nomenal opportunities

If you love food, you’ve likely noticed the growing popularity of Vietnamese cuisine in Canada and around the world. With winter approaching, there’s nothing better than a hot bowl of Pho—a noodle dish consisting of broth, herbs and meat that’s become a symbol of the country’s traditions, flavours and warmth. And don’t forget the delicious Banh mi sandwich, created in late 1950s Saigon, as an affordable meal on-the-go, rich in both flavour and calories.

Much like its vibrant cuisine, Vietnam’s economy has seen remarkable growth over the past three decades, substantially boosting income levels in the country. In fact, Vietnam’s gross domestic product (GDP) per capita, after adjusting for inflation, has grown between 5% and 8% a year over the last 30 years. And remember, that at a rate of 7%, income levels double every 10 years. So, since the early 1990s, income levels have surged by almost five times. Today, with a population of 100 million people, and a GDP exceeding US$400 billion, Vietnam stands as a major economic force in Southeast Asia.

Foreign direct investment (FDI) and trade have been critical to this impressive growth story. Vietnam’s favourable investment climate—characterized by low labour costs, political stability, and investor-friendly regulations and incentives—has made it an attractive destination for companies based abroad. In 2023, the total stock of FDI reached almost US$300 billion, nearly 70% of the country’s GDP. More than 60% of this has gone into the manufacturing sector, making Vietnam a regional manufacturing powerhouse. Roughly half of Samsung’s global smartphone production comes from Vietnam, for example.

When it comes to trade, Vietnam is one of the world’s most open economies. As a member of the Association of Southeast Asian Nations (ASEAN), and through individual deals, Vietnam has signed 17 free trade agreements (FTAs), covering more than 50 countries, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which Canada is a member. These agreements have significantly boosted Vietnam’s trade activities, helping to drive its economic growth.

This stable growth environment is expected to propel more than half of Vietnam’s population into the global middle class by 2035, driving demand for goods and services over the medium to long term. The country’s manufacturing and export-led growth model will continue to drive import activities, creating significant opportunities for Canadian exporters across a range of industries. To put this into perspective, Canada accounted for only 0.2% of Vietnam’s total merchandise imports in 2023. If we can grow our market share to just 1%, that would result in almost US$2.5 billion worth of additional exports for Canada.

At a sector level, a significant portion of new spending will be directed towards food, including the aforementioned, meat-rich delicacies and other high-protein options. This presents substantial opportunities for Canada, renowned for our high-quality meat products. Canada already has a strong presence in Vietnam, being the second-largest source of frozen boneless beef in 2022. Canadian exporters can further leverage this to consolidate our market position and explore related agricultural product opportunities.

Vietnam’s rapid pace of industrialization, combined with its commitment to achieve net zero carbon emissions by 2050, will create opportunities in green technologies and renewable energy. A focus on infrastructure modernization, backed by spending worth almost 6% of GDP, opens prospects in planning, design, project management and advanced engineering. Increased digitization, together with an increasingly tech-savvy population, creates opportunities in ICT and digital services. Nearly 80% of Vietnam’s population used the internet in 2023, and this number is steadily rising. What’s more, geopolitical tensions are prompting supply chain relocations into Vietnam, particularly in the tech sector, as companies look to de-risk their supply chains. This aligns with Vietnam’s goal of advancing from low-value electronics assembly to high-tech manufacturing, such as chip production.

These trends offer numerous opportunities for Canada to help fill gaps in Vietnam and boost Canadian exports at the same time. The CPTPP, will level the playing field for Canadian exporters, and allow investors to invest with greater confidence. That’s not to say that these opportunities are free from challenges. Complex regulations, the dominant role of state-owned enterprises, and heightened levels of bureaucracy continue to plague the Vietnamese market. Infrastructure inefficiencies and competition from regional players such as South Korea, Japan, China and Australia only add to the challenges.

Vietnam presents significant opportunities for Canadian exporters

Vietnam’s economic trajectory offers a compelling opportunity for Canadian exporters and investors. As the country’s economic landscape evolves, Canada will find numerous opportunities in sectors where we hold comparative advantages. While doing business in Vietnam comes with challenges typical of emerging markets, these can be effectively managed with the right strategies and support. As Vietnam strives to achieve high-income status by 2045, expanding its role in global trade, Canadian companies are ideally positioned to be key partners in this ambitious journey.

Export Development Canada (EDC) recently opened representation in Ho Chi Minh City. If you want to know more about doing business in Vietnam, please contact Nathan Nelson, our regional vice-president South & Southeast Asia, who oversees the Vietnamese market.

This week, a very special thanks to Nadeem Rizwan, economist in our Economics department.

As always, at EDC Economics, we value your feedback. If you have ideas for topics that you’d like us to explore, please email us at economics@edc.ca and we’ll do our best to cover them.