THE energy of Vietnam hits you the moment you emerge from the airport.
The heat and humidity comes first followed by the hustle and bustle of taxis and people selling tourist trinkets, in a country quietly emerging from war into economic prosperity.
The evidence of its growth can be seen on the streets of Ho Chi Minh City or Hanoi, with footpaths clogged with food vendors selling everything from steaming soup to cheap T-shirts.
The loud, cramped fresh produce markets now sell an array of imported beef, alongside locally grown traditional pork and seafood.
Motorbikes choke city streets as the locals commute to work, a symbol of the extraordinary economic progress the country has made since the US lifted its trade sanctions in 1995.
Australia has a strong bond with Vietnam.
Australian men fought in the Vietnam War, then there was mass migration of Vietnamese to our shores in the following decades. Vietnam became the fifth-largest source of immigration to Australia.
Australian Horticultural Exporters’ Association chair David Minnis says Australia’s early trade links after the war have not been forgotten. “We were one of the first countries to recognise them after the war … and Australia is looked at favourably for this,” Mr Minnis says.
Opening up the economy has paid off, with Vietnam becoming the poster child of the World Bank when it spectacularly reduced its poverty rate from almost 60 per cent in 1993 to about 10 per cent in 2010. This was assisted by Vietnam’s entry to the World Trade Organisation in 2007 and its recently signed series of trade agreements, including the ASEAN — Australia — New Zealand free-trade agreement and the Trans-Pacific Partnership Agreement.
Most recently it also signed an FTA with the European Union, which may present strong competition to Australian exporters in the future.
There are 94 million people in Vietnam, with the country now considered lower middle class, with an average income of US$2100 per capita.
Vietnam’s economic growth is outstripping that of all other South-East Asia countries, and is catching up on its neighbour China, whose economy has slowed, dragging down many South-East Asian economies with it. China’s GDP growth peaked at 14 per cent in 2007 but last year posted its slowest growth in 25 years, of 6.9 per cent.
In the 15 years to 2015 Vietnam’s GDP growth averaged 6.15 per cent, averaging 6.7 per cent in 2015. ANZ Bank has tipped Vietnam’s growth to be 6.5-7 per cent in the next four years, yet ANZ’s Singapore-based ASEAN economist, Weiwen Ng, says this is well below its potential.
“Vietnam’s GDP growth prospects are bullish,” Mr Ng says.
“We are tipping it has the potential for 8 per cent growth.”
He says labour costs in Vietnam are about half that of China, with manufacturing moving into Vietnam.
“Vietnam could be the new factory of Asia,” he says.
IHS Global Insight Asia-Pacific chief economist Rajiv Biswas says Vietnam’s economy is still relatively small, at about US$200 billion. In comparison China’s is US$9180 billion, Indonesia’s US$870 billion and Australia’s US$1505 billion.
Vietnam, Mr Biswas says, has been transformed in the past decade, most recently by its textiles industry and electronics manufacturing. Electronics has grown in size from $US6.9 million in 2011 to $US46 billion last year.
Mr Biswas says these growth industries are increasing incomes and spending power, especially in the cities, creating a higher-income population that will provide opportunities for Australia. “The middle class is growing very fast. It will double in size by 2030 to 30 million and the spending power will grow as well,” Mr Biswas says. “With a bigger middle class we expect to see rapid growth in processed agriculture products.”
Wheat is Australia’s largest agricultural export to Vietnam, worth $415 million in 2014-15, ranked third behind education and seafood. Vietnam regularly ranks in the top 10 destinations for Australian wheat, with exports increasing dramatically, from 380,000 tonnes in 2007 up to a high of 2.4 million tonnes in 2011.
Vietnam’s wheat-import market has big growth potential given locals in South-East Asian nations consume just 13kg of flour a year, compared to 23kg a head in Indonesia and 39kg in Singapore.
Australia’s largest exporter, CBH Group, has recognised Vietnam’s potential. The co-operative has a 50-50 joint venture with Indonesia’s Salim Group in South-East Asian milling company Interflour. Two of its nine flour mills are in Vietnam. The Vietnam operations contribute 40 per cent of Interflour’s profit.
The Vietnamese use wheat for noodles, but with a strong French colonial past, breads and cakes are also a significant part of their diet. “Every kilo of consumption that goes up makes a huge difference when there’s about 90 million people to feed,” Interflour group project director Joe Pampano says.
Interflour is building a malting plant at its Cai Mep facility south of Ho Chi Minh City to capitalise on rising beer demand. Vietnamese beer consumption has jumped 200 percent over the past decade. With a large youth population, almost one million people reach the legal drinking age of 18 each year.
While grain is Australia’s biggest agriculture export, live animal exports are rapidly closing in after a sharp increase in demand for live cattle from Australia, which was worth $331 million in 2014-15. According to Meat and Livestock Australia, 350,000 live cattle went into Vietnam last year, almost double the amount of live animals shipped in 2014, and significantly more than the 66,953 shipped in 2013.
MLA Singapore international business manager Andrew Simpson attributes this spectacular live-export growth to a drought in South-East Asia and low import permits for Australian beef into Indonesia last year, resulting in Australian exporters directing increased numbers to Vietnam. MLA predicts exports to Vietnam to drop this year to 71,000 head.
Vietnamese love beef and their preference ranges from high-end product to low quality off-cuts and offal, Mr Simpson says.
He says the average beef consumption in Vietnam is about 5-6kg per person a year, although this is much higher in the bigger cities.
Live cattle imports is an opportunity for the Vietnamese to value-add to the beef and trade it into one of the six Asian nations it shares a border with, including China, he says.
“Markets between Vietnam and China have been around a lot longer than the trade with Australia … it has a huge potential for Vietnam to sell to other countries in the Pacific Rim,” Mr Simpson says.
Dairy-product trade to Vietnam is not significant cant for Australia but Vietnam’s “attractive demographics” make it one to watch, according to Dairy Australia. ANZ Bank Vietnam chief executive Dennis Hussey says although the Vietnamese dairy industry is small, there could be good opportunities for agribusiness firms to invest in this area.
Horticulture trade between Australia and Vietnam is a sore point, after the Vietnamese Government banned the $40 million fruit export trade in January last year citing fruit-fly concerns. The ban was partially lifted in July, with citrus and table grapes allowed back in, but stonefruits and cherries remain embargoed while trade official in both countries continue negotiations.
Austrade Vietnam trade commissioner Katharine Heather says the ASEAN FTA, which started last October, will also deliver benefits.
In January tariffs on many Australian food and beverage exports to Vietnam fell significantly, and will be removed completely on some items over the next two years.
Ms Heather has lived in Vietnam for nine months and says she constantly sees opportunities, with many locals eating out every day. “They want to try new foods and enjoy their newfound prosperity,” she says. “I think many Australians are not aware of the transformation under way in Vietnam, and I urge businesses to take a closer look.”
You get the feeling the Australia-Vietnam relationship, which started decades ago in war, is starting a new brand new and tastier chapter.