Country Commercial Guides 2004

Chapter 5 - Leading Sectors For U.S. Exports And Investment

A. BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES

Computer Hardware and Services

Rank of Sector: 1
Name of Sector: Computer Hardware and Services
ITA Code: CPT, CSV

	2001 (actual)	2002 (estimated)	2003 (estimated)
Total Value of IT Market*	337	417	690
Computer Hardware
Total Market Size	265	329	552
Total Local Production	56	69	110
Total Exports	7	9	12
Total Imports	216	269	454
Imports from the U.S.	105	131	164
Computer Services
Total Market Size	36	43	69
Total Local Production	11	13	16
Total Exports	N/A	N/A	N/A
Total Imports	25	30	53
Imports from the U.S.	15	18	32

Vietnam's rapidly developing Information Technology (IT) industry was only valued at US$ 337 million in 2001, but is estimated to double to US$ 690 million by 2003, and to reach US$ 800 million by 2005, according to the International Data Group (IDG), an IT research firm. Surveys recently conducted by IDG and the local industry association show the growth rate of Vietnam's IT market to be around 25 percent per year. This percentage has remained relatively steady for the last several years and is expected to hover in the same range in the near future.

The Government of Vietnam is strongly committed to boosting the development of this industry, particularly in the software production sector, Internet infrastructure, IT education promotion, and other forms of human capital development.

Vietnam has been a hardware-focused market for the past five years.During this time, computer hardware is believed to account for approximately 80 percent of total IT spending, while the software and service sectors shared the rest equally. This focus on hardware reflects, in part, the widespread piracy of software and lack of effective Intellectual Property Right (IPR) enforcement.

The total market for computer hardware and peripherals in 2002 was US$ 329 million and is estimated to reach US$ 552 million in 2003. The IT market is still concentrated in two major cities: Ho Chi Minh City, which captures approximately 60.5 percent of the total market, and Hanoi, which accounts for approximately 29.8 percent of the total market.

Almost all-leading PC manufacturers have marketing operations in Vietnam with Hewlett-Packard, Compaq, Dell and IBM leading the market. Vietnam will continue to import a significant number of PCs and peripherals.The primary customers for imported equipment are multi-national corporations, large state-owned-enterprises, and the government.PCs for the domestic consumer market are mostly locally produced with low-end Asian components.

Internet service providers represent another fast-growing industry sector for IT equipment, software, and service suppliers.Vietnam currently has over 250,000 Internet subscribers. The figure will increase rapidly, as there are significant efforts to broaden the availability of the internet for public use. The Central Government has recently granted licenses to the Corporation for Financing and Promoting Technology (FPT) and military-based, Vietel, to be the Internet Exchange Service Providers (IXP). This move has broken the monopoly of Vietnam National Post and Telecommunications Corporation (VNPT). The Government has also approved an Internet development plan from 2001 to 2005 that calls for three to five IXPs, 30 to 40 ISPs, and many more On-line Service Providers (OSPs). The Government has made significant investments in large commercial and scientific centers to encourage IT development in the country.These include the Hoa Lac High-Tech Park (HTTP) in Hanoi, Quang Trung Software in Ho Chi Minh City, and Saigon High Tech Park in Ho Chi Minh City. The quality of Internet services is also improving throughout the country. Broadband Internet services have been introduced in Vietnam including ISDN, xDSL, VSAT, wireless access, etc. These hold great potential for U.S. hardware and service suppliers. Since the central government generally prescribes the internet service rates, ISPs in Vietnam will need to distinguish themselves through quality of connection and service.

The computer services market has developed as a two-tier market with foreign computer firms serving foreigners, and Vietnamese firms catering exclusively to their few Vietnamese clients. For the most part, foreign companies seeking computer services use foreign invested service providers. Meanwhile Vietnamese companies rely on local computer retailers who offer a limited package of services at little or relatively no cost as an incentive to increase hardware sales.

The IT industry will offer opportunities for training service providers as well. The Vietnamese Government has drawn up an ambitious plan for the domestic industry that aims at reaching an annual turnover of US$ 500 to US$ 800 million by 2005, and US$ 3 billion by 2020. The plan consists of three major programs: the development of IT human resources, the development of a software export sector, and the development of a hardware manufacturing base. Currently, Vietnam does not have the capability to execute the Government's plan in any of these areas.In order to do so, significant investment in training and technology transfer must occur – a need that offers tremendous export opportunities for American IT hardware and service suppliers.

Despite existing barriers such as poor telecom infrastructure and high communication costs, many American IT companies find Vietnam to be an attractive market and are optimistic about an emerging IT industry in Vietnam. The general outlook of the IT industry sector is very positive over the long term.

Power Generation, Transmission, and Distribution

Rank of Sector: 2
Name of Sector: Electrical Power Systems & Power Transmission Equipment
ITA Code: ELP & PTE

ELP & PTE Market	2001 (actual)	2002 (actual)	2003 (estimate)
Total Market Size	1,030.0	1,180.0	1,670.0
Total Local Production	165.0	212.0	334.0
Total Exports	0.0	0.0	0.0
Total Imports	865.0	968.0	1,336.0
Imports from the U.S.	35.0	48.0	70.0
Exchange rate (US$/VND)	14,700	15,200	15,500

At present, the electric power industry in Vietnam is solely managed by Electricity of Vietnam (EVN), a state-owned monopoly with 52 subsidiaries, which is in turn overseen by the Ministry of Industry (MoI). According to MoI, Vietnam’s estimated demand for electricity from now to the year 2010 will grow annually at the rate of 12-15percent. Economic expansion, rising living standards, increasing consumerism, extensive industrialization, and Vietnam's plan to increase the electrification rate in rural areas from the current 77.4percent to nearly 100percent by 2010 have fueled this growth.

In 2003, the total power output is expected to surge from 35.6 billion kWh (2002) to 41.0 billion kWh generated by about 20 major power plants with a total capacity of 10,800 MW. In 2002, 97 percent of districts (counties), 84.9 percent of communes (villages) and 77.4 percent of households in the rural areas already had access to the national power grid. The total power loss rate in the industry is estimated at 14.2 percent. EVN is striving to improve its efficiency by reducing the total power loss rate to 13 percent in 2005, 10 percent in 2010 and 8 percent in 2020.

According to the Power Development Masterplan V, to meet the growing demand for power estimated at 49-53 billion kWh in 2005, 89-93 billion kWh in 2010, and 160-220 billion kWh in 2020, an investment of US$19-20 billion by 2010 will be needed to develop 40 new power generation projects totaling 12,900 MW in capacity including 25 hydroelectric plants, eight gas or oil power plants, and seven coal-fired plants. This fund will also be spent on the construction of about 15,000 km of 110 – 500kV transmission lines together with 300,000 km of low medium and low voltage distribution lines as well as upgrading existing facilities to cut power loss and increase system efficiency.

The primary sources of finance for investment in the power sector are from Official Development Assistance (ODA) grants and loans committed by the World Bank (WB), Asian Development Bank (ADB), bilateral funds from various foreign governments, and funds from the Vietnamese government at less-than-market rates. Primary bilateral donors in the power sector include Japan (via JBIC), France (via AFD), Germany, Sweden (via SIDA), Belgium, Spain, Switzerland, China, Russia, and Finland. Other crucial sources of finance over the next decade include foreign suppliers’ credits, EVN’s retained earnings, and state funds. Recently, local commercial banks have been very active in providing finance for power generation projects developed by EVN and other state-owned enterprises.

Despite a rise in the electricity tariff rate from U.S. 5.1 cents to 5.6 cents per kWh (as compared to EVN’s actual average cost of generation of 7.5 cents/kWh) effective from October 2002, the current power price continues to be subsidized and as a result, EVN remains a financially weak utility

To draw the necessary capital, the power generation sector will be opened to foreign and domestic investors from other industries to develop Independent Power Producers’ (IPP) projects under various forms of investment such as Build-Operate-Transfer (BOT), Build-Transfer (BT), Build-Transfer-Operate (BTO), Joint Stock Companies, and Joint Ventures (JVs). IPPs currently generate only about 6.9 percent of total power supply output. The Government has decided to allow up to 35-40 percent of the national total generation capacity to be in the hands of IPPs among which foreign owned plants are permitted to generate at most 20 percent. This program of liberalization presents significant sales and investment opportunities for U.S. companies. Implementation of this guideline is, however, considered very slow and inconsistent among different ministries and government agencies from time to time.

The power generation market may be divided into five main segments: (1) project management, consulting and engineering services, (2) installation and construction services, (3) machinery, equipment and materials, (4) supply of equipment, spare parts, materials, consumables, and overhaul and maintenance services (aftermarket), and (5) investment in new IPP power projects in the form of BOT, BT, BTO and JV. Of these, U.S. firms are most competitive and able to find significant opportunities in engineering and consulting services, project management services, supply of machinery and equipment to new power projects, supply of spare parts to existing power plants, and investment in developing IPP power projects.

The power transmission and distribution market may be divided into four main areas: (1) project management, consulting, and engineering services, (2) installation and construction services, (3) high, medium, and low voltage electrical equipment for the national grid, and (4) medium and low voltage electrical equipment for industrial, institutional and household users. The national grid is, by far, the largest sector. U.S. firms are most competitive in the following product and service categories:

Consulting and engineering services for high tension power transmission projects.
Electrical equipment such as capacitors, circuit switches, switchgears, insulators, etc.
Electrical protection equipment such as surge arresters, fuse cutouts, circuit breakers, reclosers, etc.
Electrical testing, calibration equipment, and instruments.
Pole line hardware for high-tension transmission lines.

Understanding local business and procurement practices is crucial to successfully doing business in Vietnam. Normally, procurement under ODA loan projects is governed by standard procedures and guidelines of the respective donors and is carried out through open international competitive bidding. Procurement funded by the Vietnamese government budget is regulated by various government regulations on investment, construction, bidding and procurement. Purchases funded by the government are often carried out through open bidding, limited bidding or direct contracting depending on value, types of goods and projects. Contracts are often awarded to those who are familiar with project developers and, of course, can offer an appropriate price, good credit terms, and decent quality. This procurement process is perceived to be nontransparent, inconsistent, very bureaucratic, and complicated. Procurement decisions are usually made collectively with lobbying efforts from involved contractors as well as the influence of various political infighting factions. As a result, to be successful, we advise U.S. firms to get involved in interested projects at the “ground floor” stage.

The competition is tough, and companies from Japan, Germany, Sweden, Switzerland, China, Britain, and other countries are very active in the market. However, Vietnam favors a diversity of foreign supplier relationships in its approach to working with vendors, thus U.S. firms have a good opportunity to compete for supplier contracts. While the competition from international rivals is strong, American firms are highly respected for their quality and advanced technologies in the power industry. Interested U.S. firms should also contact U.S. government financing and insurance agencies such as Trade Development Agency (TDA), Overseas Private Investment Corporation (OPIC), and Export-Import Bank (EXIM) to enhance their competitiveness.

Telecommunications Equipment and Services

Rank of Sector: 3
Name of Sector: Telecommunications Equipment
ITA Code: TEL

Telecommunications Equipment	2001 (actual)	2002 (actual)	2003 (estimated)
Total Market Size	599.8	647.8	809.4
Total Local Production	181.6	217.9	283.3
Total Exports	11.8	12.6	16.4
Total Imports	406.4	417.3	542.5
Imports from the U.S.	28.4	37.6	54.5
Exchange rate (US$/VND)	15,200	15,250	15,300

Rank of Sector: 6
Name of Sector: Telecommunications Services
ITA Code: TES

Telecommunications Services	2001 (actual)	2002 (actual)	2003 (estimated)
Total Market Size	1,350	1,552.5	1,668.8
Total Local Production	1,161	1,334.1	1,734.3
Total Exports	119	134.4	174.7
Total Imports	70	84	109.2
Imports from the U.S.	25	27.8	40.3
Exchange rate (US$/VND)	15,200	15,250	15,300

Telecommunications and related industries are currently among the fastest growing industries in Vietnam. Vietnam's telecom sector has been rated by the International Telecommunication Union as the second fastest-growing telecom market in the world after China.

With a population of 80 million, Vietnam has sky-rocketed from 80,000 fixed telephone line users in 1986 to the level of 1.3 million telephones installed in 2002, bringing the total current number to 5.6 million - an average of just under 7 phones per 100 people. Official figures show more rural communes are being serviced, i.e. 92 per cent of villages now have telephone access. There has also been an increase in Internet usage with subscriptions up from 93,000 in 2001 to 235,000 in 2002. However, it is estimated that the number of internet users to be less than 200,000 nation-wide, with the bulk of users living in Hanoi and HCMC, the two largest cities in Vietnam. In 2002, demand for telecom services continued to grow along with the nation's overall economic recovery. Telephone development went up by 30 percent, the highest level for the past 6 years. At present, the two largest mobile phone networks in Vietnam using GSM technology include Vinaphone (run by GPC – a wholly owned subsidiary of VNPT) and MobiFone (run by a BCC between VNPT and Comvik International AB of Sweden) have 1.8 million subscribers, including prepaid. The former, the market leader, takes around 58 percent of the market. Competition among mobile network operators in Vietnam seems heating up with the participation of more players will join the rapidly expanding telecommunications market with lower fees. Vietel, a new entrant, plans to launch a mobile network on a pilot basis. A Vietel senior executive said the company would offer lower subscription fees. Vietel plans to initially launch the service in Hanoi, Da Nang City and HCMC, and later extend it to the cities of Hai Phong, Quang Ninh and Vung Tau. This mobile phone network will expand nationwide within three years. SPT, another new entrant, is joining hands under a business cooperation contract (BCC) with South Korean consortium called SLD Telecom to launch the third-generation (3G) cell phone service using Code Division Multiple Access (CDMA) technology in June 2003. The US$ 250 million network is the first time the country has used CDMA technology. The new mobile phone network called S-phone using CDMA technology will allow high-speed and high-capacity data transmission. S-phone subscribers can access the Internet, watch movies, send multimedia messages and locate other cell phone users. VNPT, the biggest player in Vietnam’s telecomm industry, expects to see 1.4 million more phone subscribers this year. The number of mobile phone users is predicted to reach more than 7 million by the end of 2005. Vietnam boasts that all 61 cities and provinces in the country have already been equipped with digital switching systems and have been linked up with each other and the rest of the world. The telecommunications sector aims to expand the telephone network so there will be 10 sets for every 100 people in 2005 and between 15-18 by 2010. Vietnam plans to develop the nation's telecommunications infrastructure, including the installation of wide-band Internet access and cable links nation-wide. It is predicted that in 2010, the national information highway will be connected to all communes and districts nation-wide by cable and other bandwidth methods, with at least 30 percent of subscribers being able to access telecommunications and the Internet. By 2010, telephone and Internet use are predicted to reach the regional average, with 60 percent of households owning telephones. While increasing telecom capacity, Vietnam has reduced international telecom charges by a yearly average of 10 percent and has increased international volume by 18 percent annually.

At present, major end-users for the telecom equipment and services are the "big-six" of Vietnam’s telecommunications industry, namely: 1) Vietnam Posts and Telecommunications Corp. (VNPT), 2) Military Electronics Telecommunications Company (Vietel), 3) Sai Gon Post and Telecommunications Joint Stock Company (Saigon Postel or SPT), 4) Maritime Communication and Electronics Company (Vishipel), 5) Electricity Telecommunication Company (ETC), and Hanoi Telecom Joint Stock Company (Hanoi Telecom). Among these, VNPT is still the dominant player over most areas of the lucrative telecom sector.

With the open-door policy, there will be a reduction on the monopoly of state corporations in the future, enabling rapid movement into a competitive market. The Government of Vietnam has approved plans for development of the telecom market, allowing enterprises from all economic sectors to take part in post and telecom services supply. However, the State still retains control in some key phases. The non-state sector is expected to increase its service market share in post and telecom markets by 25-30 percent by 2005 and 40-50 percent by 2010. The strategy encourages all forms of foreign investment, including 100 percent foreign-invested firms, to transfer technology into the country.

Vietnam will gradually open up its telecommunication market to U.S. companies following the ratification and entry into force of the U.S.-Vietnam Bilateral Trade Agreement (BTA). Vietnam is also hoping for a considerable transfer of technology and know-how from U.S. involvement. Apart from the commitments on liberalization of the telecom products market, mainly on taxation reduction and conditions for export/import, U.S. and Vietnam have made commitments on liberalizing the telecom service market. This includes permitting the establishment of joint venture enterprises. Accordingly, two years after the initiation of the Agreement, the telecom industry is permitted to provide value-added services; three years after the initiation, the telecom industry is permitted to provide Internet services; four years after the initiation, the telecom industry is permitted to provide basic services such as circuit-switched data, packet-switched data, telex, telegraph, private leased circuit, radio-based services such as cellular mobile and satellite services; and six years after the initiation, the telecom industry is permitted to provide telephone services including fixed local, long distance, and international services. None of the Joint Ventures will be allowed to build telecommunication networks, and therefore will have to lease lines and gateway facilities from VNPT, the Vietnamese largest state-run telco. Despite limited access, U.S. companies still have the chance to pose a significant challenge to VNPT's dominance. The BTA requires equal footing for companies competing for tenders or supply contracts. This offers a major opportunity for American companies.

Under a plan approved by the Government of Vietnam, Vietnam will need US$4-6 billion in investments over the next ten years for developing its postal and telecommunications networks, and another US $5-6 billion over the following ten years.

Oil and Gas Machinery and Services

Rank of Sector: 4
Name of Sector: Oil and Gas Machinery and Services
ITA Code: OGM/OGS

Oil and Gas Field Machinery and Services	2001 (actual)	2002 (actual)	2003 (estimated)
Total Market Size	970	1,360	1,559
Total Local Production	65	350	400
Total Exports	15	20	25
Total Imports	920	1,030	1,184
Imports from the U.S.	72	90	104
Exchange rate (US$/VND)	15,200	15,250	15,300

Vietnam’s oil and gas industry ranked third among producers and exporters in Southeast Asia with the exports of 17.1 million tons of crude oil worth 3.2 billion USD, brought ashore 2.26 billion cubic meters of gas and exported nearly 16.9 million tons of crude oil in 2002. For most oil majors, it is considered an immature market that has yet to truly prove itself as a major oil producing country. Vietnam’s oil and gas industry only began 15 years ago but is now the country’s leading export earner. Vietnam's oil and gas industry is now capable of exploiting nearly 50,000 tons of crude oil and 6.3 million cubic meters of gas every day. The exports of crude oil in the first two months of this year also surged by 0.5 percent in volume and 71.9 percent in value, from the same time last year, to 2.8 million tons worth $ 689 million, according to government figures. However, Vietnam currently has to export all its crude oil and imports all its petroleum (about 7-8 million tons annually) to meet domestic demand. The import of petroleum products reached 10 million tons worth $2 billion in 2002, up 11.1 percent and 10.4 percent, respectively, on-year. In the first two months of the year 2003 the official figures were 1.4 million tons worth $ 330 million, down 9.7 percent and up 38.5 percent, on-year. PetroVietnam forecasts that the annual crude oil capacity of this country is likely to reach 27-30 million tons in the following five years and the domestic demand for petroleum will grow to 12.3 million tons per annum from 2005 and 16-17 million tons per annum after 2010. Vietnam contains over 1.35 billion barrels of proven oil reserves, with probable and possible reserves ranging as high as several billion barrels. Virtually all oil exploration and production activities occur offshore, in the Cuu Long, Nam Con Son, and Southwest and PM3 basins. In 2002, exploiting activities of PetroVietnam were carried out mainly in six fields, namely Bach Ho (White Tiger), Rong (Dragon), Dai Hung (Great Bear), Rang Dong (Dawn), PM3 and Ruby. The gas flow from Lot 06.1 of the Lan Tay field in the Nam Con Son basin was brought to shore in late 2002. With a reserve of 60 billion cubic meters in the Lan Tay field, each year Vietnam will have three billion more cubic meters of gas for expanding the thermo-electric power plants. In 2002, PetroVietnam exploited 19.362 million tons of equivalent oil, in which, 17.102 million tons were crude oil. The volume of gas exploited was put at 2.26 billion cubic meters.

Vietnam’s natural gas sector is still in the early stages of development. As the country’s demand for energy continues to expand, its gas reserves will play an increasingly important role. Vietnam has estimated 6 trillion cubic feet (Tcf) of proven gas reserves. However, probable gas reserves may be as high as 10 Tcf. Regarding gas production, Vietnam exploited and transported 1.72 billion cubic meters of associated gas in 2001, an increase from 1.58 billion cubic meters of associated gas in 2000. In addition, the gas exploited has been processed to provide the domestic market with 2,900 tons of a wide variety of greases and lubricants; 79,000 tons of chemical products; 115,000 tons of condensation; and 270,000 tons of liquid propane gas (LPG).

The total picture for oil and gas exploration and exploitation in Vietnam is quite promising. In terms of international cooperation, in January this year, Vietnam announced its 47^th exploration contract with foreign partners. To date, Vietnam has signed 47 production sharing contracts (PSCs) or joint operating contracts (JOC) with foreign partners for upstream operations, bringing the total sum of investments in the upstream sector to more than US$ 4 billion. The major contract for the construction of a 420 kilometer gas pipeline from the Nam Con Son basin, valued at approximately US$ 583 million between BP, Conoco, and PetroVietnam is now being implemented to bring gas onshore in 2003. Unocal led consortium has discovered significant commercial gas reserve in the southwest and is working with PetroVietnam and the Vietnamese government on major plans including US$ 700 million gas exploration and exploitation in this area, US$ 350 million gas pipelines, and US$ 400 million power plants in O Mon. It is estimated that gas from the southwest will come onshore in 2007. Total energy-usage in Vietnam is estimated to jump threefold by 2010 with electricity generation set to over the next decade. Petroleum demand is also predicted to double to around 22-25 million tons per year and national gas use from negligible levels to 7.5 billion cubic meters annually.

Vietnam’s oil and gas industry is fired up for 2003. PetroVietnam sets this year’s target of exploiting 20.86 million tons of equivalent oil, 1.5 million tons higher than that of 2002. Moreover, the Su Tu Den (Black Lion) field will be soon put into operation (expected in the fourth quarter of this year). PetroVietnam will also promote management and provide guidelines to the implementation of major projects – Nam Con Son, Phu My Nitrogenous Fertilizer Plant, the Ca Mau Gas-Electricity-Nitrogenous Fertilizer Complex. Although Vietnam's oil fields turn out more than 16 million tons of crude oil a year, the country has to import all of its oil products, due to the fact that there is no refinery in Vietnam yet. So far, nearly all of Vietnam's crude is exported, and refined oil and oil products must be imported. This constraint is considered as a potential threat to energy security and to the economic stability of the nation in general. For that reason, PetroVietnam has been urgently assigned by the Vietnamese Government to build two refineries, namely Dung Quat Refinery with US$ 1.3 billion investment which is to be operational by the end of 2005; and Nghi Son Refinery-Petrochemical Complex with a U.S. $2 billion investment that is projected to be on-stream by 2008.

The oil and gas industry in Vietnam presents significant opportunities for the export of American oil and gas machinery and services. Given the highly technical nature of the oil and gas industry the majority of oil refinery equipment and services are sourced outside of Vietnam. Although local engineering skills are showing a fast learning curve, foreign technology and resources are still being solicited at all stages of project development. There are good opportunities for heavy plant and equipment, major components for packaged processing plant peripheral equipment and accessory items. Significant opportunities also exist for all aspects of this industry including consultants, construction contractors and specialist service companies such as survey, seismic and contact drillers, engineering, construction, installation, and training services to the industry. PetroVietnam has a large training budget available for its staff and is seeking to work with qualified providers. The total market for the import of oil and gas machinery and services in Vietnam was approximately US$ 920 million in 2001, and is estimated to be US$ 1.05 billion in 2002. It is estimated that the total import market for offshore oil and gas machinery and services will continue to grow at a rate of 15 percent per year for the next three years. U.S. suppliers of equipment and technologies need to focus on their global supply chain with a variety of international contractors in order to be short-listed on projects or integrated into a bid consortium. Service providers should also be vigilant at contacting foreign investors in a range of countries known to be interested in works to be bid in Vietnam. Over the next several years in this industry sector, U.S. companies should find prospects in supplying many types of advanced oil refinery equipment and technologies. These include residue fluid catalytic cracking and continuous catalytic reforming to produce fuel and other petrochemical technologies to produce polypropylene and polyester, and modern processing configuration with state-of-the art equipment and technology.

Although the competition is intense and foreign companies from the U.K., Japan, India, Korea and other countries are very active in the market, U.S. offshore machinery and services are highly regarded. Nevertheless, U.S. oil and gas machinery and services only accounted for a market-share of approximately 12 percent in 2002 and 15 percent in 2003. This resulted from strong demand in Vietnam for basic and less expensive oil and gas machinery and services. However, given the country's need to develop the gas industry in the coming years, more sophisticated machinery and services will be required. Therefore, U.S. oil and gas machinery will achieve a higher share of this growing industry.In the upstream and midstream operations, where opportunities for American oil and gas exploration companies appear large, the field is competitive and negotiations can be lengthy.

Medical Equipment

Rank of Sector: 5
Name of Sector: Medical Equipment
ITA Code: MED

Medical Equipment	2001	2002 (actual)	2003 (estimated)
Total Market Size	151.0	166.0	183.0
Total Local Production	0	0	0
Total Exports	0	0	0
Total Imports	151.0	166.0	183.0
Imports from the U.S.	30.2	33.2	40.5
Exchange rate (US$/VND)	15,000	15,250	15,450

Vietnam's Health sector is still in its fundamental stages of development. In the year 2000, Vietnam had nearly 1000 hospitals (including state-owned and private hospitals) providing 250,000 beds. According to the World Bank, the bed utilization rate is only 14.8 beds per 10,000 people. It is very low compared with other Asian nations. Most of the hospitals are generally unsanitary and poorly equipped. However, the sector has experienced some positive changes as a result of economic growth and established more open policies inviting private sector participation over the past several years. Incentives are being offered for construction of hospitals, production of pharmaceuticals, and modernization of medical equipment.

In recent years, the government has made the health sector a priority to modernize and upgrade its health-care facilities. The government has demonstrated its commitment to healthcare by providing a larger budget dedicated to improving the nation's health sector. From 1997-2000, the government spent approximately US$ 150 million on health-care initiatives, of this, US$ 30 million was spent on importing new medical equipment. For the year 2001 to 2002, the government spent about $50 million on importing and upgrading medical equipment. The government has received assistance from outside sources, which accounts for 80 percent of the total expenditures in Vietnam's purchase of medical equipment. The other 20 percent of total medical equipment expenditure has been incurred by the government.

According to the government's plan, from now to 2005, the government will spend about US$ 1.3 billion to build 76 new hospitals, of this, US$ 700 million will be used for purchasing new equipment. From 2005 to 2010, the government will spend about US$1.8 billion for building 57 new hospitals, of which over US$ 1 billion will be spent for medical equipment. In addition, the Ministry of Health (MOH) has launched an ambitious strategy to develop hi-tech centers nationwide, and increase the number of skillful and well-trained medical personnel.

The Prime Minister issued Decree No. 130/2002/QD-TTg on October 04, 2002 to approve the National Policy for Medical Equipment in the period of 2002-2010. According to the decree, from 2002 to 2010, the Government encourages all hospitals, clinics, and health-care centers to upgrade their equipment in order to provide good health-care services for people. The Government also continues equipping and using effectually three specialized health-care centers in Hanoi, Hue, and Ho Chi Minh City. The other specialized health-care centers in other areas will be built in this period.

In Vietnam, there are several types of public hospitals, which are supervised by various government entities. The Ministry of Health controls 18 percent of the total hospitals, which are considered central hospitals. The Local Provincial Departments of Health manage and operate 270 provincial hospitals. The provincial hospitals purchase over 60 percent of all medical equipment in the market. The remaining are district hospitals, which fall under the jurisdiction of the local districts. District hospitals are typically very small in size and only purchase medical equipment when offered Official Development Assistance (ODA).

Besides the MOH, the Ministry of Police (MOP), Ministry of Defense (MOD) and Ministry of Labor, Invalids and Social Affairs (MOLISA) also own hospitals. These ministries are key clients in the medical equipment market. Currently there are over 30 hospitals belonging to MOP/MOD/MOLISA that average 400 to 500 beds per hospital.

The increase in the number of private hospitals and clinics is a growing phenomenon. Most of these hospitals and clinics are in need of medical equipment, presenting tremendous opportunities for medical equipment suppliers. The number of private hospitals has grown from nine in 2000 to twenty in 2002: two in Hanoi, ten in Ho Chi Minh City, two in Da Nang, and the rest are spread out in a number of provinces. In addition, there are over 20,000 private healthcare clinics, and about 11,000 traditional medicine centers and family-planning clinics.

Vietnam's total market for medical equipment in 2001 is about 151 million, of which 20 percent is imported from the United States. Imported medical equipment from major firms in Asia, Europe, and the U.S. dominates Vietnam's market. Medical equipment manufactured domestically is developing but minimal.There is only one joint venture company that produces X-ray and ultrasound equipment. Although there are a few medical equipment factories, these factories mainly manufacture furniture and simple equipment.

The major competitors for U.S. equipment suppliers in Vietnam are Japan and Germany. Each country possesses 25-30 percent of the market share.

Packaging Equipment

Rank of Sector: 6
Name of Sector: Packaging Equipment
ITA Code: PKG

Packaging Eq. Market	2001 (actual)	2002 (actual)	2003 (estimate)
Total Market Size	80	150	180
Total Local Production	4	7	9
Total Exports	0	0	0
Total Imports	76	143	171
Imports from the U.S.	2	4	10
Exchange rate (US$/VND)	15,200	15,250	15,500

Packaging is one of the most rapidly developing industries in Vietnam. It is in critical demand for consumer goods and foodstuffs industries, especially for exported products. In just the southern half of Vietnam, there are around 130 major packaging manufacturers. In 2001 the packaging industry accounted for around 12 percent of the total value of Vietnamese commodities, according to local reports.

In recent years, investment in the packaging industry has soared with an average annual growth rate of around 15-20 percent. The total size of the packaging equipment market is estimated to be $180 million for the year 2003. However, Vietnamese packaging equipment producers are generally incapable of producing packaging equipment / components of a quality level sufficient for the packaging industry in the country. This industry still imports 95 percent of raw materials and equipment from abroad. Most of the companies in the sector have invested in average quality technology and equipment from the Republic of Korea, China, Indonesia, and Taiwan. Some leading companies like Tan Tien and Liksin have imported more advanced facilities from Western European countries.

At the present, the plastic packaging sub-sector is very developed. From a few small factories producing 18 million plastic packs each year in 1992, the sector has produced around one billion packs serving industries such as soft drinks, cooking oil, cosmetics and lubricants, meeting nearly 97 percent of the domestic market demand. The country now has 23 major plants producing soft packs, of which 18 factories are located in the South, four in the North and only one in the Central region. This sub-sector imports 95 percent of the raw materials and 98 percent of machinery/equipment from Taiwan, Japan, Germany, Italy, and others.

In contrast, material and equipment for production of tin foil packaging is almost 100 percent imported. Vietnamese packaging producers have also focused on carton and paper packaging for electronic appliances, construction, consumer goods, and other industries because these are more environmentally friendly. Around 80 percent of the machinery/equipment used in manufacturing paper packaging is imported among which 30 percent is second-hand. Most of these imports are from Germany, Japan, and Taiwan. Materials for paper packaging are imported from Indonesia, Taiwan, New Zealand, Finland, and England. While 80 percent of the carton packaging making equipment is produced locally, the rest is imported from Taiwan, China and some from Germany. Local manufacturers produce 50 percent of the raw materials for carton packaging.

The EU, Japan, Taiwan, China, and other countries are very active in the Vietnamese packaging market. However, Vietnamese food producers are now targeting the U.S market and thus they are interested in packaging that is suitable for U.S. consumers. This in turn has created a demand for U.S. packaging equipment. The market for packaging technology and equipment presents a large potential for U.S. suppliers thanks to their quality and advanced technologies.In particular, there is a good potential market for biodegradable plastic packaging in Vietnam, because up to now there has been very little investment in this technology and there is no practical solution to the tons of used plastic packaging waste.

Air Traffic Management Systems

Rank of Sector: 7
Name of Sector: Avionics and Ground Support Equipment
ITA Code: AVG

Avionics and Ground Support Equipment	2001	2002 (actual)*	2003 (estimated)
Total Market	13	16	20
Local Production	0	0	0
Total Exports	0	0	0
Total Imports	13	16	20
Imports from the U.S.	6	8	12
Exchange rate (US$/VND)	15,200	15,250	15,500

Aviation is one of the top priority sectors for the Vietnamese government since development of Vietnam’s aviation sector is a prerequisite to rapid national economic growth. The aviation industry in Vietnam comes under the principal jurisdiction and management of the Civil Aviation Administration of Vietnam (CAAV), a government agency reporting to the Ministry of Transport.

According to CAAV, the aviation sector is expected to grow about 10-15 percent annually and the total air passenger traffic may reach 17.5 million by 2010. The years 2000 and 2001 saw a dramatic growth in passenger traffic when the total reached 4.88 million and 5.71 million respectively, about a 14 percent and 16 percent year-on-year increase. The country currently operates a network of 17 major civil airports among which there are three international gateways including Noi Bai in the north, Danang in the center ,and Tan Son Nhat in the south. Tan Son Nhat, with a capacity of five million passengers per year, is the largest airport in the country, handling about 75 percent of the country's international passenger traffic.

The Vietnamese government is committed to opening its aviation sector to foreign carriers. The liberalization process, however, will proceed cautiously in several steps, given the weakness of the domestic air transport industry. The government will phase in each step in accordance with the CLMV (Cambodia, Laos, Myanmar, Vietnam) – ASEAN – APEC – WTO path.

At present, there are 15 domestic and 24 international regular air routes of about 22 airlines from 19 countries operating in Vietnam. Nearly 100 airlines are overflying the Hanoi and Ho Chi Minh City Flight Information Regions (FIRs), which are the two sky areas under Vietnam’s control. The air traffic management (ATM) sector is solely controlled by Vietnam Air Traffic Management (VATM), a state owned monopoly under the authority of CAAV. VATM currently has five subsidiaries including Northern Region Air Traffic Services (NORATS), Middle Region Air Traffic Services (MORATS), Southern Region Air Traffic Services (SORATS), Air Traffic Command & Coordination Center and Air Traffic Technical Services Center. In 2003, VATM expects to provide services to about 200,000 flights, generating approximately US$ 81 million in revenue. Over the last ten years, VATM’s annual turnover has grown 12 percent per year on average, and this trend is expected continue in the years to come.

According to VATM’s development plan through the year 2010, VATM will focus its resources on improving its services in the international market through upgrading and modernizing infrastructure as well as developing a dynamic and professional human resource. VATM has identified the major projects for development through 2010 including:

Ho Chi Minh (HCMC) AACC project: The total investment in this project is estimated at US$ 26 million of which US$ 10-12 will be the cost for ATM Systems. The bidding of this project is currently under way and procurement is expected in the end of 2003.
Hanoi AACC project: This will be the same size as the project in HCMC and is currently in the design phase with construction expected to start in Gia Lam Airport, Hanoi in 2005.
Vietnam Air Traffic Management Building project: The building will be located in Gia Lam Airport, serving as VATM headquarters capable of monitoring the ATM operations throughout the country. This project is currently in the design stage.
Noi Bai International Airport Control Tower: An 80 meter tall control tower will be built at the Noi Bai International Airport with state-of-the-art CNS/ATM equipment. The project is in the design phase.
Other control towers in local airports: The control towers in Vinh, Phu Bai, Phu Cat, Buon Ma Thuot, Dien Bien Phu and Pleiku airports will be upgraded while new control towers will be built in the remaining airports in the country.
Building and upgrading the telecommunication and radar systems such as ATN, DVOR/DME, DGTS and ADS in some major airports.
Establishing a new company specializing in air traffic technical services.

The primary source of finance for the above projects is expected to come from VATM’s retained earnings from providing services to domestic and international airlines.

At present, most of the air traffic management systems in Vietnam are imported from Europe and America. European suppliers have long established their presence in the market. However, as American companies are highly respected for their world leading technologies, quality, and reliability in the air traffic management sector, U.S. firms can make a significant impact in the Vietnamese market in the coming years.

To enter the market, U.S. equipment suppliers and service providers are well advised to register their interest and capabilities with the appropriate agencies, particularly CAAV and VATM. The Commercial Service Offices in Vietnam should be contacted for assistance in the registration process and the selection of reputable local firms for teaming arrangements. Interested U.S. firms are strongly urged to establish joint ventures or other forms of strategic alliances with local companies in pursuing their projects in Vietnam.

Safety and Security Equipment

Rank of Sector: 8
Name of Sector: Safety and Security Equipment
ITA Code: SEC

Safety and Security Equipment	2001 (actual)	2002 (actual)	2003 (estimated)
Total Market Size	60	62.5	65
Total Local Production	2.5	3	4
Total Exports	0	0	0
Total Imports	57.5	59.5	61
Imports from the U.S.	8	10	14
Exchange rate (US$/VND)	15,000	15,250	15,450

The total size of the safety and security equipment market is estimated to be US$ 65 million for 2003, of which 60 percent consists of safety equipment. The market sees a growing demand in commercial sectors such as construction, commercial and residential buildings, banks, municipal fire prevention and fire fighting, maritime facilities, and airports. The demand for safety and security equipment in Vietnam is tied to the development of foreign-invested construction and property projects. The current growth of foreign businesses and of government spending on infrastructure in Vietnam has stimulated the safety and security equipment market.

Primary sales of safety and security equipment have occurred in the construction market, where development of transport (roads and bridges), power (thermal and hydro), oil and gas (plant and pipeline), environment (water drainage), and buildings(hotels and commercial sites) has outpaced other types of development projects. Foreign development companies have been the predominant buyers. In addition to the state budget, the Government can rely on substantial assistance from outside sources, particularly Official Development Assistance (ODA), to initiate safety and security upgrades in government-dominated sectors such as banking, maritime, power, oil and gas, and transport.

Fire fighting and fire protection equipment is in demand, especially after the tragic fire with high casualties at a shopping center in Ho Chi Minh City late 2002. The city government has approved VND 100 billion (approx. USD 6.5 million) for the Fire Department to purchase fire fighting equipment in 2003. The Hanoi government also earmarked USD 3 million to upgrade the fire brigades’ capacity this year. Monitoring and access control devices for buildings are best prospects. More than 95 percent of Vietnam’s security safety equipment/systems are imports since the supply of domestic equipment by local companies is limited. Local manufacturers can only produce low-end items such as locks, safes, safety gloves, ropes, etc.

Competition in this sector is intense. Major suppliers include the EU, Japan, Canada, China, Taiwan, and Russia. Although late in entering the market, U.S. equipment is highly regarded, especially high-tech equipment such as security X-ray machines where American companies maintain an estimated 17 – 20 percent share of the market.

Security equipment import taxes range from 0 – 40 percent, depending on the components and the manner in which the components and systems are imported into Vietnam. Building-related equipment and systems with foreign investor’s capital contribution can be imported duty free. The Government strictly monitors the sector with tightened control by the Decree 14/2001/ND-CP which rules that foreign organizations are not allowed to provide security services. They are, however, permitted to produce and repair equipment and tools used for security purposes. The import or export of security equipment requires approval from the Ministry of Police.

Plastics Machinery

Rank of Sector: 9
Name of Sector: Plastics Machinery
ITA Codes: PME

Plastics Machinery	2001 (actual)	2002 (actual)	2003 (estimated)
Total Market Size	92	120	155
Total Local Production	18	23	30
Total Exports	0	0	0
Total Imports	74	97	125
Imports from the U.S.	7	10	13
Exchange rate (US$/VND)	14,500	15,000	15,500

The plastics industry has been one of Vietnam’s fastest growing industries over the past five years with annual growth rates of between 27 to 30 percent. Per capita plastic consumption rose from 7.95 kilograms in 1998 to 14.29 kilograms in 2001, and the trend seems set to continue. It is estimated that by 2005, plastic consumption per capita will increase to 16 kilograms and to over 30 kilograms by 2010.

The development strategy of Vietnam’s plastics industry to 2010 has stated that the industry will need investment of US$ 3 billion to achieve industry goals. The strategic development plan of Vietnam envisions an integrated plastics industry where raw materials would be almost exclusively supplied by in-country resources and products are used for both domestic consumption and export.With near self-sufficiency in mind, the industry will focus on machinery and equipment for raw material production and finished goods manufacturing at an appropriate scale to meet the sector requirements.

According to the Vietnam Saigon Plastics Association (VSPA), the total market for plastics machinery in 2001 was approximately US$ 92 million, increasing from US$ 71 million in 1999.The total market size has recovered to where it was prior to the regional financial crisis in 1997, when it dipped to US$ 20 million.

The majority of imported machinery is from regional countries, including Korea, Taiwan, and China. U.S. imports have had about a 5-10 percent share of the total import market the last couple of years. However, this trend is predicted to increase significantly as local producers look to the US for leading-edge technologies that are needed to meet the requirements of the growing market. In addition, the U.S. – Vietnam Bilateral Trade Agreement (BTA), which has been implemented since December 2001, opens the world’s largest market to Vietnamese plastics manufacturers in the future. This situation requires Vietnamese producers to upgrade to advanced, cost-effective equipment, machinery, and technology in order to compete globally. And that holds great potential for exports by U.S. plastics machinery and equipment suppliers to Vietnam.

Unlike most industries in Vietnam, the plastics industry is dominated by private sector firms, which are also the primary purchasers of equipment. VSPA has played an active role in representing local producers, and has been assigned to carry out several programs in the industry. These programs are:

A program to produce over two million plastic houses for low-income families in the Mekong Delta, highlands, and islands of Vietnam. The total value of this program is expected to be US$ 4 billion and to be completed in ten years.
A US$ 16 million project to produce high quality BOPP in Vietnam with the capacity of 8,000 MT film per year.
A Vietnamese plastics complex project valued at US$ 200 million is expected to include 100 new plastic manufacturers in Long An Province.
A US$ 250 million project to produce PP/PE from condensate in Ba Ria-Vung Tau Province. This is a part of US$ 1 billion petrochemical project carried out by Petro Vietnam.

The information about the VSPA, its members, and its programs can be found on-line at: www.vnplas.com.

The best prospects for this industry are in high-tech machinery and equipment to produce plastic and related products. The sector is now dominated by imports and is open to US suppliers.A very low percentage of equipment is locally produced, and it is usually “re-customized” machinery and equipment from other countries.

Education and Training

Rank of Sector: 10
Name of Sector: Education / Training
ITA Code: EDS

Education and Training	2001 (actual)	2002 (actual)	2003 (estimate)
Total Market Size	40.0	55.0	62.0
Total Local Production	24.0	28.0	30.0
Total Exports	0.0	0.0	0.0
Total Imports	16.0	27.0	32.0
Imports from the U.S.	6.5	7.0	10.0
Exchange rate (US$/VND)	14,500	15,200	15,500

Vietnam has a significant demand for educational and training development. The Vietnamese Government recognizes that education is key to creating a globally competitive work force that will help drive economic development. Over the last few years, the Government has increased the budget allocation, liberalized private-sector involvement, and encouraged foreign participation in developing education and training services in Vietnam. Best prospects for U.S. providers of education and training services include: English language training, vocational and technical training (including information technology and basic manufacturing skills), post-secondary education (including overseas study programs), and consulting services.

English Language Training

English has become the language of choice for Vietnamese to obtain a better education and career. Millions of Vietnamese study English in a variety of institutions in the major urban centers. U.S. firms may enter the English language training market through joint ventures or business cooperation contracts with local entities, or on their own by establishing wholly foreign-owned enterprises. State-owned institutions, public schools, and English learning centers are seeking help to upgrade both standard and specialized English courses. Schools and centers specializing in TOEFL and IELST training for study abroad will find rapidly expanding markets in Vietnam's major cities.

Vocational and technical training

There is a critical shortage of skilled workers needed for the rapid industrial development in

Vietnam. Almost one million students graduate from tertiary institutions every year, compared to only 300,000 from vocational training schools. Under State targets, 30 percent of the country’s workforce will receive vocational training by 2005, and 40 percent will by 2010. Priority will be given to training workers for high-tech fields such as information technology, biology, materials engineering and automation, as well as economic and social management. Foreign-invested companies with foreign curricula and teaching methodologies are very competitive as contracting

clients for vocational training programs in Vietnam. There is also a major opportunity for firms that can provide customized workforce training for basic manufacturing facilities, such as those in

the rapidly growing garment and footwear industry.

Information Technology.

Vietnam’s target is to train at least 300,000 to 400,000 IT engineers, programmers, and assemblers over the next five years in a bid to become an international IT player by 2005. The Ministry of Education and Training (MOET) plans to increase investment in infrastructure upgrades and re-train graduates of related disciplines so that they can work as software engineers. Foreign and domestic experts are in demand to help revise Vietnam’s IT curriculum based on training programs in other countries.

The Ministry of Education and Training has pledged to spend more than US$ 13 million to integrate IT in schools. The Teaching and Applying IT in Schools program will be carried out from

now until 2005, and will fit in with four other IT projects. By 2005, they plan to have half of all schools linked to the internet-based Education Network, or Edunet, particularly in remote areas. Thus, distance education is a prospect for U.S. providers.

Post-secondary Education

This market is divided into two distinct groups:

1. The Government is spending $7 million per year for the training of Government officials. Priority will be given to hi-tech fields, bio-genetic technology, IT, electronics, automation, new materials science, finance and banking, business administration, agriculture, forestry development, foreign affairs, culture, and artistic subjects. Many of these students will apply to overseas institutions for advanced degrees.

2. Vietnam has a large number of people seeking to study abroad using their own financial resources and savings. Last year, 12,450 students obtained visas for overseas study, of which 1,020 went to the United States. Vietnamese show a very high interest in American universities and colleges. Since not all Vietnamese can qualify for U.S. visas, U.S. academic institutions that offer web-based degree programs and/or U.S. degrees through classes held in Vietnam hold particularly strong growth potential.

Consulting Services

Education and training consulting opportunities come mainly from Official Development Assistance (ODA)-financed projects. One major ODA-related opportunity is a pledge by the World Bank to provide preferential loans worth $83.3 million from 2000 to 2005 to upgrade the training, curriculum development, and equipment of the country's post-secondary education system. The greater part of the budget is earmarked for consulting services and new equipment. The funds will be allocated to individual universities in order to modernize library and information systems, improve management, and improve training quality.

The Asia Development Bank has approved a $55 million loan to help Vietnam expand its upper secondary education sector. The money, which will help fund the Upper Secondary Education Development Project, will be used to improve the school curriculum, learning materials, develop school facilities, and train teachers.

Vietnam now has 22 million students. 1.2 million of them are University students, 330,000 are specialized high school students, 210,000 are long-term vocational trainees, and 18 million are primary and secondary students. Education is allotted 15.6 percent of the annual State budget. Universities and colleges will recruit 181,000 new students in 2003, an increase of 7.5 percent over 2002.

Environmental Equipment
Rank of Sector: 11
Name of Sector: Pollution Control
ITA Code: POL
Environment and Pollution Control Equipment/Services
2001 (actual)
2002 (actual)
2003 (estimated)
Total Market Size
420
430
450
Total Local Production
270
280
280
Total Exports
0
0
0
Total Imports
150
150
170
Imports from the U.S.
11.5
12
13
Exchange rate (US$/VND)
15,000
15,250
15,450
The above statistics are in US$ millions and are unofficial estimates.
*Based on the total ODA funding of environmental projects underway and in the pipeline, as well as projects undertaken by urban and industrial entities including water resources funds.
Vietnam faces serious environmental problems as a result of rapid economic development, population growth, and urbanization. Vietnam's pollution “hot spots” include air, water, solid waste, and noise pollution. Vietnam's environmental situation is deteriorating due to lack of resources to deal with many of the problems.
Only 60 percent of the population have access to clean water. In order to improve the situation, the government issued a development plan for water supply with the objective of providing clean water for 80 percent of the population by the year 2010. Currently, all the provinces and cities have water, sewage, and drainage projects with about 200 water treatment plants throughout the country producing 2.7 million cubic meters per day. The Vietnam Water Supply and Sewage Association (VWSA) estimates that the total investment for water supply projects will be more than US$ 2 billion for the next ten years
The drainage and sewage problems also constitute a growing concern. Vietnam's rapid urbanization and industrialization over the last ten years have placed huge pressure on the run-down sewage systems, most of which were constructed in the 19^th century. Most drainage systems are for combined usage, mixing rainwater runoff with untreated wastewater and solid wastes. None of the cities or provinces within the country has a centralized wastewater treatment plant. For the two biggest cities, Hanoi and Ho Chi Minh City, this obviously poses a great problem. Although international developers and bilateral donors have helped the government with a number of projects to develop and upgrade the drainage and sewage systems, projects for urban wastewater treatment have not made much progress.
Industrial wastewater is also having a great negative impact on the environment. Many local industrial enterprises lack resources to install their own wastewater treatment facilities. This has resulted in the direct discharge of wastewater into the environment without treatment. However, responding to a trend of global integration and global corporate citizenship standards upheld by many multinational corporations, this problem will draw greater attention from both the government and private enterprises as Vietnam's economy grows. City authorities have determined to relocate industrial polluters from the residential areas to regulated zones or industrial parks. To help local businesses with relocation efforts, financial assistance programs have been launched such as the Environmental Revolving Fund, the Development Assistance Fund, etc. This will translate into more pollution control equipment investment in the upcoming years.
Another concern is the mass accumulation of solid waste in the country. A recent environmental survey indicated that the average generation rate of solid waste is about 20,000 tons per day throughout the country. With a collection rate of 50-70 percent, the landfills, which are poorly designed and constructed, are overfilled. Leachate, the liquid seeps out from municipal waste, has become a great environment problem from the cities. Towns and provinces are trying to find solutions to deal with solid waste pollution. More money from both the local and central governments is being allocated for solid waste projects, supplementing ODA funds. However, there is not enough capital for solid waste treatment projects such as sanitary landfill construction, composting, and waste conversion schemes to move forward.
Hazardous waste from Vietnam's factories and hospitals has also become a problem. Most parts of industrial waste and hospital waste are still disposed together with domestic waste without proper treatment. Currently, there is no industrial waste management and control system in place in the country. Contamination from pesticides and agricultural chemical runoff is growing alarmingly. In addition to the disposal of hospital solid waste, there is a need to treat wastewater from hospitals. Although the national budget and bilateral aid have dealt with some problems, much more capital is needed.
Apart from the wastewater and solid waste problem, the government of Vietnam has expended great efforts in attempts to curb the growing air pollution threat. Although the use of leaded gasoline was prohibited in Vietnam since July 1, 2001, the increasing number of personal vehicles has decreased the quality of urban air. According to the Vietnamese Government, there are more than 7,500,000 registered motorcycles and about 1,000,000 automobiles in the country. In addition to upgrading the existing road network, the government plans to develop mass transit services such as bus shuttles and metro systems to deal with the emerging traffic challenges.
B. BEST PROSPECTS FOR AGRICULTURAL PRODUCTS
Agricultural trade with Vietnam is very lopsided in favor of Vietnam. In CY-2002 (calendar year 2002), the United States imported a record US$ 811 million (seafood, coffee, tree nuts, and spices) from Vietnam and exported directly only US$ 103 million (cotton, hardwood lumber, wheat, dairy products, powdered milk, and fresh fruit) to Vietnam. Actual value of U.S. agricultural products entering Vietnam is perhaps twice the official value due to re-exports, transshipments through Singapore and Hong Kong, and informal entry of goods from bordering countries.
U.S. agricultural export opportunities will be linked to overall Vietnamese economic performance, which will continue to depend on policy reform and trade liberalization. Lower tariffs and a more stable trading environment are keys to expanded trade. Vietnam is a solid market for the future. Without question, agricultural trade values on both sides will expand as bilateral relations improve and economic development in Vietnam leads to higher levels of consumption among its 80 million people.
There is a tremendous correlation between Vietnam’s agricultural development goals, and U.S. market expansion goals. In the near term, our best prospects lie in the bulk and intermediate products (cotton, lumber, hides and skins, and soybean meal) that will be transformed locally to fuel developing industries, such as textiles, furniture, leather processing, and animal / aquaculture feed production. Consumer food products (fresh foods, canned goods, and wine) are widely available in retail outlets throughout the major urban areas; however, comparatively high prices limit demand to only high-income consumers.
Tariffs, import regulations, and policies change frequently. Please contact FAS/Vietnam to obtain the most up-to-date information. Additional agricultural market reports can be found on the USDA/Foreign Agricultural Service’s website at .
Soybean Meal
Development of livestock is a national priority. Investment in commercial feed mills has resulted in milling capacity that far outstrips local production of corn and soybeans. This means imports are necessary and will continue to grow. Vietnam’s current high price for commercial feed directly bears on live-weight animal costs. Prospects for soybean meal and other bulk commodities will improve with investment in larger ports. Marketing efforts for soybeans and soybean meals are directed by the American Soybean Association’s Vietnam office in Hanoi.
Soybean meal
Unit: 1,000 metric tons

2001
2002
2003 (Estimated)
Total Consumption
505
740
870
Total Local Production
20
20
20
Total Import
483
719
850
Total Export
0
0
0
Total Imports from the U.S.
15
7
25
Import Duty: 0percent. The above statistics are unofficial estimates.
Bulk Cotton
Vietnam has a rapidly growing and vibrant textile industry, mostly based on imported or synthetic fiber. Textiles are one of Vietnam’s top foreign exchange earners with over US $2.5 billion in export sales. Cotton spinning is expanding, as export markets demand higher-value garments and products. There has been investment both to replace existing out-dated spindles and to add capacity, a development that improves prospects for U.S. cotton. Local cotton production, although expanding, meets only about 12-15 percent of demand. Marketing efforts are directed by the Cotton Council's International Regional Office in Hong Kong, and U.S. technical information is provided by Cotton Incorporated’s Regional Office in Singapore.
Bulk cotton
Unit: 1,000 metric tons

2001
2002
2003 (Estimated)
Total Consumption
108
120
130
Total Local Production
10
12
14
Total Import
103
111
120
Total Export
0
0
0
Total Imports from the U.S.
14
18
25

Import Duty: 0percent. The above statistics are unofficial estimates.
Wheat and Wheat Flour
Vietnam is rapidly evolving from a wheat flour to a wheat grain market due to increased investment in milling capacity over the past four years. Current estimated installed capacity to grind wheat is slightly over two million metric tons. Prospects for U.S. wheat will improve through the expansion of grain handling facilities and deep water ports to accommodate panamax (55,000 MT) vessels, thereby lowering unit cost of delivered grain. Wheat marketing efforts are directed by the U.S. Wheat Associates Regional Office in Singapore.
Wheat
Unit: 1,000 metric tons

2001
2002
2003 Estimated
Total Consumption
745
855
975
Total Local Production
0
0
0
Total Import
745
855
975
Total Export
0
0
0
Total Imports from the U.S.
48
35
50
Import Duty: 5percent (wheat) 15percent (flour). The above statistics are unofficial estimates.
Livestock Genetics
Vietnam has set ambitious goals for livestock production in an effort to raise per capita availabilities of animal protein in the local diet and to develop an export sector. This has been supported by foreign investment in commercial feed mills and livestock genetics. There is considerable interest in U.S. animal genetics to improve local breeds, especially swine, chickens, and dairy cows. Hog production is concentrated in southern Vietnam, primarily surrounding Ho Chi Minh City. Several U.S. companies have already established a small market for swine genetics. There is also investment in small-scale dairy projects using imported registered Holsteins and Jerseys. Vietnam is also focusing attention on increasing production of UHT milk for the domestic market, although 90-95 percent of manufactured volume is imported solids.
Live Animal
Total Herd Size (1,000 Head) – Note Herd Size
2001
2002
2003 Est.
Dairy Cows
38
54
60
Cattle
3,896
4,062
4,220
Swine
21,740
23,100
23,800
Chickens
215,800
233,064
240,000
Ducks
55,075
60,031
64,233
U.S Live Animal Export (Thousand Dollars)
442
247
350
Import duty: 0percent (breeding animal). The above statistics are unofficial estimates.
Fresh Fruit and Vegetables
Fresh fruit trade data is not reliable. According to informal data, Vietnam imported about US $7 million of apples of 2002, which grew to about $9 million in 2002. During that same period Vietnam’s imports of table grapes stayed steady at roughly $3-4 million. Vietnam imports (and in some cases, exports) many other types of fruits and vegetables, but trade data is not available. Over the past five years, imports from the United States have increased from $1.5 million to roughly $5 million. We expect the market to grow by 10-12 percent annually over the next five years.
Our share of the deciduous fruit market is being eroded by fierce competition from other suppliers, both northern hemisphere (France, Italy) and southern hemisphere (New Zealand, Australia, Chile, and South Africa) – as well as the looming giant, China. While the U.S. market share (roughly 50 percent) for table grapes has remained solid, the position of U.S. apples has plummeted from a 50 percent market share in 1994 to a 16 percent market share in 2002. While the U.S. share has dropped, China’s share has rapidly expanded to an overwhelming 90-95 percent share. However, seasonal and market niches remain to be filled.
Economic growth and lower duties will expand demand for imported fresh fruit. An improved cold chain from port to retail level would help reduce costs and improve margins. Marketing efforts are directed by the California Table Grape Commission’s Vietnam office in Ho Chi Minh City, and by a newly established representative for the (re-structured) Washington Apple Commission.
Note: Vietnamese trade data are not available.
Snack Foods, Packaged Foods, Canned Foods
Rising incomes have meant increased demand for a variety of imported consumer-ready food products. The market for consumer-oriented products has been expanding rapidly from a very low base. Canned foods (vegetables, juices) are popular among retail consumers and hotel, restaurant, institutional (HRI) customers. Prospects will improve along with development of the retail food sector. Many retailers now visit the United States to attend the FMI and PMA Shows and participate in training courses through USDA’s Cochran Fellowship Program.
Note: Vietnamese trade data are not available.
Forest Products, Hardwood Lumber
Prospects are bright for U.S. exports of hardwood lumber and other forest products. Vietnam’s 2002 informal data shows hardwood lumber imports valued at US $122 million, with the U.S. supplying about $11 million – well up from the $4 million shipped in 2001.
U.S. exports of hardwood lumber to Vietnam were a near record US $11 million, mostly of white oak, cherry, ash, and birch for furniture and office remodeling projects. We expect the market for imported hardwood lumber to increase 20 percent annually over the next five years. In July 1999, our office, in cooperation with the American Hardwood Export Council (AHEC), surveyed the Vietnam wood processing industry. AHEC is optimistic that Vietnam will develop into a steady customer for U.S. hardwoods to supply the emerging export furniture industry. Our prospects have improved due to the recent bilateral trade agreement and lower duties on Vietnamese furniture products going to the United States. AHEC’s regional office in Hong Kong directs marketing efforts in Vietnam.
Hardwood Lumber (Sawn Wood)
Unit: 1,000 Dollars

2001
2002
2003 Estimated
Total Consumption
N/A
N/A
N/A
Total Local Production
0
0
0
Total Import
55
122
150
Total Export
0
0
0
Total Imports from the U.S.
4
11
22
Import duty: 0percent The above statistics are unofficial estimates.

This site is managed by the U.S. Department of State. External links to other Internet sites should not be construed as an endorsement of the views or privacy policies contained therein.

	Home \| Embassy \| Citizen Services \| Visas \| Policy & Issues \| Resources Contact Us \| Privacy \| Webmaster