PESTEL analysis of Vietnam

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PESTEL analysis of Vietnam

This detailed PESTEL analysis of Vietnam aims to address some of the political, economic, social, technological, environmental, and legal factors that affect Vietnam today. Vietnam is officially known as the Socialist Republic of Vietnam. It is one of the most populous countries in the world and aims to become a developed nation very soon.

Political factors affecting Vietnam

In Vietnam, the president is the elected head of state and the commander-in-chief of the military, while the prime minister is the head of government. It is a country where the role of the Communist Party of Vietnam (CPV) is asserted virtually in all spheres of life. However, many analysts argue that though Vietnam is socialism-oriented from the standpoint of political philosophy, many of its economic policies have adopted capitalist principles.

Vietnam pursues a policy of building and maintaining good relations with any countries in the world regardless of their political outlook on global affairs. It is a member of the United Nations (UN), World Trade Organization (WTO), Association of Southeast Asian Nations (ASEAN), Non-Aligned Movement (NAM), and some other prestigious institutions. Though Vietnam had a bitter history with the United States, the relations between the two improved quite a lot in the last 20 years.

However, according to the Human Right Watch (2020), Vietnam has a very poor record in human rights. Freedom of expression, association, and peaceful public assembly are strictly restricted, while dissidents being imprisoned are very normal. As the Communist Party of Vietnam controls the country’s media, journalists and media platforms often risk sanctions for presenting sensitive topics and for criticising the government. Likewise, corruption is a problem though Vietnam has been making a lot of efforts to eradicate it since 2016.

Economic factors affecting Vietnam

Vietnam is the 46th largest economy in the world. Its nominal GDP in 2018 was worth $245 and is expected to reach $265 billion by the end of 2020 (Trading Economics, 2020). The country has made a lot of progress in poverty eradication and lifted 45 million people out of it between 2002 and 2018 (The World Bank Group, 2020). Its economic outlook for the next few years is positive and robust. It is interesting to note that Vietnam has come out as one of the largest beneficiaries of the trade dispute between China and the USA. However, it should also be noted that Vietnam has been struggling with high price increases for years.

Broadcasting equipment, telephones, integrated circuits, textile footwear and leather footwear are some of Vietnam’s top exports that end up in countries such as the USA, China, Japan, South Korea, and Germany (OEC, 2020). On the other hand, computers, electrical goods, telephones, mobile phones and parts, instruments and accessories, and textile fabrics are some of its top imports that mostly come from countries such as China, Japan, South Korea, Honk Kong, and Singapore.

The standard corporate income tax (CIT) rate in Vietnam is 20%. However, the tax rate varies from 32% to 50% for organisations that operate in the oil and gas industry. On the other hand, the personal income tax (PIT) rate varies from 5% to 35% (PwC, 2020).

Social factors affecting Vietnam

The next element to discuss in the PESTEL analysis of Vietnam is the social environment. As of February 2020, the total population of Vietnam is around 97 million (Worldmeter, 2020). Buddhism is the major religion, and Vietnamese is the major language in the country. The life expectancy for men is 93 years, while 81 years for women (BBC, 2019).

An emerging middle class is growing rapidly in the country and is expected to reach 26% by 2026 (The World Bank Group, 2020). Vietnamese people are generally friendly. Many tourists have shared online their interesting and memorable encounters with the locals. However, many tourists have also complained about being hassled, overcharged, and treated badly by the locals.

Though Vietnam has made massive economic progress over the years, there is a growing concern about wealth distribution. The gap between the rich and the poor is very wide and growing further. Another social challenge facing the country is ageing population.

Technological factors affecting Vietnam

Flourishing start-up culture, international investments, low costs, government initiatives, and an educated workforce have been driving an IT revolution in Vietnam for a long time. The country has a number of tech parks such as Da Nang Hi-Tech Park and Saigon Hi-Tech Park that accommodate offices and factories for more than 700 companies, including 220 foreign companies that specialise in IT and software engineering, hardware manufacturing, and infrastructure development.

Vietnam is now the eighth largest provider of IT services in the world. Five IT industries that are currently trending are fintech, artificial intelligence, E-commerce, software outsourcing, and education technology (Samuel, 2019). However, as many companies are shifting manufacturing operations to Vietnam, a fierce battle for skilled labour is well underway, exacerbating an existing shortage of skilled labour.

Environmental factors affecting Vietnam

Vietnam is one of the most beautiful countries in Asia. It houses 8 UNESCO heritage sites and received around 18 million international tourists in 2019. Tourism has been an important actor to transform Vietnam’s agrarian economy to a service one. However, it is worth noting that the fear of corona virus (COVID-19) has been a threat to the tourism industry and public health.

Rapid economic development has led to unsustainable exploitation of natural assets that may impact on future potential for growth. Vietnam is badly affected by air pollution. Similarly, water pollution is a big problem and has significant impact on human health. Vietnam is highly exposed to natural disasters such as volcanic eruptions, floods, droughts, earthquakes, floods, and typhoons.

Legal factors affecting Vietnam

The last element to address in the PESTEL analysis of Vietnam is the legal landscape of the country. However, the article offers a limited discussion on this element.

Foreign companies are permitted to operate in Vietnam and is often encouraged by the government to invest through direct or indirect investment. In fact, the company law has become quite easier noticeably in recent years. International investors can now swiftly create limited liability companies.

In November 2019, the National Assembly of Vietnam adopted a New Labor Code to be effective from 1 January 2021. This new code revises and supplements several provisions across all chapters of the current Labor Code (Baker McKenzie, 2020).

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Last update: 29 February 2020

References:

Baker McKenzie (2020) New Labor Code of Vietnam, available at: https://www.bakermckenzie.com/en/insight/publications/2019/12/new-labor-code-of-vietnam (accessed 25 February 2020)

BBC (2019) Vietnam country profile, available at: https://www.bbc.co.uk/news/world-asia-pacific-16567315 (accessed 28 February 2020)

Human Right Watch (2020) Vietnam Events of 2018, available at, https://www.hrw.org/world-report/2019/country-chapters/vietnam (accessed 28 February 2020)

OEC (2020) Vietnam, available at: https://oec.world/en/profile/country/vnm/ (accessed 25 February 2020)

PwC (2020) Vietnam Individual – taxes on personal income, available at: http://taxsummaries.pwc.com/ID/Vietnam-Individual-Taxes-on-personal-income (accessed 27 February 2020)

Samuel, P. (2019) Vietnam’s IT Sector: 5 industries to watch, available at: https://www.vietnam-briefing.com/news/vietnams-it-sector-5-industries-to-watch.html/ (accessed 27 February 2020)

The World Bank Group (2020) The World Bank In Vietnam, available at: https://www.worldbank.org/en/country/vietnam/overview (accessed 10 February 2020)

Trading Economics (2020) Vietnam GDP, available at: https://tradingeconomics.com/vietnam/gdp (accessed 25 February 2020)

Worldmeter (2020) Vietnam population, available at: https://www.worldometers.info/world-population/vietnam-population/ (accessed 28 February 2020)

Photo credit: Pixabay

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.