Financial, Professional & Business Services sectors in Vietnam
The Vietnamese financial, professional and business sector has shown unprecedented growth in the past years, but it is still largely underdeveloped, leaving enormous potential for growth.
Vietnam’s banking sector presents some of Asia’s biggest opportunities and challenges. While the sector has been rapidly developing, Vietnam is still a largely cash-based society. This is evidenced through the fact that out of a total population of 89 million, about 20% of the Vietnamese are using banking services. A 2010 World Bank study suggested that Vietnam has 18 ATMs per 100,000 people, less than a quarter than in Thailand (78) and a third of Malaysia (54). Bank accounts are still not widespread, especially in rural areas.
Vietnam is currently undertaking intensive reforms (planned for 2011 – 2015) to make its banking system stronger and more resilient. The State Bank of Vietnam (SBV) is now seriously looking into restructuring weak banks to ensure the liquidity in the Vietnam banking system.
The Vietnamese insurance market has grown rapidly in recent years, and the country’s demographic and economic development are expected to fuel further demand for insurance. Life market is considerably less crowded than the non-life sector. Market penetration for the insurance however remains low. It is estimated that just 1.5% of Vietnamese population hold insurance, leaving great potential for growth.
Though the capital market in Vietnam is still young (since 1992), the total capitalisation of Vietnam’s listed securities markets has risen to USD35 billion (50% of GDP) as at December 2010 and USD42.4 billion (35% of GDP) as at December 2011.
In response to both the move towards a market-based economy in Vietnam and international economic integration, external auditing activities began to substantially develop since the 1990s. The top six global audit firms dominate accountancy in Vietnam. Foreign accountants continue to deliver strong business results in Vietnam’s emerging market.
The Vietnamese government encourages the participation of foreign and private capital in small and medium sized commercial banks. UK banks can consider the option of equity investment in local small and medium sized commercial joint stock banks to gain access to the already established network of local branches, customer base as well as settlement system of local funded banks and thereby expanding the market share.
Vietnam is now ranked 8th among nations which witnessed the busiest M&A activities in the Asia-Pacific region. M&A activities in Vietnam grew on average 30% per year in recent years, becoming a remarkable investment channel for both local and foreign enterprises. It is also expected to grow at over 30% per year in the coming time. Banking and finance is one of the sectors which are forecasted to continue to be the most attractive sectors. Professional brokers, lawyers and consultants are much needed in the on-going M&A process in Vietnam.
Longer term prospects for the insurance sector are very positive. With 60% of the population under age 30 and GDP per capita growing fast, the rapidly growing middle class Vietnamese people can increasingly afford to buy a full range of insurance products and services. The statistics showed that only around 7% of the population are insured. Such low penetration suggests a great potential for the industry.
Getting into the market
Be prepared to invest in the medium – long term without expecting an immediate return.
Be flexible with the unstable legal framework which keeps changing from time to time and the business practice based on relationship.
Business could be done through direct public procurements and via agents.
Strong local partnerships are an important way of understanding the market, as well as accessing established networks and customer bases.
Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).
To commission research or for general advice about the market, get in touch with our specialists in country – or contact your local international trade team.
Nguyen Phuong Nam, British Embassy Hanoi. Tel: +84 (4)3936 0529 or email: firstname.lastname@example.org.
Le Hanh Le, British Consulate General HCMC. Tel: +84 (8)3825 1380 or email: email@example.com.
UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows.
ASEAN Banker Forum 2012
Date: 3 – 5 December 2012
Banking Vietnam 2013
Date: 21 – 28 May 2013