Vietnam's development in a regional context

Vietnam has experienced a baby boom since the early 1980s. Present growth rates determine that Vietnam’s population is growing at 1.2% per year, while mortality rates are on the decline. However, Vietnam is not the leader in population growth rate in Asia. The Philippines (1.8% annual growth rate), leads the population explosion followed closely by Malaysia, Singapore, Indonesia and India. Though most businesses are always attracted to the big population markets, sustainability and stability are key factors when deciding whether to invest in a market or not. Hence, Vietnam’s growth rate seems manageable and economically viable as well. Countries such as Malaysia and Singapore, with their rather modest populations, can certainly afford a few more mouths to feed. In contrast, India must be able to support a population of over 1.1 billion people with a growth rate of 1.38% annually, making one wonder about the long term viability of its recent spate of successes.

Without a doubt, China and India are worlds apart from the rest of Asia in terms of consumption capabilities. China (a 1.3 billion population) has several provinces bigger than Vietnam’s entire population, making it easy to understand why so many investors are attracted to the Middle Kingdom. However, when considering the age profiles of Asia, it is predominantly the Southeast Asian countries, with India being the exception, that has the youngest populations and henceforth the highest potential for growth. The Philippines, followed closely by Vietnam bare host to Asia’s youngest populations, both of which have 57% of their respective populations under the age of 25, meaning that both countries have their consumption years ahead of them. In contrast, Japan has only 31% of its population within the same profile and has a paltry growth rate of 0.02% annually.

Two other important population statistics, which need to be considered when comparing Vietnam’s future to the rest of Asia, is family size and the ultra-important, urban versus rural split. Not surprisingly, again the Philippines and Vietnam have the largest family sizes with an average of 56% and 43% of families exceeding five household members. When looking at other Asian countries, it becomes clear that family sizes will become smaller, creating a larger consumer base. The Philippines may be the exception to the rule due to the countries strong Roman Catholic influences, but Vietnam should, and will follow suite in the next decade, creating an expanded consumer base, within a manageable social structure.

The single most important factor which should spur economic growth in Vietnam from a population perspective is the migration of rural Vietnamese into the commercially more prosperous urban centres, such as Hanoi and Ho Chi Minh City. Vietnam today holds Asia’s largest per capita rural population, representing more that 73% of the 83 million inhabitants.

Next closest in terms of rural populations are Thailand and India (71%). Compared to China, which today already has an urban population of 43% and looking at recent migration figures within Vietnam, it stands to reason that Vietnam’s urban population will roughly reflect that of China in the next 10 to 15 years, meaning that housing, transportation, communications, other infrastructure and consumerism are going to experience record growth in Asia.

If one were to make decisions on investing in Vietnam purely on population statistics and comparatives to other Asian nations, only a partial picture of the realities for Vietnam would emerge. There are several cultural nuances which need to be mixed into the equation to gain a clearer vision of Vietnam’s economic and consumption future. Unlike the Philippines, which is so influenced by religion, Vietnam has a dichotomous religious landscape. More important to Vietnamese are Family, Fatherland and Future success, which have a huge impact on how Vietnam’s population will react to the future. Using the “World Value Survey” data for 2006, we note that Vietnam had the second highest score amongst some 10 Asian nations survey scores regarding national pride, indicating a fierce national pride in being Vietnamese. The survey also highlighted that work was very important in their lives, while family seemed less important in contrast to other Asian nation, indicating that sacrifices to family may be in the cards to achieve work happiness and success.

Interestingly, when asked about issues such a women’s rights “Voice of the People” survey, Vietnamese responded in quite a liberal fashion, identifying a possible practical approach to the future, in terms of multiple breadwinners and equality at home and at the work place.
There are many ifs, buts and assumptions required to gain an accurate understanding of Vietnam in comparison to the rest of Asia and how Vietnam’s future will evolve. Having looked at population trends and attitudes, there is reason to believe that Vietnam will in many aspects resemble China and India, but to a lesser and perhaps, more healthy extent.

So let’s conclude by comparing fact with fact. In 2006, Vietnam experienced the highest media spend growth in all of Asia, a whopping 40%, compared to India, 23% and China 18%. As the media industry is still in its infancy, these growth numbers will indeed slow down, but probably not for another few years. When comparing Vietnam FMCG (Fast Moving Consumer Goods) growth to the rest of Asia, again Vietnam leads the list at 20% growth compared to China at 11% and our similar sister nation the Philippines, experiencing declining growth of -8% in 2006.

Internet growth rates have been in a steady growth clip of around 30% per year in Asia, while Vietnam is again exceeding such growth rates at around 35% per annum over the past few years. Another key indicator is the growth of the mobile phone market. Though growing slower than other key indicators, 2004 to 2006 experienced a mild increase of 5%, while projections for 2007, indicate double digit growth in mobile phone ownership.

Considering Vietnam’s stable population growth, young population, increasing urbanisation, liberal, practical and determined attitudes and the fact that Vietnam is beginning to outgrow other Asian nations. It stands to reason that Vietnam will become the next big consumer market in Asia by 2020.

Source: VIR