This year marks 50 years since Vietnam became a unified country and three decades of bitter wars came to an end. The intervening years have seen Vietnam go from being one of the world’s poorest nations to a middle-income economy in one generation.
The economic growth story
Economic reforms since the launch of Doi Moi in 1986, combined with beneficial geo-political trends, have resulted in a remarkable development success story. Propelled by a robust manufacturing sector, export-driven policies, and a strategic focus on economic liberalization Vietnam has emerged as one of the fastest-growing economies in SE Asia with a GDP growth rate of 7.09% in 2024.
Geo-political challenges, which prompted global businesses to reduce reliance on a single country and diversify supply chains to improve resilience, have been to Vietnam’s benefit. With its strategic location and advantages in shipping, competitive labour and production costs, the country has emerged as a go-to destination for investment in manufacturing – particularly for electronics, textiles and footwear.
Political landscape
As a one-party Communist state, Vietnam has recently experienced a rare period of political turmoil with its 4th President in 3 years being elected by the Vietnamese parliament in October 2024. This turmoil has come on the back of the country’s ongoing and widening anti-corruption campaign which prompted a spate of resignations within the Vietnamese government and ruling Communist party.
The demand for goods
Despite the recent political shakeup prompting some questions about the country’s stability and concerns for investors, Vietnam’s growing economy continues to present opportunities for global businesses. Vietnam is one of the founding members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and a trade agreement with the EU has been in force since 2020.
With manufacturing being at the core of Vietnam’s high growth, there should be no surprise this has prompted a rapid increase in the demand for products to support production. Electrical machinery and equipment are the country’s number one import accounting for over 34% of total goods imports, with fuels, plastic products, other machinery and appliances and iron & steel also featuring among the top 5 products imported. In 2022, the total value of all goods imported was USD 358.8 billion, as recorded on UN Comtrade data 2022.
The recoveries landscape
Should an exporter to Vietnam unfortunately be faced with delayed payments or defaults, the available routes to recovering funds are summarised as follows:
Amicable Recoveries:
- Debtors react well and cooperate when approached locally.
Litigation:
- Generally an efficient and cost-effective option.
- Litigation timeframes vary and more complex matters may take years to resolve. However, barring any curveballs, obtaining judgment for straight-forward debt recovery claims should be achievable within a year.
- Legal action should be initiated within 3 years from the date on which the obligee accrues the course of action.
Arbitration:
- Vietnam is a member of the 1958 NY Convention.
- Recognition and enforcement of foreign awards is generally possible.
Bankruptcy:
- Generally a lengthy process which entails multiple stages and could last several years.
- A creditor may initiate proceedings against a debtor should a debt become overdue by more than 3 months.
For further information about Recovery Advisers, and to learn more about our services in Asia, MENA, Africa and Europe, please visit www.recoveryadvisers.com. Should you wish to discuss a specific case please email [email protected].
