1. Market Overview

• Vietnam’s economic growth rate has been among the highest in the world in recent years, expanding annually at 7-8 percent, while industrial production has been growing at around 14-15 percent a year.

• The entry into force of the U.S.-Vietnam Bilateral Trade Agreement (BTA) in 2001 has transformed the bilateral commercial relationship between the United States and Vietnam and greatly expanded business opportunities for American firms. Vietnam’s goal of joining the World Trade Organization in 2006 should further spur trade liberalization, enhancing market access for U.S. goods and services.

• Between 2000 and 2005, trade between the United States and Vietnam has risen from $1.2 billion to $7.8 billion, a 550% increase. In 2005, U.S. exports to Vietnam totaled $1.2 billion, while Vietnam’s exports to the United States reached $6.6 billion. In recent years, one-third to one-half of American exports to Vietnam have been composed of aircraft. U.S. non-aircraft exports have achieved growth rates of between 8 and 30% in the past three years.

2. Market Challenges

• The evolving nature of regulatory regimes and commercial law, combined with overlapping jurisdiction among government ministries, often result in a lack of transparency, uniformity and consistency in government policies and decisions on commercial projects. Many firms operating in Vietnam -- foreign and domestic -- find corruption and ineffective protection of intellectual property to be a significant challenge.

• Import tariffs remain high for many products. In most instances foreign firms are unable to distribute their own products and must rely on Vietnamese distributors.

3. Market Opportunities

• Strong economic growth, ongoing reform and a large population (83 million, with over half under 30 years of age) have combined to create a dynamic commercial environment in Vietnam.

• While sales of equipment and technologies associated with implementation of major infrastructure projects continues to be a major source of commercial activity for U.S. firms in Vietnam, opportunities in the consumer and services sectors are also beginning to emerge.

• Aviation, telecommunications and information technology, oil and gas exploration and power generation will likely continue to offer the most promising opportunities for U.S. companies over the next few years.

• Phased-in improvements through 2010 in market access for American firms committed to by Vietnam under the BTA will provide enhanced access for U.S. firms in financial services, distribution and other key areas.

4. Market Entry Strategy

• American companies interested in doing business in Vietnam may do so indirectly through the appointment of an agent or distributor in Vietnam. (Note: U.S. companies new to Vietnam should conduct sufficient due diligence on potential local agents/distributors to ensure they possess specific permits, facilities, manpower and capital). U.S. firms seeking a direct presence in Vietnam can establish a commercial operation utilizing the following options: 1) a representative office license; 2) a branch license; or 3) a foreign investment project license under Vietnam's revised Foreign Investment Law.

• American business executives should be aware that Vietnam’s legal and regulatory environment is undergoing profound change. Ongoing efforts to implement BTA commitments and to lay the legal and regulatory foundation for WTO accession will bring about significant changes in Vietnamese law affecting an array of commercial issues. In 2005, Vietnam’s National Assembly passed a number of laws affecting the commercial environment, including new investment and intellectual property legislation. Effective implementation, including formulation and issuance of follow-on implementing regulations and decrees will be important to determining the impact of many of these legislative initiatives.