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PESTEL Analysis on Vietnam

Anushree Gupta

School of Humanities and Social Sciences, Christ (Deemed to be University) University,

Delhi NCR

Bachelor of Arts ( Honours) in Economics

Dr. Jitender Bhandari

July 18, 2021

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VIETNAM

Officially known as the Socialist Republic of Vietnam country in the Southeast Asian

region. The country is located a t the eastern edge of the Indochinese Peninsula, and is

divided into 64 provinces, of which Hanoi, Haiphong, Da Nang, Ho Chi Minh City, and Can

Tho are the five municipalities. The capital city is Hanoi, but interestingly it is not the largest

city in the country as is the case in a majority of the countries around the world. 'Thang Long'

was the initial name of Hanoi, the capital of Vietnam which translates to 'soaring dragon'.

The country shares the border with the South China Sea, Malaysia, Indonesia,

Philippines, Gulf of Thailand, Cambodia, Laos, and China.

Flag of Vietnam
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National emblem of VietNam

PESTEL Analysis of Vietnam

This PESTEL analysis of Vietnam aims to address some of the political, economic,

social, technological, environmental, and legal factors that affect Vietnam .

Political factors affecting Vietnam

Political Stability

Vietnam adopted its first constitution in 1980, established a Council of State as a

collective presidency and a Council of Ministers. Later Vietnam’s government and political

structure was reformed and superseded by a second constitution introduced in 1992. This
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made major shifts in foreign policy and economic school of thought. The Communist Party of

Vietnam is the sole leader by remaining a dominant political institution, and asserts the role in

all aspects of economy and society..

Governance

In Vietnam, the president is the head of the state, and the commander-in-chief of the

army. Moreover, the vice-president is nominated by the president and the prime minister is

the head of the government. The country is split administratively into quite sixty four

provinces (tinh), of that national capital, Can Tho, Ho Chi Minh town, Haiphong and Da

Nangare the five municipalities (thanh pho). These are divided into many dozen urban

districts (quan) and many rural districts (huyen).

Government support and policies

For politics, Vietnam is adopting a mixed economy and the government still plays a

big role in planning and governing, and many countries do not recognise the market economy

for Vietnam until now even its WTO’ adhesion since January 2006. The approved official

documents of the 11th National Party Congress clearly stipulate that Vietnam continues to use

the laissez-faire economy with socialist orientation, and therefore the State Owned

Enterprises (SOEs) still play an influential role towards Vietnam’ economy. This might break

the sanctioning BE and can create threats to non-public SMEs.

Foreign Trade policy

Vietnam’s policy attempts on building and maintaining good relations with other

countries in the world in spite of their political outlook on international affairs. The Republic

country is a member of the United Nations (UN), World Trade Organization (WTO),

Association of Southeast Asian Nations (ASEAN), Non-Aligned Movement (NAM), and

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several other prestigious institutions. Though Vietnam has had a bitter history with the United

States, the relations between the two have improved quite a lot in the last two decades.

Corruption

Overall, corruption in Vietnam is characterized by a weak legal infrastructure, fiscal

unpredictability, and conflicting and negative officialdom decision-making. Surveys reveal

that petty corruption has shrivelled significantly throughout the country, whereas high-level

corruption has multiplied. Corruption is considered an obstacle for doing business in

Vietnam, and therefore the use of facilitation payments are widespread once addressing

frontline civil servants. Corruption has moved up the political agenda in Vietnam, and also

the legal framework for confronting corruption is at the moment advancely developed.

Transparency International's 2019 Corruption Perception Index grades the country at 96th

place out of 180 countries.

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Economic factors affecting Vietnam

For economic science, Vietnam maintains a stable and high economic advancement

(7% in average for the last decade). Local enterprises are facing challenges in access to

expensive credit and financial management due to high inflation (9-11%), high interest rates

of saving (13-17%/year), and currency devaluation (three times in 2010) .

Economic Stability

Vietnam is perceived as a good example for its pandemic control measures, and for

accomplishing a financial development of 2.91 percent in 2020. The economy has kept up

with development for thirty years, beating the Asian monetary emergency and the global

financial crisis, venturing to turn into a center pay country from a devastated society.

Notwithstanding, it ought to likewise be noticed that Vietnam has been battling with

exorbitant cost increments for quite a long time.

Purchase Power of the citizens

Vietnam's improvement in the course of recent years has been surprising. Monetary

and political changes under Đổi Mới, dispatched in 1986, have prodded fast financial

development, changing what was then one of the world's most unfortunate countries into a

lower center pay country. Somewhere in the range of 2002 and 2018, GDP per capita

expanded by 2.7 occasions, coming to over US$2,700 in 2019, and in excess of 45 million

individuals were lifted out of destitution. Destitution rates declined strongly from more than

70% to under 6% (US$3.2/day PPP). By far most of Vietnam's excess poor – 86% – are

ethnic minorities.
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Social factors affecting Vietnam

For social factors, Vietnam has a young population with 46% of the population are in

working age and around 1 million new entrants into the labour market each year, however

overall productivity remained extraordinarily low and is merely only three-fifths the

Association of SouthEast Asian Nation average or around tenth part of the amount in

Singapore. Vietnam holds a place in the Top 5 of the 2009 Happy Planet Index (HPI), among

all the Asian nations, as announced by the New Economics Foundation (NFF) in July 2009.

Vietnamese people are very optimistic about their future thanks to a stable political regime,

peace and economic growth.

Demography

Approximately 97 million folks are located and populating Vietnam. 73% of the

individuals don’t believe in any religion, 14.9% are Buddhist, 8.5% are Christians, 1.5%

people believe in Hoahaoism, and 1.2% people believe in Caodaism. However, the common

lifetime of men and women is ninety three and eight one years ago. Vietnamese perseveres as

the official language of the country.

Social Challenges

Vietnam is facing severe social challenges like an increasingly aging population, and

the gap between rich and poor class is increasing much higher. However, the country’s

economic progress doesn’t appear to bridge the gap between wealthy and poor.
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Technological factors affecting Vietnam

The next element to discuss in the PESTEL analysis of Vietnam is the technological

environment. Power shortage is currently exaggeratedly prevalent with increasing demand;

the web is widely accessible at cheap price; counterfeit and imitation, particularly in software

merchandise, are widespread in Vietnam.

Level of innovation

For an extended time now, flourishing start-up culture, international investments, low

costs, government initiatives, and a skilled workforce have been driving IT innovation in the

Republic country. The country incorporates a number of tech parks such as Saigon Hi-Tech

Park and Da Nang Hi-Tech Park that welcomes offices and factories for over 700 firms,

including 220 foreign companies that specialise in IT and hardware manufacturing,

infrastructure development and software engineering.

Vietnam is momentarily the eighth largest provider of IT services in the world. Five IT

industries that are currently trending are fintech, AI, E-commerce, software outsourcing, and

education technology (Samuel, 2019).

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Environmental factors affecting Vietnam

Vietnam features a long coastal border (2500km) and is taken into account as one

among the most vulnerable countries due to natural disaster risks, climate change and sea

level rise. Enterprises in Vietnam need to take seriously into consideration the environmental

factors to their business planning and operating processes. Vietnamese people do not tolerate

business practices that harm the environment. For example, the Vedan Vietnam Limited JSC,

a wholly Taiwanese-invested firm has to pay a “huge figure” for its pollution to Thi Vai

River, the Coop Mart Supermarket System and retailers refused to sell Vedan’ merchandise,

promotional activities encourage the clients to respond NO with Vedan and therefore the

company is facing to bankruptcy in 2007-2009.

Environmental Challenges

The exploitation of natural resources and economic growth has resulted in many

challenges, and it threatens the country’s economic growth in the long run. Air and water

pollution has had a very bad impact on the health of workers and ordinary people.

Most significantly, Vietnam has experienced many environmental disasters like typhoons,

floods, earthquakes, droughts, and volcanic eruptions.

Tourism

Vietnam falls under the league of the world's most stunning countries. More or less,

18 million individuals visit the country annually. She’s home to 8 World Heritage sites. The

tourism industry played a significant role in shifting the country from an agricultural to a

service industry. However, the pandemic of covid-19 has turned out to be terribly dangerous

to tourism.
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Environmental policies

Urbanization and powerful economic and population growth are inflicting speedily,

increasing waste management and pollution challenges. Waste generation in Vietnam is

predicted to double in less than fifteen years. Connected to the present is the issue of marine

plastics, ninety percent of worldwide marine plastic pollution is calculable to be at disposable

from simply 10 in-land rivers, as a consequence Mekong is one among them. Vietnam is

among the ten countries worldwide that are most plagued by air pollution. Water pollution

has a vital toll on productivity of key sectors and human health.

The government is operating in full swing to lower the environmental footprint of the

country’s growth and effectively mitigate and adapt to climate change. Key strategies and

plans to stimulate green growth and viable use of its natural assets are in place
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Legal factors affecting Vietnam

The Communist Party of Vietnam and state are putting forth extraordinary attempts to

work on the legitimate climate, fostering law and order, particularly for business, to transform

Vietnam into an appealing speculation objective. Ceaseless lawful change is being made to

change the business climate, and similarly significant is the rebuilding of the economy to

further develop development, efficiency and seriousness.

International Trade Regulations

Vietnam has accessible Enterprise Law, Investment Law and other international and

regional agreements (WTO, ASEAN, APECââ, ), in theory, all kind of enterprises (SOEs,

private enterprises, joint ventures) ought to play the game with indistinguishable rules,

nevertheless in custom, the implementation of Laws is a real challenge because of poor

quality of human resource in public service and corruption issues (116/178 ranked countries).

Regulations

Vietnam allows and encourages foreign companies to invest and operate their

business in the country. The government has legally made it easier for companies, and now

they can easily create a limited liability company.

The National Assembly of Vietnam introduced new Labor Laws in 2019, and it has been

active since January 2021. However, it has made many amendments in the labor law.
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References

UKEssays. (November 2018). Pestle Analysis Of Vietnam. Retrieved from

https://www.ukessays.com/essays/economics/pestle-analysis-of-vietnam-economics-e

ssay.php?vref=1

Rahman, M. (2020). PESTEL analysis of Vietnam.

https://howandwhat.net/pestel-analysis-vietnam/

OECD (2021), Government at a Glance 2021, OECD Publishing, Paris,

https://doi.org/10.1787/1c258f55-en.

The World Bank Group (2020) The World Bank In Vietnam, available at:

https://www.worldbank.org/en/country/vietnam/overview

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

BBC (2019) Vietnam country profile, available at:

https://www.bbc.co.uk/news/world-asia-pacific-16567315

Abbreviations

BE - Business Enterprises

SMEs - Small- Medium Enterprises