Overview

The time to deepen the economic relationship between Vietnam and Australia is now. This will help our countries recover from the COVID-19 pandemic.

This Strategy and its accompanying Implementation Plan set out a vision for why — and how — we can work together with the aim of becoming top ten trading partners and doubling two-way investment. The Strategy is focused on key sectors where Vietnam and Australia have particular strengths to build on the trade and investment relationship, as well as the greatest potential to assist both countries’ recovery from COVID-19 and to achieve the targets of this Strategy.

Global economic and strategic context

Economic growth in the Indo-Pacific region has re-shaped the global landscape. This region comprises 58% of the world’s population, 63% of the world’s gross domestic product (GDP)¹ and 46% of the world’s merchandise trade². Vietnam, and other member states of the Association of South East Asian Nations (ASEAN) are at the centre of this vibrant region.

The pandemic has had a serious impact on economic activity across the globe. Both developed and developing economies have gone into recession in the worst global downturn since the Great Depression. Recovery from COVID-19, boosting economic growth and creating jobs are key features of this Strategy and Implementation Plan. These will benefit Australia and Vietnam, and contribute to the wider recovery of the Indo-Pacific region.

Recognising that a country cannot achieve sustainable, lasting, economic growth without ensuring all of its population are included and that COVID-19 has had disproportionate impacts on women and girls, both countries have committed that the Strategy will incorporate principles of diversity, inclusion and equality.

In recognition of the significance of the equitable inclusion of women in the economy, this Strategy will support initiatives that provide opportunities for, and remove barriers to, women’s participation and leadership in trade and investment, at all levels and in all sectors.

Australia and Vietnam’s Strategic Partnership

On 26 February 1973, Vietnam and Australia established diplomatic relations. Since then, Australian and Vietnamese people-to-people links have flourished, including through tourism, business, education and long-term migration. There are now almost 300,000 people of Vietnamese ancestry living in Australia and Vietnamese is the fifth most spoken language in Australia. Many Australians have travelled to Vietnam for tourism, others live in Vietnam to build our trade and investment relationship or have migrated to Vietnam with their families.

Vietnam and Australia’s bilateral relationship is strong, based on mutual trust, understanding and respect. We established a Comprehensive Partnership in 2009 and elevated the relationship to a Strategic Partnership in March 2018, at which time we committed to deepen the bilateral trade and investment relationship and pursue more open trade and investment through global and regional economic integration. Australia and Vietnam agreed a Plan of Action for the Strategic Partnership on 5 November 2020, to cover the period 2020 to 2023.

Further, in 2019, Australia and Vietnam agreed to develop an Enhanced Economic Engagement Strategy with the aim of our countries becoming top ten trading partners and doubling two-way investment between our countries. This reflects a shared commitment to build on the 2018 Strategic Partnership.

Vietnam has a strong economy, attractive to investors

Since the doi moi reforms commenced in 1986, Vietnam has achieved remarkable socio-economic growth. Guided by the Socio-Economic Development Strategy (SEDS) 2011-2020, Vietnam’s economy grew by an average of 6.2% per year³. During the same period, Vietnam’s GDP per capita more than doubled⁴.

Vietnam’s economy attracts strong domestic and foreign investment flows. Its rapid industrialisation, geographic proximity to rapidly growing economies, and embrace of trade liberalisation has led Vietnam to become one of the most trade intensive economies in the world. This is demonstrated by improvements in international rankings of Vietnam’s competitiveness and ease of doing business:

• Vietnam was ranked 19 globally as a destination for foreign direct investment (FDI) in 2020, jumping five places from 2019 according to the United Nations Conference on Trade and Development⁵;
• Vietnam’s ranking in the World Economic Forum’s Global Competitiveness Index jumped 10 spots to 67 (the largest jump of any economy in the world) in 2019;
• according to the World Bank’s Ease of Doing Business Index, Vietnam rose 12 places from 82 in 2016 to 70 in 2020; and
• ratios of foreign direct investment inflows to GDP (a key positive indicator of the business environment) are among the highest in Southeast Asia — at 6.2% of GDP in 2019⁶.

Vietnam’s rapid economic growth has, in part, been underpinned by a progressive women’s workforce participation rate. Vietnam has one of the highest female labour force participation rates in the world. As of 2019, some 79% of females aged 15 to 64 years were in the labour force, compared with 84% of men. This figure has remained consistently high for around two decades.

Notwithstanding almost two decades of a relatively high rate of labour force participation, gender inequalities persist in employment, entrepreneurship and the economy in Vietnam as they do in Australia and other countries.

Australia’s advanced economy remains resilient

Australian economy has had unprecedented economic growth since the early 1990s, with GDP growth rate averaging 3.2% per year (higher than every other major advanced economy in the world). This growth has been interrupted only by the impact of the COVID-19 pandemic.

Strong demand for natural resources, energy and agricultural products from rapidly growing economies in the Indo-Pacific, including Vietnam, has been an important driver of economic growth and integration with the region. Increased demand from the region for Australia’s education, tourism and other professional services has also contributed to Australia’s economic growth. The strength and resilience of the Australian economy is also based on sound governance and strong institutions.

Australia’s economic success is reflected in measures of international competitiveness and ease of doing business:

• as of 2020, Australia is the 13th largest economy in the world, with an annual GDP of almost US$1.4 trillion⁹;
• the World Economic Forum’s Global Competitiveness Index for 2019 ranked Australia at 16; and
• the World Bank’s Ease of Doing Business Index for 2020 ranked Australia at 14.

Australia recognises its continued economic success is dependent on ensuring women’s workforce participation and women’s economic security. In May 2021, Australia’s women’s workforce participation rate was 61.8% and the gender pay gap persisted, at 13.4%¹⁰.

In recognition of long-standing challenges and those presented by the COVID-19 pandemic, Australia continues to prioritise women’s participation in the economy, with a range of measures contained in, for example, the 2020 Women’s Economic Security Statement and 2020-21 Women’s Budget Statement.

Baseline trade relationship

There is little direct competition in the structure of trade between Australia and Vietnam but instead a strong complementarity, which presents opportunities for further trade cooperation. Over time, as Vietnam has produced a greater range of products in greater quantities, it has become more competitive and attractive to Australian customers. And, as Vietnam’s economy has grown and its citizens’ standard of living improved, so has its demand for energy, raw materials, food, and education. Both countries have benefited from economic growth, with each country’s strengths helping to meet the other country’s needs.

Over the past 20 years, the Vietnam-Australia two-way trade relationship has grown on average by 8.6% each year, much faster than the growth in Australia’s overall trade (5.8% a year over the past 20 years) and faster than the growth in Australia’s trade with ASEAN countries over the same period (5.5%). Total two-way goods and services trade was valued at A$14.6 billion in 2020¹².

This growth in the value of our trade is reflected in our relative importance to each other as trading partners. Vietnam was Australia’s 19th-largest two-way merchandise trading partner in 2000, rising to 13th place in 2020. For Vietnam, Australia was its 14th largest merchandise trading partner in 2020¹³.

To meet the trade target of this Strategy, our two-way trade will have to continue to grow faster than trade with our other partners. Given the resilience and complementarity of Australia and Vietnam’s economies, this target is achievable, supported by an Implementation Plan to further enhance trade and investment in specific sectors.

Australia-Vietnam Trade (Goods and Services)

(AUD million)

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Baseline investment relationship

Bilateral investment between Australia and Vietnam has also increased, but has room to grow further. The total stock of two-way investment amounted to A$2.17 billion in December 2020¹⁵. To meet this Strategy’s targets, the stock of two-way investment will need to double to A$4.36 billion.

Vietnam's investment in Australia (both direct and portfolio) increased five times, from A$155 million in 2008 to A$785 million in 2020. Investment grew strongly between 2010 and 2014, after the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) entered into force¹⁶. In 2019, Vietnamese investors invested more in Australia than in any other country¹⁷. Significant Vietnamese investors in Australia include Hoa Phat and TH Group in live cattle.

As of December 2020, Australia’s investment in Vietnam totalled A$1.38 billion, (accounting for 0.51% of total registered investment in Vietnam and ranked 20 out of all countries with investment in Vietnam)¹⁸. Australian investment is concentrated mainly in manufacturing and processing industries; food services; agriculture, forestry and fisheries. Prominent Australian investors in Vietnam include Austal, Blackstone Minerals, BlueScope Steel, CBH Group, LOGOS, Linfox, Mavin Group, RMIT University and SunRice.

Australia-Vietnam Bilateral Investment

(stock, AUD million)

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Development cooperation to support bilateral trade and investment

Vietnam has sought to effectively mobilise financial resources for development, including official development assistance (ODA). With ODA of A$78.9 million in 2020-21, Australia is an important partner in supporting Vietnam’s economic integration and reform agenda.

Aus4Reform — the Australia Supports Economic Reform in Vietnam Program — makes a positive impact on economic activities by improving the business environment and facilitating business production in Vietnam.

Aus4Innovation — the Australia-Vietnam Innovation Partnerships Program — has strengthened the capacity of Vietnam’s national innovation system to build resilience in the agriculture and food sector, and helped Vietnam's economy to grow to meet the challenges of a digital future.

The Australian Government has also worked with financial institutions like the World Bank and Asian Development Bank (ADB) to further improve Vietnam’s socio-economic development. The iconic Cao Lanh Bridge Project, co-financed by Australia in collaboration with ADB, has helped to boost private sector investment and local industry by removing a critical transport bottleneck and connecting exporters with major markets in Vietnam, Cambodia and Thailand.

Australia’s Aus4Skills human resource development program partners Australian and Vietnamese experts to develop a sustainable industry-led skills development model in Vietnam, which will equip technical and vocational education and training graduates with the competencies for working in the logistics sector to improve Vietnam’s workforce productivity.

Australian Government funded scholarships for Vietnamese citizens will continue to build enduring institutional and people-to-people partnerships and pursue solutions to shared national and regional challenges.

The Australian Alumni Program in Vietnam supports alumni of Australian education institutions to contribute to the development of their sector, community and country and strengthen their links with Australia. Australian alumni in Vietnam better understand Vietnam’s business environment and open doors for Australian businesses in Vietnam.

Australia’s development cooperation with Vietnam includes a strong focus on increasing women’s economic empowerment, with support for women’s participation in the labour market and global value chains. For example, the Aus4Equality initiative supports Vietnamese farmers, logistics providers and tourism operators to revive and improve their livelihoods, especially for businesses led by women and people from minority groups and through the ILO-IFC Better Work Programme, Australia furthers the right to decent work by supporting labour standards and women’s economic empowerment for the predominantly female workforce in Vietnamese garment factories.

Australia’s broader development cooperation with Vietnam also supports, among others, Vietnam’s efforts to strengthen its health security and systems, increase awareness of human rights standards, bolster its institutional capacity and train future leaders. These efforts, in turn, help to reinforce Vietnam’s social and economic resilience and stability.