Local and international businesses have found an alternative to shrinking exportmarkets in the last place anyone expected: rural Vietnam.

Tom DiChristopher

explores the new frontier.Photo by

Fred Wissink

t a special market in the small town oVinh Gia in southwestern An GiangProvince, community members are rummag-ing through a range o Vietnamese products,many o which aren’t regularly available tothem. But despite the urry o activity, oneelderly man is content to stand by a booth setup by national supermarket chain Co.op Mart,attempting to divine the secret to a machinethat reads the packaging on products anddisplays their prices on a little screen.“It was the frst time in his lie seeing thatkind o machine,” says Tran Nguyen, deputymanager o the nonproft Business Studiesand Assistance Center (BSA), as he recalls thescene. “I think that’s a good point, becauseour programme is bringing modern lie, themodern trade, to that area.”Since March o this year, BSA and its Viet-namese member companies have been settingup these markets to introduce consumersto their products and establish distributionnetworks. It's a new trend that was largelybrought about by the eects o the globalfnancial crisis, throughout which many com-panies’ export and outsourcing contracts havebeen slashed.“They lost this very big market,” says Tran,“so they have to come back to the Vietnamesemarket.”But even beore Vietnam’s export marketsbegan to shrink, a transormation was occur-ring in the rural provinces, where approxi-mately 76 percent o the country’s populationresides. When consumer research frm TNSbegan assessing the rural market a ew yearsago, they ound something no one expected:there are more than 17 million consumers inrural Vietnam that earn 1.5 million VND ormore, roughly three times as many as in urbanVietnam (about 5 million).“Seven out o ten consumers are actually inrural Vietnam, and they’ve been ignored upuntil the last year or so,” says Ral Matthaes,managing director o TNS Vietnam. “No-body’s ever paid attention to the rural marketbecause they’ve thought (a) they’re poor and(b) because o the difculties o distributionin the past, it made it very expensive to bringproduct into rural Vietnam.”Now that the assumption has been turnedon its head, companies are scrambling tolocate these rural consumers. The potential isso huge that Matthaes says rural Vietnam hasbecome “the next new battleground.”

rural prosperity

There’s no simple way to determine the rootcause o this growth in consumer earning;likely these 17 million consumers have pros-pered since Vietnam’s economic awakeningor a number o reasons. However, it’s possibleto identiy trends that have aected individualhousehold income, namely agricultural devel-opment, access to credit, export growth andmanuacturing.The agriculture and aquaculture sector,which employs more than hal o the work-orce, has seen some o the biggest changessince the end o collective arming in theearly 90s and the subsequent rise o land-userights. According to the World Bank, yearlyagriculture growth has averaged 4 percentsince 2000, thanks largely to increasedproductivity due to market-based incentivesand modernisation o arming methods. Theexport actor is closely related; in the spano just 10 years Vietnam has gone rom anet importer to a net exporter o agriculturalproducts. Today, Vietnam is the global leaderin pepper exports, second only to Thailand inrice exports and a top-ten seaood exporter.Though it’s still an emergent phenomenon,Matthaes says access to credit in rural areashas also been signifcant: “You know that oldsaying, ‘It’s better to teach them how to fshthan to give them fsh?’ Well, now they havecredit to buy a fshing pole.”During a December 2007 seminar thatocused on rural credit access, the State Banko Vietnam reported that although supply wasnot yet adequate to meet demand, total loansin the agricultural sector had increased tenoldrom a decade earlier, reaching 192 trillionVND (nearly US $11 million) in 2007.Manuacture, spurred largely by boomingexport markets, has also contributed to this in-

the next new

battleground