Vietnam: A Rising Growth Engine with Emphasis on High-Quality Foreign Direct Investment

Vietnam: A Rising Growth Engine with Emphasis on High-Quality Foreign Direct Investment

A recent report titled “Vietnam: A Global Engine of Growth,” jointly released by Golden Gate Ventures and Boston Consulting Group on September 7, highlights the projected increase in ASEAN trade by $1 trillion by 2031. Major contributors to this growth are expected to be China, Japan, South Korea, the EU, and the US. Within ASEAN, Vietnam is set to take center stage within the next decade, as it already leads in terms of GDP growth.

The report emphasizes Vietnam’s emergence as a frontrunner in global high-tech manufacturing, which has been fueled by escalating geopolitical tensions between China and the West. As uncertainty persists in the West-China relationship, Vietnam has become an attractive destination for foreign direct investment (FDI), particularly in the high-tech manufacturing sector, with significant contributions from Asia Pacific nations.

Vietnam has experienced steady growth in FDI disbursement, with a compound annual growth rate of 6.4% from 2015 to 2022. This growth is expected to continue, supported by the Vietnamese government’s administrative reforms, legal and tax incentives. Notable global companies such as Apple, Foxconn, Google, Hyundai, Intel, LG Electronics, and Samsung have established manufacturing facilities in Vietnam, potentially to diversify their reliance on China.

Vietnam’s shift from a focus on “high speed” to “high quality” economic development is another significant factor in its growth trajectory. The government has prioritized innovation, talent development, and the advancement of digital, green tech, and high-tech industries. This strategic move positions Vietnam to become a global tech powerhouse, following in China’s footsteps from over a decade ago.

The Vietnamese government has outlined key factors that define “high quality FDI,” including investments in education, research and development, supply chain linkages, advanced high-tech enterprises, and businesses that prioritize environmental impact and adhere to regional and global standards.

Regulatory reforms in Vietnam have also contributed to a more favorable business environment. Globally, Vietnam ranks 70th out of 190 countries for ease of doing business and 7th out of 78 countries as the best country to start a business, surpassing the Philippines and the US. Vietnam’s strategic geographic location, serving as a vital link in the global supply chain, coupled with its extensive economic, trade, and investment relationships, further support its growth potential.

The unique socioeconomic environment, distinct risks and opportunities, and sophisticated growth strategy set Vietnam apart from other rapidly growing economies like Indonesia and China, according to Il-Dong Kwon, Managing Director and Partner at Boston Consulting Group Vietnam. This positioning marks a significant inflection point in Vietnam’s journey towards becoming a global growth engine and sets the stage for its next decade of growth.

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