Vietnam Thrives Amidst Slowing Global Economy

Despite the gloomy global economy, Vietnam has demonstrated resilience. This is due to robust domestic demand for manufacturing, a growth in Foreign Direct Investment into Vietnam, and record-breaking private sector growth. The government’s combination of emphasis on facilitating locally-led and locally-owned organizations, as well as policy changes that welcome international investors, has propelled Vietnam to one of the region’s top performing economies.

1. Vietnam is attracting more foreign investment despite the world’s challenging time

According to data from the Ministry of Planning and Development, foreign direct investment into Vietnam increased 15.2% year on year (yoy) to USD 17.73 billion from January to October 2022. Meanwhile, FDI pledges fell 5.4% yoy to USD 22.46 billion, indicating the size of future FDI disbursements. Manufacturing and processing are expected to receive the most investment (57.5% of total pledges), followed by real estate (17.2%). Singapore received the most FDI pledges, followed by Japan and South Korea.

Vietnam’s GDP increased 13.67% yoy in Q3 2022, much faster than the 7.72% increase in Q2 and pointing to the fourth consecutive quarter of expansion. Due to low base effects last year, when the COVID-19 broke out strongly, the latest print also had the fastest rate of growth since at least 2000. Industry and construction output increased (12.91% vs 7.70% in Q2), as did services (18.86% vs 6.60%) and agriculture (3.24% vs 2.78%).

In the first three quarters of the year, GDP increased 8.83% yoy, the greatest increase of 9 months in the period 2011-2022, as business and production activities gradually recovered steady growth, policies recovered, and the government’s socioeconomic development was fully implemented. The economy is expected to grow at a rate of 6% to 6.5% for full 2022 – an impressive figure for foreign investors considering investing in Vietnam.

2. Welcome policies – National Strategy on Foreign Investment: Decision 667

The Government of Vietnam has recently approved a 10-year National Foreign Investment Strategy. The National Strategy for the period 2021-2030 aims to improve Vietnam’s business environment in order to attract more foreign investors and higher-quality investments, especially in high-tech and the digital sectors. It will seek investments from major investors such as Japan, China, Taiwan, South Korea, and Southeast Asian countries, as well as the EU. The Strategy proposes 9 solutions for leveraging foreign investment into Vietnam:

1. Effectively implement the issued solutions.
2. Improve the business investment environment, as well as the quality, efficiency, and competitiveness of the economy.
3. Creating a science, technology, and innovation ecosystem.
4. Innovating and increasing competition for foreign investment into Vietnam.
5. Creating supporting industries, fostering connections, and spreading
6. Improve the efficiency of foreign investment cooperation by building internal capacity and capitalizing on competitive advantages.
7. Improve the effectiveness of international economic integration and Vietnam’s international standing.
8. Improve and broaden investment promotion.

The following are also part of the strategy:

Develop the country’s innovation ecosystems: accelerate the implementation of the government’s 2020 Resolution 52/NQ-CP on how the country will approach the Industry 4.0 Revolution; introduce incentives for cooperation and technology transfers; and complete the legal framework on the establishment, protection, and commercialization of intellectual property (IP) rights in scientific, technological, and creative activities.

Encourage supporting industries: continue to improve the legal environment for technology transfers by constructing a synchronous document system; encourage the formation and development of intermediary organizations; and facilitate the formation of joint ventures and interconnections between foreign-invested enterprises and domestic universities and research institutes.

3. Reasons why consider investing in Vietnam:

• Valuable workforce
  Vietnam ranks 48 out of 157 in terms of “Human Capital Index”, placing it between Bahrain and the United Arab Emirates.
  Vietnam easily outperforms Mexico (66), Brazil (88), and India (115), which are far more popular among global investors.
• Rapid growth: 
  Prior to the global Covid-19 recession, Vietnam was the second-fastest growing country in Asia at 7.02%, trailing only Cambodia and ranking 12th overall in the world. While most countries’ GDP fell (-0.2% on average in Asia) in 2020, Vietnam’s GDP increased by a respectable 2.2%.
• Favorable Demographics: 
  With a population of over 96 million people, Vietnam has a larger population than Germany, France, or the United Kingdom. Vietnam’s population is also relatively young. Its demographics are bottom-heavy: the median age is 30.5 years, which compares favorably to the global average (30.4 years), China (37.4 years), the European Union (42.9 years), and Japan (47.3 years).

The positive trends in the business environment, production, investment, and international trade in 2022 provide the foundation for many prestigious international organizations to continue positively assessing Vietnam’s economic situation in the future. Foreign investors have high hopes for investing in Vietnam, believing that the country will be a safe shelter from the upcoming economic recession.