Vietnam’s Consistent Growth Attracts Foreign Investors

May 30th, 2021

Any investor who is interested in Southeast Asia needs to have Vietnam on his radar. Not only does the nation have one of the most rapidly growing economies in the region, it has also managed the COVID-19 pandemic very well. It's currently on a strong economic recovery path, with projections by various international financial bodies of 2021 GDP growth exceeding 6 percent, and topping 7 percent the following year.

In fact, Vietnam is becoming an economic superstar, attracting billions of dollars in foreign investment. An extraordinary success story, it was just 46 years ago in 1975 that the Vietnam War ended and the nation's economy lay in tatters, one of the poorest in the world. Adding to its economic woes was a forced transition to a Communist command economy, bringing with it a plethora of problems in agricultural and industrial production, as well as significant international debt.

Vietnam's turning point was the implementation of the so-called Doi Moi policy in the mid-1980s, which outlined a transition from a centralized economy to a “socialist-oriented market economy” that permitted private enterprise.

Over the following years, private businesses increased productivity and exports, leading to impressive economic growth. Positive public sentiment, paired with a diligent and reasonably well-educated workforce was a recipe for success for this nation of 98 million people. This in turn encouraged foreign investors to set up businesses in the country.

With manufacturing accounting to around 70 percent of foreign direct investment, in the earlier years it was mainly about low-cost labor intensive industries such as textile, machinery etc.. In recent years the trend is shifting towards high-tech industries, leading by big international brands, for example Intel in Ho Chih Minh.

Since 1990, Vietnam’s GDP has grown between approximately 5 to 10 percent annually, encouraged by the ruling Communist Party of Vietnam’s economic plans that have continued to enhance the role of the private sector. Even during 2020 with COVID-19, Vietnam’s economy expanded by nearly 3 percent.

Contributing factors have included decades of stable politics and favorable government policies to attract investors, plus overall macroeconomic advantages of a perfect strategic location, good weather and an abundance of natural and human resources.

 

Image: Gdp growth chart (Source: PwC Vietnam)

Article copyright: Amata