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What makes foreign investors choose Vietnam instead of neighboring markets?
In 2022, Vietnam is forecast to record growth at a significantly higher rate, partly thanks to the high vaccination rate that helped the country recovered most of its economic activity since late 2021.
PwC recently published the report “Vietnam Outlook 2022: Economic prospects in the wake of COVID-19”. The report said that, after a long time coping with the COVID-19 pandemic, Vietnam still recorded a GDP growth rate of 2.58% in 2021. This is also one of the few economies to achieve 2 consecutive years of growth since COVID-19 broke out.
However, GDP growth rate does not fully represent the real impact of COVID-19 on the economy. Vietnam is going through a K-shaped recovery, with different sectors being impacted in different ways. Specifically, while tourism, hotels, and food and beverage services have been severely affected, export-based industries have recorded remarkable resilience in the past two years.
COVID-19 clarifies the fact that Vietnam is an export-based economy, less dependent on tourism or hotels. When compared with neighboring countries with a strong tourism industry such as Thailand (GDP growth -6% in 2020), the Philippines (-9.6%) or Cambodia (-3.1%), it shows that these countries have been significantly impacted. Meanwhile, Vietnam can maintain positive growth.
The report emphasizes that, with the latest Regional Comprehensive Economic Partnership (RCEP) taking effect from January 1, 2022, trade relations with global markets will continue to improve, helping Vietnam gradually become the region’s fast-growing country.
When compared with neighboring markets, Vietnam is still considered the destination of many supply chains and production relocation waves, due to its solid economy and favorable investment environment. As of December 20, 2021, the country recorded a total of 31.15 billion USD in new, adjusted and share purchases by foreign investors.
One of the main reasons why Vietnam has become a “winner” in the battle to reposition the supply chain is its ability to build a strong manufacturing ecosystem. This includes a network of suppliers that support major domestic manufacturers, as well as the process of improving the nation’s electricity, road and transport infrastructure.
In the past, Vietnam was mainly known for its textile manufacturing sector. However, in recent years, Vietnam has emerged as a leading electronics manufacturing center in Southeast Asia.
Accordingly, a series of investment projects by US investors specializing in manufacturing electronic equipment and consumer electronics “landed” in Vietnam in 2019.
In 2020 and 2021, Vietnam also welcomed many other FDI projects, but some of them had to be delayed due to the impact of the COVID-19 pandemic.
This trend is expected to continue over the next few years, including a shift in investment away from other markets, as well as an increase in investment in the foreign manufacturing sector.
In 2022, Vietnam is forecast to record growth at a significantly higher rate, partly thanks to the high vaccination rate that helped the country recovered most of its economic activity since late 2021.
Mai Lan
Source: https://vietnamnet.vn/en/business/what-makes-foreign-investors-choose-vietnam-instead-of-neighboring-markets-820867.html