An export-oriented manufacturing and inbound foreign direct investment drive Vietnam's economic growth.
While global uncertainty persists, Vietnam's prospects are reassuring as the economy continues to be among the world's fastest-growing.
Chairman of EuroCham Alain Cany gave the remarks at the conference held today [October 25] by HSBC Vietnam, titled "Market Outlook: Vietnam Today, Tomorrow and Beyond."
According to Cany, although the World Bank predicted a weak 2.8% global growth for 2022, Vietnam is expected to grow 7.2%.
Supporting such an optimistic view was that the country posted a GDP growth of 8.83% during the first nine months of 2022, the highest nine-month growth during the 2011-2022 period.
The Government has recently suggested the GDP growth in 2022 could be around 8%, surpassing the goal set by the National Assembly by 2-2.5 percentage points.
"This has been driven by Vietnam's young, dynamic, and a tech-savvy workforce of 56 million, making it one of the world's largest labor forces in percentage and absolute numbers," said Cany.
"Considering Vietnam's high-quality and affordable labor offerings, it's no surprise that foreign investors want to move manufacturing operations here," he continued.
Meanwhile, export-oriented manufacturing and inbound foreign direct investment are driving Vietnam's economic growth, Cany asserted.
As of 2021, Vietnam's exports accounted for 19% of its GDP, an increase from less than 1% in 2010. He noted that the country's export market surpassed Malaysia and Thailand.
A wave of big-name FDI projects has illustrated this, Cany said, referring to LEGO with an investment of $1 billion in Binh Duong to build its forward-looking first factory in Vietnam and its second in Asia; Apple supplier Pegatron planning to invest up to $1 billion in the country; Foxconn committing $300 million to upgrade its Bac Giang manufacturing facility, or Samsung beginning to manufacture semiconductor parts in Vietnam in 2023.
According to the General Statistics Office (GSO), FDI implemented in the first nine months of 2022 totaled $15.43 billion, representing a 16.3% increase over the same period last year, the highest in the previous five years.
"Vietnam is consistently one of the world's top FDI receivers relative to GDP, ranking second only to Malaysia among ASEAN economies," Cany said.
As multinational companies seek to expand in Vietnam under its China Plus One strategy, and because of the 15 free trade agreements Vietnam has, the FDI export market will continue to grow.
Sharing Cany’s optimistic view of Vietnam’s outlook, CEO of HSBC Vietnam, Tim Evans, expected the country would remain a regional outperformer in terms of GDP growth, with HSBC suggesting the estimated economic expansion rate at 7.6% for this year.
In early September, Moody’s upgraded Vietnam to Ba2 and following an upgrade by S&P, Vietnam is now only one notch below investment grade, Evans noted, while Fitch actually upgraded Vietnam to BB in May 2018 and currently has Vietnam BB rating on a positive outlook.
In addition, PMI – a measure of manufacturing confidence in the economy – posted 52.5 in September. “Although this number was down compared with the previous month, Vietnam’s manufacturing conditions have improved significantly, following the ASEAN’s improvement trend, signaling a solid improvement in the health of the manufacturing sector,” he said.
“Moreover, Vietnam is set to become the 10th largest global consumer market by 2030, bigger than Germany and UK,” Evans suggested.
For Vietnam to become a more robust and sustainable economy, Cany from EuroCham called on the Government to continue making business conditions simpler to increase investment, knowledge sharing, and tech transfers amid a competitive global market.
"It is an absolute necessity that Vietnam's legal framework, administrative procedures, and business incentives are given high priority," he said.
Another priority is to make it easier for public and private investors to accelerate the green transition.
"With more than three thousand kilometers of coastline, Vietnam is highly vulnerable to climate change. Floods and saltwater intrusion caused by rising sea levels are destroying homes and livelihoods," he said.
In response, Vietnam has become an ambitious player in sustainability, Cany noted. The COP26 in 2021 marked a milestone for Vietnam when Prime Minister Pham Minh Chinh committed to reaching net zero by 2050.
Following COP26, ambitious targets for 2030 include reducing GDP's energy intensity, boosting renewable capacity, increasing the digital economy, and extending forest coverage. A comprehensive legislative package, such as Vietnam's 2021-2030 National Green Growth Strategy, provided further momentum.
According to Cany, green transformation, critical infrastructure development, and digital products are priorities that Vietnam should further press on.
Cany applauded the Government's efforts in promoting human resources capacity, including a boost of the skilled labor force from 26.1% to 75% by 2030. This is critical for the country to create a foundation for future high-quality growth.
HSBC Vietnam CEO Evans suggested the Vietnamese people would make a difference in the country.
"It is evidenced in the way Vietnamese people get out of Covid-19 and re-build the economy together as one, as well as through all the highs and lows, overcoming all challenges laid before them throughout their history," he said.
"We are lucky to be here to witness, support, and drive the success story of Vietnam," Evans said.