British investors look to Vietnam in 2022, beyond

Vietnam has maintained high economic growth over the past years, attracting many foreign investors, including those from the UK, according to a market entry advisor at Dezan Shira & Associates.

"There are plenty of activities in Asia and something which is of particular interest to businesses in Great Britain at the moment is investment in the Vietnamese market market," said Maria Kotova, also head of business development UK & Ireland at the global consultant firm.

Kotova was speaking in a podcast interview conducted by The Leaders Council of Great Britain and Northern Ireland Wednesday on the opportunities the Vietnamese market brings to British businesses.

“Vietnam basically grew from one of the poorest countries in the world to a middle-income one in just three decades,” she said.

Apart from its economic reforms and major free trade agreements the country has signed over the past 20 years, a factor that contributed to the “miracle” of Vietnam's economy is the heavy investment into human and physical capital, Kotova noted.

"This was a vital step since a larger population meant more job openings, resulting in the development of a skilled workforce, which has enhanced productivity and competitiveness over time."

According to a World Bank overview in April 2022, Vietnam is a fast-growing middle-income country with almost 100 million people. Between 2002 and 2021, GDP per capita increased 3.6 times, reaching almost $3,700.

Vietnam was one of only a few countries to post GDP growth in 2020 when the pandemic hit. This achievement shows the resilience of the economy with good development plans, making it an appealing destination for overseas products and capital, the report noted.

In May 2021, the UK-Vietnam Free Trade Agreement (UKVFTA) came into effect, paving the way for rising trade between Vietnam and the European country. Bilateral trade reached nearly $6.6 billion in 2021, up 17% from the previous year, Vietnam's Ministry of Industry and Trade (MoIT) data shows.

The podcast indicated several areas for UK investors to consider investing in Vietnam.

Electronics is booming and Vietnam has gone “from zero to hero,” Kotova said. The nation became the 12th biggest exporter of electronic products worldwide in 2019, according to Hanoi-based Central Institute of Economic Management, with turnover of $87 billion.

While electronics makes up a significant proportion of Vietnam’s total exports, up to 95% of the turnover of such products are in the hands of foreign-invested enterprises.

Energy is one of the hottest sectors for foreign direct investment. Renewable energy industries are at the center of the Vietnamese government's development strategy, focusing on wind, solar and biomasses energy.

British investors should also look into the automotive industry and electric mobility in the coming years, Kotova suggested.

In the first four months of 2022, sales of domestically-assembled cars and imported CBU cars increased by 38% to 79,442 units and 22% to 53,423 units year-on-year respectively, Vietnam Automobile Manufacturers' Association reported.

Scott Challinor, a senior broadcaster from The Leaders Council, commented that the eco-vehicle industry and energy are both important in the Southeast Asia country, given its need to reduce carbon emissions and boost sustainability, along with energy security.

"Those two sectors over the next few months and indeed years will also grow exponentially in Vietnam, given its investments into eco cars and renewable energy," he said.

Vietnam is a giant in the textile area. The country was the world’s second largest exporter of ready-made garments, following China, according to the World Trade Statistical Review 2021 released by the World Trade Organization.

The country is also favorable to companies who seek special economic zones since Vietnam boasts a low labor cost and better policy incentives compared to other countries, according to Kotova.

Notably, the government has invested heavily into training and improving the labor force quality, particularly for niche markets. Tax incentives are widely available for investments in prioritized industries or economic zones that the government wants to develop further. Another key factor luring British businesses is Vietnam’s integration into the global trade network.

"Many companies are either setting up production in Vietnam and then exporting their products under zero or very low reduced tax rates, or exporting products to Vietnam and then processing, adding some labor dependent on each category," Kotova added.

Vietnam's GDP grew 6.81%, 7.08%, and 7.02% in 2017, 2019, and 2019 respectively. The economic expansion was 2.91% and 2.58% in 2020 and 2021 due to the pandemic fallouts, according to government data.