The significance of Vietnam for US businesses, why they should take notice
Steven Cranwell, CEO and regional head, client coverage, in the Americas of Standard Chartered, explains why companies and investors should watch opportunities offered by Vietnam.
Vietnam has gone from being a frontier economy in ASEAN to a flourishing, cost-effective industrial nation. Firms and investors that are looking for new markets to grow, source or manufacture their products – especially in Asia – should consider Vietnam’s long-term potential and stay updated on its opportunities.
In recent years, Vietnam has benefited from trade tensions between the U.S and China. With U.S. companies adopting a ‘China plus one’ approach to their supply chains, the percentage of exports from Vietnam to the U.S. has risen by approximately 9% between 2018 and 2021.
It is, however, important to note that Vietnam has been an alternative to China for general manufacturing in Asia long before the Covid-19 pandemic, and its long-term prospects remain bright.
Despite the uncertainty from global economic conditions, we remain confident in Vietnam’s outlook. The country’s business-friendly atmosphere, strategic location as a gateway to other fast-growing markets, plentiful and skilled labor, competitive labor cost and incentives have been compelling propositions to companies looking to expand their manufacturing in the region.
Take Apple for example. While Vietnam has yet to host an Apple plant, the country is already home to 31 companies with 160,000 workers producing and assembling parts for Apple products. Other tech companies like Intel Corporation are also planning to increase their investments in the country. Nike is another example of a company that has expressed interest in expanding its investment and production in Vietnam. The recent increase in the S&P Global Vietnam Manufacturing Purchasing Managers' Index to above 50.0 in February is a positive sign of its manufacturing sector's renewed strength.
Numerous advantages for US companies
ASEAN is poised for long-term prosperity and is on track to become one of the world’s largest trading blocs, benefitting from global supply chain shifts and favorable demographics. It is one of the few economic blocs in the world where every major economy wants to do further business, and the opportunities in trade, investment, digitization, and sustainable finance are well acknowledged.
Over 90% of the 500 global business leaders we recently surveyed indicated plans to expand in ASEAN, and over 80% mentioned that they will increase investments in the region. This is consistent with feedback from U.S.-based respondents, where 92% have existing and future plans to expand sales in the region and 51% currently have or plan to have production capabilities in Vietnam.
While we are optimistic that more respondents will increasingly have plans to expand into Vietnam, there are challenges to ensure this trajectory continues at pace.
It is not uncommon to hear companies voicing concerns that Vietnam's infrastructure needs improvement, particularly in ports, transportation, and logistics capabilities, for the country to continue its rate of growth. Additionally, Vietnam's reliance on raw materials from China may impede the diversification efforts of companies as production may be disrupted if supplies from China cease. For example, the garment and textile industry relies on China for 70-80% of the material they require.
But these challenges come with opportunities. To enhance the national transportation network, the country’s Transport Infrastructure Master Plan is expected to support the upgrading of all transport infrastructure by 2030 and solve Vietnam’s traffic and congestion issues through public-private investments.
Vietnam participates in numerous free trade agreements. Some of them include the Regional Comprehensive Economic Partnership (RCEP), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam FTA, and UK-Vietnam FTA – all of which will improve the country’s ability to participate in worldwide and regional supply chains. This in turn enables businesses established in Vietnam to diversify and access a broader range of markets at favorable conditions.
Foreign direct investment to support the country's growth is also expected to continue through attractive tax and investment schemes. For example, special sectors like healthcare, technology, renewable energy, and infrastructure development can expect to receive preferential corporate income tax rates. Projects in specific sectors and regions may also qualify for tax exemptions and reductions if they meet specific criteria.
Last but not least, as industries transition into more sustainable sources of fuel, Vietnam is well-positioned to partake in the energy transition. With the country’s recent agreement to be part of the Just Energy Transition Partnership, it will stand to benefit from an initial $15.5 billion of public and private finance over the next three to five years to support the country’s shift to renewable energy sources. Given Vietnam's access to various renewable energy sources, such as solar, wind, and biomass, it is evident that there will be significant growth opportunities for businesses involved in promoting clean energy, sustainable infrastructure, and decarbonization technologies.
Vietnam is set to become one of the most important players in the Indo-Pacific and is making significant investments in the region. With certain geopolitical tensions persisting and the RCEP estimated to further enhance regional growth, Vietnam's draw as a growth market and manufacturing hub is likely to rise as companies seek to expand in ASEAN. Companies that take notice will only stand to benefit.
- Read More
Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year
Vietnam’s central province of Quang Ngai will work with the investor to have construction of VSIP II Quang Ngai, a facility based on the Vietnam-Singapore Industrial Park (VSIP) model, begin in August 2025.
Industrial real estate - Sat, November 2, 2024 | 3:47 pm GMT+7
Vietnam likely to grow 6.5% in 2024-2025: VinaCapital
VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to achieve 6.5% growth in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.
Economy - Sat, November 2, 2024 | 2:00 pm GMT+7
Major Vietnamese developer Novaland appoints new CEO
Duong Van Bac, who joined Novaland as chief financial officer in August 2023, has been appointed general director, starting Friday.
Companies - Sat, November 2, 2024 | 10:24 am GMT+7
Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3
Ho Chi Minh City-based Bamboo Capital Group recorded an after-tax profit of VND331.2 billion ($13.1 million) in the third quarter of 2024, an astounding 36-fold expansion year-on-year.
Bamboo Capital - Sat, November 2, 2024 | 9:41 am GMT+7
ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout
Vietnam Beverage, wholly owned by Thai Beverage (ThaiBev) will rake in VND1,374 billion ($54.26 million) worth of dividend from Ho Chi Minh City-based top brewer Sabeco.
Companies - Sat, November 2, 2024 | 9:13 am GMT+7
Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex
Leading Vietnamese steelmaker Hoa Phat had invested more than VND52.5 trillion ($2.08 billion) in its Dung Quat Iron and Steel Integrated Complex (Dung Quat 2) in the central province of Quang Ngai as of Q3/2024.
Industries - Sat, November 2, 2024 | 8:00 am GMT+7
Vietnam becomes Australia’s fastest-growing inbound market
The number of Vietnamese tourists to Australia has grown significantly after the Covid-19 pandemic, with nearly 178,000 reported in the 12 months to August 2024, according to a Friday press release by the Australian Minister for Trade and Tourism’s Office.
Southeast Asia - Fri, November 1, 2024 | 10:02 pm GMT+7
Study finds shift in Thai consumers’ spending patterns
Consumers in Thailand are shifting their spending focus to experiences and investments, according to the latest ASEAN Consumer Sentiment Study (ACSS) by United Overseas Bank (UOB).
Southeast Asia - Fri, November 1, 2024 | 10:00 pm GMT+7
Energy security, digitalization key to Indonesia's economic growth
The Indonesian government is prioritizing long-term economic growth through energy security, digitalization, and natural resource industrialization, according to Deputy Minister of Finance Thomas Djiwandono.
Southeast Asia - Fri, November 1, 2024 | 9:58 pm GMT+7
Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM
Prime Minister Pham Minh Chinh’s freshly ended six-day trip to the UAE, Saudi Arabia and Qatar has produced important outcomes, demonstrating the growing relations between Vietnam and the three Middle-East countries, Deputy Prime Minister and Foreign Minister Bui Thanh Son told the Vietnam News Agency.
Politics - Fri, November 1, 2024 | 9:25 pm GMT+7
Vietnam, Qatar look to tap potential for energy, oil & gas collaboration
Vietnam and Qatar have recognized the significant potential for further collaboration in multiple sectors such as energy, oil and gas, especially LNG, agriculture, Halal industry, and banking.
Politics - Fri, November 1, 2024 | 9:02 pm GMT+7
Thailand bans export of raw palm oil until December
Thailand's Department of Internal Trade has temporarily banned the export of raw palm oil due to reduced production caused by drought and plant diseases.
Southeast Asia - Fri, November 1, 2024 | 8:31 pm GMT+7
Envision Energy to build $420 mln wind power plant in Vietnam from June 2025
Envision Energy Singapore Pte Ltd, under China-based Envision Energy, aims to kick off construction of the 300-MW Envision Nam Po wind power plant in Vietnam’s northern mountainous province of Dien Bien in June 2025.
Energy - Fri, November 1, 2024 | 8:30 pm GMT+7
Indonesia to ban plastic waste imports from 2025
The Indonesian government will start imposing a ban on the import of plastic waste from the beginning of next year, according to Minister of Environment Hanif Faisol Nurrofiq.
Southeast Asia - Fri, November 1, 2024 | 8:29 pm GMT+7
Islamic economy makes up 48% of Indonesia’s GDP
The contribution of Islamic business activities to Indonesia’s GDP has been estimated at 48%, local authorities reported at the 11th Indonesia Sharia Economic Festival (ISEF).
Southeast Asia - Fri, November 1, 2024 | 8:28 pm GMT+7
Restructured construction giant Tracodi gets set to execute ambitious plans
After changing its name and restructuring as a group, Tracodi Construction Holdings JSC (HoSE: TCD), a member of Bamboo Capital Group (HoSE: BCG), has completed a leadership shake-up and is poised to achieve rapid growth.
Bamboo Capital - Fri, November 1, 2024 | 4:43 pm GMT+7
- Travel
-
Indian billionaire to visit Vietnam’s Ha Long Bay with 4,500 employees
-
Vietnam in talks on visa exemptions with 15 countries to boost tourism
-
Foreign businesses in Vietnam urge relaxation of visa, work permit requirements
-
AI can be a game changer for Vietnam tourism
-
Google Doodle honors world's largest cave Son Doong
-
Four Vietnam airports to suspend operations as typhoon 'strongest in a decade' approaches