Top Southeast Asia exporter Vietnam needs more infrastructure investment: McKinsey

As Southeast Asia's biggest exporter, Vietnam's projected infrastructure investment is below the optimum level required to match its trade growth, says McKinsey & Company.

In a Thursday commentary, the American consulting firm said Vietnam is currently the largest exporter in the region, with exports growing from $320 billion in 2019 to $440 billion in 2023, achieving a compound annual growth rate (CAGR) of 8.2%.

The growth is largely driven by substantial FDI in the manufacturing sector, particularly in electronics. There are significant export flows between Vietnam and Europe, mainland China, and the United States, it noted.

Other major exporters in Southeast Asia are Indonesia, with value rising from $180 billion in 2019 to $290 billion in 2023, Malaysia from $280 billion to $370 billion, and Thailand from $257 billion to $314 billion.

However, McKinsey pointed out that even with all the expected exports and growth of production in Southeast Asia, China will likely stay the most important producer and exporter in the region.

The growth rate may be the same, but China’s exports reached around $3.5 trillion in 2023, almost double the total of Southeast Asian volumes at $1.8 trillion.

Even as production ramps up in the region, China will continue to benefit from its achieved size and remain a major force in manufacturing, McKinsey added.

Investing in logistics infrastructure to meet export demand

The global supply chain is constantly changing, shaped by manufacturers around the world striving to limit risk, build resilience, manage costs, and explore new markets for production, McKinsey highlighted.

As many manufacturers seek to reduce their dependence on a single supply source, Southeast Asia is emerging as a prominent manufacturing hub. Indonesia and Vietnam are currently leading the manufacturing and trade flow shifts.

In 2023, Indonesia received about $33 billion in greenfield manufacturing FDI and Vietnam about $16 billion, the consulting firm stressed. The most prominent trend in Vietnam is increasing growth in electronics; and in Indonesia, in metals and chemicals.

The shift in FDI toward Southeast Asia underscores the strategic importance of these countries in the global supply chain. And for investors and logistics providers, this presents opportunities to capitalize on the growing demand for infrastructure and logistics services.

Governments in these countries have made significant infrastructure investments to support this growth. While substantial investments have been made or planned, McKinsey suggests that if trade continues on its current trajectory, there could be an additional $60 billion opportunity to provide trade infrastructure in the region.

In particular, Vietnam announced infrastructure capital expenditure of $117.3 billion in 2025-2030, about $11.46 billion below the optimal figure. The country could hold potential for containerization of electronics shipments, McKinsey recommended.

In Vietnam, chemicals and electronics exports are growing fast and could represent areas of opportunity where logistics support may be needed.

Chemicals exports to mainland China have more than doubled since 2016, as have electronics exports to mainland China, Taiwan, and the United States. Overall, there has been increased containerization in Vietnam’s exports, suggesting another area for growth, McKinsey added.