Vietnam holds its own in challenging 2023 with more highs than lows

Vietnam showcased impressive resilience in the face of numerous challenges faced in 2023, recording several economic and diplomatic highs and some lows. The Investor looks back.

Uptick in ties with major economic powers

During U.S. President Joe Biden’s September 10-11 visit to Vietnam, the two countries upgraded their bilateral ties to the highest level of “comprehensive strategic partnership.” Many mega businesses agreements were struck during the visit.

When Chinese Party Secretary and State President Xi Jinping visited Hanoi on December 12-13, the two countries signed 36 agreements that lay out cooperation in several areas. Notably, Vietnam and China decided to enhance cooperation on railways and other infrastructure projects in order to facilitate bilateral trade flows.

A large number of deals were signed between Vietnamese companies and their counterparts during South Korean President Yoon Suk Yeol's visit to Vietnam on June 22-24 and Singaporean PM Lee Hsien Loong’s Hanoi visit on August 27-29.

In November, during President Vo Van Thuong's Tokyo visit, Vietnam and Japan upgraded their relations to that of a "comprehensive strategic partnership.” Nearly one month later, PM Pham Minh Chinh’s conducted a trip to Japan and witnessed a series of deals.

GDP grows 5.05% to $430 bln in 2023

Vietnam’s GDP grew 5.05% year-on-year to $430 billion in 2023, according to the General Statistics Office. The growth missed the target of 6.5% set by the National Assembly, Vietnam's highest legislative body, but it was still higher than recorded by many regional peers.

The growth was higher than the 2.91% recorded in 2020 and 2.58% in 2021, the two peak years of the Covid-19 pandemic; but lower than 8.02% in 2022, the post-pandemic period, and 7.02% in 2019, the pre-pandemic period.

Agriculture was a bright sport, with six farm products posting record-high export revenues. They were fruit-veggie with $5.69 billion, up 69.2% year-on-year; rice with $4.78 billion, up 38.4%; cashew with $3.63 billion, up 17.6%; coffee with $4.18 billion, up 3.1%; shrimp with $3.38 billion, down 21.7%; and wood and wooden products with $13.37 billion, down 16.5%.

Vietnam expands expressway network to nearly 1,900 kilometers

Vietnam has opened 730 kilometers of new expressways to traffic since mid-2021 when the current government was sworn in, raising the total to nearly 1,900 km nationwide so far. The latest two additions were the 23-kilometer My Thuan-Can Tho and 40.2-kilometer Tuyen Quang-Phu Tho. They were opened to traffic in late December.

Another 1,700 kilometers of expressways are under construction, placing the country well on the way to achieving expressway network expansion to 3,000 kilometers throught 2025 and over 5,000 kilometers by 2030.

The development is part of the authorities' efforts to invest VND96 trillion ($3.94 billion) in the traffic infrastructure in 2023, with notable projects of Ho Chi Minh City's Ring Road 3, Hanoi's Ring Road 4, and Dong Nai province's Long Thanh airport.

Vietnam attracts $36.6 billion of FDI in 2023

Registered foreign direct investment in Vietnam reached $36.6 billion in 2023, up 32.1% year-on-year, the highest ever growth, according to the Ministry of Planning and Investment. Disbursed FDI grew 3.5% year-on-year to $23.18 billion.

Some major investments were joint venture between Tokyo Gas, Kyuden International, and Truong Thanh Vietnam Group receiving an investment license to build a $1.99-billion LNG-to-power plant in the northern province of Thai Binh; Japan’s Sumitomo Mitsui Banking Corporation (SMBC) completing the acquisition of a 15% stake in Hanoi-based VPBank for $1.5 billion; LG Innotek, the electronic component arm under South Korea’s giant LG, investing an additional $1 billion in Vietnam’s Haiphong city.

Approval of Global Minimum Tax

In November, the National Assembly, Vietnam’s highest legislative body, passed a resolution on the global minimum tax (GMT) with a 93.52% endorsement. The resolution became effective on January 1, 2024, however, tax payments per the scheme will be applied from fiscal year 2025.

In December, the Ministry of Planning and Investment started gathering feedback on a draft decree to establish a fund that will use part of GMT revenues to support investors in priority sectors. The fund aims to help stabilize the investment environment, and attract both foreign and domestic investment in prioritized sectors, helping offset the loss of preferential policies for investors as a result of instituting the GMT.

Credit growth reached 9.87%, below 14% target

Vietnam’s credit growth reached 11.09% in the year to mid-December, still some way off the 2023 target of 14%, reported the State Bank of Vietnam (SBV). The central bank pointed out that shrinking investment, production and consumption led to falling demand for credit.

Banks should continue cutting costs in order to reduce interest rates, State Bank of Vietnam Governor Nguyen Thi Hong said in December. Hong clarified the central bank has cut the interest rate four times this year, helping reduce the average loan interest rates in the first 10 months of this year by three percentage points. The governor also called on banks to deliver their best efforts to streamline loans procedures, ease collateral requirements, and reduce interest rates.

Approval of Power Development Plan VIII (PDP VIII)

In May, Prime Minister Pham Minh Chinh issued Decision 500/QD-TTg, approving the much-awaited National Power Development Plan for 2021-2030 with a vision to 2050 (PDP VIII).

Energy-thirsty Vietnam expects renewable energy to make up 50.3% of the total capacity generated by 2030.

Under the plan, Vietnam needs $134.7 billion to develop new power plants and grids between 2021 and 2030. The 2031-2050 period will require another $399.2-523.1 billion, with $364.4-511.2 billion for generation and $34.8-38.6 billion for transmission.

Electric vehicle maker VinFast listing on Nasdaq

The market capitalization of Vietnamese electric vehicle (EV) producer VinFast reached $85 billion on its Nasdaq debut in mid-August with nearly 6.8 million shares changing hands. VinFast’s shares on Nasdaq Global Select Market go under the ticker symbol “VFS”. It became the second Vietnamese company listed on Nasdaq after Cavico, which was delisted in 2011 due to violations in information disclosure.

VinFast was founded in 2017 and envisioned to drive the movement of the global smart electric vehicle revolution. It operates a manufacturing complex in northern Vietnam’s Hai Phong city that boasts up to 90% manufacturing automation and an annual production capacity of up to 300,000 units per year in phase one.

Semiconductors excitement

In September, South Korea’s Hana Micron Vina Co., Ltd inaugurated a $600-million semiconductor plant in Bac Giang province, the first of its kind in northern Vietnam. It plans to increase its total investment to over $1 billion in 2025, generating annual revenue of $800 million.

In October, U.S.-based Amkor Technology Inc., a leading provider of semiconductor packaging and test services, held a grand opening for its newest factory in Vietnam’s northern province of Bac Ninh. Amkor has committed $1.6 billion for the two phases of the project, including $520 million in the first phase.

In December, Nvidia said it plans to establish a legal entity in Vietnam and make the country its second home, the U.S. chipmaker’s president and CEO Jensen Huang stated. Nvidia is willing to set up strategic relations with Vietnam in the AI field, work with universities in the country to encourage new generations to engage in AI, improve manpower skills, and develop one million AI engineers, he added.

Meanwhile, Intel will continue to invest in Vietnam per its pledged commitment and continue stable operations, said Intel Products Vietnam general director Kim Huat Ooi in November. Intel invested $1.5 billion in Vietnam between 2006 and January 2021, the executive noted.

Van Thinh Phat, Saigon Commercial Bank – billion dollar embezzlement busted

Truong My Lan, chairwoman of property developer Van Thinh Phat Group, is set to face trial for embezzling over VND304 trillion ($12.53 billion) from Ho Chi Minh City-based Saigon Commercial Bank (SCB). (Vietnam’s GDP in 2023 was estimated at $430 billion).

In mid-December, the Supreme People’s Procuracy of Vietnam issued an indictment against Lan and 85 other defendants in the case. According to the indictment, from 2012 to October 2022, Lan directed her subordinates to make false documents to take out more than 2,500 loans with a total value of over VND1,066 trillion ($43.88 billion).

The Van Thinh Phat chairwoman was accused of appropriating more than VND304 trillion ($12.53 billion) from the private lender where she allegedly controlled more than a 90% stake.