Three factors keep Vietnam’s economy humming along
Hanoi (VNA) – Infrastructure investment, trade environment
and competitive wages are three factors that keep Vietnam’s economy humming
along and its growth numbers positive, according to an article published
on the vietnam-briefing.com.
Specifically,
Vietnam spent around 6% of its GDP on infrastructure, which is among the highest
in the ASEAN region.
Among that spending were some
big ticket items such as the ambitious 1,800 km HCM City–Hanoi highway; the Long
Thanh International Airport, which will eventually replace HCM City’s overly
congested Tan Son Nhat; metro projects in Hanoi and HCM City; as well as
thermal and waste-to-energy power plants.
Over the past few years, Vietnam has been active in signing
bilateral trade agreements with countries around the world. Its membership in
the Association of Southeast Asian Nations (ASEAN) also makes it a party to
several FTAs that the regional bloc has inked.
The standard of product quality, manufacturing, and employee
rights guaranteed in these agreements will allow Vietnam to become a
manufacturing hub and expand its export base.
The EU-Vietnam Free Trade
Agreement (EVFTA), for example, has boosted Vietnam’s exports despite the
pandemic. In 2021, the UK-Vietnam FTA helped expand trade between Vietnam and
the UK to nearly 6.6 billion USD. Similar increases were also noted
with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
with exports to Canada and Mexico.
Moreover, Vietnam’s business environment is
open, and the Government has provided investor-friendly policies aimed at
attracting investment and socio-economic development. These are important pull
factors for investors looking to invest in Vietnam. This has been made easier
through Vietnam’s increasing number of FTAs.
One of Vietnam’s biggest advantages is its competitive wage. It has
a young, dynamic workforce that is ready to fill the gap. Its young labor force
also comes at a relatively lower cost. More than 40% of Vietnamese university
graduates major in science and engineering. As Vietnam sees its economy grow,
its wages will rise. It will thus have to maintain a balance between inflation,
wage levels, and productivity to avoid disrupting the overall labour market.
In conclusion, the article wrote that even
while geopolitical tensions persist, Vietnam’s economic prospects are promising. In the short term, costs are likely to increase, but investors that play the
long game stand to reap big rewards./.