Vietnam the world's next growth market: SeekingAlpha

The COVID-19 situation has considerably sped up the transition of manufacturing work into Vietnam and the country is uniquely positioned to take advantage of this move, said an article recently published on SeekingAlpha content service.
Vietnam the world's next growth market: SeekingAlpha ảnh 1An automobile factory of VinFast (Photo: VNA)

Hanoi (VNA) –
The COVID-19 situation has considerablysped up the transition of manufacturing work into Vietnam and the country isuniquely positioned to take advantage of this move, said an article recentlypublished on SeekingAlpha content service.

Vietnam has welcomed many companies that have looked to shift manufacturing inthe recent years, the service for financial markets noted.

Although not very big, the Vietnamese economy is growing rapidly at around 6-7percent. The country is the fourth largest economy in the region and postingfaster growth compared to its neighbours, according to the article.

Vietnam has a slightly more diversified economy that does manufacturing of textiles,footwear (Nike, Adidas), some electronic components (Lenovo), and alsoautomotive manufacturing (Ford Motor Company and VinFast).

Vietnam the world's next growth market: SeekingAlpha ảnh 2Inside Duc Giang Textile Joint Stock Company (Photo: VNA)

Meanwhile, other Southeast Asian nations like Malaysia is over reliant on oiland gas, which account for nearly 16 percent of exports; Brunei with almost 90percent of exports linked to oil; and Indonesia with more than 25 percentexports linked to oil and coal.

The International Monetary Fund (IMF) reports there will be a significantreduction in economic activity for 2020 and in 2021, they see a steep bounceback. It also illustrates the macro stability that Vietnam has in terms ofgrowth, current account deficit, or the employment numbers.

The economy is diversified enough to manage the COVID-19-induced economicslowdown and still stay positive in forecasts published by IMF, it added.

This economy will continue to be resilient as indicated by another independentanalysis done by the World Bank assessment, which states that themacro-economic and fiscal framework remains resilient with an estimated GDPgrowth rate of 1.8 percent in the first half of 2020, projected to reach 2.8percent for the year.

Vietnam is one of the few countries in the world not to expect a recession,though its growth rate for this year is far less than the typical 6-7 percentpre-crisis projections.

The article went on to note that automotive industry is just taking off inVietnam, and local auto manufacturers are now starting to become bigger playerswith VinFast automotive. It is a very big development as automotive industrygenerally adds a lot of jobs and growth in a country.

“The advantage of fledging auto industry is the development of manysub-suppliers which leads to related job/economic impacts. This sector,although from a small base, is growing at more than 100 percent and demand isrobust.”

The Vietnamese Government is also trying to encourage this growth by reducingtaxes for companies that engage in manufacturing automobiles and its parts inVietnam rather than import the parts.

Furthermore, wages in Vietnam are still lower than most regional areas aroundit, hovering around 5.5 USD per hour.

“The Vietnamese Government has increased its spending on infrastructure andplans to focus on growing this further. Currently, Vietnam is spending 5.7percent of its GDP on infrastructure improvements, the highest in the region.”

The investment is going into trying to connect more villages through roads, amassive railway infrastructure including a north-south railway line connectingthe two ends of the country.

Vietnam is also planning to build 39 ports as part of a seaport expansion plan.The total spend is going to be around 80-100 billion USD over the next 10 yearsor more.

Vietnam the world's next growth market: SeekingAlpha ảnh 3Lach Huyen International Port in Hai Phong city (Photo: VNA)

In addition, the article said, Vietnam is going into demographic dividend erawhere more than 70 percent of its population will be below 35 years of age.

With a population of about 100 million as of 2019, there are only about 13percent who come under the middle class/income category. This is slated todouble by 2025-26 to 26 percent and projected to give a big boost to thecountry’s consumption story and push growth rates higher from the current 6percent average.

Many companies will want to take advantage of this consumption boom and take aleap to invest further in this economy.

Lastly, the ease of doing business ranking has improved significantly over thelast 10 years going to 70 this year from 98 in 2011.

With the Government more focused on infrastructure, the country has 99 percentof villages lit up with electricity coupled with a high Human Capital Index, itis well placed to challenge this score further and make a move towards the top50 in the next few years.

Vietnam the world's next growth market: SeekingAlpha ảnh 4Students of the Ha Huy Tap Secondary School in Vinh city, the central province of Nghe An. Vietnam achieved better Human Capital Index in 2020. (Photo: VNA)

With all these positives, the article said, Vietnam will be the nextmanufacturing factory of the world./.
VNA

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