Vietnam on the brink of industrial dominance
Vietnam is increasingly becoming a prime beneficiary of the current trade landscape shift, positioning itself as not just a manufacturing powerhouse, but a regional financial gateway. With a growing GDP, a rapidly expanding stock market, and a strategic location in Southeast Asia, the country is laying the groundwork for significant economic growth.
Two international financial centres, set to begin operation in Ho Chi Minh City and Danang in September, are a testament to Vietnam's expanding financial sector. These centres are seen as a strategic move by the government to attract global financial institutions, deepen capital markets, and enhance Vietnam's integration with international investment flows.
The resilience and adaptability of Vietnam continue to shine, as the nation embraces transformation and positions itself as a dynamic force in the global economy. This shift echoes the US-China trade war from 2018, causing a massive shift in global production. The policy has triggered a response of relocation for many global manufacturers, who are drawn to Vietnam for several key reasons.
Firstly, Vietnam's extensive Free Trade Agreements (FTAs) offer significant tariff reductions on exports to major markets like the US and EU, securing investor confidence. The country has 17 FTAs, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EU-Vietnam Free Trade Agreement (EVFTA), and a new Vietnam-U.S. Trade Deal.
Secondly, Vietnam's competitive labor costs make it an attractive destination for labor-intensive and assembly manufacturing. Manufacturing salaries average around US$332/month, with entry-level workers at approximately US$250. Overall operating costs are about 50% lower than China’s.
Thirdly, Vietnam is moving beyond low-value operations to higher-value textile processes, increasing local input sourcing to nearly 50%, and adopting advanced automation and environmentally friendly technologies. This shift enhances supply chain resilience and attracts higher-quality investment.
Despite new tariffs, Vietnam's strategic trade agreements, cost competitiveness, and strategic positioning in shifting supply chains provide compelling reasons why global manufacturers continue relocating there. Supply chain consultants report a surge in inquiries from US and European buyers seeking to hedge against tariff volatility.
Vietnam's manufacturing ecosystem has significantly matured since 2018, particularly in electronics, textiles, furniture, semiconductors, and electronic vehicle components. Multinational firms are expanding in Bac Ninh province and Haiphong city in the north, and scouting new sites in central and southern Vietnam for apparel, furniture, and electronics manufacturing.
While Vietnam still faces hurdles, including labour shortages, energy constraints, and regulatory bottlenecks, the government is addressing these challenges through strategic reforms and expanding industrial capacity. Infrastructure investments in ports, highways, and industrial parks continue to improve, further strengthening Vietnam's position as a competitive manufacturing hub.
In conclusion, Vietnam offers the scale and cost-efficiency of emerging markets, with the trade access and policy predictability of more mature economies, making it more cost-effective than many alternatives when logistics, labour, and regulatory factors are considered. The country's resilience, adaptability, and strategic positioning make it an attractive destination for global manufacturers seeking to navigate the complexities of the current trade landscape.
Amidst Vietnam's growing financial sector, two international financial centers in Ho Chi Minh City and Danang are expected to attract global financial institutions, deepening capital markets, and enhancing Vietnam's integration with international investment flows.
With an extensive network of Free Trade Agreements and competitive labor costs, Vietnam continues to attract global manufacturers, making it a favored destination for labor-intensive and assembly manufacturing.
