Financial Times: Vietnam's economic moment has come

According to the British financial daily Financial Times (FT), Vietnam's economic moment has come and we need to take advantage of the boom in manufacturing activities for long-term development.

FT believes that Vietnam needs to reinvest growth dividends to support the development of knowledge-rich, higher-productivity industries to achieve the goal of becoming a high-income economy by 2045. Illustration photo: Bloomberg

The FT on July 9 commented that after decades of promise, the moment of the Vietnamese economy has finally come. This is the fastest growing economy in Asia last year (growing 8%) and is one of the few economies globally to achieve growth for two consecutive years since the Covid-19 pandemic. Foreign direct investment (FDI) in Vietnam soared to a decade high in 2022. Big corporations, including Dell, Google, Microsoft and Apple, have all moved part of their supply chains to Vietnam in recent years. Accordingly, the advantage of location near China, low costs along with a young and well-educated workforce have attracted manufacturers. Initially just clothes and shoes, now, Vietnam has become a place to produce more advanced electronic devices such as Apple's AirPods. The FT also sees a trend of foreign companies seizing the opportunity to diversify their supply chains, as rising labor costs and political risks erode China’s advantages as a business destination. More than $20 billion of FDI flowed into Vietnam last year, mainly from Japan, Singapore and China. The US’s share of imports from Vietnam has also increased by nearly 2 percentage points since trade tensions between Washington and Beijing flared in 2018. According to the FT, rapid export-led growth has lifted millions of people out of poverty in recent decades. But the newspaper asserted that Vietnam’s economy is at a critical crossroads to achieve greater success. In the short term, to continue attracting investors’ attention, Vietnam needs to strengthen its business environment. In the long term, to meet the government’s ambitious goal of becoming a high-income economy by 2045, the government must also leverage the benefits of manufacturing growth to diversify the economy. Over the next decade, Vietnam must increase its manufacturing capacity to meet the growing demand from manufacturers’ investment plans. The demographic dividend of a young population will provide a large labor force, but attention must be paid to competitiveness in technical skills. Vietnam’s schools are globally superior, but the quality of vocational schools and universities needs to improve.

And above all, the country's infrastructure needs upgrading as the national power grid comes under pressure from growing industrial demand, the FT said.

Over time, Vietnam will need to reinvest its current growth dividends to support the development of more knowledge-rich and productive sectors to meet its 2045 goals. Backbone services such as finance, logistics and legal services create highly skilled jobs and add value to existing sectors.

The World Bank (WB) also recommended that Vietnam provide more support for technology adoption, improve management skills and further ease restrictions on FDI in the services sector. FT stressed that Vietnam needs to do more to turn today's "de-risking" trend into long-term prosperity.

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