Vietnam is located in the heart of South-East Asia, with the Pacific Ocean to its East, China to its North and Laos and Cambodia to its West. The country struggled through a turbulent period of war for most of the 20th century until 1975. It remained closed to the world until the reorientation named “Doi Moi” was launched in 1986, which opened a new page for Vietnam’s economy to grow into one of the fastest growing countries in the world.
According to the 2017 report “The World in 2050” by PwC, Vietnam is predicted to make the greatest move up the rankings (GDP at Purchasing Power Parity) of its economy to become the world’s 20th largest economy by 2050 from 30th in 2016. In terms of growth, Vietnam is among the two fastest growing economies during this period. Thanks to its dynamic transformation, the country is benefiting from the shift of value chains and is becoming the new production and technology hub of Asia.
- Macro Economy
- Capital Market
The “Doi Moi” reformation in 1986 spurred rapid economic growth, transforming what was one of the world’s poorest nations into a middle-income country. Vietnam is now one of the most dynamic emerging countries in the world. Between 2002 and 2022, GDP per capita increased by 10 times, reaching 4,110 USD. Poverty rates (percentage of population with personal income of less than 1.90 USD/day) declined sharply from over 37% to 4%.
The first milestone of Vietnam’s integration into the global economy was becoming the seventh member of ASEAN – Association of Southeast Asian Nations and normalizing relations with the U.S. in 1995. Following this, the country officially joined the WTO in 2006, which opened the gates for made-in-Vietnam products to reach global markets. Until now, Vietnam is a member of 15 Free Trade Agreements (FTAs), which includes many trading partners within the EU, Asia, and Americas.
Thanks to its favorable location, competitive labor costs and wide connection to the global economy, Vietnam has experienced waves of investment from leading global FDI firms. For instance, Samsung and LG have invested 25 billion USD into Vietnam, leading to the country becoming a production hub for high-tech products. As a result, Vietnam’s market share in global exports has doubled from 1994 to 2022 and become one of the most open countries in the world given total trade nearly doubles nominal GDP.
Vietnam’s compelling growth story presents several lucrative opportunities for business. Vietnam’s economy is connecting more to the global economy, accelerating its industrialization progress. The country is expected to undergo massive infrastructure investment in coming years, spurring urbanization. Through the government’s continued efforts to develop public institutions and strengthen macroeconomic fundamentals, Vietnam is well positioned to be one of the most vibrant and dynamic places to do business over next several decades.
Further integration into the global economy. Low labor costs, a young population and its strategic location have helped Vietnam to welcome a large number of FDI companies over the last 20 years. Now, thanks to the US-China trade war, multi-FTAs and commitment to net zero-carbon, Vietnam is benefiting from the China +1 strategy and has an opportunity to move up the value chain in certain sectors. This will allow access to advanced technology to produce greater complex product lines and provide an even greater contribution to global export.
Emergence of the middle-income class. Strong economic growth and stable inflation are the keys to enhancing personal wealth steadily. Combined with a young, willing-to-spend, tech-savvy population there stands a solid base for domestic consumption to grow. According to Fitch Solutions, Vietnam’s consumer market is expected to grow at a Compound Annual Growth Rate (CAGR) of 9.5% over the next five years. This growth is expected to result in the market size reaching a significant milestone of 300 billion USD by 2026.
Rising urbanization rate. Vietnam currently spends around 6% of its GDP on infrastructure, the largest among ASEAN countries. However, given over 60% of the population is still living in rural areas, the need for further spending is still significant. Thanks to a low public debt to GDP ratio (below 40%), Vietnam has significant room to improve infrastructure to reach a 60% urban population in 2050 as forecast by Fitch Solutions.
Vietnam is a one-party state ruled by the Communist Party of Vietnam (CPV), which helps the country to be one of the most politically stable countries in South East Asia
227 USD/month which is only half of the labor cost of China and 30% lower than the average of the regional peers
Vietnam parties to 15 different Free Trade Agreements (FTAs) with over 80 countries in the world
Vietnam, unlike other South East Asia countries, shares a border with China, enabling investors to move part of their production while still being close to China’s manufacturing hub, reducing costs without interrupting the supply chain
Turicum Investment Management AG
Turicum Investment Management AG
