The AXA Investment Managers Asia headquartered in Singapore recently published an article which elucidates the reasons behind Vietnam’s high ranking on economic performance and discusses the prospects for broadening the country’s position in the regional and global production ecosystems.
|A production line of a foreign invested firm in Thai Nguyen province. (Photo: VNA) |
Hanoi - The AXA Investment Managers Asia headquartered in Singapore recently published an article which elucidates the reasons behind Vietnam’s high ranking on economic performance and discusses the prospects for broadening the country’s position in the regional and global production ecosystems.
“There are several characteristics contributing to Vietnam’s growing trade and manufacturing competitiveness,” the article stated.
It affirmed that the successful integration into the Association of Southeast Asian Nations (ASEAN) was key to igniting Vietnam’s trade engine.
“Vietnam also signed free trade agreements with other major economies including China, the European Union, the UK, and Japan, creating a fertile environment for trade relations to grow,” it noted.
It continued that a rapid increase in manufacturing competitiveness has also contributed to Vietnam’s rise as a regional export powerhouse. Manufacturing value-added increased by the most in the past decade, doubling India’s gain.
The article went on that manufacturing competitiveness has been underpinned by low labour expenses. A rapidly growing young population has helped to keep wage pressure low despite fast economic growth.
“Vietnam has also been very successful in attracting foreign direct investment (FDI), thanks to favourable government policies”.
The authors cited that by 2020, the number of industrial parks in Vietnam had grown to 369, an increase of 180 percent from 2005. Vietnam’s ranking in the World Bank’s “ease of doing business” index – up 23 places to 70 from ten years ago.
“Vietnam’s FDI inflow has experienced the fastest growth in the region,” the article pointed out.
According to a set of proprietary competitiveness scores calculated based on ease of doing business, logistic quality, wage cost, GDP growth and changes in the share of exports and FDI, Vietnam is viewed as the most competitive country in the region, which has underpinned its impressive export market share gains in recent years.
The authors projected that in the short term, the adverse impact from the COVID-19 pandemic will linger, weighing on Vietnam’s manufacturing and export sector, restraining the pace of corporate capital expenditure, and hampering the relocation of global supply chains.
Meanwhile, over the long term, foreign businesses are expected to resume the establishment of efficient global supply chains.