Vietnam’s tech-driven momentum

Trade wars are hard to win. But if there is an obvious beneficiary in the United States-China geo-macro dispute that has reshaped trade and supply chain strategies across Asia, it is Vietnam.

Always an attractive market in south-east Asia, Vietnam has bucked a global trend of sluggish capital inflows in recent times, instead embracing a surge in foreign direct investment, particularly in manufacturing. The location’s newly minted reputation as a preferred global manufacturing hub has been driven by companies looking to build resilience into their regional operations.

Vietnam is a fast-growing developing economy with average growth over the last three decades in excess of 6.5 per cent. The year 2023 was a little more challenging, with softening in the property sector. But growth is picking up and it looks like the country will exceed 6 per cent GDP growth in 2024 - and Vietnam is well placed to maintain momentum at, or above, that level for the near future.

Recent data showed Vietnam recorded a trade surplus of more than $US14 billion so far in 2024. Exports are outpacing 2023 by more than 15 per cent, while imports are already more than 18 per cent higher. Those are impressive numbers in anyone’s language.

Vietnam is strategically located within Asia-Pacific, well connected to major shipping routes, and has focused on building strong trade relationships. In March, Vietnam and Australia agreed to a comprehensive strategic partnership, in a move that will strengthen trade between the two countries. Similar relationships are enjoyed by China, the United States, India, Japan, Korea and more.

That openness to trade, along with an increasingly well-educated, young workforce with a strong work ethic, makes Vietnam an ideal location for businesses and investors alike, right across the Asia Pacific and further afield.

Diversification

At ANZ, we are increasingly seeing multinational customers looking to diversify their own manufacturing and supply chains, and have seen inbound investment in Vietnam strengthen as a result.

The technology space, particularly in manufacturing, has seen huge growth in Vietnam in recent years, specifically computers, mobile equipment, and semiconductors. Tech manufacturing is now number one in terms of exports.

Revenue from the Vietnamese semiconductor market is expected to come in at more than $US18 billion in 2024. The country has offered tax breaks, among other perks, to semiconductor producers in a bid to help attract more investment.

Global players like Samsung, Apple, and Intel (including their key suppliers) have all made large investments in Vietnam. The country also has local champions like FPT, which is becoming an important player in technology support regionally.

With rapidly developing tech capabilities and skillsets, Vietnam is becoming an important IT services hub with around 300,000 to 400,000 employees in that segment alone.

The country attracts plenty of interest from international banks and long-term investors to fund growth. Big conglomerates like Masan Group, Hoa Phat and MobileWorld have ready access to international syndicated loan and bond markets.

The banking sector continues to develop too. Recent regulatory changes now allow supply chain financing on a limited or no recourse basis for both payables and receivables, which should assist local companies to improve their working capital cycle.

Long-term view

Vietnam has been hugely successful in negotiating bilateral and multilateral trade agreements with its peers. As well as the Australian agreement, recent upgrades of diplomatic relationships with the US and Japan will open further business opportunities between Vietnam, those countries, and even others.

Companies from South Korea, Japan, Taiwan and China are all very active in Vietnam and have a long-term view of the market. ANZ has had strong engagement with customers from these markets, and there is still significant appetite for further investment in Vietnam.

Vietnam remains an emerging market with an evolving regulatory environment. For businesses, navigating these can be challenging and requires patience. For any company looking to establish here, it is important to have good advisors and strong trusted partnerships with local knowledge.

It’s clear Vietnam’s commitment to regulatory reform is helping the country progress. There is a strong focus on building a legal and regulatory framework to attract capital into areas like renewable energy development - changes that will deliver on Vietnam’s commitment to a net zero emissions target by 2050.

Vietnam has huge growth potential - and is so far delivering at pace.

Mark Fitz Gerald is Vietnam Country Head at ANZ