Insights

In a conference organized by Nikkei ScoutAsia Japan and Fiin Group Vietnam on March 7th, 2023 speakers discussed trends in foreign investment in Vietnam in recent years, as well as prospects in the near future. Experts discussed various details regarding Vietnam’s economy, government investments and foreign direct investment.  According to FiinGroup, local and FDI companies are interdependent on each other to bring quality products into the marketplace. Experts also discussed the competitiveness of Vietnam as an investment target as compared to other countries in Southeast Asia. Competition for investors among ASEAN nation is fierce, and each nation must strive to attract foreign investment. Vietnam remains an attractive investment market due to its strengths including a young and capable workforce with competitive costs, good existing manufacturing networks, and an attractive structure of multi bilateral trade agreements.  However, Vietnam has areas that it could improve upon, such as the ease of doing business, elimination of corruption, greater market transparency, and high logistics costs.

A shortage of skilled laborers is making it difficult for factories to hire and retain specialized or experienced staff.  Due to short supply, recruiting is very difficult with many job postings going unfilled.  Firms that do successfully hire then face stiff competition to retain the employees that have opportunities to secure higher wages at other companies that have roles to fill.  This is a symptom of insufficient vocational training and education resources in the market.  While Vietnam benefits from low labor costs in a general sense, skilled labor and qualified professional resources are in shortage which drives high cost and market inefficiencies.  Removing obstacles to investment into training and professional education businesses would be a positive step towards addressing the skills gap and resulting labor shortage in the longer term.

Read more at VnExpress

Vietnam has long enjoyed large investment and interest from high-tech sectors, with Intel, Samsung, Canon and others featuring prominently in the country. Boeing has begun investing into Vietnam, and recently organized an aerospace forum in the rapidly developing country. This recent Vietnam Express article discusses these investments. Many challenges and risks remain in the Vietnamese market, including, supporting industrial networks, professional skills development, and a difficult investment and business environment. Vietnam must actively focus on improving on these items to avoid the middle income trap.

Vietnam's economy grew 8.02% in 2022, which is the highest annual growth since 1997. It is the result of strong domestic retail sales and exports. However, economists warned Vietnam is facing headwinds ahead, with weakening global demand having already begun to impact shipments. Key export goods like textiles, footwear, and electronics have been especially affected. Consequently, Vietnam may face difficulties in boosting export and attracting foreign investment in 2023.

Read more in this article from Reuters

According to Bloomberg's article, Vietnam continues to climb the list of top trading partners of the U.S. Based on year-to-date 2022 data, Vietnam has passed the UL to become the U.S.'s 7th largest trading partner. The UL continues to struggle with the after-effects of Brexit and COVID. Vietnam, along with Mexico, continues to benefit from the US trade war with China and the resulting shift of US supply chains from reliance on China.