Will Vietnam become the next economic miracle?
The latest issue of the British "The Economist" published an article "Vietnam will become another Asian tiger". The article believes that in the case of China's economic slowdown and rising labor costs, the Vietnamese economy can benefit from its huge cheap labor force. Profit.
In 2016, Vietnam's foreign direct investment (FDI) funds in place reached US$15.8 billion, a year-on-year increase of 9%. In recent years, Vietnam has vigorously attracted foreign investment in various fields. The government has also actively created an open business environment and released preferential policies, particularly encouraging high-tech industries such as new materials and new energy, as well as ethnic cultural undertakings such as education, medical care, and sports.
Vietnam, running wildly on its way to Asia's manufacturing powerhouse
According to data released by HSBC and Markit Economics, since August 2013, Vietnam's Manufacturing Purchasing Managers Index (PMI) has been in the expansion range of more than 50% every month, which shows that Vietnam's manufacturing industry is rapidly expanding.
The growth rate of Vietnam's manufacturing industry has far exceeded that of other Asian countries.
Last year, Vietnam became the country that exported the largest volume of goods to the United States among the ten ASEAN countries. With its strategic location advantages, younger labor force and lower wages, Vietnam has successfully attracted the manufacturing bases of Samsung, Intel, and Siemens from China to the country. In addition, a large number of apparel and footwear companies have also moved to Vietnam.
Vietnam’s biggest advantage lies in its cheap labor. According to statistics from the International Labour Organization, the average monthly salary of Vietnamese workers in 2013 was only US$197, while in Thailand and China, the figures were US$391 and 613 respectively. US dollars. In addition, the demographic structure of Vietnam is relatively younger. The elderly over 65 only account for 6% of the total population, while the proportions in China and South Korea are 10% and 13%, respectively.
Of course, Vietnam’s manufacturing industry currently remains mainly in relatively low-end industries, such as textiles, clothing, furniture, and electronic products. However, as major companies increase investment, improve training levels, and change research and development strategies, this situation may change in the future.
China has been wearing the hat of the world's factory for many years, and "Made in China" has also been transformed into "Made in China" under the leadership of generations of leaders. As a neighbor of China, Vietnam is also following the pace of China, step by step to the next "world factory" position. Vietnam, a country that was once looked down upon by everyone, achieved an economic growth rate of close to 7% in 2015 thanks to its advantageous geographical location and a young and ever-increasing population, making it one of the fastest growing countries in the world.
Nowadays, not only Japanese companies have increased their investment in Vietnam, but many Chinese companies are also migrating their production capacity to Vietnam. After Vietnam joined the TPP, with the assistance of developed countries such as the United States and Japan, many Southeast Asian countries are systematically "digging corners" for manufacturing in China through various strategies such as trade, taxation and land concessions. Recently, the momentum of "Made in Vietnam" has been strong, and it has been replaced by "Made in China", and this is by no means alarmist.
Vietnam was once one of the poorest countries in the world. In recent years, this country has been among the ranks of middle-income countries and has been favored by global capital. From January to July this year, Vietnam attracted actual foreign direct investment (FDI) of US$8.55 billion, a year-on-year increase of 17.1%. After the finalization of a number of free trade agreements, the country’s FDI reached US$14.5 billion last year, a record high.
As of the first half of 2016, Vietnam’s economic and industrial zones had attracted a total of 7,510 foreign investment projects, with USD 147.6 billion in contracted funds and USD 81.4 billion in funds in place. There are 7,163 domestic investment projects, with a total agreed investment of VND 1,173 trillion (approximately USD 55 billion) and funds in place of approximately VND 540 trillion (approximately USD 27 billion). Ranked 9th among 110 countries investing in Vietnam.
As a neighbor with a heavy war memory, Vietnam is both familiar and unfamiliar to its people. But in fact, every reform in Vietnam over the years cannot be underestimated. Today, Vietnam has become the world's second largest rice exporter from a country dependent on food products. Its economic growth rate once jumped to the second place in the world, second only to China. Even in the field of investment, Vietnam has begun to take aim at China's rice bowl. According to Peterson International Economic Research Institute, Vietnam's economic growth rate will reach about 10% by 2025.
With the rapid development of Vietnam’s economy and the increase in the country’s openness, Vietnam’s manufacturing industry has developed rapidly in recent years. First of all, the employment pressure in Vietnam is increasing, the labor force is sufficient, and the production cost of manufacturing in Vietnam will be very low compared to China. With the development of China's economy, per capita GDP has increased substantially, and labor costs have risen.
Statistics show that the overall cost of China's manufacturing industry is about 35% higher than that of Vietnam. This has caused a large number of manufacturers and producers in the world to move to Vietnam or other ASEAN countries, but this is also an inevitable trend of my country's economic transformation.
On February 4 this year, the Trans-Pacific Strategic Economic Agreement (TPP) achieved a substantive breakthrough. 12 countries including the United States, Japan, Australia, Canada, Malaysia, and Vietnam formally signed the agreement in New Zealand. Once the agreement is approved by the national parliaments and formally Effective, the Vietnamese garment industry is expected to become a big winner.
Vietnam is catching up with China step by step, and it will undoubtedly be a great challenge for China. However, we can see that from the perspective of Vietnam's development path, whether it is reform thinking or development model, Vietnam and my country are highly overlapped, and it seems to be a replica of my country's reform.
Over the past 20 years, Vietnam’s economic reforms can be summarized in three aspects: establishing a state-managed market economy system, encouraging the development of non-state-owned economies, and striving to build a market environment for equal competition; confirming the household contract system, reducing land taxes, and implementing agricultural product price subsidies ; Actively expand opening up, strengthen international economic and trade cooperation, and vigorously attract foreign investment with preferential policies.
Will Vietnam become the most promising economy in ASEAN? Or even become the next economic miracle?