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Economic 360 for Vietnam: Growth Prospects and Emerging Opportunities in the Manufacturing Industry
Frost & Sullivan, Dec 2010, Pages: 87
Manufacturing sector accounts for 24 percent of the GDP in 2009. With an aim to become industrialized country by 2020, Vietnam’s manufacturing industry has been undergoing major changes as a result of government initiatives, WTO commitments and industrial liberalization. Industrial development strategy for the period 2011-2020 to focus on the development of Textiles, Leather, Chemicals, Agro processing, Electronics, Automotive, Information and Communications technologies are expected benefit from the industrial development strategy. Due to improving business climate, increased trade and investment cooperation, low labour cost and Vietnam is expected to emerge as a major manufacturing hub in the ASEAN region.
Research Overview
The manufacturing industry plays a vital role in Vietnam’s economy by providing employment opportunities and accelerating its growth. Simultaneously, liberalization, removal of investment restrictions, and semi-privatization of the economy have greatly boosted the country’s industrial growth rate. The main manufacturing sectors in Vietnam are textiles and garments, food and beverages, and leather and wood. The Government has implemented various programs to transform Vietnam’s economic structure from agriculture-driven to industry-driven and reduce its import dependency. The development of export processing and industrial zones is just one of the initiatives that bolstered the country’s industrial growth. The Government has also offered incentives to investors in social sectors such as health and education. However, since liberalization, the Government’s share in the overall industrial investment has been declining, thereby enabling higher participation of private and foreign companies.
Financial and R&D support as well as the allotment of land in industrial zones are likely to encourage stakeholders in the manufacturing industry to increase their investments. While sectors such as textiles, leather, food and beverages, automobiles, chemicals, and energy were resilient even during the economic downturn, a booming food processing sector, an unsaturated pharmaceuticals market, and a dynamic garments sector are expected to add value to the industrial production in Vietnam. The Government has retained the majority of the stake in energy, finance, banking, and telecom and shielded the agriculture, food, and automobiles sectors from international competition. Higher private and foreign investment had enhanced the growth rate of sectors such as transportation, real estate, communication, and mining. However, the country does not permit foreign investments in national defense, security, and health, and it places conditional restrictions on investments in telecommunications, postal network, and airports. The Vietnamese Government’s initiatives and specific incentives for the industrial sector are likely to increase exports and drive the economic growth. Liberalization and the removal of various restrictions generating sector-specific investment opportunities are expected to attract more private and foreign participants to manufacturing industry.
Frost & Sullivan’s Manufacturing Country Industry Forecast service provides vital inputs for evaluating the attractiveness of a country and its manufacturing industry. Apart from enabling decision makers to assess the impact of non-market forces, it also helps in identifying new market opportunities. This service provides a strong base for preparing contingency plans. In addition, investors can assess industry-specific risk factors as well as conduct a more in-depth micro research.
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