Market Opportunities in Vietnam

As manufacturing increasingly transitions from China to India and ASEAN nations, Vietnam has emerged as the driving force for growth in the region. Following the outbreak of the US-China trade war, the country experienced impressive growth rates of approximately 7.4% in both 2018 and 2019. Remarkably, Vietnam managed to avoid negative growth throughout the pandemic, further demonstrating its resilience and economic potential.

Regarding the opportunities in Vietnam, the country presents far more than just the manufacturing sector. With a burgeoning middle class, increasing wealth, rapidly improving business environment, accelerated infrastructure development, expanding healthcare access, and a thriving IT industry, Vietnam is capturing everyone’s attention across the globe.

From the macroeconomic point of view, Vietnam has 100 million population and growing. Many of them are still young with a median age of 32.8 (2023).  As household incomes in Vietnam rise rapidly, demand for luxury goods and services will increase, though from a relatively low base. However, the retail sector offers promising entry opportunities, as trade barriers are being reduced with numerous partners through a variety of bilateral and regional trade agreements. A consumerist culture is taking root among young adults, supported by greater access to modern retail outlets in urban areas and the expansion of e-commerce platforms.

From the perspective of the manufacturing sector, Vietnam has gained a reputation as the primary low-cost regional alternative to China for export-focused manufacturing. This, along with the country’s rapid economic growth and participation in several major free-trade agreements like ASEAN, RCEP and EVFTA, have been instrumental in attracting foreign investor interest. As reported by the Ministry of Planning and Investment (MPI), Singapore was the leading source of foreign investment commitments in 2021, followed by South Korea, Japan, mainland China, Hong Kong, and Taiwan. In 2021, the manufacturing and processing sector continued to be the top recipient of FDI, accounting for 58.2% of foreign investment commitments.

From the perspective of healthcare, the market in Vietnam presents significant opportunities for growth and development. As of November 2021, the country had insured 88 million citizens, which represents 90% of its population, achieving this milestone two years ahead of schedule. The government aims to reach universal healthcare coverage by 2030 and is on track to accomplish this goal early. However, the range of treatments covered by health insurance is expected to remain limited, with substantial co-payments. Private expenditure accounted for 55% of total healthcare spending in Vietnam in 2019, with the government encouraging the adoption of private insurance to reduce out-of-pocket expenses. Despite gradual decentralization of the healthcare funding system and increased managerial autonomy for provincial and district healthcare facilities, public facilities continue to face challenges such as overcrowding, poor local infrastructure, and inadequate equipment. The ratio of hospital beds to population in Vietnam is below the global average, and there is an ongoing effort to improve this situation.

From the infrastructure perspective, Vietnam’s new PPP Law has streamlined the legal framework for private investment in infrastructure, broadening its scope and introducing standard contracts and revenue-sharing systems.  Despite concerns about government assurances and project agreements being subject to Vietnamese law, the successful allocation of segments of the North-South Expressway to the private sector signals positive reception. With increasing demand for infrastructure and budgetary limitations, private sector involvement is expected to increase, presenting growth opportunities for investors. Vietnam’s position in the regional supply chain, trade agreements, and economic reforms contribute to its expanding transportation infrastructure.

From the energy perspective, the market of Vietnam remains uncertain. During the COP26 climate change conference in 2021, Vietnam announced its commitment to achieving net-zero emissions by 2050. However, the multiple delays in finalizing the PDP-8 and its most recent draft version, which expanded the role of coal in Vietnam’s energy mix, have raised concerns about the country’s genuine dedication to a comprehensive energy transition.

From the digital economy perspective, we are seeing an acceleration of IT developments as well as the software innovation. With more people, companies, and the entire country going online, the market potential is huge, particularly through the integration of IT solutions into private and public sector operations and processes. The adoption of cloud applications and infrastructure services is expected to gain momentum, as customers increasingly bypass the on-premises era. The pandemic has further accelerated trends such as e-commerce, online content and service consumption, mobile payments, and remote work, which will continue to be fueled by ongoing investments in data networks, logistics, retail, and channel operations. The government’s initiative to develop an IT services industry over the next 15-20 years, including the National Technology Innovation Fund, is anticipated to expedite the growth of local enterprises. Additionally, a robust purchasing power growth trend will enhance the local currency affordability of imported PCs and those assembled locally with imported components, contributing to the overall potential of the IT sector in Vietnam.