Vietnam has emerged as one of Asia’s great success stories, backed by a stable political system, commitment to sustainable growth, relatively low inflation, strong FDI inflows, a youthful and digital population, and a strong manufacturing sector.
In addition, the country has a large domestic market and a growing middle class. These dynamic factors have created an extraordinary opportunity for international investors to take advantage of the regional growth perspective and focus their attention on Vietnam, particularly in the manufacturing sector.
As global businesses seek to diversify, increase the resiliency and connectivity of their supply chains, and decrease reliance on China, Vietnam has become a top destination for investment in manufacturing due to its strategic location and advantages in shipping, competitive labor, and production costs.
As Vietnam transforms into a global manufacturing hub and has been a major beneficiary of the supply chain relocation and diversification trend out of China over the past several years.
While Vietnam is smaller compared to global manufacturing superpowers like China, the manufacturing industry has still succeeded due to several factors, such as low competitive labor costs, and potential low-skilled and mid-skilled additions to the labor market.
Considering the quality and potential of Vietnam’s manufacturing industry post-pandemic, investment from international sources is increasing. For instance, Samsung recently announced a 920 million USD investment to establish a new production facility, which boosts the tech giant’s overall investment to 2.27 billion USD within the country.
One of the main reasons why the manufacturing sector in Vietnam has witnessed an increase in foreign investment is the government’s proactivity to entice business, such as the use of free trade agreements (FTAs).
These FTAs not only provide better accessibility to foreign business and vice versa, but it also allows Vietnam to enjoy reduced tariffs with partner countries which ultimately strengthens the competitiveness of Vietnam’s manufacturing industry.
As compared to its regional peers, it is the highest on digitalization in production and manufacturing, in relation to cross-border e-commerce.
The nation is very geographically strategic, and compared to most of its neighbors, is highly accessible to major trade and freight routes in and out of Southeast Asia and Asia.
It has a multitude of international airports, seaports, and rail links — all of which facilitate production flow and its requisite logistics.
The Vietnamese authorities have put in place efficient and robust taxation policies dedicated to the manufacturing sector, where investors can benefit from massive tax reductions, breaks and incentives, depending on the size of their project.
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