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Is Vietnam Asia's New Tiger?

Is Vietnam Asia's New Tiger?

Is Vietnam Asia’s New Tiger?

Vietnam’s growth has been astronomical. In 2019, the country is set to welcome a new National Innovation Centre, IoT Innovation Hub and produce its own domestic automobiles as VinFast gears up its production plant in Haiphong. This builds upon the country’s strong PMI outlook, which can also be attributed to the rise of Vietnamese steel conglomerates such as Hoa Sen Group and Hoa Phat Group. Regarding the country’s rise, Andrew Harker, Associate Director at IHS Markit has commented that, “The recent success of Vietnamese manufacturing firms in being able to generate strong new order growth continued in December 2018. This meant that 2018 as a whole was the best calendar year for the sector since the PMI survey began in 2011 and leaves the industry well placed to have a positive 2019 despite headwinds elsewhere in the global economy.” Article by Hazel Koh.

According to Li Baodong Secretary General of the Baoao Forum for Asia, Vietnam is recognised by the world’s most prestigious organisations as the new economic tiger of Asia. This is due to the fact that the country’s economy is rapidly emerging as one of the fastest growing globally with increasing international investments. For example, just based on the number of Chinese investments that the country has attracted to date, Nguyen Duc Chung, Chairman of the Hanoi People’s Committee has observed that a total of 425 ​​projects in Hanoi with total registered capital of USD 517 million has been recorded.

While Deputy Minister of Foreign Affairs, Le Hoai Trung, has attributed Vietnam’s success to its huge workforce that amounts to a population of at least 60 million working age adults and the country’s status as a dynamic, fast growing and stable economy. In fact, Vietnam’s Nikkei Purchasing Managers’ Index (PMI) in November 2018 reached 56.5 points which is the highest level that the country has attained in seven years, resulting in the country leading Southeast Asia in terms of its PMI ratings.

Striving Towards Self Sufficiency In Steel Production

Driven by rising steel demands and economic growth, Vietnam is looking to reduce its dependency on Chinese steel and has undertaken active steps towards this goal.This is evidenced as two of the country’s largest steelmakers look set to embark on multibillion-dollar capacity investments within the country.

In fact, Hoa Sen Group intends to spend VND 10 billion on production facilities in southern Vietnam’s Ninh Thuan province in order to capitalise on the area’s deep water ports to import raw materials and export its manufactured steel products. Although the company has yet to reveal the details of its new manufacturing facilities in Ninh Thuan, construction is scheduled to occur in 2019, with operations beginning in 2019. Hoa Sen’s new facility would possess a blast furnace, which is a tool that Vietnam still lacks, and would boost an additional capacity that would more than quadruple total outputs to 16 million tons a year in 2031.

Meanwhile, Hoa Phat Group, intends to build a VND 2.7 billion steelworks in the Dung Quat Economic Zone of Quang Ngai Province and aims to begin operations in 2020. This facility is projected to increase the company’s annual capacity to 4 million tons which would lift the group total by 130 percent. At the same time, the company will be developing a $170 million steel plate mill in Hung Yen Province, which is close to the Dung Quat facility.

Strategies To Overcome Uncertainties Induced By The Trade War

In 2018, disbursement of FDI projects in Vietnam reached a record high of USD 19.1 billion, showing the high confidence of foreign investors in Vietnam’s business and investment environments. This is an increase of 9.1 percent year-on-year amid global concerns over the tension caused by the US China Trade War. Additionally, the rapid growth of both privately and state run enterprises such as Vingroup or Viettel is an indication of Vietnam’s economy prosperity and the fact that the country’s business environment is capable of nourishing large corporations of global scale.

However, as tensions over the Trade War continue to escalate in 2019, uncertainly over the status of the global manufacturing sector has continued to plague the industry and much attention has been focused on Vietnam due to the country’s status as an emerging manufacturing hub. Currently, Vietnam is projected to capture some of China’s global market share in labour-intensive manufacturing, although, in the long-term it is uncertain if Vietnam will continue to benefit from the displacement of manufacturing from China. Thus, as the trade war drags on, experts have advised Vietnam to develop a new development strategy to evade potential risks. And Mai Vu Minh, a Germany-based investor and Chairman of SAPA Thale GmbH, has further commented that Vietnam must not merely react to changing winds but take action to innovate its way up the supply chain. He also added that this means that, “Entrepreneurs need to change to adapt new technologies, management style[s] and [strive towards] the Fourth Industrial Revolution”

Strong IPO Standings

In 2018, proceeds from Southeast Asia’s IPOs plunged 34 percent. This is the first decline in two years. However, despite the overall weakening of the region’s growth, Vietnam has emerged as the region’s fastest-growing economy and witnessed increases in its IPO presences that were significant enough to allow the country to overtake Singapore and Thailand.

In total, the Ho Chi Minh Stock Exchange topped the region’s exchanges in total IPO proceeds for 2018 with a value of USD2.6 billion. This is 3.7 times more than the figure for 2017. This can be attributed to the growth of local enterprises such as the Vietnam Technological and Commercial Joint Stock Bank, which raised USD 923 million in April 2018 alone.

The emergence of Vietnam as Asia’s hot IPO destination “is a synchronized result of government support, market reform, inflow of foreign capital and high pace of economic growth,” said Margaret Yang, a Singapore-based analyst at CMC Markets.

Future Outlook

Vietnamese Prime Minister Nguyễn Xuân Phúc has pledged support for the implementation of Industry 4.0 in Vietnam and this vision looks set to continue to be incorporated into the country’s national development strategies. During the opening ceremony for the Industry 4.0 Summit and Expo in 2018, Prime Minister Nguyễn Xuân Phúc had also said that, “Vietnam has actively researched and transferred new technologies such as the Internet of Things (IoT), big data and robotics in order to improve [the country’s] competitiveness and innovation”.

Thus, as we look towards Vietnam’s future, it is expected that developments in infrastructure systems, especially ICT and digital connection infrastructures, cybersecurity, IoT and foreign collaborations will continue to dominate the country’s manufacturing sector.


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