VinFast automobile factory. Photo: An Dang/VNA

COVID-19 acute respiratory infectionis accelerating the process of shifting production and Vietnam has some advantages at the macro level to take advantage of this opportunity, as well as welcome many companies to move their production facilities to Vietnam. That is the opinion in an article recently posted on the website seekingalpha.com.

According to the article, although not too large, Vietnam's economy has been growing rapidly at about 6-7% for many years and Vietnam is the 4th largest economy in the region and is growing much faster than other countries.

The article assesses that compared to some neighboring countries, Vietnam has a more diversified economy, including textile and footwear production (Nike, Adidas), some electronic components (Lenovo) and automobile production (Ford Motor), VinFast...

Meanwhile, countries in the region such as Malaysia are too dependent on oil and gas (nearly 16% of export turnover); Brunei has nearly 90% of export turnover related to oil; Indonesia has more than 25% of export related to oil and coal; Cambodia has a very small economy and focuses only on textile production.

Vietnam - A rising star in the post-Covid-19 world economy

The International Monetary Fund (IMF) report said that economic activity in 2020 declined significantly and will recover strongly in 2021.

The report shows the macroeconomic stability that Vietnam is enjoying in terms of growth, current account deficit or employment.

The economy is diversified enough to withstand the economic downturn caused by COVID-19 and still grow positively as forecast by the IMF.

That Vietnam’s economy will continue to grow steadily is also indicated in another independent analysis by the World Bank: The macroeconomic and fiscal framework remains stable with GDP growth estimated at 1.8% in the first half of 2020, expected to reach 2.8% for the whole year of 2020.

Vietnam is one of the few countries in the world that is not expected to enter recession, although its growth rate this year is much lower than the pre-crisis forecast of 6-7%.

According to seekingalpha.com, the automobile industry in Vietnamis just developing and domestic car manufacturers are getting stronger and stronger (VinFast cars). This is a huge development because the auto industry in general creates a lot of jobs and growth for a country.

The advantage of the young auto industry is the emergence of many small suppliers, which affects economic activity/jobs. The industry, although small in base, is growing by more than 100% and demand is huge.

Thailand has a highly developed automobile industry, which has helped the country grow over the years.

The Vietnamese government is encouraging growth by offering tax breaks to companies that manufacture cars and components in Vietnam instead of importing parts.

Another advantage of Vietnam isaverage salarystill lower than most of its neighbors, hovering around $5.50 an hour. China has become an economic powerhouse by leveraging low-cost manufacturing and labor.

Garment production at Visip industrial park. Photo: An Dang/VNA

The Vietnamese government is now increasing spending on infrastructure and planning to focus on further growth.

Vietnam is spending 5.7% of its GDP on infrastructure, the highest in the region.

Money is invested to connect more villages by opening roads, railway infrastructure including the North-South railway connecting the two ends of the country.

Vietnam also plans to build 39 ports as part of its seaport expansion plan. The total cost will be around $80-100 billion over the next 10 years or so.

The article assesses that Vietnam is entering a "golden" era of demographics when more than 70% of the population is under 35 years old.

With a population of around 100 million as of 2019, only around 13% of the population is middle class. This is expected to double to 26% by 2025/2026. This will create a big boost for consumption and push growth higher from the current average of 6%.

Many companies will want to take advantage of this consumer boom and take a leap to invest further in the Vietnamese economy.

Over the past 10 years, the ease of doing business index has improved significantly, from 98 in 2011 to 70 in 2020.

With the government focusing more on infrastructure investment, Vietnam has 99% of villages with electricity, plus a high human capital index (HCI).

Vietnam can improve this index further and rise to the top 50 in the next few years. With all these positive aspects, the article concludes, Vietnam has the potential to become a manufacturing powerhouse of the world./.