From an agricultural economy with approximately 60% of the population living below the poverty level, Vietnam has emerged to become a lower-middle-income country since 2010 (per-capita income of USD 1,130 by and the poverty rate of 12% in 2010). That achievement came from the results of the transition from central-planned economy to a market economy, started in 1986 with the “Doi Moi” – Renovation reforms, also from an agriculture to a more industrial and service-oriented economy. This helped Vietnam to be among the group of countries leading in economic development, starvation elimination and poverty reduction in the world.

 

The recent Socio-Economic Development Strategy (2011-2020) clearly indicates its main focuses, such as: stabilize the macro-economy, create world-class infrastructure, develop a skilled labor force, and enhance market-based institutions. Realizing these goals was not easy on the grounds as the country has just undergone economic turbulence in recent years (2009 – 2012), high inflation, and currency depreciation due to the impacts of the financial crisis. Besides, there have been structural problems as a consequence of the rapid economic growth. Problems revolve around the issues of: resource-intensive growth, lack of diversification and value addition in exports, the decreasing productivity to growth, the shrinking of the youth population, and shortage of skilled labors.

 

Despite all of the above challenges, Vietnam is advantageous and attractive for the foreign investments thanks to the political stability, continued commitment to creating more favorable conditions for the foreign-owned companies, cheap labor costs, and increasing proportion of the middle-affluent consumers in big cities and provinces.

 

Vietnam is the 14th most populous in the world, and the 3rd in the Southeast Asia, also, has a large market of over 93 million people with abundant young people and a highly literate workforce of nearly 53 million people. Notably, nearly 13% of the total population (mainly concentrated in big cities like Hanoi and Ho Chi Minh) is the middle and affluent people, and it is expected to be on the rise in the upcoming years. This will certainly lead to a consumption trend towards being more health conscious and more demanding for the quality of goods and services.

 

Vietnam is known to be one of the most dynamic economies. Economic growth between 1991 and 2010 averaged 7.5% each year and in spite of the many difficulties the country faced between 2011 and 2013, GDP growth still rose 5.6%. The trade deficit of Vietnam has been pulled back to the balance for the first time after 20 years, with the surplus of nearly USD 500 million in 2012, USD 200  million in 2013, and USD 2 billion at the end of 2014 (Vietnam General Statistics Office). Notably, the FDI sector has greatly contributed to these achievements in recent years. It is expected that trading with and investing into Vietnam will be continued to rise under the context of the just-finalized FTAs with the EU and South Korea, the establishment of ASEAN Economic Community in 2015, and the being-negotiated Trans-Pacific Partnership.

 

Vietnam has been a well-known destination for attracting foreign direct investment in the Southeast Asia as it has many comparative advantages (e.g. the cheap and skilled labor, socio-political stability), and investment climate where foreign investors enjoy some preferences in tax, land rent, capital… Statistics (April, 2014) revealed that there were more than 16,300 FDI projects in Vietnam that have collectively pulled in a total of USD 238 billion.  

 

The investors come from 100 countries and territories, and many of them are some of the world’s leading corporations like Samsung, Panasonic, LG Electronics, Lotte Corporation, etc. Manufacturing and processing sector is ranked on top in terms of the FDI’s registered capital, which is followed by estate trading industry. Notably, Vietnam just announced an Action Plan to develop four (04) key industries including: electronics, agricultural machinery, agro-fishery processing, and environmental industry and energy conservation. These industries are viewed as playing a leading role in attracting foreign investments in the upcoming years.

 

The government of Vietnam is continuing to revitalize its business and investment climate by different measures, some of which are: (i) building an advanced and integrated infrastructure, (ii) developing a quality workforce, and (iii) improving its legal framework and institutions related to business and investment.