Vietnam’s top leaders have resolved to become at least a middle-income country over the next five years by attracting more foreign investment in manufacturing.
A deputy planning minister said that Vietnamese people should earn around $5,000 per year on average by 2025, up from $2,750 now.
Vietnam would reach that milestone — middle income or higher in World Bank terms — by extending 10-year-old economic reforms that now attract foreign investors to the country that’s seen as a manufacturing peer to world factory powerhouse China.
Their investment creates jobs and raises incomes among Vietnam’s 97 million people. Vietnam is now lower middle-income.
The government is likely to stimulate new wealth by improving infrastructure and offering incentives to investors for production of high-value electronics. Prized investors today include Intel and Samsung Electronics.
Business shutdowns due to the pandemic have cost jobs worldwide and lowered consumer demand, a hit to Vietnam’s factories that make garments, shoes and furniture for export.
The economy grew at just 2.9% in 2020, according to Vietnam’s General Statistics Office, down from the average 6%-7% or more every year since 2012. The Planning and Investment Ministry, however, has set a 2021 growth target of 6% to 6.5% while both the IMF and ADB forecasted a GDP growth at about 7% for Vietnam in 2021.
“They are confident that they are going to have a positive growth rate,” said Frederick Burke, Ho Chi Minh City-based partner with the law firm Baker McKenzie. “They’ve got the coronavirus more or less under control, but the next stage is the challenging one.”
By 2025, Vietnam is expected to finish its North-South Expressway, which will stretch from its capital city Hanoi in the north to the country’s southernmost province, and the first phase of a new international airport that would take pressure off the one in urban Ho Chi Minh City, domestic news website VnExpress International reports. Manufacturers need quality infrastructure to ship in raw materials and ship out goods for export.
Nearly 3,900 foreign investment projects were licensed last year with total registered capital of $362.5 billion, higher than Vietnam’s $260 billion GDP.
To bring in more, the government will try to cut bureaucracy and local-level corruption, said Jack Nguyen, a partner at the business advisory firm Mazars in Ho Chi Minh City and a member of our Advisory Board. Foreign chambers of commerce in Vietnam have urged the state to cut red tape, he said.
“When you get to the lower-level officials there’s always going to be some sort of bureaucracy [and] petty corruption, but overall I think there’s a general desire from top government officials down just to try to make business for foreign investors as easy as possible,” he said.
(credit: VOA)