Vietnam: Ready for Take-off
/We continue to highlight the growing importance of #Vietnam to world trade & #geopolitics It’s incredible to recall that just 25yrs ago US and Vietnam normalized relations.
A pic of Ho Chi Minh City to whet your appetite for development.
As tension with China rises (U.S., India, South China Sea, etc), we continue to assess Vietnam to be a key beneficiary as FDI is redirected.
Given this trend, we thought it worthwhile to share quick dive on Vietnam and why this #SEAsia economy of 90mm people has become so important, again.
Location, location, location...
Vietnam only recently opened its hybrid form of capitalism.
Pros
- Young, inexpensive, high-energy & growing workforce
- Agriculture and energy production sectors w/abundant resources, but still largely under-invested
- Alongside, socio-political stability and established military
Areas for Growth
- Continued health & transport infrastructure investment
- Improved banking sector regulation
- Improved legal transparency
The elephant in the room is China It's proximity is one of Vietnam’s greatest strengths, while also a potential Achilles heel Disputes regarding the #SouthChinaSea are just one area for friction and Vietnam historically looks at China with a wary eye.
Vietnam's role in tech manufacturing is established & growing For example, exports of smartphones and spare parts, mostly produced by Samsung, rose 4.4% last year to $51bn out of $274bn total exports in 2018.
Primary export destinations remain:
1) China
2) US
3) S. Korea & Japan (alternating)
To give you a sense of how fast this growth is occurring pre #SARSCoV2 & #ChinaUS trade war....
In 2007, total trade to Top 5 partners was ~$55bn
By 2019, total trade to Top 5 partners grew to $350bn, a 7x increase
This trend will accelerate as US China relations deteriorate and China continues its transition to a consumption & services driven economy, away from manufacturing. This transition will continue to driver higher manufacturing costs reducing China’s ability to be the low-cost industrial plant for the world.
Vietnam’s top trade partners, 2019
While Vietnam's Achilles includes reliance on and proximity to China, it also depends on the US Navy for safe passage of required petroleum imports to fuel its economy.
Notably, Vietnam is a net exporter of food, particularly rice and including to China; so it has its own cards to play.
After decades of relative quiet and growth in the shadows of larger, neighboring economies, #Vietnam now finds itself back in the global frame as a critical manufacturer and food producer located next to the Giant Panda, but also aligned with US, S. Korean, Japan and Oz interests.
