Business
What is behind Vietnam’s economic success story?
The World Bank has forecast Vietnam will show the strongest growth out of emerging economies in Southeast Asia.
In a new forecast from the World Bank, Vietnam’s economic growth is expected to reach 6.1% by the end of 2024 and 6.5% in 2025.
Both forecasts are higher than what was estimated in April, with the increase in growth down to a rebound in manufacturing exports, tourism and investment, the report said.
This shows that Vietnam could have a bigger growth in 2025 compared to other emerging economies like Thailand, Cambodia, Malaysia, Indonesia and the Philippines.
“Vietnam certainly faces some serious challenges, not least the ailing domestic sector and over-reliance on the [foreign direct investment] sector, but compared to other Southeast Asian countries, its economic prospects remain bright,” Nguyen Khac Giang, researcher and visiting fellow at the ISEAS Institute, told DW.
What is driving growth?
Vietnam, like other Southeast Asian countries, relies heavily on foreign direct investment.
Between 2021 and 2023, FDI inflows into Vietnam, Thailand, Indonesia, Malaysia, Singapore and the Philippines averaged about $236 billion a year, according to the ASEAN Investment Report 2024.
As Western investors try to diversify away from China amid geopolitical tensions between the Washington and Beijing, Southeast Asian countries are becoming a top choice for foreign investment from the US, Japan and the EU.
Nguyen Khac Giang said Vietnam is taking advantage of those tensions.
“I think Vietnam can maintain its growth momentum due to its domestic advantage of a 100-million population with a rising middle class, while also optimizing the benefits of its geopolitical position in the great power competition between China and the US,” he said.
China has also been investing in Southeast Asia, with Beijing and Hanoi establishing their “comprehensive strategic partnership” in 2008.
‘China plus one’
Like China, Vietnam’s economic growth comes under the stewardship of a one-party system, with the Communist Party having complete controlover the state’s functions, social organizations and media.
“China is Vietnam’s biggest trade partner, but more importantly, it plays a crucial role in Vietnam’s manufacturing sector, as most of its inputs come from China. I don’t think that will change in the foreseeable future,” Nguyen Khac Giang said.
“China Plus One” is a global economic business strategy for investors to reduce sole reliance on market and supply chain operations in China, aiming to expand into other countries while maintaining presence in the Asian giant.
Countries in Southeast Asia are seen as suited alternatives.
Bich Tran, an adjunct fellow at the Center for Strategic and International Studies (CSIS), said Vietnam is a top choice.
“Vietnam is one of the top choices for many companies’ China plus one policy because of the geographical proximity and similar culture,” she told DW.
“For those who have been operating in China, moving to Vietnam is much easier, and dealing with the Vietnamese would be more familiar than dealing with Indonesia or Malaysia,” she said.
“That being said, Vietnam is much smaller than China, so it can only absorb a small number of companies who want to relocate. India, if they open up their economy, would have much better chance of competing with China than Vietnam,” she added.
Vietnam attracts Western economies
The US is Vietnam’s second biggest trade partner and largest export market.
In September 2023, Washington and Hanoi upgraded their diplomatic relations, signing a “Comprehensive Strategic Partnership for Peace, Cooperation and Sustainable Development.” Analysts say the agreement was largely to boost economic benefits.
The US is one of Vietnam’s growing list of strategic partners, including Australia, China, India, Russia, South Korea, and more recently France.
But huge investment from Washington is key to economic opportunities for Vietnam.
Apple, the US tech giant, was again named the most valuable company in the world this year.
Vietnam has become a key manufacturing location for the company, with Apple investing over $15 billion in the country in the last five years.
Apple CEO Tim Cook seen during a visit to Hanoi in 2024
© NHAC NGUYEN/AFP
Vietnam has low labor costs, and a young and large workforce, with 58% under 35-years-old, out of a population of almost 100 million, making the country an attractive bet for investment.
More structural reforms needed
However, strong growth is also encountering domestic issues. Although Vietnam has one of the fastest growing economies in the region, it has a poor reputation on corruption, political censorship, human rights and civic society.
Domestically, local small to medium companies are struggling to become as competitive as manufacturers exporting to international markets.
Prices are also increasing for essentials such as food production due to climate change events, such as the recent Typhoon Yagi. Vietnam faces frequent electricity shortages, and experts say it must increase the use renewable energy.
Sebastian Eckardt, a practice manager for East Asia at the World Bank, said structural reforms are needed.
“During the first half of the year, Vietnam’s economy benefitted from the rebound in export demand. To sustain growth momentum not only for the rest of the year but over the medium term, the authorities should deepen structural reforms, step up public investment while carefully managing emerging financial risks,” Eckard said.
Edited by: Wesley Rahn
Author: Tommy Walker (in Bangkok)
The Central Bank of Nigeria (CBN) has dismissed as false a circulating report claiming that it has introduced new N5,000 and N10,000 banknotes to enhance cash transactions.
In a post on its official X handle, formerly Twitter, the apex bank said, “The content is not from the Central Bank of Nigeria. Kindly note that the official website of the CBN is cbn.gov.ng.”
A statement from the CBN’s communications department further clarified, “The only official sources for releasing statements to the media are our website or statements from our department. There is also no Deputy Governor by such name. We are investigating the source of this fake content.”
The report quoted one Deputy CBN Governor, Ibrahim Tahir Jr., the move is aimed at reducing cash-handling costs and providing Nigerians with more efficient means of conducting large transactions. “The introduction of these new high-value denominations aligns with global best practices and will enhance economic activities while reducing the stress associated with carrying large amounts of cash,” the Governor stated. The CBN said there is no such name in its leadership.
- Small-scale farmers warning of $56/kg rump steaks
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Australian consumers could end up paying more than $50 a kilo for steak at the supermarket as a result of Donald Trump‘s tariffs on agriculture exports, farmers say.
A kilogram of rump steak at Woolworths is now selling for $28.
But the Australian Food Sovereignty Alliance, representing 350 small-scale farmers, fears rump steak will end of costing Australian consumers $56 at the supermarket.
Spokeswoman Tammi Jonas, an organic beef cattle producer from Daylesford in Victoria, said the American tariffs on agricultural imports would see more countries buy Australian beef to avoid trading with the US.
‘We already know there’s high demand for Australian beef around the world and I think that’s just going to get higher,’ she told Daily Mail Australia.
‘In a global supply crunch like this, we could see rump steak climb past $50 per kilogram.
‘That’s not a family dinner – that’s a premium luxury.’
Dr Jonas said higher export prices would see less Australian meat sold to domestic consumers.
Australian consumers could end up paying more than $50 a kilo for steak as a result of Donald Trump ‘s tariffs on agriculture exports, farmers say (pictured is a Coles supermarket)
‘I would say there’s a strong likelihood of that, yes,’ she said.
‘And even if we still have enough beef sold within Australia, the prices are certain to go up.
‘Whenever you’re in those global markets, you roll with the volatility and if they can get a really high price overseas, they’re not going to charge less for domestic sales.’
But Angus Gidley-Baird, a senior analyst in animal protein with RaboResearch, said more expensive steak at the supermarket was unlikely, given the strong supply of Australian beef with the recent rainfall.
‘We produced record volumes of beef last year, I don’t see why there would be a shortage in the domestic market that would cause prices to rise,’ he told Daily Mail Australia.
‘The exports are effectively our markets that we sell the additional production into.’
Meat and Livestock Australia data showed the US was Australia’s biggest market for beef exports in 2024, putting it well ahead of Japan, South Korea and China.
Of the beef sent to the United States, 96 per cent of it was the leaner, grass fed variety that was either chilled or frozen.
The Australian Food Sovereignty Alliance fears rump steak will end of costing Australian consumers $56 at the supermarket. Spokeswoman Tammi Jonas (left) said the American tariffs on agricultural imports would see more countries buy Australian beef to avoid trading with the US
The Americans have been in the grip of a drought, and most of their beef is fattier, grain-fed.
South American beef exporters Argentina and Brazil are also dealing with a lack of rainfall, which means demand for Australian beef would continue to be strong.
Mr Gidley-Baird said the Americans, who produced fattier, grain-fed beef, would still need the leaner, Australian grass-fed beef to make hamburger patties, regardless of import tariffs.
‘The US still continues to need imported product because they’re not producing as much themselves,’ he said.
‘They’ll still need Australian beef – the drought, it’s getting better in the US but they’ve liquidated their herd and production volumes are down.
‘What Australia sends to the US complements their production system over there in that it balances out the fatter product they’re producing for hamburger production.
‘They need the product and we’re one of the biggest suppliers of it – me being rational would still say that they would still buy it.’
At the margins, strong American demand for grass-fed beef had pushed up prices for Australian lean mince, now selling for $15.50 a kilo at Woolworths.
The Trump Administration’s tariffs of up to 25 per cent on agricultural imports are coming into affect on Thursday, along with tariffs on pharmaceutical products (President Donald Trump is pictured in the White House)
‘The US market has been very strong – it’s demanding a fair amount of product which is putting a bit of pressure on mince prices, lean product prices,’ Mr Gidley-Baird said.
The Australian Food Sovereignty Alliance sees mince prices more than doubling to $36 a kilo.
But Dr Jonas predicted possible tariffs of up to 25 per cent on Australian beef would see American demand plunge, despite the fact they are in drought with an undersupply of grass-fed beef.
‘I think with a 25 per cent tariff they won’t be able to afford it – Americans are in as big a cost-of-living crisis as Australians are and they can’t handle a 25 per cent tariff on top of the higher meat price of imported Australian beef,’ she said.
The Australian Food Sovereignty Alliance didn’t do specific economic modelling on Australian beef prices, as a result of the Trump tariffs on agriculture coming into effect on Thursday.
But it argued China’s African swine flu in 2019 led to a doubling of pork prices, as supply fell by 40 per cent.
The alliance campaigns against agribusiness giants like JBS Foods Australia, which owns feedlots and abattoirs.
‘The local farmers like us are losing access to the facilities to slaughter,’ Dr Jonas said.
‘While that sounds like a good thing for Australia – when we think, “We can export more” – the reality of that is very few people profit from that higher export.’
The Trump Administration’s tariffs of up to 25 per cent on agricultural imports are coming into effect on Thursday, along with tariffs on pharmaceutical products.
‘If it’s a large tariff but applied to everyone, our competitive position remains the same,’ Mr Gidley-Baird said.
They follow 25 per cent tariffs on steel and aluminium, introduced on March 12.
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