Investing in Vietnam: Opportunities Now and in the Future

By Frank-Jürgen Richter

March 24, 2024

Vietnam, with its burgeoning economy and increasingly friendly business environment, has become an attractive destination for foreign direct investments (FDIs). With its expanding middle class and a population of over 95 million, the country has generated significant revenue from consumer services and retail sales. This has further boosted the disposable income of consumers in both urban and rural areas, resulting in a positive growth outlook for Vietnam.

The Southeast Asian country experienced a strong GDP growth. Despite the dip during the pandemic, it swiftly bounced back to its dominant position. As of 2022, Vietnam’s GDP has seen an increase of 8%, a figure slightly above its pre-pandemic levels. In the same year, the per capita GDP of Vietnam stood at $4,086. The government of Vietnam has set a target to elevate this figure to a minimum of $18,000 by 2035. With the disposable income in major urban regions being four to five times the national average, there is a rapid emergence of substantial opportunities in the sectors of consumer goods and services.

By 2025, Vietnam’s digital economy is expected to scale to US$52 billion. Digital economy sub-sectors such as e-commerce, digital banking, and online gaming are nascent and high-growth areas which will be highly attractive for investors. 

Among the notable investors, China has emerged as a significant player, ranking as Vietnam’s 5th largest source of FDI in 2022. This trend begs the question: will Chinese investment in Vietnam evolve towards high-tech sectors? Moreover, what new areas can both countries explore to enhance mutual cooperation, and what further policy support is necessary from governments on both sides?

The upcoming Horasis China Meeting, scheduled for 14th to 15th April 2024 in Binh Duong, Vietnam, will feature a dialogue session on this topic. The meeting will bring together 300 of the most senior members of the Horasis Visions Community, including business leaders from China and Vietnam. The meeting will play an important role in facilitating the rapidly expanding trade and investment between China and Vietnam.

Shifting Dynamics: Chinese Investment in High-Tech Sectors

The influx of Chinese investment into Vietnam is poised to undergo a transformation, particularly towards high-tech sectors. While traditional sectors like manufacturing and infrastructure have historically dominated Chinese investments in Vietnam, recent developments suggest a shift towards technology-driven industries.

One notable example is the Chinese tech giant Huawei, which has invested significantly in Vietnam’s digital sector. Huawei’s strategy for Vietnam encompasses the construction of digital infrastructure, the acceleration of industry digitization, the reduction of carbon emissions, and the enhancement of intelligent digital transformation. A key aspect of their plan is to cultivate a digital talent pool within the country. Huawei has already partnered with local telecom providers to establish and enhance networks, including 2G, 3G and 4G.

This move not only diversifies China’s investment portfolio in Vietnam but also contributes to the country’s technological advancement. Additionally, the Vietnamese government’s proactive measures to attract high-tech investment, such as offering tax incentives and creating specialized economic zones, further incentivize Chinese companies to explore opportunities in sectors like artificial intelligence, biotechnology, and renewable energy.

Exploring New Avenues for Mutual Cooperation

Apart from high-tech sectors, there are numerous areas where Vietnam and China can deepen their cooperation. A potential area is the creation of smart cities and urban facilities. As both nations are quickly urbanizing, there’s a crucial need for creative solutions to tackle issues in transport, energy use, and environmental conservation.

Collaborative projects between Vietnamese and Chinese companies in smart city development can leverage each country’s expertise and resources to create more livable and efficient urban environments. 

Vietnam is a major agricultural producer, while China is the world’s largest consumer of agricultural products. By leveraging Vietnam’s abundant natural resources and China’s technological prowess in agricultural innovation, both countries can enhance food security, promote sustainable farming practices, and tap into export markets more efficiently.

Policy Support and Facilitation

To fully realize the potential of bilateral cooperation, governments on both sides must provide adequate policy support and facilitation. This includes streamlining regulatory processes, ensuring intellectual property protection, and fostering an enabling environment for cross-border investments.

For example, establishing bilateral agreements to protect intellectual property rights and facilitate technology transfer can instill confidence among investors and encourage greater collaboration in high-tech sectors. Moreover, implementing measures to enhance transparency and reduce bureaucratic hurdles will create a more conducive environment for business partnerships to flourish.

Additionally, promoting people-to-people exchanges and cultural diplomacy initiatives can foster mutual understanding and trust between Vietnamese and Chinese stakeholders, laying the foundation for long-term cooperation.

By harnessing the synergies between their respective strengths and addressing mutual challenges, Vietnam and China can forge a deeper and more sustainable economic relationship in the years to come.

By 2025, Vietnam’s digital economy is expected to scale to US$52 billion