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Financial Times: Vietnam's economic moment has come




According to the British financial daily Financial Times (FT), Vietnam's economic moment has come and we need to take advantage of the boom in manufacturing activities for long-term development.

 FT believes that Vietnam needs to reinvest growth dividends to support the development of knowledge-rich, more productive industries to achieve the goal of becoming a high-income economy by 2045. Illustration: Bloomberg

FT newspaper on July 9 commented that after decades of promises, the moment for Vietnam's economy has finally come. It was the fastest growing economy in Asia last year (8% growth) and one of the few economies globally to achieve two consecutive years of growth since the COVID-19 pandemic.

Foreign direct investment (FDI) in Vietnam soars to its highest level in a decade in 2022. Big-name corporations including Dell, Google, Microsoft and Apple have all moved parts of their supply chains of them to Vietnam in recent years. Accordingly, the advantage of location near China, low costs along with a young and well-trained workforce has attracted manufacturers. Initially it was just clothes and shoes, but now Vietnam has become a place to produce more advanced electronic devices such as Apple's AirPod.

The famous financial newspaper also noticed a trend of foreign businesses seizing opportunities to diversify their supply chains, in the context of rising labor costs and political risks eroding their advantages. China as a business destination. More than 20 billion USD of FDI capital flowed into Vietnam last year mainly from Japan, Singapore and China. The proportion of US imports from Vietnam has also increased by nearly 2 percentage points since trade tensions between Washington and Beijing broke out in 2018.

According to the FT, rapid export-led growth has helped millions of people escape poverty in recent decades. But the newspaper affirms that Vietnam's economy is at an important crossroads to achieve greater success. In the short term, to continue to attract investors' attention, Vietnam needs to strengthen its business environment. In the longer term, to meet the government's ambitious target of becoming a high-income economy by 2045, the government must also take advantage of manufacturing growth benefits to diversify the economy.

Over the next decade, Vietnam must increase production capacity to meet the growing demands of manufacturers' investment plans. The advantage of young demographics will provide a large pool of workers, but attention needs to be paid to competitiveness in technical skills. Vietnam's schools are of outstanding quality globally, but quality in vocational schools and universities needs a new step forward.

And according to the FT, above all, the country's infrastructure needs to be upgraded as the national power grid comes under pressure from growing industrial demand.

Over time, Vietnam will need to reinvest current growth dividends to support the development of more efficient and knowledge-rich industries to meet the 2045 target. Backbone services such as finance, logistics and legal services create highly skilled jobs and add value to existing industries.

The World Bank (WB) also recommends that Vietnam provide more support for technology application, strengthen management skills and continue to reduce restrictions on FDI in the service sector. FT emphasizes that Vietnam needs to do more to turn today's trend of "de-risking" into long-term prosperity.

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