At present, Vietnam is becoming a global manufacturing base for electronic mobile phones, accounting for 20% of global manufacturing shipments. This article summarizes the top 10 trends and challenges of foreign investment in Vietnam in 2024**, which is for reference only and does not constitute any advice.
1.Asian tech giants are bullish on Vietnam
In addition to traditional infrastructure companies, many Asian tech giants, such as TCL, BOE, BYD Auto and CATL, have invested heavily in Vietnam to gradually increase their module and component production capacity in order to take advantage of Vietnam's preferential policies for production capacity and origin.
2.American and European tech giants have set up operations in Vietnam
Last year, in order to diversify the production capacity risk in China and deploy new technology product production lines, technology companies in the United States, Europe and other places made key investments in the Vietnamese market. South Korean companies plan to transfer more high-end technologies to Vietnam, while Japan plans to deploy production capacity for new home appliances and new energy motorcycles to Vietnam. The United States is committed to complementing Vietnam's semiconductor industry chain and making it a new center of the global semiconductor industry.
3.Manpower shortages and labor disputes are becoming increasingly prominent
With the recovery of the global economy and the growth of local demand in Vietnam, the order volume of Vietnamese enterprises continues to rise, and the demand for labor is also increasing. However, due to the neglect of science and engineering education in the past, Vietnam is now facing a serious shortage of science and engineering talents. In addition, with the relocation of the production capacity of consumer electronics brands in Europe and the United States, Vietnam has also experienced a "labor shortage" phenomenon similar to that in China in the early years, and labor disputes have also increased.
4.Power shortages become the norm in the summer
From April to October, high temperatures and rainfall from typhoons pose severe challenges to Vietnam's power supply**. In particular, hydropower accounts for more than 30% of Vietnam's total electricity generation, but high temperatures have led to an increase in river evaporation and a sharp drop in power generation from hydropower plants. To meet this challenge, companies investing in Vietnam need to bring their own diesel power generation equipment or adjust their production schedules to avoid periods of power shortages.
5.Vietnam has strengthened the supervision of foreign-owned enterprises
With the continuous influx of foreign capital in Vietnam, the international community is increasingly concerned about the ethics of its humanistic governance and manufacturing industry. In the face of problems such as the deterioration of the employment environment and the increasing pressure on order delivery, Vietnam will strengthen the supervision of foreign-funded enterprises and crack down on illegal employment, tax evasion and other behaviors. This also reminds enterprises investing in Vietnam to comply with local laws and regulations, pay attention to social responsibility and environmental protection, and avoid possible legal risks and social pressures.
6.Resource-intensive businesses face a dilemma
Given Vietnam's limited access to critical resources such as human resources and electricity, large-scale manufacturing industries that are highly dependent on these resources, such as the photovoltaic industry, could quickly deplete local resources, causing resource costs to soar. Traditional manufacturing industries such as textiles, garments, footwear and furniture face the same challenges. Due to high energy consumption and high labor demand, these industries may struggle to continue operating under cost pressures and declining operating rates. In 2023, there are already signs of production cuts by PV companies and rising costs in traditional manufacturing, indicating the intensification of this trend.
7.Hai Duong, Hung Yen and Nghe An provinces have become new investment hotspots
In Vietnam, areas with well-developed infrastructure and strategic location are more attractive to foreign investment. Hai Duong and Hung Yen provinces are strategically located in the north of Vietnam, with well-developed transportation networks and abundant labor resources, making them key areas for foreign investment in 2024. As the center of economic exchange between Hanoi and Hai Phong, Hai Duong province has relatively low industrial land rents, attracting many companies such as Ford and MTC to settle in. Hung Yen Province is a concentrated investment place for Japanese enterprises, with a complete industrial chain, providing investors with good industrial facilities and employee base.
8.The trend of land *** is obvious
Although Vietnam is regulating the real estate market to prevent a bubble, industrial land resources are becoming increasingly scarce due to the conflict between industrial land and agricultural land, resulting in land**, especially industrial and commercial land**, which will continue to be used in 2024**. This situation is not expected to ease anytime soon, putting pressure on costs for investors.
9.Consumption upgrading and prosperity of the business and trade service industry
With the advancement of industrialization, the consumption capacity and desire of Vietnamese workers have been improved, which has promoted the upgrading of consumption and the rapid development of the business service industry. This trend has been accelerated by the popularity of Western-style consumption and internet e-commerce. This provides more room for growth in high-quality and innovative business models. Through the experience and user data accumulated by Chinese companies in cooperation with international brands, they are expected to find new growth points in the Vietnamese market.
10.From "Made in Vietnam" to "Made in Vietnam".
Although Vietnam is currently mainly undertaking the OEM industry in China and other countries, this does not prevent Vietnam from developing its own local brand manufacturing industry. The Vietnamese market is strong in ethnicity, and with the technology accumulated in the process of industrialization, it is expected to strengthen local brand building and upgrade to creative industries. In 2024, the rise of local brands in Vietnam will become an important trend in the market, providing new opportunities for investors.