Vietnam’s gross domestic product grew eight percent this year, according to official statistics on Thursday. This is not only the fastest growth in the region, but also the highest rate for the socialist republic in a quarter century. It is driven by exports, which rose by more than ten percent to $372 billion.
70 percent of exports are made by branches of foreign companies, with mobile phones being one of the top exports. This also has to do with the fact that the South Korean electronics giant Samsung alone is responsible for 20 percent of Vietnamese exports. More than 50 percent of Samsung’s smartphones currently come from Vietnam.
Samsung is leading the way
In Vietnam’s capital Hanoi, Samsung is now expanding its largest production site for smartphones into an innovation center. The group intends to develop software for its mobile phones and technology for mobile networks in the new building on an area of almost 12,000 square meters on 16 floors, reports the online newspaper heise.de, among others.
Apple wants to come in 2023
In other companies, such as the competitor Apple, China still dominates the production of high-tech. According to US bank JP Morgan, Apple produces more than 95 percent of its products there. But the uncertainties caused by the coronavirus and the increasing geopolitical disagreements between Washington and Beijing – fueled by the Ukraine war – are also causing Apple to rethink.
Apple supplier Foxconn is scheduled to start producing MacBooks in Vietnam in the spring. A $300 million factory in the north of the country appears to be almost operational, the Financial Times (“FT”) recently reported. With the production site outside of China, Apple wants to diversify its supply chains more. In addition to AirPods and MacBooks, Apple is also targeting the production of Apple Watch computer watches and the HomePod series of smart speakers for Vietnamese locations, according to previous reports.
China’s lead is melting
JP Morgan predicted that Apple would cut its production in China to 75 percent by 2025. “Overall, China’s advantage in terms of low-cost manufacturing is waning, and many US companies are looking to alternatives outside of China,” the FT quoted an expert as saying. Initially, this was mainly due to the pressure from Donald Trump’s US government to impose punitive tariffs on goods from China. Then the CoV policy of the communist leadership in Beijing became a problem.
Vietnam is a big beneficiary of this development. Samsung is symbolic of this. In recent years, the company has invested $20 billion in factories and has become the largest foreign investor in Vietnam. Another $3.3 billion in semiconductor production is planned soon. Around 160,000 jobs depend directly or indirectly on Samsung’s branches in Vietnam, which attracts with cheap wages.
Even before the coronavirus pandemic, Vietnam was one of the fastest growing economies in Asia for years. While more than 50 percent of the population lived below the poverty line in the mid-1990s, in 2018 it was just under seven percent. In 2019, gross domestic product increased by seven percent. A number of observers even identified an economic miracle.
But there are also many problems
During the two years of the pandemic, however, growth then dropped to less than three percent. “The economy has recovered,” said the statistics office in Hanoi. At eight percent, growth in 2022 also exceeded the government’s target of six to 6.5 percent. However, it slowed down towards the end of the current year. In the fourth quarter, growth was only 5.9 percent.
Exports even fell by six percent compared to the same period last year because orders from Europe and the USA failed to materialize due to inflation and the Ukraine war. The statistics office also warned on Thursday of the consequences of “global political and economic uncertainties and challenges”. According to the Vietnamese Federation of Trade Unions, working hours have been cut for almost half a million workers in the past four months, and around 40,000 people have lost their jobs.
And the list of other problems that Vietnam is struggling with is long: it ranges from an overdue tax reform to dealing with state-owned companies, the new billionaires, corruption and the stabilization of the capital markets to the rapid development of climate-friendly energy supplies, counted the “Frankfurter Allgemeine” (“FAZ”) on Thursday. For example, a Lego factory is being delayed because the toy manufacturer wants to at least partially offset its climate-damaging plastic production with green energy – but Vietnam still lacks that.
