Vietnam becomes United States’ sixth largest trading partner

In a recently published article entitled “Can Vietnam become the next Asian tiger?”, the East Asia Forum newswire noted this jump is an important pivot in the Vietnamese economy, as the country’s main exports to the US are no longer textiles and garments, but instead high-tech products.

The article outlined that many flagship Apple products will have been assembled in Vietnam by the end of the year.

Rather than competing against China’s ‘world factory’ tag, Vietnam has branded itself as an additional manufacturing destination to the northern neighbour within the global supply chain ecosystem.

The country has also provided a much needed ‘neutral’ environment for foreign fintech firms to de-risk and reroute their exposure from the US–China great power rivalry, including Apple’s shift of production away from China and US-based Amkor Technology’s investment of US$1.6 billion investment in a semi-conductor factory.

Furthermore, Vietnam is also welcoming back Huawei after initially deferring to US efforts to ban the company.

In line with this, it boasts the potential to become the fourth largest exporter of high-tech goods, behind China, Taiwan (China), and Germany.

Though Vietnam currently holds seventh position, its growth has no rival, with high-tech goods as a share of overall Vietnamese exports hitting 42% in 2020, up from 13% in 2010.

The Vietnamese Government’s intervention in opening the country up for free trade and foreign direct investment can be seen as overwhelmingly positive and non-threatening to the global trading system as a whole.

While the country’s high-tech exports are fueling further growth, there is an overreliance on foreign innovation inputs, with about 70% of total Vietnamese export value being driven and captured by foreign companies.

According to the article, there is also a significant bright spot in the form of the current FDI inflows from fintech companies which are giving Vietnam more time to address its dependency on foreign innovation inputs.

The Vietnamese Government could entice Apple to invest in research and development and at the same time deepen its relationships with Vietnamese universities and students, as the tech giant did in China.

Vietnam has uniquely positioned itself to be among the fastest growing economies over the coming decade. This comes off the back of its success in managing COVID-19 as Asia’s top performing economy during the pandemic which strengthened the country’s statism and reputation as a safe and friendly environment for foreign direct investment.

However, the article also pointed out that the country’s race to become the next Asian tiger has its challenges, including the question of how to reduce its overreliance on foreign innovation inputs. But it appears that core elements of an innovation ecosystem are taking root as the country establishes itself as a high-tech export power.