Vietnam – a rising star among rapid growth markets

Ernst & Young, a leading global auditing group, said that wages in the Vietnamese manufacturing sector are currently estimated at nearly half those paid in China and Thailand, encouraging manufacturers to move operations to diversify production and capitalise on lower costs.

“This has enabled Vietnam to attract more than US$6.5 billion in FDI in each of the last five years,” it reported.

Alexis Karlins-Marchay, Co-Director of the Ernst & Young Emerging Markets Centre, highlighted Vietnam’s young and well-educated population of almost 88 million, its modest labour costs, its 6 percent targeted growth in 2013  and its scope for future economic restructuring.

Ernst & Young quoted the World Bank as saying that over the last few years, mobile phones and related accessories have become the second-largest Vietnamese export item, accounting for 10.5 percent of total exports. The World Bank expects this category to have overtaken garments as Vietnam’s largest source of export revenue in 2013.

The report added that the ability to attract and retain foreign firms in high-value manufacturing products such as electronics, computers, and phones is a potentially lucrative advantage for Vietnam, particularly as some of its neighbours have found it harder to move up the value chain.

The World Economic Forum’s Global Competitiveness Report 2011-2012 recently revealed that Vietnam had advanced 20 places in terms of its macroeconomic environment.

In June, Standard and Poor’s upgraded the country’s outlook from negative to stable, stressing all the while that price stabilization must remain a priority. The State Bank of Vietnam (SBV) has already cut interest rates five times this year to support activity but must take care to avoid excessively loosening monetary policy.

Ernst & Young also praised Vietnam’s success in improving its trade and current account balances, saying that the country’s current account moved into surplus in 2011 from a deficit of 12 percent of GDP in 2008.