In the early months of 2022, Vietnam's manufacturing sector showed positive signs and was on a path to recovery. This contributed to boosting investor confidence, alongside market opening opportunities and support from the Vietnamese government. 2022 holds the promise of being a year of robust growth and resurgence in the industrial sector.
Value chain development trends
Faced with the complex dynamics of the pandemic, Vietnam's export indicators continue to show strong growth. Compared to the same period last year, the total export turnover of goods reached $212.55 billion, an increase of 21.2%. Notably, the group of industries including mobile phones and components recorded an impressive growth of 13%, accounting for 16.8%, and achieving $35.7 billion.
It's worth noting that the electronics, computers, and components industry have maintained their growth momentum from the previous year and have surpassed the textile and garment industry since 2019. The share of export turnover in textiles, apparel, and footwear has decreased to 10% and 6% compared to last year. This indicates a shift in the major export industries from low-value-added products to higher-value products such as electronics and components. It can be said that the production-export ratio has demonstrated the changing direction of the industry.
Regarding foreign direct investment (FDI), the manufacturing and manufacturing sector has witnessed a remarkable growth of 16.45% compared to the same period, constituting 53.4% of the total investment. The FDI inflow has reached $11.83 billion with the approval of 402 projects. In this value chain shift, the highest share of investment is in the electronics equipment industry (19.29% of total investment), followed by electronics and computers (17.14%), plastic products (14.66%), and rubber (13.54%). The textile and garment as well as the food industry only accounted for less than 4% each.
It is evident that the increasing number of free trade agreements (FTAs), along with a young workforce and government incentives, have made Vietnam one of the most attractive manufacturing hubs in Asia.
Divergence in industrial sectors between the North and South
The Northern region is attracting a significant amount of investment in the manufacturing of electronic equipment. The Northern region has recorded the highest level of newly registered FDI at $3.99 billion in the first 9 months of 2021. Electronic equipment leads the way in terms of investment, accounting for 18%, followed by computers and electronics at 16%. Another notable point is that in the first 9 months of the year, 4 out of 5 major investment projects in the key economic areas of the North come from high-value-added industries.
On the other hand, the manufacturing landscape in the Southern region exhibits a different trend compared to the North. Investments in the Southern region during the first 9 months of the year are smaller in scale and focus on traditional manufacturing sectors. Industries such as plastics and rubber, food, paper, and textiles receive a relatively equal share of new FDI registrations in the range of 2-3%.
The food and beverage industry received the largest total investment, with Protrade Industrial Park in Binh Duong securing $78 million from IDL Coffee Holdings and Becamex Industrial Park in Binh Phuoc receiving over $36 million. Following that, the metal and paper product sectors each received $60 million in investment in two industrial zones, Minh Hung in Binh Phuoc and Loc An-Binh Son in Dong Nai. Thanh Cong Industrial Park in Tay Ninh received $48 million for the textile industry from Top Sports Textiles.
The modernization of Vietnam's industrial sector will be driven by the development of industries within the value chain. Experts have pointed out that the manufacturing sector could achieve up to 16% growth by 2030 if small and medium-sized enterprises begin to adopt technology. In addition, new technologies could contribute an additional $7-14 billion to this sector in the future.