Hanoi, Vietnam’s capital, is just a three-and-a-half-hour flight from Singapore. Its airport is neat, efficient, and functional, but lacks the polish and sophistication of major global hubs. This no-frills practicality extends to many aspects of daily life in the city. Yet, this very simplicity underscores Vietnam’s vast potential. There is still so much room for growth, and that’s exactly why its economy continues to expand, offering immense promise for the future.
Manufacturing, consumption, and tourism are the backbone of Vietnam’s economic growth, while digital and new-economy sectors are still emerging in select areas. Currently, the internet /digital space is dominated by large regional and global players. However, as the economy expands and digitisation integrates more deeply into daily life, the rise of strong domestic champions appears inevitable.
Could economic growth deliver further surprises? My local friends believe its possible if government supports more business-friendly policies, and if there is increased access to domestic capital to support entrepreneurial ventures.
Details follow.
A Remarkable Story of Economic Growth
From a modest $31 billion economy in 2000 to a robust $433.7 billion in 2024, Vietnam’s growth has been exceptional. Per capita income has soared more than tenfold, from $433 to $4,500. This growth has been broadly distributed, with policies driving equitable economic benefits—reminiscent of China’s economic model.
Cultural and Economic Ties with China
Hanoi, with its proximity to China, displays strong cultural and economic ties. Chinese culinary influence is pervasive, with many restaurants catering to tourists and business travelers. Korean restaurants are also common, reflecting the growing number of South Korean visitors. Economically, the northern regions of Vietnam showcase a blend of Chinese influence alongside French colonial remnants in the south.
Thriving F&B Businesses
Coffee shops are ubiquitous, with a shop available every few meters in Hanoi. Leading F&B chains:
- Highlands Coffee: over 800 stores nationwide
- Trung Nguyen Legend Coffee: ~700 stores
- Phuc Long Coffee & Tea: >150 stores in 2024
- Other leading restaurant chains include Pho 24, Golden Gate Group, Kichi-Kichi
Regional economic hubs
While Hanoi remains significant, Ho Chi Minh City outpaces it in economic vibrancy, serving as the primary business hub in Vietnam. Many companies establish themselves in Ho Chi Minh City before expanding to other regions like Hanoi and Da Nang.
Booming Tourism Sector
Vietnam is expected to welcome 17 million international tourists in 2024, surpassing Singapore’s numbers. The tourism industry, contributing ~$33 billion to the economy, is seeing a surge in visitors from South Korea, China, India, and beyond. The country ranks as the third-most-visited in Southeast Asia, with a 40% increase in international visitors from 2023.
The Manufacturing Powerhouse
Vietnam is rapidly becoming a global manufacturing hub, contributing nearly 25% of the GDP and attracting significant foreign investment—USD 23.5 billion in 2024. With competitive wages, a strategic location, and the “China-plus-one” strategy, Vietnam is a preferred manufacturing base. The sector employs 17.4 million people, with 55% female participation, second only to Singapore in Southeast Asia. Key exports include smartphones, clothing, and furniture.
Looking Ahead: Opportunities and Hurdles
Near-term Focus: Mitigating Geopolitical Risks
Vietnam’s export growth to the US is remarkable, but managing trade risks is a key concern. Exports to the US reached $136.6 billion in 2024, with a record trade surplus of $123.5 billion.
Medium-term Focus: Regulatory Environment and Access to Capital
Vietnam has made strides in improving its business environment, ranking 70th in the World Bank’s Ease of Doing Business report (2020). However, challenges remain in areas like resolving insolvency and starting a business, where Vietnam ranks 122nd and 115th globally, respectively. Access to domestic capital remains constrained, creating opportunities for startups that can secure international investments.
Longer-term Focus: Enhancing Education and Skill Development
Vietnam excels in primary education but faces challenges in tertiary education and English proficiency. The enrollment rate in tertiary education is only around 30-35%, and English proficiency lags behind peers like Singapore and the Philippines. The demand for English language training is high in major cities like Hanoi and Ho Chi Minh City.
My takeaway?
Vietnam presents a truly compelling picture of ambition and progress. It’s a country rapidly modernising, creating opportunities, and becoming increasingly important on the global stage. While challenges exist, the overall trajectory is positive. It’s a fascinating place to watch, and for those looking towards Southeast Asia, Vietnam’s dynamic story is definitely one to follow closely.
As Vietnam continues to integrate into global supply chains and attract foreign investment, it is poised to play an increasingly important role in the Southeast Asian economic landscape. Investors who can capitalize on the country’s strengths while addressing its challenges may find substantial opportunities in this dynamic market.
