Six Trends for Vietnam’s Export Machine
The question for Vietnam is no longer whether it’s going to become an export powerhouse. Exports in the first nine months of 2022 rose 17.2% to $282.3 billion, helping the economy expand almost 14% in the third quarter.
Shipments to key markets like the U.S. are rising, key multinational firms are flocking to Vietnam to give them an alternative to China at a time of trade tensions between Washington and Beijing, and Asian supply chains continue to mushroom. A new trade deal with Asian partners is goosing exports.
In September, Vietnam’s exports expanded 9.9% to $29.8 billion. Of that, $22.7 billion, or 76%, a very high number, was the result of foreign direct investment. Overall, imports in September increased 4.9% to $28.4 billion. For the first three quarters of 2022, imports rose 12.8% to $275.6 billion, maintaining Vietnam’s strong trade surplus.
Thanks to billions in new investments from foreign companies, Vietnam’s total trade, remarkably, is worth roughly twice that of its gross domestic product. The new Regional Comprehensive Economic Partnership, or RCEP, is expected to boost commercial relationships by cutting tariffs and ease trade among countries including Vietnam, China, Japan, South Korea, Australia and New Zealand. Vietnam has signed over a dozen other trade deals in this century, and its low labor costs, stable exchange rates and prodigious foreign investment turned Vietnam into a shining star.
Having established its place among trade heavyweights, Vietnam is now figuring out what its exact role will be in the global economy heading into the mid-2020s. Here are six trends Trade Data Monitor sees for Vietnamese exports, heading into 2023.
First, it’s clear that, aided by the new pan-Asian trade deal, Vietnam will play a top role in Asia’s globally-dominant supply chain. In September, imports from China rose 7.7% to $9.4 billion; imports from the U.S. fell 13.7% to $1.2 billion; and imports from the EU declined 13.1% to $1.2 billion. Imports from ASEAN countries, however, rose a whopping 37.5% to $3.6 billion.
Second, it’s going to need to import a lot of raw materials, attracting salespeople from commodity trading houses. In September, imports of plastics increased 12.1% to $913.1 million. Imports of petroleum products rose 223.8% to $616.1 million. By value, imports of cotton increased 31.2% to $427.3 million. By quantity, they fell 11.3% to 141,480 tons, another signal that Vietnam is transitioning to making and selling higher-value goods.
Third, Vietnam is going to be a tech power. Companies like Apple and Google are expanding their manufacturing presence in the country. In September, exports of machine, equipment, tools and instruments increased 38.8% to $4.1 billion, and exports of computers increased 7.7% to $5.1 billion. Exports of phones and parts fell 12.3% to $5 billion. However, the first nine months of 2022, those exports increased 9.9% to $45.1 billion.
Fourth, it’s not giving up on basic manufactured goods. Exports of shoes in September exploded, up 163.9% to $1.8 billion.
Fifth, it’s becoming a strong middle- and upper-class consumer market. In September, imports of motor vehicles rose 87.8% to $367.4 million.
Finally, Vietnam is still building market shares in key consumer markets, especially the U.S. Exports to the European Union increased 20.3% in September to $3.6 billion. Shipments to China rose 3.5% to $5.6 billion. Exports to the U.S. rose 16.4% to $8.2 billion.
To be sure, Vietnam still has some challenges to overcome, including attracting more high-skilled workers, and building better port and road systems. But with the government promising “a flexible and prudent” monetary policy, shooting for 6.5% GDP growth and 4.5% inflation in 2023, it’s among the few countries in the global economy finding a lot of answers right now.