Vietnam: Can it be the Next Frontier for Digital Industrialization in Asia?
Xuan Thang Nguyen, Country Manager at Schaeffler Vietnam
Vietnam has been consistently making waves in the business world over the past decade. With rapid economic growth, political stability, and an increasingly digitalized business model, Vietnam is the primed as the next leader of business in Asia. This is seen from Vietnam becoming more attractive for businesses looking to invest and expand their operations in Asia. We will explore how Vietnam is the next frontier of business in Asia, with a particular focus on digital transformation, and what more needs to be done as the country rises as a hotspot for digital industrialization.
Despite the impact of COVID-19, Vietnam has remained as one of the fastest-growing economies in Asia, with its GDP growing by 8.02% in 2022. 1 The country’s stable political environment, developed infrastructure, and geographic proximity to key markets in Asia has also made it an attractive destination for foreign investment.
Proactive collaboration and robust workforce
But Vietnam’s success story is not by chance. Instead, it is through strong proactive collaboration between the government and the private sector that Vietnam is able to support enterprise innovation and unlock growth in the country. Currently, Vietnam is also home to several free trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) 2 and the EU-Vietnam Free Trade Agreement (EVFTA) 3, which provide businesses with access to a vast network of trading partners. Additionally, Vietnam’s relatively robust population – with 75% of the population at working age 4 – has created opportunities for a competitive labor force that supports a vibrant digital ecosystem for innovation particularly in manufacturing and production.
Digital transformation has become a buzzword in recent years, and Vietnam is no exception
For instance, we have worked with both industry and governmental partners to tap into a robust talent pool through apprenticeship and management trainee programs to further optimize our digital operations at our plant in Bien Hoa.
A compelling destination for innovation and digitalization
Digital transformation has become a buzzword in recent years, and Vietnam is no exception. The Vietnamese government has set a goal to become a digital economy by 2030, with a focus on developing key digital infrastructure. With over 64 million internet users, Vietnam is also one of the fastest-growing digital economies in Southeast Asia.
Against this backdrop, strong governmental support such as competitive tax incentives coupled with Vietnam’s skilled labor market have played a strong role in enabling Vietnam to serve as an offshore manufacturing hub as businesses look to diversify and strengthen their supply chains.
Case in point, we launched a complete greenfield digital pilot plant in the province of Bien Hoa, which focuses on data utilization and analytics together with robotic applications for critical processes in our plants. Tapping on the country’s free market reforms and dynamic innovative workforce, the pilot plant project aims to increase the efficiency of our operations and serve as an innovation hub to scale our digital operation efforts in our manufacturing sites worldwide.
"Vietnam is a country on the rise, with a growing economy, stable political environment, and a relatively young workforce, making it an attractive destination for businesses looking to expand their operations in Asia"
Moreover, we are also working with strategic software and technological partners locally to better drive end-to-end data usage, including predictive analytics to enable forecasting as well as controlled processes based on data to bring our business and production to the next level.
A continuous pursuit for productivity growth
Nonetheless, Vietnam still has ways to go if it wishes to keep up in the face of an uncertain global environment. Efforts in continuous improvements to its infrastructure and innovation ecosystems, including improvements to the legal environment will serve as crucial factors in enabling a strong productivity growth within the country.
In light of these challenges, the government recently issued Decision 667 regarding the strategy on Foreign Investment to highlight its commitment towards reshaping the business environment that is focused on innovation and digitalization.
The strategy, which promises a set of new regulations, policies, and investment incentives from the government, will demand national ministries and departments to address obstacles to the country’s competitiveness including the state management of Intellectual Property among other administrative reforms.
Vietnam is a country on the rise, with a growing economy, stable political environment, and a relatively young workforce, making it an attractive destination for businesses looking to expand their operations in Asia. The country’s commitment to digital transformation, along with its emergence as a manufacturing hub, makes it a compelling destination for businesses. As Vietnam continues to develop and grow, we can expect to see an increase in foreign investment and opportunities for businesses looking to tap into this dynamic and exciting market.