Vietnam’s early focus on building strong economic fundamentals has helped it emerge as the nation with the highest growth rate in Asia in 2020. We spoke to Christopher Jeffery, chief academic officer at the British University Vietnam and vice chairman of the Vietnam Business Forum, to understand how systematically preparing for the future has given the country an advantage in an unprecedented time.
The story of Vietnam’s economy has been one of resilience and steady growth despite the pandemic that has stymied activities across the world. The country’s growth rate was the highest in Asia in 2020, according to IMF figures, owing to their ability to swiftly pivot and effectively capture opportunities that lay open in the US and China trade tussle. Additionally, Vietnam’s quick response to the COVID-19 pandemic in the early stages showcased best practices in disease tracking and management.
None of this would have been possible if its economic structure was not based on strong fundamentals and policies developed over the past three decades.
The result is that rapid technological and socioeconomic development, increasing foreign direct investment, and an emerging start-up ecosystem have all helped to ease the impact of COVID-19 on the private sector. The Asian Development Bank (ADB) forecasts strong economic growth in Vietnam into next year with 6.7% growth expected this year and 7% expected in 2022.
Christopher Jeffery, British University Vietnam (BUV) chief academic officer and Vietnam Business Forum vice chairman. Photo: LinkedIn
It is not difficult to understand how this successful outcome is possible, even in the midst of a pandemic, after talking to Christopher Jeffery, chief academic officer at the British University Vietnam (BUV) and vice chairman of the Vietnam Business Forum.
Having lived and worked in Vietnam over the last decade, he has witnessed not only the pace of development in the country, but also the enthusiasm of the population to learn key skills to help them acquire better jobs in a globalised workforce.
In his view, activities such as the initial journey from the airport into Hanoi and going shopping, illustrate how much things like infrastructure and supply chains have changed in a relatively short period.
“I’ve really seen a massive change,” Jeffery said.
He notes that modern airports with the latest tech systems are now the norm and that even the landscape throughout the journey into Hanoi tells the story of the country’s rapid modernisation.
“It shows the journey of Vietnam in 10 years, and it’s one that has, from a political – but also business level – really taken on board technology, the 4IR (Fourth Industrial Revolution), and decided that is the future.”
Jeffery noted how the manufacturing and industrial sectors have shifted from, “basic outsourcing to value package outsourcing” by moving up the value chain from its well-established specialties within the IT sector as well as in non-IT skills, such as furniture manufacturing and design. This has enabled Vietnam to be open to opportunities to contribute at every part of the value chain supplying budget retailers as well as more expensive brands.
This coincides with various major global trends coming together, such as the push to diversify manufacturing operations to improve supply chain resilience and rapid technological advancement, to create this opportunity for Association of Southeast Asian Nation (ASEAN) members. As Boston Consulting Group (BCG) points out, Vietnam was selected as the destination for a new Samsung manufacturing hub due to, “the quality of its young and educated workforce, widespread internet access, a domestic venture capital ecosystem, and government incentives and support”. The country has also prioritised advanced manufacturing systems and continues to receive significant foreign-direct investment (FDI).
“That illustrates what Vietnam is good at,” said Jeffery. “When it’s good at something. It’s everything.”
The Mindsets Behind Economic Development
Beyond the political and business level, another powerful driver of the country’s economic performance has been the Vietnamese people themselves. As Jeffery explains, self-motivation and a commitment to learning (especially practical skills that open the door to international career opportunities) have been crucial to the country’s rapid growth.
This can be seen from the construction workers who make small talk in English to practice their skills, to parents who line up outside language centres with their children on weekends and students who develop impressive portfolios of accomplishments at a young age to earn spots in higher education institutions. In his view, this makes the generation that are finishing school ideally suited to the Fourth Industrial Revolution (IR4).
“Vietnamese (people) understand the power of language… if you look at the investment that’s coming in and where it’s coming from, they speak English because it’s the global language but then they will speak another language or another two languages. That gives them that powerful differentiator; they can communicate across every nationality virtually, and that is an amazing thing.”
Building a Business in Vietnam
As foreign investment increases and more businesses expand into the market, a motivated and skilled workforce is incredibly valuable. However, for business leaders, finding this type of workforce doesn’t necessarily guarantee success in the Vietnam market.
“Motivation is key, but the other one is commitment,” said Jeffery.
To him, that means differentiating between achieving success fast and maintaining a sustainable operation for the long term. Building a network is also essential, because it creates a solid foundation and opportunities for growth.
“That’s a great necessity here, because it is a laborious process sometimes, but once you’ve achieved it, it is fantastic,” he said.
Business leaders looking to expand into the Vietnam market or set up operations there face many opportunities for growth. However, success will be dependent on how committed you are to the market.
Christopher Jeffery’s tips for expanding into the Vietnam market:
- Don’t imagine it’s easy. It’s tough and it takes time.
- Trust is key. Building trust, and showing your commitment to Vietnam, is important.
- Find a friend. Whether it’s a commercial friend, or a chamber friend, for example, who knows Vietnam, knows the market, and knows the people.
- Leave your operating system at home. Vietnam operates as Vietnam and trying to impose your mindset of how to do things never works.
QUICK INSIGHTS
➤ Healthcare: Parallel to Vietnam’s economic dynamism is its healthcare system. The World Bank states that between 1990 and 2016, life expectancy rose from 70.5 to 76.3 years – “the highest in the region for countries at a similar income level.” However, the World Health Organisation notes Vietnam as among the countries with the fastest aging population in the world, owing to sharply declining fertility rates.
➤ Media Access & Freedom: Despite these upward trends, Internet freedom remains low for the approximately 98 million people living in the one-party communist state. Vietnam scored 22/100 (not free) in Freedom House’s Freedom on the Net 2020 report, as government-imposed restrictions on alternative voices continue to raise concerns internationally.
➤ Connectivity: Evidence of Vietnam’s systematic planning to enable economic growth can also be found in the surge of Internet usage over the past decade. Statista figures reveal that nearly 70 million people are now connected – predominantly via mobile device – for activities including studies, ecommerce and entertainment.
➤ Ease Of Business: Vietnam’s sound foundations have also resulted in a strong focus on improving the business environment for foreign companies. The World Bank’s 2020 Doing Business report placed Vietnam 70th amongst 190 economies that were measured on various indicators of ease of doing business. Of these, the country scored highest in access to credit and payment of taxes, pointing towards improved access to credit information, and upgraded technological infrastructure for tax payments.
