 (6).png)
2 weeks ago
4
ARTICLE AD BOX
Summary
A look at how Vietnam leverages reforms and foreign investment to become a high-growth, electronics-driven global trade and manufacturing hub.
For anyone scrolling through social media lately, Vietnam seems to have taken over the feed, with its cafés, coastlines and bustling streets firmly etched onto the global travel map. But the tourism buzz is only the surface of a deeper story.
Emerging from the ashes of the war with the US and from being one of the world’s poorest economies in the 1980s, Vietnam is now seen as an economic miracle, delivering sustained high growth (8% in 2025) and reducing poverty to below 5% from nearly 80% in 1993. It has also become a key destination under the West’s China-plus-one strategy, offering a compelling cost-productivity mix.
For India, long contending to be China’s alternative, the task is to match Vietnam’s integration into global supply chains before it can position itself as a credible substitute.
Trade lead
Vietnam’s economic transformation began with the Doi Moi reforms in 1986, when it introduced a series of measures to shift from a centrally planned system to a “socialist-oriented market economy”. Unlike several economies that undertook similar reforms in the 1980s and 1990s, Vietnam aligned global liberalization with sweeping internal reforms.
A broad push to improve the business climate, including deregulation, export incentives, special economic zones, and openness to foreign investment, turned trade into the backbone of growth. Export-oriented manufacturing zones, streamlined customs procedures, and competitive labour policies helped firms plug quickly into global supply chains.
The country has also entered into numerous bilateral and multilateral trade agreements since joining the World Trade Organization (WTO) in 2007. Today, it is part of 18 Free Trade Agreements (FTAs) spanning partners such as the EU, UK, the Association of Southeast Asian Nations (Asean), China, India, South Korea, and Japan. It was also among the early movers in securing a trade deal with the US during the recent tariff escalations. On the back of these measures, Vietnam’s share in global trade has risen from just 0.1% in 1996 to about 1.5% in 2023, outpacing regional peers. Merchandise exports have surged from $32 billion in 2005 to about $475 billion in 2025.
Total trade crossed $930 billion in 2025, with a surplus of $20 billion. Exports now approach 100% of GDP, with roughly half of output and every second job tied to the external sector, making Vietnam one of East Asia’s most trade-dependent economies.
Tech pivot
Not only have Vietnam’s exports surged dramatically, but the products it exports have also changed significantly over time. In the mid-1990s, the country was largely an exporter of agricultural and food products such as rice, shrimp, cashew nuts and coffee, which accounted for about 41% of exports in 1995. By 2010, this had begun to shift, with labour-intensive manufacturing, such as apparel and footwear, emerging as key drivers, accounting for around 28% of exports.
The past decade and a half has seen a decisive pivot towards electronics. Vietnam moved quickly to position itself as a base for electronics assembly by attracting large anchor investors, most notably Samsung, and building supplier ecosystems around them. Production was concentrated in dedicated industrial clusters, especially in the north, linked to ports and logistics networks, allowing firms to scale rapidly. The country specialized in final assembly operations, importing components and exporting finished products at speed. As a result, high-technology exports have surged from 8.8% of manufactured exports in 2008 to 44.3% in 2023.
Today, nearly half of Vietnam’s export basket is driven by electronics and machinery, with electronics exports reaching nearly $165 billion in 2025. Computers, electronics and components crossed the $100 billion mark for the first time in 2025, emerging as the main driver of trade growth.
Investment influx
Strong FDI inflows have been central to Vietnam’s export surge, as global firms moved in to tap its proximity to major suppliers and consumer markets, alongside a stable political and macroeconomic environment. The Vietnamese government has reinforced this through generous corporate tax incentives, with the standard rate of 20% often reduced to 10-17% for priority sectors and locations, along with tax holidays and favourable treatment on import duties and land use. In recent years, inflows have been further boosted by the diversification of multinational enterprises away from China, driven in part by US tariffs on Chinese imports in 2018. The country’s inward FDI stock has grown at an annual rate of over 13% since 2007, with inflows averaging nearly 5% of GDP between 2015 and 2023, higher than regional peers and India.
Fund inflows have been heavily concentrated in manufacturing, which accounted for 61% of inward FDI stock in 2023, helping raise the sector’s share in GDP from less than 8% in 1990 to 27% in 2022. Foreign firms dominate the export sector, accounting for nearly three-quarters of shipments in 2023 and up to 90% in key products such as phones and electronics. Samsung alone accounts for about one-fifth of exports, underscoring Vietnam’s position as a global manufacturing hub.
Import leverage
A key part of Vietnam’s strategy of assembly-led, global value chain (GVC)-driven growth is that it is not simply replacing China, but working alongside it by importing inputs and plugging them into global supply chains. Global firms such as Samsung and Apple have set up large manufacturing bases in Vietnam, importing components from across Asia, primarily China, assembling them locally, and exporting finished products to global markets.
This plug-and-play model has enabled Vietnam to scale exports rapidly without building the entire production ecosystem domestically. The extent of this integration is reflected in the rising foreign value added embedded in exports. At 48% in 2020, up from 36% in 2005, Vietnam’s foreign value-added share is significantly higher than that of Indonesia, Malaysia and Thailand. In effect, the country produces only about half of the value in the goods it exports, underscoring its role as an assembly hub within global production networks. This reliance is most pronounced in technology-intensive sectors such as machinery and electronics, though even in apparel, foreign value-added has risen and remains above Asean peers.
While this model has delivered strong gains in exports and jobs, spillovers to the domestic economy remain limited, with imports accounting for nearly four-fifths of export inputs. Even so, Vietnam’s ability to quickly embed itself in global supply chains explains its leadership in GVC integration.
Wage edge
Vietnam’s trade success, from low-cost exports to deep integration into global value chains and strong FDI inflows, has been sustained by the low wages it offers. At roughly $302 a month in manufacturing, wages remain well below those in regional peers and far below China ($654 a month), making the country an attractive base for export-oriented production. This cost advantage is rooted in structural factors: a large working-age population, a legacy of agrarian underemployment, improving but still moderate skill levels, and a stable policy environment under one-party rule that has prioritized labour-intensive industrialization.
In recent years, however, real wages have begun to rise, growing at about 5% annually since 2006, owing to sustained economic growth, tighter labour markets, and rising demand from foreign firms in manufacturing hubs. Yet wage growth remains below China’s. Meanwhile, even as overall productivity levels remain relatively low due to limited domestic technological capabilities, reliance on assembly operations, and weak spillovers from foreign firms, labour productivity growth has outpaced regional peers, driven by capital accumulation, technology transfer through FDI, and participation in global value chains.
About the Authors
Puneet Kumar Arora
Puneet is an assistant professor of economics at Delhi Technological University, where he teaches courses in statistics, econometrics, and applied economic analysis. He has been an independent contributor to Mint since June 2021, writing regularly for the Plain Facts section. His work focuses on simplifying complex economic ideas using data-driven insights and empirical tools. Drawing on his teaching experience, he translates technical concepts into clear and accessible narratives for a general audience. His writing combines statistical analysis with current economic developments to explain trends in a way that is both rigorous and easy to understand. <br><br>Puneet’s professional experience includes research and writing across sectors such as infrastructure, telecom, and energy, which strengthens his ability to interpret macroeconomic trends in a practical context. He has written extensively on a wide range of macroeconomic and policy issues, including India’s efforts to build globally competitive professional services firms, the economics of domestic social media platforms, the role of comparative advantage in shaping trade outcomes, the country’s nuclear energy pivot, bank consolidation, monetary policy transmission, and critical assessments of free trade agreements in a fragmenting global economy. He brings an interdisciplinary perspective to his work, connecting academic tools with real-world applications.<br><br>Puneet believes that data should be used not only to inform but also to communicate clearly, making economic analysis relevant, credible, and accessible to a wider readership.
Jaydeep Mukherjee
Dr. Jaydeep Mukherjee comes with 25 years of experience in academics, teaching and research. His areas of interest include Macroeconomic Theory and Policy, International Macroeconomics, International Finance, Trade Analytics and Global Business Environment.<br><br>He is presently working as Professor in Economics at Great Lakes Institute of Management Chennai. His previous assignment was with Shiv Nadar University Chennai as a Professor of Economics. Prior to that he held a full-time faculty role at the Indian Institute of Foreign Trade (IIFT) Delhi, and also served as Visiting Faculty in Economics at Jawaharlal Nehru University (JNU), IMI Delhi, IIM Raipur and IIM Sirmaur.<br><br>Dr. Mukherjee holds an MA in economics, and a PhD from Jadavpur University, Kolkata. He was awarded the gold medal at both undergraduate and postgraduate levels. He has done extensive professional development programmes on Shipping and Logistics organized by APEC-Antwerp/Flanders Port Training Centre at Port of Antwerp, Belgium and successfully completed Summer School on DSGE Modelling at University of Surrey, UK.<br><br>He has completed more than 18 funded research projects sponsored by reputed organisations in India and abroad, namely, Walmart, International Finance Corporation World Bank, DFID-UK, PWC, Reserve Bank of India, etc. Dr. Mukherjee has more than 30 publications in Scopus/ABDC-indexed Journals. Some of his research papers are published in reputed peer-reviewed international journals, namely, Journal of Policy Modelling, Journal of Asian Economics, Management Research Review, South Asian Journal of Macroeconomics and Public Finance, Review of Market Integration, Journal of World Trade, Journal of World Investment and Trade, etc. His articles on macroeconomics and trade related issues have been published in newspapers like Mint, The Hindu Business Line, The Economic Times, Nikkei Asia, etc.
English (US) ·