October 8, 2015.
Intel started it all in Vietnam when it opened a semiconductor factory there nearly a decade ago and says that its factory, the largest American investment in Vietnam, is “steadily rising up the value chain”.
As one of 12 countries in the Trans-Pacific Partnership (TPP), Vietnam will be able to ship products to countries that make up two-fifths of the world’s trade, tariff free. According to the forecasts of the Peterson Institute of International Economics, Vietnam will gain the most out of all the participants.
The Chinese economy’s slowdown and shifting away from low-value manufacturing has elevated Vietnam’s position in those markets. Vietnamese labor is 70% cheaper than that in China and the two countries’ large border makes it easy for Vietnam to import raw materials from China.
However, some of this low-value production is already moving from Vietnam to Cambodia, Laos and Myanmar, where labor is even cheaper. Vietnam is attempting to stay ahead of the curve and bring in more high-tech production like Samsung’s $2.5 billion smartphone assembly center and a $1 billion screen production plant.
Goldman Sachs forecasts that Vietnam, now the 55th largest economy in the world, will grow to 17th by 2025 and overseas fund managers can tell. Out of the top 50 Vietnamese companies, over half have reached a 49% foreign ownership level.
Louie Nguyen, CFA is the CIO of San Diego-based Soledad Investment Management. Soledad invests qualified clients’ assets in markets around the world, including Vietnam.