A new Oxford Economics study has ranked Ho Chi Minh City to be the second fastest growing economy in Asia by 2021, with predicted annual growth of 8%. The study of thirty Asian cities placed HCMC just below New Delhi, making it the only non-Indian city in the top five.
This projected rapid growth has been echoed in similar reports. In January, Chicago-based financial services firm JLL ranked HCMC the world’s second most dynamic city, after Bangalore, India. HCMC was regarded as a “High Potential City” driven by low cost of living, market expansion, with high levels of foreign investment.
Ralph Jennings at Forbes suggested a few reasons for this boom. First, regardless of recent tensions surrounding the US and the Trans-Pacific Partnership, Vietnam is still likely to benefit from trade agreements with regional countries.
Jennings also believes Vietnam’s middle class will double by 2020 to 33 million people. Members of this group earn at least US$714 a month, enough to have disposable income to inject back into the economy.
One reason for this middle class boom is that traditional industries, such as textiles and shoes, are being replaced with more lucrative, high-tech endeavors.
Official Ministry of Finance data reveals that in the first half of this year, HCMC received US$2.15 billion in foreign investment, which is double the amount received in the same period last year.
This is part of an overall trend of economic growth in the city, despite a recent regional slowdown. Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong, told Forbes that Vietnam as a whole was in a “sweet spot.”
He predicted that strong growth would persist because: “It is continuing to gain market share in exports and even giving China a run for competitiveness. Foreign companies continue to invest in Vietnam to take advantage of its highly competitive labor and low cost.”
Limits on foreign ownership of companies in India are gradually being reduced or eliminated, enabling the rapid growth. Despite some friction regarding foreign-owned companies, Vietnam seems to be heading that way as well, a strategy that could create more economic success in the future.