Feeling fresh after months of Covid-19 hiatus, the Director of Thinh Long Intra Bui Ba Thien could not hide his delight in seeing production return to full scale after the difficult year of 2021.
“Things are starting to get back to normal, but we remain highly aware of the Covid-19 pandemic,” Thien told The Hanoi Times.
Thinh Long Intra, which specializes in making medical facemasks, is planning to build a new manufacturing plant in Hoa Binh Province to meet growing needs for such a product in Vietnam and abroad.
“The Government’s shift in Covid-19 strategy towards living with the pandemic is a major boost for us. Just like after rain comes fair weather, we are trying to make the most of the situation to push for a speedy recovery in the coming time,” he said.
In a similar mood, the Director of Hanoi CNC Accurate Mechanical Company Nguyen Minh Chau said her company started the year with 100% of the workforce available.
Chau expressed hope for a positive year ahead as the company has already signed several contract orders since the beginning of 2022. “This is a good start and we need to keep up the work to ensure the company’s long-term future after a difficult year,” Chau told The Hanoi Times.
According to Chau, timely support from the Government and local authorities has built trust among the business community and laid the foundation for the business to focus on recovery.
Indeed, Vietnam’s change of Covid-19 approach in the third quarter of 2021 from zero-Covid-19 strategy to safe and flexible adaptation to the pandemic helped salvage the economy from a devastating year of multiple outbreaks that forced major cities into prolonged lockdowns.
The GDP growth, from a deep contraction of 6.17% in the third quarter - the sharpest fall since Vietnam first announced its quarterly GDP, rebounded to 5.22% in the subsequent one, much higher than any forecasts.
Head of Markets and Securities Services in HSBC Vietnam Ngo Dang Khoa attributed the positive performance to Vietnam’s quick decision in reopening socio-economic activities in early October.
The growth, albeit at a slower rate compared to the previous year of 2.91%, could be seen as a strong result amid the pandemic which left more severe consequences compared to 2020, and more significantly, the “economy’s main drivers are once again robust,” Khoa told The Hanoi Times.
“We have witnessed the strong resumption of manufacturing and swift recovery of exports after the lockdown,” he said.
Khoa said the country’s status as a new manufacturing hub of Asia Pacific is thanks to an abundant supply of laborers and skilled workers that can ensure high-quality output, low labor, and production cost.
Additionally, China’s Covid-19-related restriction policy has cast a shadow over the global supply chain with fear of sudden disruptions due to prudent prevention measures.
“Several global brands have increased investment in their production lines in Vietnam, including Nike, Adidas, Foxconn, Pegatron, Lego, among others,” he continued.
“It marks a potential boom in manufacturing in Vietnam. And it, as a result, will drive export growth, the next main driver of Vietnam’s economy in 2022,” Khoa said.
In 2021, Vietnam’s export turnover hit over US$336 billion, an increase of 19% compared to the previous year. The country also enjoyed a trade surplus of $4 billion last year.
“It demonstrated the great potential for exports which has created great momentum for 2022. One of the factors that backed the export growth was the FTAs. Vietnam currently has 15 FTAs with many economies in the world, facilitating its export activities,” he said.
Being a member of FTAs also helps Vietnam attract further foreign investments to the country.
FDI to Vietnam in 2021 reached US$31 billion for the first time, with Singapore, South Korea, and Japan as the top three biggest investors. Processing and manufacturing industries attracted up to US$18 billion, equivalent to over 58% of the total investment.
“With RCEP becoming effective in early 2022, more opportunities have opened up in Vietnam for international investors, and we expect FDI inflow to Vietnam will continue to rise,” he said.
For the Chief of Representative of the Japan External Trade Organization (JETRO) in Hanoi Takeo Nakajima, Vietnam’s reopening was a timely move to assure foreign investors of the country’s long-term prospects.
This is especially important for Japan, which remains the second-largest source of direct investment and the fourth largest trading partner of Vietnam.
“Vietnam is a crucial supply chain hub for Japanese global business and manufacturing. Before the fourth wave of Covid-19, when Vietnam minimized the negative pandemic impact, many Japanese enterprises looked at Vietnam as a safe investment,” Nakajima told The Hanoi Times.
About two-thirds of JETRO/METI [Ministry of Economy, Trade, and Industry]'s subsidy to support diversification of supply chains went to Japanese manufacturers eyeing Vietnam, he informed.
"There was a disastrous effect of the pandemic on Japan, particularly on the automotive, electronics, and machinery industries,” he said.
Nakajima, however, took time to applaud Prime Minister Pham Minh Chinh’s visit to countries like Japan or France in late 2021 when there was concern among the foreign business communities over the pan-demic situation in Vietnam.
From his view, this was seen as the sign of an active government looking to control the situation as quickly as possible and deliver a clear message that Vietnam is and remains a “solid investment destination”, where the “new normal” and “with corona” policy in effect.
Given the uncertainties surrounding the Omicron variant and the pandemic situation in general, Nakajima stressed the necessity for Vietnam to avoid possible disruption to the economy.
“By sending the message of “we will not stop the economy” to the world, it would help maintain Vietnam’s status as a preferred destination for foreign firms in the region, including those from Japan,” he said.
The Vietnamese Government is aware of foreign businesses’ concerns, which is proved by Vietnam’s efforts to significantly expand the vaccination coverage since the fourth quarter of last year and early 2022.
Currently, 95% of people aged 18 years old and above have been fully vaccinated against Covid-19, while this percentage in the group aged 12 to 17 is 76%.
Michael Kokalari, the chief economist at VinaCapital, noted Vietnam’s Covid vaccination campaign gives foreign companies confidence that the Government is committed to achieving a prudent balance between public health and economic health concerns.
“People are more confident to return to work, and [the high vaccination rate] also paves the way for the resumption of foreign tourism, which directly accounted for about 8% of Vietnam’s GDP in the pre-Covid period,” Kokalari suggested.
The beginning of 2022 marks a positive start for Vietnam’s economy, as a recent World Bank report pointed out a sharp rise in all major mobility indicators as vaccination coverage surpassed 73% of the population.
In January, while industrial production index growth moderated to 2.4% year-on-year from 8.7% in December 2021, the manufacturing PMI rose from 52.5 in December 2021 to 53.7, the highest reading since May 2021, indicating significantly improved business conditions.
On the other hand, retail sales registered the first positive year-over-year growth rate since May 2021 with 1.3% year-on-year.
“This recovery was fueled by strengthening consumer demand, particularly for goods as households prepared for Tet celebration,” noted the World Bank.
Indeed, sales of goods, which accounted for over 80% of retail sales grew by 4.3% year on year.
Those early indicators seem to back up the Government’s confidence as it set the GDP growth target for Vietnam at 6-6.5% in 2022. The HSBC Global Research suggested the economic expansion rate may be around 6.5%.
Kokalari from VinaCapital expected a surge of 7-7.5%, or even higher, driven by “vigorous rebounds in Vietnam’s domestic consumption and construction activity, as well as by a resumption of tourist arrivals in the months ahead,” he said.