FDI sector is behind Vietnam growth story, and too big to fail

June 2014
by Hung Pham, Chief Economist SSI

Not until the recent factory riot did people realize the important role of the Foreign Direct Investment (FDI) sector in Vietnam economy. GDP growth was spearheaded by FDI in 2013 and 1Q14, where FDI sector enjoyed a much higher growth rate in construction, foreign trade and employment. Given the fact that Vietnam currently runs a budget deficit and the whole economy and in particular, the banking system is still deleveraging, support from foreign investments is what is needed to salvage growth.

FDI is synonymous with labor intensive sectors (such as garment and textile, footwear, electronics assembly,...) which continues to be a refuge for Vietnam's rising labor force. Should these labor intensive sectors fall prey to recent events, unemployment rate might surge, and social unrest might supersede.

Vietnam's Top FDI Investors in 2013

Source: MPI

About the Author:
Hung Pham, Master of Economics (Honours), Sydney University, 2007; BA, External Economics, Foreign Trade University, 1999.
Hung Pham serves as Chief Economist SSI, the largest brokerage house in Vietnam. He has more than 15 years of experience in macroeconomic analysis, including working for the Ministry of Trade from 1999.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.

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