Trade war drives 9% gain in 2018, pulling garment production from China
Foreign direct investment in Vietnam climbed 9.1% in 2018 to reach $19.1 billion, the government reports, marking a sixth straight annual record as capital keeps flowing into one of Southeast Asia’s fastest-growing economies.
Industries such as apparel have been moving production out of China and into Vietnam looking to escape the higher U.S. tariffs. A prolonged trade war is expected to accelerate this shift.
Vietnam is Asia’s biggest beneficiary of the Sino-U.S. trade war, according to Mizuho Research Institute, which estimates the effect will be a 0.5 percentage point boost to its real gross domestic product.
Though investment approvals fell 1.2% in 2018 to $35.4 billion for the first decrease in four years, the dip may be due to the figure not including the large fossil-fuel power plant projects in central and southern Vietnam that received green lights in 2017.
Japan led all nations in 2018 with FDI approvals for Vietnam totaling $8.5 billion. South Korea ranked second at $7.2 billion, followed by Singapore, Hong Kong and mainland China.
Approvals last year included the Hanoi “smart city” project, in which Japanese trading house Sumitomo Corp. takes part, as well as liquid crystal display and camera facility investment by South Korea’s LG group in the northeastern city of Haiphong.
Vietnamese real GDP growth is estimated at 7.08%, according to government data. But heavy economic reliance on foreign companies represents a concern. South Korea’s Samsung Electronics accounts for roughly 25% of Vietnam’s overall exports by value.
“For sustainable growth, Vietnam needs to ease its dependence on foreign capital,” said Hiromasa Matsuura, an economist at Mizuho Research Institute.
Vietnam, with a population of nearly 100 million, ranks third among the 10 members of the Association of Southeast Asian Nations, trailing just Indonesia and the Philippines. The country’s middle-income population is expanding in large cities, including the capital and the southern commercial center, Ho Chi Minh City.
According to a report on Nikkei