Abubakr Buleshov | 22.09.2025
Vietnam’s Manufacturing Boom: The New “Factory of the World”?
Over the past two decades, Vietnam has transformed from a largely agrarian economy into one of the fastest-growing manufacturing hubs in the world. (Vietnam’s manufacturing sector accounts for 25% of GDP) Global firms, such as Nike and Samsung, now rely on Vietnam’s manufacturing for everyday stuff like shoes and phones. This rapid growth has led to some calling Vietnam the ‘factory of the world’, a title once used to label China. Even though Vietnam offers lower costs of manufacturing, a young, efficient workforce and increased global foreign investments flowing into Thailand, the question still remains whether it can fully replace China’s dominance.
The transition from a prominently agricultural-led economy into a more manufacturing one started in the mid/late 1980s through economic reforms like Doi Moi, which attracted foreign FDI (foreign direct investment), integrating Vietnam into global trade. The Doi Moi reforms focused on opening markets and attracting foreign investment (FDI in Vietnam reached $36.6 billion in 2023), creating a foundation for its manufacturing boom. CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership, 2018) - This is a free trade agreement between 11 Pacific Rim countries, lowering tariffs, opening up access to huge market opportunities for Vietnamese exports such as textiles, electronics and footwear.
EVFTA (EU-Vietnam Free Trade Agreement, 2020) - This agreement abolishes ~99% of tariffs between Vietnam and the EU, a massive consumer market.
RCEP- Signed with 14 Asia-Pacific countries (including China, Japan, South Korea), creating the world’s largest trading bloc. Vietnam benefits from more ‘straightforward’ trade flows in Asia.
Vietnam offers several advantages over choosing manufacturing in China; labour costs in Vietnam are significantly lower due to the lower cost of living. The average monthly wages in the manufacturing sector in Vietnam are ~250-300$ compared to China’s ~700-800$. Allowing foreign companies to produce goods at a cheaper rate without needing to sacrifice quality. Another advantage is that Vietnam has a very young population, with nearly 70% of the whole population being under 35, providing a large, adaptable and energetic workforce for industries. These advantages have already attracted major multinational corporations; for example, Apple has shifted production of some of its AirPods and iPads to Vietnam as part of its strategy to diversify China’s supply chains.
Despite the rapid progress, Vietnam still has to face significant challenges that could limit its ability to overtake China to become the world’s main manufacturing hub. The infrastructure inside Vietnam still remains underdeveloped:
Vietnam’s rapid rise as a manufacturing hub (exports of Vietnam grew from $266 billion in 2018 to $424 billion in 2023) is an example of how proper economic reforms, trade agreements, and a young workforce have reshaped its global role. While it may not yet fully replace China as the ‘factory of the world,’ Vietnam has firmly established itself as a crucial part of global supply chains. Its future progress and success in the manufacturing business will depend on whether it can sustain the rapid growth whilst not being ignorant of problems like infrastructure and dependence on foreign investment.
Sources:
https://kelmer.com
https://data.worldbank.org
https://www.vietnam-briefing.com
https://atlas.hks.harvard.edu
https://www.wikipedia.org
The transition from a prominently agricultural-led economy into a more manufacturing one started in the mid/late 1980s through economic reforms like Doi Moi, which attracted foreign FDI (foreign direct investment), integrating Vietnam into global trade. The Doi Moi reforms focused on opening markets and attracting foreign investment (FDI in Vietnam reached $36.6 billion in 2023), creating a foundation for its manufacturing boom. CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership, 2018) - This is a free trade agreement between 11 Pacific Rim countries, lowering tariffs, opening up access to huge market opportunities for Vietnamese exports such as textiles, electronics and footwear.
EVFTA (EU-Vietnam Free Trade Agreement, 2020) - This agreement abolishes ~99% of tariffs between Vietnam and the EU, a massive consumer market.
RCEP- Signed with 14 Asia-Pacific countries (including China, Japan, South Korea), creating the world’s largest trading bloc. Vietnam benefits from more ‘straightforward’ trade flows in Asia.
Vietnam offers several advantages over choosing manufacturing in China; labour costs in Vietnam are significantly lower due to the lower cost of living. The average monthly wages in the manufacturing sector in Vietnam are ~250-300$ compared to China’s ~700-800$. Allowing foreign companies to produce goods at a cheaper rate without needing to sacrifice quality. Another advantage is that Vietnam has a very young population, with nearly 70% of the whole population being under 35, providing a large, adaptable and energetic workforce for industries. These advantages have already attracted major multinational corporations; for example, Apple has shifted production of some of its AirPods and iPads to Vietnam as part of its strategy to diversify China’s supply chains.
Despite the rapid progress, Vietnam still has to face significant challenges that could limit its ability to overtake China to become the world’s main manufacturing hub. The infrastructure inside Vietnam still remains underdeveloped:
- Congested ports - the lack of the amount of ports in Vietnam leads to the existing ports, like Cat Lai in the city of Ho Chi Minh, dealing with long waiting times because of the huge amounts of containers arriving and leaving exceeding the designed capacity of the port.
- Limited rail networks
- Shortages of electricity
Vietnam’s rapid rise as a manufacturing hub (exports of Vietnam grew from $266 billion in 2018 to $424 billion in 2023) is an example of how proper economic reforms, trade agreements, and a young workforce have reshaped its global role. While it may not yet fully replace China as the ‘factory of the world,’ Vietnam has firmly established itself as a crucial part of global supply chains. Its future progress and success in the manufacturing business will depend on whether it can sustain the rapid growth whilst not being ignorant of problems like infrastructure and dependence on foreign investment.
Sources:
https://kelmer.com
https://data.worldbank.org
https://www.vietnam-briefing.com
https://atlas.hks.harvard.edu
https://www.wikipedia.org
