Vietnam’s struggle to be a regional manufacturing powerhouse has not been long. In the mid-1980s, with a centrally controlled economic policy structure, Vietnam was one country making very slow economic progress at that time. However, things changed dramatically in the late 1980s when Vietnam started on its high growth journey. Since then, the country has been continuously outpacing its ASEAN partners in terms of economic performance.
Kamaz, the largest truck maker in Russia, and JAC Motors of China have turned to Vietnam. In 2018, Warburg Pincus, one of the world’s largest private equity firms, added logistics and banking to its Vietnam portfolio exceeding its total investment into the country to over $1 billion. From Qatar’s Ooredoo to Indonesia’s Gojek, investment is coming from all over the globe. The following are some of the factors indicating why the furniture industry has been witnessing a renaissance in Vietnam:
Enhanced production capabilities
Vietnam adopted a two-pronged industrial policy: attracting foreign investment by relaxing foreign exchange regulations and encouraging export-oriented manufacturing. The increasing flow of foreign direct investment has been playing a key role in enhancing the high-tech manufacturing sector. It also drives activities in other sectors of the economy as a result of backward and forward linkages. Foreign investors have been taking advantage of Vietnam’s low-wage labor to produce competitive products.
Domestic industries have upgraded or replaced their production means in order to meet the growing demands and requirements of foreign firms. The transition of Vietnam’s production structure from resource-based to hi-tech manufacturing creates new opportunities for both the local and the international business community.
Vietnam has witnessed extensive development in road infrastructure, navigable waterways, and ports over the last few years. A deal was signed between Vietnam and Japan for the construction of high-speed railways; Vietnam Railways has proposed a high-speed rail link between Hanoi and Ho Chi Minh City. The network of railway lines will be extended to other cities.
Vietnam has now diverted its attention towards macroeconomic stability after pursuing a growth-led model that paid attention to quantum only. As a result, the country has been in a position to maintain single-digit low inflation, reduction in deposit and lending rates, stability in the exchange rate, and a disciplined fiscal policy.
Favorable business environment
It’s important to consider that Vietnam’s business environment has improved significantly which can be observed through the country’s international ranking in many indicators. Some of the key indicators that create a favorable business environment include the ease of doing business metrics, reduced corruption, the scale of competitiveness, and political stability.
About VTV Furnitures
VTV Furniture is an innovative furniture factory in Vietnam where we design and manufacture made-to-order furniture for both residential and commercial applications. Contact us for more details!