Vietnam Manufacturing Tracker: 2024-25

The manufacturing sector is the cornerstone of Vietnam’s economic growth and resilience. The government has undertaken several initiatives to leverage the country’s inherent strengths, resulting in tangible outcomes supported by compelling data. The 2024-25 Vietnam Manufacturing Tracker by Vietnam Briefing offers the latest data, insights, and policy updates to keep foreign investors and analysts informed about the industry.

Over the past few decades, Vietnam has effectively leveraged its key advantages to become a significant player in global supply chains, with its role gaining even more prominence amid the “China Plus One” production relocation strategy.

This growing importance is primarily driven by Vietnam’s labor-intensive manufacturing sector, characterized by relatively low labor costs, well-developed export infrastructure, and a strategic location on major trade routes.

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The Vietnamese government has been proactive at both national and provincial levels, implementing measures such as national schemes, generous corporate income tax breaks for high-tech companies, and the development of specialized industrial zones.

According to the General Statistics Office (GSO), Vietnam’s economy experienced substantial growth in the first quarter of 2024, led by a 6.98 percent expansion in the processing and manufacturing sector. This growth is fueled by stronger domestic consumption, increasing foreign investment, and rising export demand. Additionally, Vietnam’s manufacturing sector’s inventory index surged by 14.1 percent in Q1 2024 compared to the same period last year, highlighting the country’s resilience and potential for sustained growth.

GDP and the value added by the manufacturing sector

According to the GSO, the added value of the entire industry in 2023 rose by just 3.02 percent compared to the previous year, marking the lowest increase in the 2011-2023 period and contributing 1.0 percentage point to the overall economic growth rate.

Breaking this industrial contribution down:

• Processing and manufacturing increased by 3.62 percent, contributing 0.93 percentage point;
• Water supply, management, and treatment of waste and wastewater increased by 5.18 percent, contributing 0.03 percentage point;
• Electricity production and distribution increased by 3.79 percent, contributing 0.14 percentage point;
• Mining activity decreased by 3.17 percent, reducing growth by 0.1 percentage point; and
• Construction was up by 7.06 percent, contributing 0.51 percentage point.

Nonetheless, the manufacturing sector remains Vietnam’s trade balance anchor and leading GDP contributor, accounting for over 20 percent of GDP in the past decade. It also played a key role in managing Vietnam’s economic resilience during the pandemic period, driving GDP growth by 2.6 percent in 2021 and 8 percent in 2022.

Vietnam Manufacturing Purchasing Managers’ Index (PMI)

The S&P Global Manufacturing PMI reflects the manufacturing sector’s performance by surveying 400 firms in the industry. The PMI is built on five weighted sub-indexes:

• New orders (30 percent)
• Output (25 percent)
• Employment (20 percent)
• Suppliers’ delivery times (15 percent)
• Stock of items purchased (10 percent)

A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month, below 50 represents a contraction, while 50 indicates no change.

Vietnam’s monthly manufacturing PMI data – 2024-25

Latest PMI update interpretation

Vietnam’s S&P Global Manufacturing PMI stood at 54.7 points in July 2024, sustaining June’s growth momentum with several key highlights:

• New orders rose for the fourth consecutive month.
• Output reached its highest level since March 2011.
• The stock of purchased items fell for the 11th consecutive month, with the fastest decline since April.

Index of Industrial Production (IIP)

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The IIP is an indicator that evaluates the growth rate of industrial production monthly, quarterly, or yearly. It reflects industrial production growth in general and the growth rate of each commodity in particular.

The IIP is calculated as a percentage of the industrial production generated in the current and base periods.

Vietnam’s IIP data – 2024-25

Latest IIP update interpretation

Vietnam’s IIP in July 2024 is estimated to have grown by 0.7 percent compared to June and increased by 11.2 percent year-over-year. Compared to the same period last year, the sectors measured in the IIP showed the following fluctuations:

• Processing and manufacturing increased by 13.3 percent;
• Electricity production and distribution increased by 9.9 percent;
• Water supply, waste, and wastewater management increased by 12.1 percent; and
• Mining decreased by 7.0 percent.

For the first seven months of 2024, the IIP is estimated to have risen by 8.5 percent year-over-year:

• Manufacturing increased by 9.5 percent, contributing 8.2 percentage points to the overall rise;
• Electricity, gas, steam, and air conditioning supply increased by 12.4 percent, contributing 1.1 percentage points;
• Water supply, sewerage, waste management, and remediation increased by 7.2 percent, contributing 0.1 percentage points; and
• Mining and quarrying decreased by 6.2 percent, reducing the overall growth by 0.9 percentage points.

Employment in manufacturing

Affordable labor costs are a key advantage for Vietnam in attracting foreign manufacturers. Given the manufacturing sector’s critical role in the economy, its employment impact is also substantial. By 2022, manufacturing employed the second-largest workforce in Vietnam, second only to agriculture.

Note: (*) Data from 2021-2023 was calculated following the ICLS19 standard. Under ICLS19, people working to produce self-sufficient products in the agriculture, forestry, and fishery sectors will not be identified as employed as per the ICLS13 standard.

Foreign direct investment in Vietnam’s processing and manufacturing industry

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According to the Ministry of Planning and Investment (MPI), FDI into Vietnam’s manufacturing industry was over US$23.5 billion in 2023, contributing 64.2 percent of the total FDI capital received. With the robust recovery in export demand for electronics, computers, and components from key markets like the US, EU, and China, the GSO projects Vietnam’s manufacturing sector to rebound strongly in 2024.

Vietnam’s merchandise exports

Incentives for investing in Vietnam

Investors in Vietnam can benefit from tax incentives under the 2008 Law on Enterprise Income Tax, as amended in 2023. The law promulgates tax incentives for various economic activities, including:

• 10 percent tax incentive for 15 years;
• 10 percent tax incentive for the entire operating period;
• 17 percent tax incentive for ten years;
• 17 percent tax incentive for the entire operating period;
• 15 percent tax incentive;
• Extending the preferential tax rate application period; and
• Tax incentive for projects receiving special investment support.

Industrial park classification in Vietnam

Industrial parks in Vietnam fall under three categories according to Decree No. 82/2018/ND-CP on the management of industrial parks and economic zones. These are as follows:

• Export processing zones: Industrial parks focused on manufacturing goods for export and providing services to support production for export. These zones must comply with the conditions, processes, and procedures outlined in the Decree.
• Auxiliary industrial areas: Industrial parks specializing in manufacturing auxiliary products and providing related services. Up to 60 percent of the rentable industrial land within these parks can be leased or re-leased for auxiliary industry projects.
• Eco-industrial parks: Industrial parks that emphasize cleaner production, efficient use of natural resources, and cooperation among enterprises to enhance economic, environmental, and social benefits through industrial symbiosis.

Vietnam’s national policy framework for manufacturing development

Recognizing the importance of the manufacturing sector and industrial development to the health of the overall economy, Vietnam’s government has implemented several national schemes to further promote these areas.

Strategy on exports and imports for 2011-2020, with a Vision to 2030

Former Prime Minister Nguyen Tan Dung approved the Strategy on Exports and Imports for 2011-2020, with a Vision to 2030 in his Decision 2471/QD-TTg dated December 28, 2011.

This framework outlines specific targets and implementation strategies for the manufacturing sector:

• Export orientation: Focus on developing high-tech and advanced products in the processing and manufacturing industries.
• Production and economic restructuring: Encourage and attract investment in supporting industries to meet domestic needs and integrate into the global supply chain, particularly in manufacturing mechanics, electronics, automobile components, textiles, footwear, and high technology.

Industrial Development Strategy Through 2025, with a Vision to 2035

The Industrial Development Strategy Through 2025, with a Vision Toward 2035, was approved under Decision No. 879/QD-TTg dated June 9, 2014. This strategy set specific development priorities for the following processing and manufacturing sub-sectors:

• Mechanical engineering and metallurgy;
• Chemicals;
• Agricultural, forestry, and fishery product processing; and
• Garments, textile, leather, and footwear.

National Industrial Development Policy by 2030 with a Vision to 2045

Resolution No. 23/NQ-TW, dated March 22, 2018, outlines the National Industrial Development Policy for 2030 with a Vision to 2045. The specific targets to be achieved by 2030 include:

• Industry is expected to contribute over 40 percent of GDP, with the processing and manufacturing sector accounting for around 30 percent and manufacturing alone for over 20 percent.
• The proportion of high-tech products in the processing and manufacturing sector will reach at least 45 percent.
• The industrial added value growth rate will average over 8.5 percent, with the processing and manufacturing sector growing over 10 percent annually.
• Labor productivity in the industry will grow by 7.5 percent per year.
• The Competitive Industrial Performance (CIP) Index will rank among the top three ASEAN countries.
• The proportion of labor in the industrial and service sectors will exceed 70 percent.
• Development of large-scale, multinational, and globally competitive industrial clusters and enterprises.

Socio-Economic Development Plan for 2021-2025

The government’s action plan designated in Resolution No. 99/NQ-CP implements the Socio-Economic Development Plan for the five-year period from 2021 to 2025. The action plan states its specific objectives related to the manufacturing sector, which are:

• Average GDP growth rate in this 5-year period to reach about 6.5 – 7 percent;
• Proportion of processing and manufacturing industry in GDP to reach over 25 percent;
• Digital economy to account for about 20 percent of GDP; and
• Contribution of total factor productivity (TFP) to growth to be about 45

National Green Growth Strategy for 2021-2030, Vision Towards 2050

Aiming to empower the economy through a green growth transition, Vietnam’s government issued Decision No. 1658/QD-TTg approving the National Green Growth Strategy for 2021-2030 with a Vision Towards 2050. Key goals are:

• Reducing the level of energy consumption in manufacturing, transportation, commercial, and industrial activities
• Facilitating the conditions for the development of new green manufacturing industries; and
• Encouraging the application of green technologies along with manufacturing activity management and control systems.

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