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.

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.

Q3 2024 update

External headwinds, along with substantial losses from Typhoon Yagi, have had an adverse impact on Vietnam’s economic performance in Q3 2024. Despite these setbacks, the country has demonstrated resilient growth, with most key indicators remaining positive.

Vietnam’s economy recovered well in Q3 2024, reflecting global optimism as the year draws to a close. The country’s GDP growth for the first nine months reached 6.82 percent, a significant increase from 4.4 percent in the same period last year. The industrial and service sectors were the primary drivers of this growth.

GDP and the value added by the manufacturing sector

The General Statistics Office (GSO) reported that the industrial sector’s value-added contribution to GDP in the first nine months of 2024 increased by 8.34 percent year-over-year, contributing 2.71 percentage points to the economy’s overall growth rate.

Breaking this industrial contribution down:

• Processing and manufacturing increased by 9.76 percent, contributing 2.44 percentage points;
• Water supply, management, and treatment of waste and wastewater increased by 9.83 percent, contributing 0.06 percentage points;
• Electricity production and distribution increased by 11.11 percent, contributing 0.43 percentage points; and
• Mining activity decreased by 7.01 percent, reducing growth by 0.22 percentage points.

According to the GSO, the processing and manufacturing industry accounts for over 79.4 percent of the total added value of all industries at comparable prices, making it the key driver of Vietnam’s industrial growth rate and driving the Vietnam economy’s overall growth.

Vietnam Manufacturing Purchasing Managers’ Index (PMI)

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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

Interpreting the PMI scores

In July 2024, Vietnam’s S&P Global Manufacturing PMI remained strong at 54.7, sustaining the growth momentum from June. Key indicators showed positive trends, with new orders rising for the fourth consecutive month and output reaching its highest level since March 2011. Meanwhile, the stock of purchased items continued to decline for the 11th straight month, experiencing the fastest reduction since April.

However, by September, Vietnam’s PMI dropped below the 50 benchmark, signaling weaker business conditions during Q3 2024 after a prolonged period of strong growth. The PMI fell to 47.3 in September, indicating a significant deterioration in the manufacturing sector’s health, largely due to the devastating impact of Typhoon Yagi. This marked the sharpest decline since January 2023.

Key highlights from September include:

• A sharp decline in both output and new orders.
• Inventories of incoming goods dropped to near-record lows.
• A slight increase in employee numbers.

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

Interpreting the IIP scores

Vietnam’s IIP in September 2024 is estimated to have grown by 10.8 percent year-over-year. Compared to the same period last year, the industries covered by the IIP exhibited the following changes:

• Processing and manufacturing increased by 13.1 percent.
• Electricity production and distribution rose by 6.4 percent.
• Water supply, waste, and wastewater management grew by 15.2 percent.
• Mining declined by 7.3 percent.

For the first nine months of 2024, the IIP is estimated to have risen by 8.6 percent year-over-year, with sector-specific performance as follows:

• Manufacturing increased by 9.9 percent.
• Electricity, gas, steam, and air conditioning supply rose by 11.1 percent.
• Water supply, sewerage, waste management, and remediation grew by 9.9 percent.
• Mining and quarrying decreased by 6.4 percent.

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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During the first nine months of 2024, the processing and manufacturing sector continued to lead in attracting foreign direct investment (FDI). As of September 30, 2024, the sector accounted for the highest number of new investment licenses, with registered capital reaching US$9.02 billion, representing 66.6 percent of the total newly registered capital. Cumulatively, by September 2024, FDI in the processing and manufacturing industry totaled US$14.98 billion, constituting 70.7 percent of the total newly registered and additional capital.

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 has projected Vietnam’s manufacturing sector to rebound strongly in 2024.

Vietnam’s merchandise exports

Vietnam’s import and export activity exceeded expectations in the first nine months of 2024, with total trade turnover reaching US$578.5 billion, up 16.3 percent year-over-year. The country recorded a trade surplus of US$20.8 billion, a positive outcome for the 2020-2024 period.

According to the Ministry of Industry and Trade (MOIT), Vietnam’s exports in the first nine months of 2024 reached approximately US$299.63 billion, reflecting a 15.4 percent year-over-year increase. Processed and manufactured goods continued to dominate, contributing about US$253.9 billion, or 84.7 percent of total export turnover. Exports of these goods increased by 15.2 percent compared to the same period in 2023.

Incentives for investing in Vietnam

Vietnam’s Law on Investment specifies the three forms of incentives that are available to companies operating within the country:

• Corporate income tax (CIT) incentives, including various preferential tax rates and tax holiday rates;
• Import duty incentives; and
• Exemption or reduction of land rents and levies.

The CIT incentives can be granted to investments based on whether they belong to prioritized or government-encouraged sectors and/or are established in economic zones or disadvantaged locations, etc.

Read more: Tax Incentives for Foreign Enterprises in Vietnam

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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