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.

Economic growth: Forecast for 2024 and outlook for 2025

According to Vietnam’s Ministry of Planning and Investment (MPI), the economy has demonstrated clear signs of recovery in 2024, with consistent improvements month-on-month and quarter-on-quarter. Dynamic growth regions such as Ho Chi Minh City, Hanoi, Hai Phong, Da Nang, Binh Duong, and Dong Nai are expected to experience robust expansion in the fourth quarter. The ministry forecasts that this momentum could enable Vietnam's economic growth in 2024 to reach or exceed 7 percent.

Meanwhile, the International Monetary Fund (IMF) predicts a recovery to 6.1 percent in 2024, citing strong external demand and supportive government policies. Similarly, the Asian Development Bank projects steady growth at 6 percent, while the United Overseas Bank has revised its full-year estimate upward to 6.4 percent.

Looking ahead, Vietnam’s economy is expected to sustain its growth trajectory, driven by a flourishing manufacturing sector and increasing foreign direct investment (FDI). By 2025, the country’s GDP is projected to reach approximately US$506 billion.

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 November 2024, Vietnam's manufacturing sector continued to experience growth, although business conditions improved to a lesser extent than in October. The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) remained above 50 in November, indicating that business conditions improved for the second consecutive month following a decline caused by Typhoon Yagi in September. However, the PMI reading of 50.8 was down from 51.2 in October, suggesting modest improvement in the health of the manufacturing sector.

Overall, while manufacturing output increased for the second consecutive month, it did so at a slower pace than in October.

Key highlights from November 2024 include:

• Output and new orders increased slower due to weak export performance.
• Employment continued to decline as companies implemented cost-cutting measures, further accumulating outstanding work.
• Input costs rose, but only modestly, leading to a slight increase in output prices.

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 November 2024 is estimated to have grown by 2.3 percent month-on-month. Year-on-year, the country's IIP rose by around 8.4 percent, with sector-specific performance as follows:

• Manufacturing increased by 9.7 percent, contributing 8.5 percentage points to the overall growth.
• Electricity, gas, steam, and air conditioning supply rose by 10.2 percent, adding 0.9 percentage points.
• Water supply, sewerage, waste management, and remediation grew by 9.6 percent, contributing 0.2 percentage points.
• Mining and quarrying decreased by 7.3 percent, reducing the overall growth by 1.2 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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As of the end of November 2024, total new and additional investments, capital contributions, and share purchases by foreign investors amounted to US$31.4 billion, reflecting a year-on-year growth of 1 percent. Notably, foreign enterprises allocated funds across 18 of the 21 economic sectors, with the processing and manufacturing industry leading the way. This sector attracted nearly US$20.2 billion in investment capital, representing 64.4 percent of the total.

In 2023, FDI into Vietnam’s manufacturing industry was over US$23.5 billion, contributing 64.2 percent of the total FDI capital received. Robust recovery in export demand was witnessed for the electronics and computers and components sectors from key markets like the US, EU, and China.

Vietnam’s merchandise exports

According to Vietnam's Ministry of Industry and Trade (MOIT), during the first 11 months of 2024, the total preliminary import and export turnover of goods reached US$715.55 billion, reflecting a year-over-year growth of 15.4 percent. The trade balance reported a surplus of US$24.31 billion, with exports growing by 14.4 percent and imports increasing by 16.4 percent.

The country's export turnover of processed industrial products also showed a strong recovery in the first 11 months of 2024, rising by 14.3 percent compared to the same period last year and reaching US$313.6 billion. This figure accounts for nearly 85 percent of the country's total export turnover.

Notably, several key products achieved high double-digit growth rates, including:

• Computers, electronic products, and components generating US$65.2 billion, up 26.3 percent;
• Phones and components generating US$50.2 billion, up 3.2 percent;
• Machinery, equipment, tools, and spare parts generating US$47.8 billion, up 21.6 percent;
• Textiles and garments generating US$33.65 billion, up 10.6 percent;
• Footwear of all kinds generating US$20.76 billion, up 12.9 percent;
• Wood and wood products generating US$14.7 billion, up 21.2 percent; and
• Iron and steel generating US$8.5 billion, up 12.7 percent.

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.

This article first appeared on Vietnam Briefing, our sister platform.