Vietnam - faster growth than some other parts of Asia

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There are advantages in being left behind for a while: market forces usually ensure rapid catch up will follow.

Take for example Vietnam’s economy.

You can see from the graph that the GDP per head of population has grown well since 1986, but has fallen behind the average of other Asian countries.  

This GDP gap is now a competitive advantage:  it means, very simply, that workers in China, Indonesia, South Korea, Thailand and Japan are contributing more their national economies than workers in Vietnam.

That means they are less productive, and paid less.

Hardly surprising then that there has been a stampede now by international corporations to invest in new Vietnamese factories, in real estate projects, infrastructure and a host of other business opportunities (with a slowdown in 2011-2012).  These corporations can see that Vietnam has lagged behind in economic development, and is now ripe for growth that is likely to outstrip their comparatively over-developed and expensive neighbours.

Labour costs are only half that in China, for same job in same kind of factory.  But that only makes sense if productivity is half, which is unlikely, especially in any newly built manufacturing base.

Expect therefore that the investments will continue – although it may be a challenge to consistently top more than $10bn a year, as has been the case recently, because there are even cheaper destinations such as Myanmar that are opening up.


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