Like other countries, Vietnam has been increasingly relaxing its coronavirus restrictions in recent weeks. In some regions, bar and discos are reopening, hotels are welcoming guests again and festivals are taking place. However, the country is continuing to impose strict entry conditions that require a period of quarantine and repeated testing for the virus. There are also considerable restrictions on air travel, although these could also be relaxed soon.
The World Bank anticipates that Vietnam’s economy will grow by just under 3 per cent in 2020. This is some way off the rate of nearly 7 per cent recorded in recent years, but still higher than in many other countries. One reason for this expansion is foreign investment, particularly from China, where companies are increasingly opting to move production facilities to Vietnam.
Many Vietnamese firms have mothballed their expansion plans and are restructuring their businesses. Around 34,000 companies have had to close down; many others are being forced to change their business models. Some 1.3 million Vietnamese people have lost their jobs, and a further 30 million (around half of the country’s workforce) could be affected by restructuring measures in the future.
Nevertheless, the economic slump could also present opportunities for thriving companies to expand or to become more cost-efficient. Indeed in several areas, Vietnam is already benefiting from global trends and developments:
EU-Vietnam Free Trade Agreement (EVFTA)
The free trade agreement between the European Union and Vietnam (as we reported) came into force on 1 August 2020. The agreement has not only put an end to numerous customs tariffs and trade restrictions, but also increased investment security by improving intellectual property rights, liberalising markets and recognising international regulations such as those set forth by the International Labour Organization. It therefore has the potential to provide a further boost to Vietnam’s growing economy and open up new markets for European companies.