While China tightens controls on its population in pursuit of its elusive Covid Zero goals, its neighbor to the south is reaping the rewards of its decisive, yet measured, policies. Last month, Vietnam dropped its quarantine and post-arrival testing requirements for international travelers. This will allow Vietnam, which had been virtually inaccessible to foreign travelers for two years, to revive its tourist trade, a sector that had accounted for almost 10 percent of the nation’s overall economy before the onset of the pandemic. Vietnam’s Ministry of Culture, Sports & Tourism stated on March 17 that, “between 2015 and 2019, Vietnam’s tourism sector was the fastest-growing one in the world, increasing an average of 22.7 percent per year during that period.” Naturally, officials would love to restart that growth engine.
Vietnam isn’t dropping all Covid-related restrictions. Though foreign visitors will no longer be required to quarantine, they will have to:
- Provide proof of a negative PCR or LAMP (loop-mediated amplification) test, taken within 72 hours of their departure for Vietnam, or a rapid antigen test was taken within 24 hours of departure.
- Complete a health declaration form and download the PC-COVID app for use throughout their stay.
- Provide proof that they’ve purchased a travel insurance policy carrying a coverage minimum of VND 50,000 (US $10,000) to cover the cost of any COVID-related healthcare they might require during their stay.
- Monitor themselves for symptoms for the first 10 days and immediately inform the nearest medical facilities of any COVID-like symptoms
- Wear masks in public spaces
The rules published did not include a vaccination requirement, and children under two years old are exempt from testing.
Vietnam’s reopening, in the face of a flare-up of Omicron cases, signals its willingness to live with the milder strains, in contrast to the strategy which has large swaths of China under lock and key. It also confirms early predictions of Vietnam’s resilience, cited in this column. Experts agree that before Vietnam can take the next great leap, it must increase its output among supporting industries, a deficiency the country is working to address.
Vietnam is a country rich in raw materials with a large workforce sufficiently skilled to execute the final assembly of complex products that include automobiles, electronics, and computers. Where Vietnam is lacking is in the domestic manufacturer of components used in the final assembly. As reported on Vietnam-briefing.com,” Currently, only about 500 firms in Vietnam are engaged in the supporting industry production, accounting for about 0.2 percent of approximately 1 million enterprises.” That’s a lower rate of localization than key competitor nations. However, Vietnam has been working hard to lure foreign direct investment to these lagging industries with strong results. In 2021, industrial parks in Vietnam’s southern provinces “attracted US$1.1 billion in capital and investment projects in the supporting industry and other manufacturing enterprises.” By 2030, Vietnam hopes that supporting industry products will meet 70 percent of demand and account for about 14 percent of domestic industrial production.
Areas of concentration for planned supporting industry expansion include:
- Electronics — Given that supporting industries for electronics account for over 80 percent of the production value, this is a huge area for growth. Unfortunately, most Vietnamese workers are inadequately trained at present for these tasks.
- Mechanical engineering — The country’s mechanical engineering sector only fulfills around one-third of the country’s current demand, which is predicted to exceed US$300 billion by 2030.
- Hi-tech products — Samsung, Microsoft, Intel, and LG have all made significant investments in research and development, as well as chip and smartphone production, in Vietnam.
- Automotive — Vietnam’s emerging middle class has spurred automobile industry growth substantially in recent years. Yet, the production of automobiles in Vietnam is at a basic level of assembly.
These areas offer significant opportunities for growth, provided the Vietnamese government maintains consistent policies to incentivize foreign investment and expands job training for its workforce. For contract manufacturers, Vietnam’s commitment to supporting industries could mean lower costs and a more secure supply chain.