By 2030, Southeast Asia is prone to surpass all other regions to change into the world’s largest single market. This is evidenced by financial flows, which have remained high lately. As barriers to intra- and inter-regional trade and investment are step by step removed, ASEAN member states have gotten more open to global trade.
As the economy and workforce structure change into more formalized and more young people enter the workforce, growth patterns will probably be energized. The typical age in Southeast Asia is 30.2 years, much younger than in China (38.4) and Europe (44.1).
The ASEAN region has benefited from a privileged geopolitical position and is prone to proceed to learn from this. The growing rivalry between superpowers the US and China has prompted each nations to deepen ties with the region.
China has strong economic ties with ASEAN countries and desires to strengthen them by investing more in infrastructure and facilitating trade, for instance through the Regional Comprehensive Economic Partnership (RCEP).
ASEAN governments have implemented facilitation policies and preferential incentives to benefit from this shift in regional supply networks under the “China Plus One” or “China Plus Many” plan. This involves reducing taxes, making it easier to do business, increasing spending on infrastructure and introducing incentives within the areas of free trade and special economic zones.
Vietnam has benefited greatly from the China Plus One strategy lately, with the manufacturing industry alone expected to account for around 58 percent of total FDI in 2020.
Due to various aspects, including a positive business environment, reasonably priced labor costs and favorable position in Southeast Asia, Vietnam has change into a sexy destination for foreign investment seeking to diversify beyond China.
The rapid inflow of foreign investors over the past few years has been the major driver of the rapid growth of Vietnam’s economy. Despite the results of the Covid-19 pandemic, Vietnam managed to import foreign investments price over $28 billion in 2020, a big a part of which is from China.
Vietnam has also benefited from trade disputes between the U.S. and China, as many corporations have moved their production there to avoid tariffs imposed on Chinese imports. Vietnam has benefited greatly from the trend of shifting manufacturing activities away from China because of this of the US-China trade war.
Vietnam has also ratified various free trade agreements, comparable to the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which have opened latest markets and created opportunities for businesses operating in Vietnam.
Overall, Vietnam’s success in attracting foreign capital and diversifying its economy highlights the opportunities open to ASEAN countries implementing the China Plus One plan.
