By Thuy Anh Nguyen, product specialist at Vietnam Enterprise Investments Limited (VEIL)
Few countries have transformed as dramatically as Vietnam. Fifty years after the end of the US war, the country has gone from one of the world’s poorest economies to a manufacturing powerhouse that counts Samsung and Apple among the companies building critical supply chains there.
Since the 1986 Đổi Mới reforms, Vietnam has opened its economy to the world, attracted hundreds of billions of dollars of foreign investment and lifted millions of people into the middle class. Today, with a “golden population structure” of more than 100 million two-thirds of whom are working age, Vietnam has a powerful demographic advantage. But can it get rich before it gets old?
The headline numbers remain impressive. Vietnam’s GDP grew by 8.02% in 2025. Manufacturing grew by almost 10%, while services expanded by 8.62%. Growth has remained strong in 2026, supported by exports, investment and domestic demand.
Exports are an important part of the story. In the first six months of 2026, Vietnam exported $266.5bn of goods, up 21% year-on-year. Foreign-invested companies accounted for almost 80% of exports. Registered foreign direct investment reached $34.7bn, up 61%, while disbursed FDI rose 11.2% to $13bn.
This demonstrates one of Vietnam’s greatest strengths: its ability to attract multinational companies looking to diversify their supply chains making it a major beneficiary of the “China+1” trend.
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But this success also highlights one of the country’s challenges. A large proportion of the value generated by Vietnam’s exports still comes from foreign-invested companies. Domestic companies account for only around 20% of exports. The next stage of development therefore needs to involve more than attracting factories. Vietnam needs to develop stronger domestic suppliers, improve productivity and capture a larger share of the value chain.
There are encouraging signs. The government is pushing ahead with infrastructure investment and administrative reforms so sweeping they are called Đổi Mới 2.0, while giving greater emphasis to the private sector. Major projects in transport, energy and urban infrastructure could help reduce logistics costs and improve connectivity between Vietnam’s economic centres.
Domestic consumption is an increasingly important piece of the jigsaw. Vietnam’s growing middle class is creating demand across financial services, retail, tourism, healthcare and consumer goods. This provides a potential growth engine less dependent on exports.
The challenges, however, should not be underestimated.
The first is Vietnam’s exposure to global trade. The country has benefitted enormously from becoming a manufacturing base for global companies, but that openness also leaves it exposed to changes in trade policy and global demand.
The US is particularly important. Vietnam is now one of the largest net exporters to the US market, making US trade policy an important consideration. Liberation Day in April 2025 assigned punitive tariff to imports from Vietnam which was subsequently negotiated down.
In March 2026, the US Trade Representative launched a Section 301 investigation into structural excess capacity and production, with Vietnam among 16 economies under investigation. The investigation is examining whether government policies and practices contribute to excess manufacturing capacity that could harm US commerce.
This is a risk we are watching closely. However, it is important to distinguish between the impact on Vietnam’s export economy and the exposure of the VEIL portfolio. The portfolio is focused predominantly on companies benefitting from Vietnam’s domestic economy, including financial services, real estate, consumer businesses and infrastructure. We therefore remain vigilant about the potential second-order effects of US trade measures, but do not see the portfolio as directly exposed to Vietnamese export tariffs.
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Imports grew faster than exports in the first half of 2026, resulting in a $16.7bn goods trade deficit. This partly reflects strong investment but also shows how dependent Vietnam’s export manufacturing model remains on imported components and machinery.
The longer-term issue is productivity. Vietnam has benefitted enormously from moving workers from agriculture into manufacturing and services, attracting foreign capital and integrating into global supply chains. That model cannot deliver the same gains indefinitely. Future growth will increasingly need to come from better technology, skills, infrastructure and domestic companies becoming more productive and internationally competitive.
This is why I think Vietnam’s next chapter is particularly high stake. The question is no longer whether Vietnam can grow rapidly; it has already demonstrated that it can. The more important question is whether it can translate growth into greater domestic value creation — quickly enough to benefit from its demographic window.
There are genuine risks: US trade policy, global demand, infrastructure bottlenecks, energy requirements, demographic ageing and the need to strengthen domestic companies. But there are also considerable structural opportunities.
Vietnam has the combination of a large domestic market, strong manufacturing capabilities, rising consumption, a favourable demographic profile, substantial FDI and an increasingly ambitious reform programme.
If these elements can be brought together successfully, the country can move beyond being simply a competitive manufacturing base and become a higher-value, more productive economy.
