In the first half of 2020, foreign manufacturers announced the lowest number of greenfield projects in Vietnam on record, according to data from greenfield investment monitor fDi Markets.  

Its figures show that Vietnam, which has attracted the most manufacturing FDI in south-east Asia since 2014, captured just 20 FDI greenfield projects into the sector between January and June, down from 46 a year earlier. 

“Looking ahead, Vietnam’s economy remains vulnerable to new waves of coronavirus outbreak and, even in their absence, it could be stuck in what we can label as the ‘Covid-19 economic trap’,” Jacques Morisset, lead economist and programme leader at the World Bank, wrote on August 4. 

“The export manufacturing industry – a major source of urban employment – will face a further decline in orders from abroad. All manufacturing exports – with the notable exception of computer parts – have contracted in the past six months, with this negative trend accelerating during the most recent months.”

Covid-19 is reversing an economy that, up until a few months ago, had been capitalising on the trade tensions between China and the US. Some 11 relocation projects were announced in Vietnam from China in 2019, up from two a year earlier, fDi Markets reports, as international companies producing in China try to avoid getting caught in the crossfire as Washington and Beijing escalate their tariff war. 

In 2019, Vietnam bucked a downward trend in manufacturing FDI projects across Asia Pacific, gaining 11 more projects than the previous year as manufacturing FDI projects across the region fell by 27.5%. Japanese companies announced 25 projects, while Chinese and Taiwanese companies announced 17 and 15 projects, respectively.

Electronic components and textile manufacturers accounted for the majority, such as Hon Hai Precision Industry, better known as Foxconn, which announced three projects, and Hong Kong-based shoe manufacturer and retailer Stella International.

Meanwhile in 2019, China and India, the historic largest recipients of manufacturing FDI in Asia-Pacific, saw respective year-on-year declines of 23% and 28% in manufacturing projects.

The World Bank now expects annual economic growth to slow down to 2.8% in 2020, from 7% in 2019. It has forecast a rebound in 2021, when growth should bounce back to 6.8%.