Vietnam’s Manufacturing Sector: A Cornerstone of Economic Growth

The manufacturing sector is pivotal to Vietnam’s economic landscape, acting as the backbone of its growth and resilience. In recent years, the government has implemented various initiatives aimed at enhancing the country’s inherent strengths, yielding significant results that are well-reflected in compelling data. The Vietnam Manufacturing Tracker by Vietnam Briefing provides critical insights, data, and policy updates tailored for foreign investors and industry analysts keen on following this dynamic sector.

The Asia Manufacturing Index: Insights and Rankings

The second edition of the Asia Manufacturing Index by Dezan Shira & Associates has been released, offering detailed insights into Asia’s vibrant industrial scene. This 2025 index evaluates eleven countries across eight essential categories, including tax policies, infrastructure, and innovation. For a deeper dive into these rankings, explore the index here.

Economic Performance Amid Tariff Concerns

As of August 12, 2025, despite potential challenges stemming from shifts in U.S. tariff policies, Vietnam has reported optimistic outcomes in key economic and manufacturing metrics. The first seven months of 2025 saw impressive increases in foreign direct investments (FDI), the Manufacturing Purchasing Managers’ Index (PMI), and the Industrial Production Index. Notably, the U.S. has maintained its position as the leading market for Vietnamese exports, generating robust revenue of approximately $85.1 billion in the same period.

Over the past few decades, Vietnam has strategically positioned itself within global supply chains, especially gaining traction with the “China Plus One” production relocation strategy. This stature is attributed largely to its labor-intensive manufacturing sector, characterized by competitive labor costs, well-developed export infrastructure, and a geographic advantage along major trade routes.

Government Initiatives and Economic Growth Outlook

Vietnam’s government is actively engaged at both national and provincial levels in fostering a conducive environment for manufacturing through various measures—such as national schemes, attractive corporate income tax incentives for high-tech firms, and the establishment of specialized industrial zones. According to Vietnam’s General Statistics Office (GSO), the country’s Gross Domestic Product (GDP) grew by an impressive 7.52 percent in the first half of 2025, marking the highest growth since 2011 and the preeminent expansion in Southeast Asia during this period.

The United Overseas Bank (UOB) has updated its GDP growth forecast for Vietnam to 6.9 percent for 2025, following this robust performance. With ambitious targets set by Prime Minister Pham Minh Chinh, including a GDP growth rate exceeding 8 percent and a goal of achieving a GDP per capita of $5,000, Vietnam is poised for an exciting economic trajectory.

Manufacturing Sector’s Contribution to GDP

The industrial sector significantly bolstered GDP in H1 2025, reflecting an 8.07 percent value-added increase year-over-year, contributing 2.64 percentage points to the overall growth rate. A breakdown reveals:

• Processing and manufacturing: Increased by 10.11 percent, contributing 2.55 percentage points.
• Water supply and wastewater management: Grew by 7.3 percent, contributing 0.04 percentage points.
• Electricity production and distribution: Expanded by 4.2 percent, adding 0.17 percentage points.
• Mining activity: Contracted by 4.25 percent, negatively affecting the growth rate by 0.63 percentage points.

Vietnam’s Manufacturing Purchasing Managers’ Index (PMI)

The S&P Global Manufacturing PMI serves as a barometer for the manufacturing sector, based on surveys of 400 firms. A key insight from July 2025 indicates that the manufacturing sector rebounded, posting a PMI of 52.4 for the first time in months, mainly driven by increased new orders.

However, challenges around sourcing raw materials persist, attributed to supplier delays and rising costs. Growth forecasts highlight the need for sustained efforts in overcoming these obstacles if the manufacturing sector is to achieve further upward momentum.

Index of Industrial Production (IIP)

The IIP, which gauges the growth rate of industrial output, showed an upward trend, with an average increase of 8.6 percent from the previous year in the initial seven months of 2025. Notably, the manufacturing and processing industry surged by 10.3 percent, contributing significantly to overall industrial growth.

Employment in the Manufacturing Sector

The manufacturing sector plays a critical role in employment, with 17.4 million individuals employed in manufacturing and construction by 2024—accounting for over a third of total employment in Vietnam. This sector not only offers ample job opportunities but also supports competitive wage growth, which saw an average increase of 10.1 percent year-over-year in early 2025.

Foreign Direct Investment Dynamics

FDI inflows into Vietnam’s processing and manufacturing sectors reached over $24.09 billion in the first seven months of 2025, marking a notable 27 percent year-over-year rise. Of this, approximately $12.1 billion was directed toward processing and manufacturing, reaffirming this sector’s appeal to foreign investors.

Vietnam’s Merchandise Exports

As for trade balances, Vietnam maintained a trade surplus of $9.7 billion during the first seven months of 2025, with a total export turnover of around $262.44 billion—an increase of 14.8 percent year-over-year. Processed industrial goods comprised a significant portion of these exports, ensuring that Vietnam remains a key player in global trade and manufacturing.

Incentives for Investors

Vietnam’s investment climate is enhanced through various tax incentives, including corporate income tax breaks and import duty exemptions designed to attract both local and foreign investments. Recent policy directives aim to create favorable conditions, addressing essential areas like tax frameworks and administrative processes.

National Policy Framework for Manufacturing Development

The Vietnamese government has established several strategic frameworks and initiatives to further cultivate the manufacturing sector. These strategies emphasize high-tech and advanced manufacturing, positioning Vietnam as a competitive player in the long-term growth of global supply chains.

Through focused efforts, Vietnam aims to amplify its role in international trade, leverage its labor force, capitalize on FDI, and transform its manufacturing sector into a leading driver of economic growth, all while maintaining a commitment to sustainable practices.

For further exploration into Vietnam’s expanding manufacturing landscape, visit the Vietnam Briefing website or consult with experts in viable business strategies, investments, and opportunities in this thriving economic environment.