It is always a great pleasure to tell Vietnam’s story with pride to the rest of the world. One of the most interesting aspects of this story is the remarkable growth journey that the country has been on over the past few decades, and this is now reflected in the position that Vietnam is taking across global supply chains.

From an initial low starting point, Vietnam has moved itself to become a lower-middle-income country with a fast-growing economy. The numbers speak for themselves. Vietnam is now a signee to 16 free trade agreements and has established comprehensive strategic partnerships with a further eight countries. The GDP of the economy is projected to reach $760 billion by 2030.

Tim Evans, CEO of HSBC Vietnam

This year, HSBC Global Research expects the country’s GDP to grow by 7 per cent, becoming the fastest growing economy in ASEAN and producing as much new additional GDP as the Netherlands. It is now also among the world’s 40 largest economies in terms of GDP, and in the top 20 in terms of trade. This progress has led to an income per capita that has risen to $4,300 from $100 since the economic reforms of the 1980s.

This country has come a long way to become what it is today. A key component of this success is its willingness to embrace change. For years, foreign direct investment has been a key driver of this incredible growth, accounting for between 4-6 per cent of GDP annually.

However, Vietnam’s growth story is more than just “foreign investment in, exports out”. There are additional new growth drivers that have emerged to help drive Vietnam’s story to the next level.

CHANGE IS INEVITABLE

The world is changing now more than ever before because of two key game-changers. Firstly, the technological advancements that we have seen in the last decade alone have transformed the way we live our lives.

A decade ago, owning a smartphone would have been a luxury for many people. Today, it is an integral part of life for nearly 70 million people in Vietnam. We can do almost everything with just a few taps on the screen, from reading news to checking emails, performing shopping tasks to paying bills, and so on.

What is more, the rise of AI, machine learning and robotics has also completely transformed various industries, from healthcare to manufacturing, and even within our own banking industry. For example, ChatGPT has gone beyond a conventional search engine, and is just one example in the AI universe.

Let’s not forget that the COVID-19 pandemic also accelerated the pace of digital transformation. It accelerated the adoption of technologies like remote working tools, e-commerce, and telemedicine. Now with the pandemic behind us, the rise of digitisation continues.

The other game-changer that is impacting the world is climate change. We may be tempted to think of it as a slow and steady process, which is following a fairly predictable, even manageable path. That is a mistake. In fact, the result of continuously heating our planet is ongoing, leading to an ever-increasing number of natural disasters that are leading us to the point of no return. You may have heard of the deadly hurricanes that recently hit the United States. Their ferocity has been impacted by climate change, which has led to wind speeds increasing on average by 11 per cent and increased rainfall by about 10 per cent. This proves that climate change is already here, and it is an existential threat to the world with far-reaching impact.

The United Nations estimates that the Earth will be 3°C warmer by the end of the century despite a number of net-zero commitments that have been made around the world which aim to reduce greenhouse gas emissions. This year’s Intergovernmental Panel on Climate Change (IPCC) report estimates that close to 3.5 billion people live in areas with a high vulnerability to climate change. The World Bank’s estimate is even higher. According to its November 2023 Policy Research Paper, 4.5 billion people are being exposed to extreme weather events, such as floods, droughts, cyclones, or heatwaves. It has also warned that Vietnam is one of the top five countries likely to be adversely affected by climate change.

OPPORTUNITIES OPEN UP

Vietnam has a strong appetite for digital consumption. Demographic tailwinds include a population of over 100 million and a workforce that is 70 per cent of the total population. The rapid rise in internet users also helps drive the adoption of the digital market. Almost 80 per cent of Vietnam’s population now use the internet, thanks to smartphone ownership that has doubled from a decade ago.

State-led initiatives to drive rural digitalisation have also spurred progress in building a digital economy that is the fastest-growing in ASEAN with impressive growth of 20 per cent according to the e-Conomy Southeast Asia 2023 report.

Measured by gross merchandise value, the country has the potential to become the second-largest digital market in the region by 2030, just after Indonesia. The expansion is expected to be led by a rapidly developing e-commerce ecosystem, supported by a rising consumer base.

One of the most powerful effects of the digital revolution is the way that it has levelled the global playing field, allowing countries like Vietnam to compete with more advanced economies. Companies like Sky Mavis, MoMo, and VNLife – all unicorns founded in Vietnam – are world-class competitors, but if the country is to continue to build on its success, there is a need to continue to invest in education and accessibility to build a thriving digital ecosystem that drives innovation.

Climate change, which is a severe challenge to Vietnam, also represents a huge opportunity for the country and its corporate sector.

Vietnam’s renewable energy potential is huge, given its conducive conditions and the government’s pledge to achieve net-zero by 2050. The country’s natural resources offer the potential to attract more investment into the growing renewable energy sector.

RIDING THE WINDS OF CHANGE

We can see the multidimensional efforts of Vietnam to keep up with these two trends through its various strategies and plans for this decade and beyond.

In response to the government’s efforts, businesses are rewiring their organisations and deploying technology integration at scale. As of 2023, 47 per cent of businesses in Vietnam have undergone some kind of digital transformation, according to the Agency for Enterprise Development under the Ministry of Planning and Investment (MPI). They have also started working out their own net-zero transition plans.

Sustainability used to be the playing field of foreign-invested enterprises as they tended to follow the policies and strategies of their parent companies in other countries where environmental, social, and governance trends were potentially more developed than in Vietnam.

However, the awareness of local businesses has been rising. According to a PwC survey, 40 per cent of them have planned for and set themselves such commitments. The net-zero transition was said to be critical to them by 48.7 per cent of businesses in a survey by the Vietnamese government’s Private Economic Development Research Board.

Obviously, change is not an option but a necessity for businesses. It brings them benefits, too. Digitalisation helps businesses step up their game to offer better products and services, in large part, thanks to cutting-edge technology. Some of the main benefits include more efficiency, improved user and customer experience, more accurate insights, and so on. On the other hand, companies that fail to address climate change will undermine trust with their stakeholders, including employees, investors, customers, and regulators. And their businesses will also not be future-proof against climate risks.

WHAT CHANGE WOULD COST?

What would net-zero cost? Total global spending by governments, businesses, and individuals on energy and land-use systems will need to rise by $3.5 trillion a year, if we are to have any chance of getting to net-zero emissions as a planet in 2050.

That is a 60 per cent increase in today’s level of investment. It is equivalent to half of all global corporate profits, a quarter of world tax revenues, and 7 per cent of all household spending. Vietnam needs approximately $400 billion by 2040 (nearly 6.8 per cent of its annual GDP) to tackle climate change, according to the Department of Climate Change under the Ministry of Natural Resources and Environment.

Meanwhile, worldwide spending on digital transformation is forecast to reach almost $4 trillion in 2027, according to the International Data Corporation. In Vietnam, the minimum investment for digital transformation is estimated to be 1 per cent of the state budget.

Every transformation project is different and the total cost of digital transformation will vary depending on each company, industry, type of transformation, and other factors. The average cost of a digital transformation project is $27.5 million, according to the same corporation.

Both the digital and green transitions require enormous investments, in which finance will play a critical role. Vietnam’s state budget for fighting climate change can provide about $130 billion, less than half of what is needed. Cost is also the top challenge in digital transformation, as cited by 60 per cent of businesses in a survey by the MPI in collaboration with the US Agency for International Development.

Global banks like HSBC can help to facilitate finance, to connect investors, and to provide our clients with relevant expertise and to channel capital in the right direction.

Change is costly, but delay would cost us even more. Are we going to embrace the change to stay ahead in this rapidly evolving landscape? The choice is ours.