By 2030, Southeast Asia will likely surpass all other regions as the world's biggest single market. The financial flows, which have remained strong in recent years, are evidence of this. As barriers to intra- and inter-regional trade and investment have been gradually removed, ASEAN member states are becoming more open to global commerce.
As economies and workforce arrangements become more formalized and more young people join the labor market, growth patterns will be boosted. Southeast Asia's typical age is 30.2 years, which is significantly younger than China's (38.4) and Europe's (44.1).
The ASEAN region has benefitted from a privileged geopolitical position and will likely continue to benefit. An intensifying rivalry between superpowers, the US and China, have prompted both nations to deepen their ties with the region.
China has strong economic ties with ASEAN nations, and it wants to strengthen those ties by investing more in infrastructure and facilitating commerce, for example through the Regional Comprehensive Economic Partnership (RCEP).
The ASEAN governments have implemented enabling policies and preferential incentives to take advantage of this change in regional supply networks as part of the "China Plus One" or "China Plus Many" plan. This involves lowering taxes, making it easier to do business, increasing infrastructure expenditure, and providing incentives in free trade and special economic zone areas.
Vietnam has benefited greatly from the China Plus One strategy in recent years, with the manufacturing industry alone bringing in about 58 percent of all FDI in 2020.
Due to a number of factors, including its favorable business environment, affordable labor costs, and advantageous position in Southeast Asia, Vietnam has emerged as an appealing destination for foreign investments looking to diversify away from China.
The surge in foreign investor inflows over the past few years has been the main driver of Vietnam's economy's rapid growth. Despite the COVID-19 pandemic's effects, Vietnam managed to bring in more than USD 28 billion in foreign investment in 2020, with China accounting for a sizable part of that total.
Vietnam has also benefited from the trade disputes between the US and China, as many companies moved their production there to escape tariffs levied on Chinese imports. Vietnam has benefited greatly from the trend of manufacturing activities moving out of China as a result of the US-China trade war.
Vietnam has also ratified a number of free trade agreements, such as the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which have opened up new markets and presented opportunities for businesses working in Vietnam.
Overall, Vietnam's success in luring foreign capital and diversifying its economy draws attention to the possibilities open to ASEAN nations implementing the "China Plus One" plan.
