Vietnam at Economic Crossroads: Shifting from Low-Cost Reliance to High Value and Sustainability

Vietnam's economy is facing a significant challenge to transition beyond a development model reliant on inexpensive labor, intensive energy consumption, and high emissions. The manufacturing and processing industry, a key economic growth driver, is under mounting pressure to move towards higher value addition and sustainability. In the agricultural sector, key export markets such as the US, the European Union (EU), and Japan are tightening sustainability requirements for agricultural products, making the transition to low-emission farming increasingly important. In response to regulations like the EU's Deforestation Regulation (EUDR), Vietnamese coffee that already complies with EUDR requirements is being sold at a premium, and opportunities in this sector are expected to grow further. Achieving Vietnam's target of agricultural, forestry, and fishery exports worth over $74 billion in 2026 will require stronger traceability systems, particularly for key export commodities, high-value products, and major markets like the EU, the US, and China. In the energy sector, the transition involves not just replacing fossil fuels with wind and solar power but also building a sustainable energy ecosystem where clean power generation, energy storage, smart grids, and material recycling chains develop in parallel. This approach will enhance energy efficiency, further reduce greenhouse gas emissions, and help Vietnam achieve its green growth and net-zero emissions targets by 2050. Rooftop solar power, when integrated with energy storage systems and direct power purchase mechanisms, is expected to supplement distributed energy sources, reduce pressure on the national power system, and serve as a driving force for green growth. In terms of the investment environment, Vietnam's future competitiveness will increasingly depend on structural and long-term factors, including transparent institutions, policy predictability, and an investment environment capable of supporting long-term strategic investors, rather than relying primarily on low labor costs and tax incentives. Ho Chi Minh City remains Vietnam's leading recipient of foreign investment, with 21,351 valid FDI projects worth a combined $146.8 billion. In the first half of 2026, the southern economic hub recorded nearly $7.5 billion in registered FDI, fulfilling over 68% of its annual target. The digital economy is also a crucial growth driver. According to the Department of Taxation, 259 overseas suppliers have registered, declared, and paid taxes through the portal, with tax revenue from this group reaching 78.1% of the full-year target, surging 119% from a year earlier, making foreign suppliers the fastest-growing source of tax revenue in Vietnam's digital economy. Stronger cooperation in cross-border e-commerce is expected to become a new growth channel, contributing to the realization of bilateral trade targets and supporting the digital economies of both countries. EuroCham's latest survey shows European business confidence rebounding to its highest level in nearly seven years, driven by stronger demand despite global uncertainty. This indicates a positive sign for Vietnam as it deepens its integration with the international community and transitions its economic growth towards a more sustainable and high-value model. Source: VietnamPlus English