Nonetheless, Vietnam stood out as one of the brighter spots of 2020 with an estimated GDP growth rate of 2.91 per cent thanks to its effective handling of the pandemic.

Looking at 2021, Vietnam remains favoured with an expected GDP growth rate between 6.7 per cent, according to the International Monetary Fund, and 8.1 per cent, as estimated by Goldman Sachs and HSBC. Given Vietnam’s effective control of the health crisis and its economic implications, such positive outlook comes from multiple supporting factors.

Firstly, the rapid rise of the established middle class and the more affluent group, which both grew from 25 per cent in 2017 to 45 per cent of the population in 2030.

Secondly, multilateral trade tariffs are being largely eliminated between Vietnam, Asia-Pacific, and the EU nations, which will benefit the expansion of key export products, such as smartphones and electronic products, textiles, footwear, and agricultural products.

Thirdly, the positive changes in the Law on Enterprises 2020 and the Law on Investment 2020 will help unlock more opportunities for foreign investors, as well as bring better protection to minority shareholders.

Though COVID-19 has imposed many challenges, it has also offered many growth opportunities. Companies with strong resources and agile management teams could navigate the uncertainties and gain market shares from those who have been shaken during the turbulences and were slow to react.

This agility is also demonstrated in the digitalisation of business operations, not only in the form of providing products and services like online sales, but also in business management and daily operational activities such as collaborating via video calls.

Throughout the last year, activities of global and regional private equity (PE) markets posed a downwards trend. Vietnam’s PE market, in contrast, still saw an upwards trend in both the number of deals and their values. The global PE industry suffered an overall drop of 13.1 per cent in the number of deals and a 33.8 per cent decrease in total value during the first half of 2020, compared to the same period of 2019.

During the first half 2020, deal activities in the ASEAN-5 and Vietnam generally slowed down after a busy 2019. The number of deals dropped from 230 in the first half of 2019 to 200 in the first half of 2020, and their value dropped by more than half from $9.1 billion to only $4.3 billion.

Vietnam was behind Malaysia in 2019 but then surpassed it in the first half of 2020 as the only country with increasing trend despite COVID-19.

Vietnam’s PE sector is expected to see even larger growth in 2021 as most investors believe deals will only be postponed for less than a year. When the country relaxes its travel restrictions again, it is expected that there will be a significant jump in the number of deals.

According to our survey, the most attractive industries are logistics and transportation, education, renewable energies, technology and fintech, and healthcare.

The market size of the logistics sector is expected to reach $113 billion by 2022, posing a compounded annual growth rate (CAGR) of 16.6 per cent. This strong growth is supported by a good number of free trade agreements and the booming e-commerce sector. Large manufacturers such as Apple, LG, and Panasonic consider Vietnam a new hub to diversify their supply chains and distribution networks away from the US-China trade war and the pandemic.

The education sector is forecast to continue attracting investment thanks to the growth of the middle class, accompanied by an increase in spending on education, not only for children, but also for workers aged 40 and below as they are striving to acquire more skills and knowledge to meet the ever-increasing demand of the labour market.

The growth prospects in healthcare, meanwhile, come from the higher healthcare spending per capita with a CAGR of 9.8 per cent from $194 in 2019 to an expected $309 in 2024. The shortage of qualified personnel and inadequate healthcare infrastructure results in a huge supply gap, and the increasing ageing speed of the Vietnamese population will further boost healthcare demand.

Meanwhile, the technology sector has been attracting a lot of venture capital and PE funds, with an impressive CAGR of 26.1 per cent in the 2015-2019 period. Multiple drivers for investment include favourable tax incentives, government credit support, and low cost-high quality labour.

In renewable energies, Vietnam has become home to the second-largest installed capacity in ASEAN with 54,880MW in 2019. As a prioritised industry with a rising targeted share of 6.5 per cent in the total electricity production in 2020 to 10.7 per cent in 2030, the renewables industry requires $10.8 billion annual investment from now to 2030.

The industry receives many incentives from the government, including preferable tax schemes, the previous feed-in tariff for solar energy, and the approval for full foreign ownership in energy companies. While we expect a slowdown in solar power, we also believe that wind power will receive a lot of attention in the coming time.

In general, the positive achievements in the fight against the pandemic, backed by the creativity, resilience, and adaptability of the Vietnamese people have helped the economy recover rapidly in 2020, creating a springboard for strong and sustainable growth in the future.

Thus, Vietnam can truly be seen as a rising star and an attractive investment destination among emerging economies, especially in Southeast Asia.