Vietnam overtakes Thailand in exports as global firms shift capacity to lower-cost hub

HANOI, 24 AUGUST 2026 —

VIETNAM OUTPACES THAILAND AS ASEAN’S NEW PRODUCTION HUB, DATA SHOWS

The shift is highlighted in the IMD World Competitiveness Ranking 2025, which saw Thailand drop five places to 30th globally due to weaknesses in government efficiency, infrastructure, and labour productivity. While Vietnam is not yet ranked in the IMD index, it is increasingly viewed as ASEAN’s “rising economic star,” with analysts noting its rapid ascent in global trade and investment.

Thailand still holds key advantages, including one of ASEAN’s most transport and logistics networks, with logistics costs accounting for 13.5% of GDP, according to the National Economic and Social Development Council’s 2024 Logistics Report. The country also benefits from strong road infrastructure, public-private partnership (PPP) investments, and its role as a regional headquarters hub for multinational corporations.

However, persistent challenges—such as bureaucratic delays, administrative fragmentation, and uneven adoption of artificial intelligence (AI)—are eroding Thailand’s competitive edge. Meanwhile, Vietnam is aggressively investing in infrastructure to solidify its position as a low-cost, high-efficiency production hub.

Under Vietnam’s 2030-2050 Transport Strategy, the country has expanded its expressway network from just 89 km in 2010 to over 3,000 km in 2025, with plans to reach 5,000 km by 2030. A flagship project, the US$67.34 billion north-south high-speed railway, will connect Hanoi and Ho Chi Minh City over 1,541 km, integrating supply chains from southern China into a new global manufacturing corridor.

Thailand is countering with its own infrastructure push, including the Land Bridge project, a THB1 trillion (approx. US$28 billion) initiative linking Chumphon and Ranong to position Thailand as a gateway between the Indian and Pacific Oceans. Yet, implementation delays remain a critical hurdle.

A key factor in Vietnam’s rise is its demographic advantage. With a population of over 100 million, a median age of 30, and a minimum wage ranging from US$200 to US$350 per month—lower than Thailand’s US$300 to US$500—Vietnam offers a younger, more cost-competitive workforce. Thailand, meanwhile, is grappling with an ageing society and labour shortages, further straining its industrial competitiveness.

Transparency International’s 2025 Corruption Perceptions Index (CPI) underscores the divergence. Vietnam scored 41 points, ranking 81st globally, supported by its "Blazing Furnace" anti-corruption campaign. Thailand, by contrast, fell to 33 points, placing 116th, with 89.1% of Thai businesses citing corruption as a major investment barrier, according to a Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) survey.

Global manufacturers are taking notice. Samsung has invested US$220 million in a R&D centre in Hanoi, while LG Electronics has relocated its TV production from Thailand to Vietnam. Apple and other tech giants are expanding operations in Vietnam, reinforcing a "dual-market" strategy where Thailand serves as a regional management and research hub, while Vietnam handles large-scale, low-cost manufacturing.

The competition between the two neighbours is evolving from mere rivalry into a structural contest for ASEAN’s economic future. While Thailand retains strengths in infrastructure, logistics, and integrated industries—particularly in automotive, petrochemicals, and processed food—Vietnam is rapidly closing the gap in electronics, semiconductors, and advanced manufacturing.

Vietnam’s participation in key free trade agreements, including the CPTPP and EVFTA, has further boosted its appeal, granting tariff-free access to European and North American markets. This has transformed Vietnam into a global export base for smartphones, computers, machinery, textiles, and footwear, shifting its image from a low-cost producer to a high-tech manufacturing hub.

Trade data reflects the shifting dynamics. Vietnam is now Thailand’s sixth-largest trading partner globally and second-largest in ASEAN, after Malaysia. The two countries have set a US$25 billion bilateral trade target by 2026 under the "Three Connects" strategy, which aims to integrate supply chains, local economies, and joint green growth initiatives.

Investment flows are also becoming more reciprocal. The Thailand Board of Investment (BOI) reports growing interest from Vietnamese firms in clean energy, food processing, logistics, data centres, and electric vehicle (EV) industries, aligning with Thailand’s BCG Economy model and net-zero commitments. Meanwhile, Thai investors are accelerating projects in semiconductors, renewable energy, e-commerce, and healthcare in Vietnam, particularly in smart electronics and high-tech manufacturing, supported by global tech leaders.

Kriengkrai Thiennukul, honorary chairman of the Federation of Thai Industries (FTI), warned that Thailand’s competitiveness is now falling behind Vietnam’s. While Vietnam faces challenges—such as unstable electricity supply—its government is actively addressing these issues. Vietnam’s export value has already surpassed Thailand’s, and while its GDP remains lower, its foreign direct investment (FDI) inflows are higher.

If current trends persist, analysts warn that Vietnam’s GDP could overtake Thailand’s in the coming years. Vietnam’s large working-age population contrasts sharply with Thailand’s ageing society, a demographic imbalance that could further tilt the scales.

Energy security remains a key differentiator. Thailand boasts stable electricity supply and is expanding its clean energy share, a critical factor for attracting high-tech industries such as semiconductors and data centres. Vietnam, however, is racing to develop its own renewable energy capacity to compete for similar investments, with Singapore, Malaysia, and Thailand as its main regional rivals.

Despite the intensifying competition, Thailand and Vietnam are not purely adversaries—they remain interdependent trade partners. Thailand is Vietnam’s largest ASEAN trading partner, and many Thai businesses have already established operations in Vietnam. Kriengkrai emphasised the need for regional collaboration, stating:

> “ASEAN is becoming an important global production base in place of China. Instead of competing alone, ASEAN countries should work together to increase bargaining power and build collective strength.”

As global supply chains realign amid geopolitical tensions and trade wars, the Thailand-Vietnam economic relationship is entering a phase. While Thailand still holds structural advantages in infrastructure and high-value industries, Vietnam’s cost competitiveness, infrastructure expansion, and strategic trade agreements are positioning it as the new engine of ASEAN’s industrial growth.

The coming years will determine whether Thailand can revitalise its competitiveness or whether Vietnam will consolidate its role as the region’s dominant production hub. One thing is clear: the ASEAN economic landscape is being redrawn, and the rivalry between these two neighbours will shape the future of Southeast Asia’s industrial and trade dynamics.

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