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Growth of smaller cities a boon for business

Released at: 08:43, 13/05/2015

Growth of smaller cities a boon for business

Population shifts towards smaller cities present new opportunities for businesses in Vietnam, according to a recent report from Nielsen.

by Son Ho

In discussing the trends that will shape Asia in the future, most people would say that populations will center in major cities or large metropolises. The latest report from Nielsen on the Asian cities of the future, however, contains some quite surprising results. About 62 per cent of the region’s urban population is likely to reside in cities or urban centers of less than 500,000 people by 2025.

This will open new doors for Vietnam’s economy. While GDP per capita in the majority of ASEAN countries is significantly higher in primary cities compared to smaller cities, Vietnam is an exception, according to the Nielsen report. Regional and international businesses operating in the country are afforded a number of concessions and incentives so they will invest in industrial parks and economic zones in smaller urban centers. Such initiatives are seen as a major factor in Vietnam’s economic development strategy and its industrial parks and economic zones have attracted over $110 billion in foreign direct investment to date.

While moving towards smaller cities along with a high population (99.8 million by 2025 according to World Urbanization Project), Vietnam appears to be continuing this trend, with plans to spread investment and urban development cited in various planning documents developed in conjunction with or for the Vietnamese Government. Examples of success have set a foundation for continued investment and clear structures that small cities in other countries can follow.

“Rural consumers are such a large piece of the Vietnam pie and cannot be ignored,” said Mr. Vaughan Ryan, General Director of Nielsen Vietnam. “This consumer is changing and doing so fast. They are increasingly well-educated, have higher levels of disposable income, and are more aware of trends in the market than ever before.” New consumption hotspots are emerging across Southeast Asia and industrial zones will develop strongly in these areas because of low labor and land costs, Mr. Ryan added. “This in turn is having the knock-on effect of attracting migrants and stimulating local economies,” he said.

He also recommended that in order to step into these potential areas, businesses must continuously focus on product development to rapidly adapt and meet the requirements of local consumers. Products with small packaging suitable for single-use will be more appealing to shoppers with growing purchasing power and for traditional trade retailers who are challenged by storage space.

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