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Its Manufacturing Risk Index (MRI) scores each country against 20 variables that make up three final weighted rankings covering conditions, cost, and risk.

The data underpinning the MRI comes from a variety of reliable sources, including the World Bank, UNCTAD, and Oxford Economics.

The report reveals that China is the leading country when viewed from a baseline scenario that gives equal importance to a country’s operating conditions and cost competitiveness. Vietnam ranked 15th in this regard, in and around the other countries in the Southeast Asian region. Malaysia ranked highly, at seventh globally, while Thailand, Indonesia, and Singapore ranked tenth, 13th, and 14th, respectively.

Regarding cost scenario, which gives a higher score to countries where operating outlay, including labor costs, is lower, China leads the pack, with Malaysia second and Vietnam performing strongly in third ahead of most competitors in the region as well as other global competitors. Asian countries dominated the top 10. From elsewhere, only Lithuania and Romania, in seventh and eighth, respectively, feature prominently.

The third ranking, the risk scenario, considers rising geopolitical risk by favoring countries with lower levels of economic and political threat. In this scenario, North America leads the way with the US and Canada first and second, respectively, and China slipping to fourth.

European locations account for more than half of the top 10, led by the Czech Republic, at third, with Germany, Denmark, Finland, Austria, and the UK also featuring in the top 10.

“Low-cost locations in Asia-Pacific are still attractive for labor-intensive manufacturing and will continue to be sought-after given their cost competitiveness,” said Dr. Dominic Brown, Head of Research for Asia Pacific.

“We are seeing this play out with the China+ manufacturing strategy, which is helping to drive growth in the industrial sector in Southeast Asia. Developed markets with robust regulatory frameworks such as Australia, Singapore, and Japan offer companies a reasonable level of protection from geo-political and loss of intellectual property (IP) risks.”

“Vietnam’s low cost of doing business, booming middle class, and deregulated environment have helped it become 69th out of 190 countries worldwide in the World Bank’s ‘Ease of Doing Business Rankings’,” said Mr. Paul Tonkes, Director of Industrial & Logistics Services.

“It placed above the Asia-Pacific regional average and ahead of competitors like Indonesia, the Philippines, and Laos.”

However, Vietnam could be facing the dreaded middle-income trap, as it is at a challenging juncture and needs to address the issues surrounding this problem. It will need to focus on increasing productivity in the next few years.

The government is looking to Industry 4.0 to help drive this with “chinh phu kien tao” (enabling government) policies. Investors shouldn’t focus on labor costs in the long term, as rising costs can be offset by using technology and knowledge transfers as a way to leverage human capital. VN Economic Times