Stable economic growth has made Viet Nam an attractive destination for foreign investors particularly amid current changes in the global supply...
Vietnam and India are emerging as alternative labour sources.
Disruptions to international trade as a result of the US-China trade conflict and the COVID-19 pandemic has made companies rethink their supply chains.
Traditionally, supply chains were designed to keep costs low. In the post-pandemic era, however, supply chains are being reworked to reduce the risks of future disruptions.
Notably, the international community is moving toward relocating supply chains to India and Viet Nam.
The article cited a recent second-quarter Barometer report by QIMA, which showed that Viet Nam and India were emerging as alternative sourcing locations.
Viet Nam’s reforms allowing foreigners to own property as well as majority holdings in Vietnamese companies were driving the move. Consistent economic growth had also made Southeast Asian nations attractive for foreign investment.
The QIMA global sourcing survey showed that 43 per cent of US-based respondents described Viet Nam as among their top three buying geographies as of early 2021 and around one-third of buyers globally.
Similarly, VietnamBriefing, recently highlighted the country’s advantages in attracting foreign investors compared to other regional production sites.
Viet Nam’s supply chains have significantly evolved from how they were a decade ago, VietnamBriefing said, noting that among the countries competing for investment, Viet Nam had emerged as a highly effective alternative for relocation in Southeast Asia.
“Viet Nam’s pursuit of foreign investment, competitive costs, free trade agreements, and liberal investment environment have made it an ideal location for investors seeking to reduce costs and diversify supply chains,” it said.
The writing also analysed Viet Nam’s competitive edge in terms of labour costs, political climate, infrastructure, working environment and flexible administrative system.
It quoted Dustin Daugherty, Head of the North American Desk for Dezan Shira & Associates, as saying that Viet Nam enjoys a high degree of regional diversity, and the North, Centre, and South all have particular competitive advantages for different industries and types of businesses.
The article reported that Viet Nam spent up to 5.7 per cent of its GDP to improve transport infrastructure and logistics. A total investment value of US$120 billion had been planned for PPP projects in the road and power sectors.
Daugherty noted that Viet Nam was still a rather unfamiliar market for new investors. Investors had to play the long game and look at Viet Nam as a long term investment to be able to manage risks, he said.
While Viet Nam would be impacted by the COVID-19 pandemic, its overall positive growth rate provided a partial buffer, the article concluded.
Standard Chartered has lowered its growth forecast for Vietnam for 2021 from 6.7 per cent to 6.5 per cent.