return icon

Vietnam proves potential to profit from shifts in global supply chain

Years of economic growth and success in fighting Covid-19 paved the way for Vietnam to receive shifting FDI inflows, but limited participation in manufacturing industries might hinder its progress.

Processing seafood for export.

The global crisis

About 500 int’l delegates on November 18 attended the 2020 Export Forum on shifting the global supply chains and sustainable development post-Covid. The forum was held by HCMC Investment and Trade Promotion Center.

At the forum, according to the World Bank (WB), developing countries have to face with "strong headwinds" brought about by the epidemic. Covid-19 accelerated the trend of global trade, GDP and productivity slowdowns.

Representatives from the World Bank Group (WBG) stated how developing countries are fighting an uphill battle brought about by the epidemic which stagnated global trade, GDP growth and productivity.

The WBG also predicted that global GDP will decrease by 5.2% in 2020, which would be the deepest recession in 8 decades and the 4th deepest of 14 global recessions in the past 150 years.

In the same report, they said commodity trade could shrink 13%-32% in 2020. Per capita income this year is also expected to decline in 93% of all countries.

Major sources of development capital like FDI, indirect investment and remittances have all seen a sharp decline. The inflows of external private finance into developing economies could be reduced by US$700 billion compared to 2019, exceeding the impact of the 2008 global financial crisis by 60%. FDI inflows into emerging markets and developing economies will also go down by 21.4% this year.

What’s more, important int’l supply chains are over-concentrated in several specific countries, notably China, causing the supply chain to seriously break down when the pandemic hit. 

The role of Vietnam

Director of Baker & McKenzie Vietnam Co., Ltd. and American economist Frederick R. Burke at the forum noted that Vietnam’s macroeconomic indicators shows huge potential for growth despite the impact from the pandemic.

As of now, Vietnam is one of the most open economies in the world with great opportunities for new supply chains, with 13 global free trade agreements (FTAs) already in effect and an RCEP agreement on the way.

FDI investment into Vietnam within the first 6 months of 2020 reached nearly US$16 billion, down 15% year-on-year but still better than the average global drop rate of 30%-40% in 2020.

However, Vietnam’s participation in global value chains (GVCs) is still lacking compared to other ASEAN countries. According to the World Bank, Vietnam in 2018 only generated US$20.4 billion through GVCs, ranking 53rd out of 174 countries.

At the same time, the nation’s degree of participation in complex manufacturing processes remains low. According to the 2020 World Development Report (WDR), it is currently at the “limited processing-manufacturing” level and needs to move forward in GVCs to increase productivity.

Numbers show Vietnam’s GVCs account for 66% of commercial transactions, but localized trades only take up 28% of the total trade turnover. Not only that, the country’s economy is hyper-focused on specific markets such as textiles, electronics, chemicals and metals, which in total accounts for 2/3 of national trade.

At the same time, the 4 largest markets for Vietnamese manufacturers are China, Japan, Korea and the United States which account for 60% of total trade turnover. The top 4 corporations in the country are Samsung, Foxconn, Intel, Panasonic which account for 70% of trade turnover in GVC. This also means that 70% of Vietnam’s export turnover is earned by FDI enterprises.

It is estimated that every 1% increase in participation in GVC will increase per capita income by more than 1% in 2020, twice the amount earned from traditional trades.

Experts believe that Vietnam should adjust policies based on close association between public and private investment, and work hard to attract investors when they seek providers outside of China to diversify its GVC.

They also suggest to focus on the training of high-quality workers and promoting higher level education if one wants to move on from product assembly.

To grow ancillary industries, it is necessary to reduce logistic costs, build connecting infrastructures, improve administrative procedures, and improve the role of economic associations in connecting businesses. SGGP 

Hai Ha 

New FTAs puts logistics in limelight

New FTAs puts logistics in limelight

New-generation free trade agreements are increasing the importance of domestic logistics groups, with Vietnam emerging as a safe yet high-return market for overseas parties pouring money into new developments.

VN firms need to meet foreign firms’ requirements to enter global supply chains

VN firms need to meet foreign firms’ requirements to enter global supply chains

Vietnamese companies need to meet the requirements of foreign firms if they want to participate in global supply chains from mid-2021 when the Covid-19 pandemic is expected to be under control, experts said.


Fashion shows to spread quintessence of Vietnamese culture and heritage

The series is the brainchild of former supermodel Ha Vy and director Hoang Cong Cuong, who is the mastermind of several big events in Vietnam including the opening ceremony of the Southeast Asian Games (SEA Games) 31 in Hanoi in May.

Low-carbon rice production helps Vietnam meet emission target

Rice, which is Vietnam’s most important crop and grown on more than half of its agricultural land area, accounts for 48 per cent of the agriculture sector’s GHG emissions and over 75 per cent of methane emissions.


Number of air passengers down 14% in September

Vietnam needs highly skilled labour force to compete

The vocational training system of Vietnam needs reforming to create highly-skilled human resources that meet the requirements of the labour market in increasingly integrated international market, experts said.

Lengthy visa process a setback for FDI firms

The visa process does not always go smoothly. Sometimes, it moves so slowly that some specialists cannot enter Vietnam on schedule, leading to production disruptions.

Petrol and oil price stabilisation fund requires thorough appraisal

The Government needs to carefully evaluate the effectiveness of the petrol and oil price stabilisation fund in keeping the commodity’s retail prices stable before deciding to maintain or eliminate the tool, experts said.

Embedded finance the next big thing: summit

Embedded finance is the next big thing in the financial services industry as it has integrated seamlessly into the local fintech landscape in recent years, experts said at a meeting last Friday in HCM City.

Entertainment and cultural events of the week (September 26-October 2)

Upcoming entertainment and cultural events in Vietnam's major cities on September 26-October 2.


PM orders urgent measures against Storm Noru

Beauties wow in traditional costume contest at Miss Grand Vietnam

Vietnamese beauties boasted of their charm in a traditional costume segment of the ongoing Miss Grand Vietnam 2022 taking place on September 23.

State Bank’ rate hike necessary to defend VND, control inflation: ADB Country Director

ADB Country Director Andrew Jeffries has talked on the recent interest rate hike by the State Bank of Vietnam in the context of the Fed, ECB and a number of countries raising their rates to curb inflation.

Prop-tech has potential but faces challenges

Many prop-tech startups are facing challenges, though it is a new market with potential in Vietnam.

Prime Minister asked to stabilise rice price

India's restriction on rice exports is said to have an impact on the volume and price of Vietnamese rice exports.

Vietnamese artworks to go under the hammer in France

The auction’s highlight is Les Rapides de Cho Bo, a six-panel lacquer screen with gold highlights, painted in 1942 by Le Quoc Loc. The artwork is estimated to fetch €400,000 ($396,000), the highest price of the lot.

A pearl in mountainous province

Referred to as the “Halong Bay of the northwest region”, Nong Dung Lake has recently been attracting tourists as an ecotourism destination due to its emerald water and poetic scenery.