Vietnam to benefit from supply chain relocations

The global health crisis is accelerating global trends in supply chain shifts, offering Vietnam possible development advantages on a silver platter.
vietnam to benefit from supply chain relocations

Vietnam Citi country officer Natasha Ansell

Vietnam Citi country officer Natasha Ansell shared her view with VIR’s Phu Canh on Vietnam’s economic outlook and its current position as a potential manufacturing hub in the region.

Following the reopening of the economy, what is your view on Vietnam’s economic outlook?

While growth in Vietnam is expected to decrease to 2.4 % in 2020, the economy is gradually showing signs of recovery with an expected rebound in 2021.

Tourism, hotel, retail, and transportation industries, which account for 20-25 % of GDP, are showing steady improvements although it will require a significant rebound in international tourism to boost these sectors back to pre-COVID levels.

Oil prices too have a significant impact on government revenue. Outside of Vietnam, global demand cutbacks are also having an impact. Shoes and garment exports of $46 billion, which account for 18 % of Vietnamese exports, have been affected by sluggish demand from the US and EU markets, where nearly half of these products go to.

Despite various points of pressure, Vietnam has been duly applauded for the way the country has handled the COVID-19 pandemic. By taking aggressive steps in early February, the country has kept its overall infection numbers to around 400, with zero casualties.

This has helped to prop up the domestic economy and travel as well. While we continue to monitor the health crisis and the ongoing uncertainty within the broader region and globally, we remain confident on Vietnam’s future prospects.

Supported by a growing middle class, consumer spending, and fiscal policies that encourage public spending, we expect to see further GDP growth.

This is a strong endorsement of the government’s ability to keep the pandemic under control while continuing to attract foreign direct investment into the market, despite an understandable slowdown in capital inflows during this time overall.

What are the levels and activities around banking and lending in this period?

Lending levels and other banking activities have varied during this time, depending on whether companies were managing supply-side or demand-related shocks.

In the initial stages of the pandemic, around February and March, many companies faced a bottleneck in the supply of raw materials due to factory shutdowns and border restrictions across multiple markets. This led to a reduction in loan demand.

As the pandemic progressed to other parts of the world, factories in the region, including in China, began to resume production. While supply chains are gradually normalising, activity did not return to full capacity given demand shocks from export markets such as the US and the EU.

With a focus on maintaining liquidity to support business growth, companies started to deploy loans with longer tenors during this period. We continued to use our balance sheet and strong liquidity position to support our clients, the majority of whom are foreign-invested companies, with strong fundamentals and support from their parent companies.

We are also seeing an increase in new loan facilities and requirements from corporates in the region that are expanding their supply chains to Vietnam and, as a result, expanding their production capacity here. We are partnering with our clients to facilitate these plans in the country while ensuring we are lending prudently and in line with our risk management policies.

What impact is COVID-19 having on supply chains and what implications does have for Vietnam?

COVID-19 is accelerating supply chain relocation plans for companies. The pandemic has exacerbated trends that were already visible due to geopolitical developments and the demands of changing business models.

With the pandemic, we expect supply chain shifts to occur at a quicker pace than previously anticipated. Vietnam stands to benefit from these shifts given an increasing interest in the country from companies which are keen to expand manufacturing capacity.

In recent years, a number of multinational firms have relocated parts of their supply chains to Vietnam as part of their persification strategies. South Korea was the largest investor in Vietnam last year, pouring close to a fifth of the $38 billion in new foreign direct investment (FDI) into Vietnam. Hong Kong, Japan, and China were also amongst the top investors.

Vietnam represents a pro-business and liberal investment environment, with competitive cost structures and a wide range of tax incentives and tariff benefits resulting from multiple free trade agreements. This includes the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and more recently, the EU-Vietnam Free Trade Agreement that aims to encourage new trade flows and, consequently, supply chains.

We believe that Vietnam has a significant potential to prosper from this opportunity, supported by government policies and interest in attracting FDI into the market.

What are the hurdles that may prevent supply chains from moving to Vietnam and what more can be done to take advantage of the trend?

To capitalise on the opportunity of shifting supply chains, Vietnam will need to continue to develop its infrastructure and build up its capacity. Relative to other markets, Vietnam’s GDP is small and, on a per capita basis, it is still below many developing countries. Labour supply is moderate and the logistics, as well as transportation infrastructure, needs to be further developed.

Focus on further developing the road network, port infrastructure, industrial parks, and utility supply would be critical for Vietnam to continue being competitive in attracting FDI.

Specifically on infrastructure, Vietnam must develop its infrastructure more quickly, especially in Ho Chi Minh City and its surrounding areas.

According to the World Economic Forum’s Global Competitiveness Report 2019, Vietnam ranks 67th out of 141 in terms of overall quality of infrastructure, 103rd in quality of roads, and 83rd in quality of port infrastructure.

The government must further emphasise the improvement of industrial zones, transportation networks, and power projects. To solve traffic congestion problems in large cities, the government should facilitate major public transportation projects.

Those actions would be very important for the country to continue to establish Vietnam as a prominent regional manufacturing hub in Asia.

Source: VIR
english.vov.vn

Related News

Vietnam ready to export first batch of sweet potatoes to China

Vietnam ready to export first batch of sweet potatoes to China

Vietnam’s 70 sweet potato cultivation areas and 13 packaging facilities have been licenced to export to China, reported the Ministry of Agriculture and Rural Development (MARD)’s Plant Protection Department.
Australian Governor-General wraps up State visit to Vietnam

Australian Governor-General wraps up State visit to Vietnam

Australian Governor-General David Hurley, his spouse and the Australian delegation left Ho Chi Minh City on April 6, wrapping up his State visit to Vietnam from April 3-6.
Vietnam a potential market for French businesses, investors: experts

Vietnam a potential market for French businesses, investors: experts

French businesses should innovate their approach, enhance their understanding of culture and language, and make changes to adapt to Vietnam's transitioning economy in order to expand their market share and boost investment in the Southeast Asian nation, said Dr. Jean-Philippe Eglinger, the founder of the Viet Phap Strategies.
Vietnam active at UN Human Rights Council’s 52nd session

Vietnam active at UN Human Rights Council’s 52nd session

The Vietnamese delegation, led by Deputy Prime Minister Tran Luu Quang, made active contributions to the agenda of the 52nd regular session of the UN Human Rights Council (UNHRC) that concluded in Geneva on April 4.

Latest News

Saigontex 2023 attracts over 1,300 domestic, foreign businesses

Saigontex 2023 attracts over 1,300 domestic, foreign businesses

More than 1,300 businesses from 21 countries and territories are participating in the Vietnam Textile & Garment Industry Expo (Saigontex) 2023, the leading exhibition of the industry in Southeast Asia, which opened in Ho Chi Minh City on April 5.
Mong Cai international border gate sees strong recovery

Mong Cai international border gate sees strong recovery

The Mong Cai international border gate in the northern province of Quang Ninh has become vibrant as before the pandemic, showing a positive sign in the economic recovery of Mong Cai city in particular and Quang Ninh province in general.
Import and export turnover across Cao Bang prospers but still exists difficulties

Import and export turnover across Cao Bang prospers but still exists difficulties

VCN – After China resumes trade, Cao Bang province's import and export activities see remarkable prosperity.
Cashew industry strives to "get on the shelves of world supermarkets"

Cashew industry strives to "get on the shelves of world supermarkets"

VCN - Although holding the number one position in the world in exporting cashew kernels for many years, the position of Vietnam's cashew industry in the world cashew value chain is very small because it mainly exports kernels with preliminary treatment.

More News

HCM City’s industrial production index down 0.9% in Q1

HCM City’s industrial production index down 0.9% in Q1

Ho Chi Minh City’s Index of Industrial Production (IIP) in the first quarter of 2023 declined by 0.9% compared to the same period last year, the municipal Department of Industry and Trade reported at a press conference on April 3.
Fisheries exports estimated at 1.85 billion USD in Q1

Fisheries exports estimated at 1.85 billion USD in Q1

Fisheries export value was estimated at 1.85 billion USD in the first quarter (Q1) of this year, a fall of 27% compared to the same period last year due to lower consumption and import demand under the impacts of inflation and economic recession, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).
Quang Ninh aims to attract quality FDI inflows

Quang Ninh aims to attract quality FDI inflows

The northern coastal province of Quang Ninh has strengthened measures to attract quality foreign direct investment (FDI) inflows, especially from big names in the processing-manufacturing industry.
Exports face many difficulties

Exports face many difficulties

VCN - In the first months of 2023, the absence of export orders plus the downward trend in commodity prices have slowed down trade activities.
Manufacturing enterprises increase their competitiveness thanks to digital transformation

Manufacturing enterprises increase their competitiveness thanks to digital transformation

VCN - Overcoming difficulties in 2023 requires manufacturing enterprises to self-improve and innovate. Digital technology is one of the effective solutions to help manufacturing businesses grow and compete.
32nd Việt Nam Expo promises to boost business linkages

32nd Việt Nam Expo promises to boost business linkages

The 32nd Việt Nam International Exhibition (Vietnam Expo) will take place in Hà Nội from April 5-8 with the participation of more than 500 domestic and foreign enterprieses, the event’s organisers have announced.
Prevention of price risks before news that Indonesia increases rice imports in reserve

Prevention of price risks before news that Indonesia increases rice imports in reserve

VCN - In response to demand signals from key markets such as Indonesia and the Philippines, the Import-Export Department (Ministry of Industry and Trade) suggested that rice exporters actively monitor the market situation and fully assess the opportunities as well as risks to build a trading plan.
Japanese investors highly appreciate Vietnamese property market

Japanese investors highly appreciate Vietnamese property market

Representatives from around 180 Japanese businesses and investors on April 1 attended a Tokyo workshop on Vietnamese real estate, during which many of them highly appreciated the potential of Vietnam’s property market.
Seafood enterprises propose to remove obstacles from exporting to the EU

Seafood enterprises propose to remove obstacles from exporting to the EU

VCN - Seafood enterprises are facing inadequacies in applying for material certification (S/C) and food safety certificates (H/C), which affects the production and export of seafood to the EU.
Read More

Your care

The system has not recorded your reading habits.

Please Login/Register so that the system can provide articles according to your reading needs.

Latest Most read
Saigontex 2023 attracts over 1,300 domestic, foreign businesses

Saigontex 2023 attracts over 1,300 domestic, foreign businesses

More than 1,300 businesses from 21 countries and territories are participating in the Vietnam Textile & Garment Industry Expo (Saigontex) 2023, the leading exhibition of the industry in Southeast Asia, which opened in Ho Chi Minh City on April 5.
Mong Cai international border gate sees strong recovery

Mong Cai international border gate sees strong recovery

The Mong Cai international border gate in the northern province of Quang Ninh has become vibrant as before the pandemic, showing a positive sign in the economic recovery of Mong Cai city in particular and Quang Ninh province in general.
Vietnam a potential market for French businesses, investors: experts

Vietnam a potential market for French businesses, investors: experts

French businesses should innovate their approach, enhance their understanding of culture and language, and make changes to adapt to Vietnam's transitioning economy in order to expand their market share and boost investment in the Southeast Asian nation, said Dr. Jean-Philippe Eglinger, the founder of the Viet Phap Strategies.
Import and export turnover across Cao Bang prospers but still exists difficulties

Import and export turnover across Cao Bang prospers but still exists difficulties

VCN – After China resumes trade, Cao Bang province's import and export activities see remarkable prosperity.
Cashew industry strives to "get on the shelves of world supermarkets"

Cashew industry strives to "get on the shelves of world supermarkets"

VCN - Looking back to 2022, while the export turnover of the cashew industry reached US $ 3.08 billion, the import turnover of raw cashews consumed US $ 2.678 billion.
Mobile Version