Featured article - Vietnam Investment Review Journal: Arraying Vietnam for global investment shift

The world’s supply chain is now evolving from China to other countries in the world, particularly to the Southeast Asian region. Jack Nguyen, partner at international accounting and advisory firm Mazars in Vietnam, provides some thoughts on how Vietnam can utilise its advantages to compete with neighbouring countries in developing the supply chain.

August 24th, 2020

Key areas covered in the article:

  • Ease of doing business
  • Investment incentives
  • Free Trade Agreements
  • Demographics and labour
  • Productivity via education and high-tech machineries

There is no doubt that the global supply chain is now evolving and pivoting from China to elsewhere, particularly to ASEAN. Companies operating in China were already starting to shift their manufacturing plants to other lower labour-cost countries a few years ago.

The emergence of the US-China trade spat in 2018 continued the supply chain shift away from China as companies looked to lower their export costs to the United states. However, the two factors mentioned pale in comparison to the tsunami of companies that will shift out of China in the coming years as a result of COVID-19.

Companies around the world have been shocked by the concentration of their manufacturing in China and the tremendous challenge of accessing supplies, particularly personal protective equipment and pharma products, during the height of the pandemic.

Many economies will vie for the companies that are looking to relocate out of China, and those currently oft-mentioned to benefit from the supply chain shift include Mexico, India, Taiwan, and ASEAN markets. But by all accounts, Vietnam should be the first choice for companies looking to relocate. Vietnam has been mentioned in numerous news outlets and media channels around the world as the country that will benefit the most from the supply chain pivot.

Undoubtedly, other ASEAN countries will also benefit but Vietnam is in the best position to be the new host of companies moving out of China.

The   reasons   most   mentioned are its maturing manufacturing industry, its geographical proximity to China, its emerging skilled and lower-cost labour force, the continuing ease of doing business, and investor-friendly investment laws.

According to Mr. Jack Nguyen, "The best part for Vietnam is the country is already recognised as the preferred country for foreign investments and supply chain diversification."

Even before the US-China trade war, Vietnam was widely viewed as the most attractive country for foreign investment.  In its most recent ranking of the most suitable locations for global manufacturing among 48 countries in Europe, the Americas and Asia Pacific, Cushman & Wake- field ranked Vietnam as the second most cost-competitive manufacturing hub in the world.

Already, since the pandemic outbreak some of the biggest brands in the world have moved their manufacturing out of China to Vietnam.  these brand names include Hasbro, Nintendo, Samsung, and Skechers. Apple suppliers Foxconn and Goertek have also moved their operations to Vietnam.

This is already being seen on the ground.  there is not a week that goes by when I do not get a call from European or North American companies asking Mazars to assist them moving their manufacturing operations and set up business in Vietnam. However, for Vietnam to maintain its foreign investment momentum and be the leading choice for foreign investors, it must invest and improve itself in several areas: 

  • Ease of doing business
  • Investment incentives
  • Free Trade Agreements
  • Demographics and labour
  • Productivity via education and high-tech machineries

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Vietnam Investment Review_Arraying Vietnam for global investment shift

Vietnam Investment Review_​Arraying Vietnam for global investment shift