ECONOMY
WHY VIETNAM FOR MANUFACTURING BASE/OUTSOURCING DESTINATION OVERVIEW Vietnam is a promising destination for manufacturing sector compare to other countries in Southeast Asia with the fast growth in economy and technology development. Vietnam puts a step in creating competitive environment for the development of manufacturing and becomes an attractive destination for foreign investment. This briefing will give an overall insight in Vietnam's economy, competitive advantage over other countries in Southeast Asia and limitations.
THE GROWTH TREND Vietnam continues to expand the economy, growing the fastest in Southeast Asia (2019). Manufacturing, tourism and private consumption contribute to Vietnam's GDP growth of 7 percent.
PROMISING OUTLOOK Expansion on Manufacturing
2019 has been a bad year for global manufacturing and also in Southeast Asia. It is apparent that the region's contracting Purchasing Manager's Index (PMI) was close to, or in, a manufacturing recession. Most share falling prices for manufactured goods. Vietnam was on the expansion trend to compete with China Gain Net Beneficiary of Trade
Since mid-2018, there is a clear slower trend in the export the major ASEAN countries. As more factories relocate from China, the US imports from Vietnam (Jan-Oct 2019) are up by a third.
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Vietnam Gets On The Trade Winds
The pace of companies moving production lines to Vietnam began speeding up in 2019 because of the Trade War. Vietnam has many prominent benefits for foreigners and creates an open market for investors.
COMPETITIVE ADVANTAGE
PANDEMIC LABOR COST CONTROL Competitive Price Jan 2019, Vietnam's labor cost is 1.9 times lower than in Bangkok and Kuala Lumpur (from JETRO). This is a great advantage since companies can save the costs of labor when outsourcing in Vietnam.
EXPAND MARKET
WORKFORCE
95%
Impressive Result Vietnam's impressive handling of the public-health aspects. It became one of the first countries to ease social-distancing measure even though Vietnam has a weak healthcare system and low government budget.
Literacy Rate
75.98%
of Vietnam's population are in working age
Free Trade Agreement is an incentive for investors to invest in Vietnam. Vietnam increases the adoption of information and communications technology (ICT). The growing of Generation Z - New Age Consumers create the significant opportunities for investors.
LIMITATION Low English Proficiency English is still a main barrier that keeping Vietnam to move upstream in the global market. The EF EPI 2019 gives out score 51.57, which is low in Asia.
Skilled Labor Only 12% of workforce are highly skilled, which creates a shortage for companies shifting manufacturing to Vietnam. Workers are getting tough to find.
Raw Materials Shortage Many raw materials are facing a big challenge to meet the demand of production lines. Nearly all the electronics components come from Japan, China and Taiwan (WSJ). The pace of finding qualified parts is on the race and many major parts need to be imported.
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Source: PwC Vietnam
Vietnam is on the pace "to diversify trade opportunities and create a more transparent business development environment and prepare for Industry 4.0" Grant Dennis Chairman, Consulting Leader PwC Vietnam
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