Vietnam: ASEAN’s top destination for manufacturers

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Vietnam: ASEAN’s top destination for manufacturers

As a low-cost country, Vietnam proves to have a major competitive edge among other Asian countries. A recent survey carried out by the U.S. Chamber of Commerce of Singapore found that ~25% of U.S. enterprises priorities Vietnam as their market for future business expansion in ASEAN (the Association of Southeast Asian Nations).

The survey titled ‘the ASEAN Business Outlook’ is an annual poll that collects opinions of thousands of senior business executives representing U.S. companies in all ten ASEAN markets.

According to the survey, Vietnam overtook Indonesia as the first market U.S. companies look for to expand across ASEAN, followed by Indonesia with 38% and Myanmar (34%). Thailand ranked 4th place with 30%.

With more than half of respondents (53%) believing the ASEAN region as an important area for many of the companies’ worldwide revenues, it is without a doubt these emerging markets are becoming a magnet for investors. By the end of 2016, ASEAN’s workforce is expected to increase by 49%.

Moreover, 17% of voters from the survey chose Vietnam as the second market for moving investments from China into ASEAN. The survey also stated that Vietnam has many other competitive advantages like low labor costs, good personal security and a stable government and political system.

According to Michael Sieburg, Associate Partner at Solidiance Vietnam, an Asia-focused management consulting firm, Vietnam will further drive for foreign investments, particularly in the manufacturing sector, once the Trans Pacific Partnership (TPP) agreement has been ratified. “With the agreement soon to be enacted, key export manufacturing like textile & garment, footwear and fishery, etc, will enjoy rapid outsized growth”, he said.

Vietnam’s major manufacturing sectors: output and CAGR

vietnam major manufacturing sectors

Source: Vietnam GSO, Solidiance’s analysis and research

With large domestic and foreign investments pouring into Vietnam’s economy following major trade agreements, manufacturing facilities will tend to scale-up to take advantage of economies of scale, according to Solidiance’s white paper titled “Trans Pacific Partnership: A Boost for Vietnam’s Manufacturing Growth”.

The scale of both domestic and foreign enterprises following TPP’s implementation will also drive the development of upstream suppliers as well as manufacturers in supporting industries. Having laid out the groundwork for boosting Vietnam’s economic potential, foreign companies need to take note and define a strategy to capitalize on the opportunities.

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