- As Vietnam transforms into a worldwide manufacturing hub, it has emerged as an efficient relocation vacation spot also called the China+1 technique.
- Upbeat progress projections are set for the nation’s import-export enterprise as the worldwide financial system resumes.
- Vietnam Briefing highlights offers an summary of the industries primed for import and export actions.
With its rising prices, China is now not the go-to vacation spot for a lot of companies, and Vietnam has arisen as a critical competitor. Latest tendencies present that the variety of orders shifting from China to Vietnam has seen a major improve.
For instance, China’s Pearl River Delta, lengthy referred to as one of many key manufacturing unit facilities for the world’s producers (significantly these from Hong Kong) has now grow to be too expensive for a lot of corporations to remain within the area.
Up to now few years, a rising variety of companies have relocated their operations from China to Vietnam in an try to flee rising prices and an more and more advanced regulatory setting.
Given the latest commerce conflict between China and the US, alongside Vietnam’s latest free commerce agreements such because the RCEP, the EVFTA, and the UKVFTA the nation is steadily turning into extra open to worldwide commerce and funding.
Situated in a strategic place for overseas corporations with operations all through Southeast Asia, Vietnam is a perfect export hub to achieve different ASEAN markets.
In contrast with different growing markets within the area, Vietnam is rising because the clear chief in low-cost manufacturing and sourcing, with the nation’s manufacturing sector accounting for 25 % of the nation’s whole GDP in 2021.
At present, labor prices in Vietnam are roughly 50 % of these in China at US$2.99 per hour in comparison with US$6.50 per hour respectively, and round 40 % of these reported in Thailand and the Philippines. With the nation’s workforce rising yearly, Vietnamese staff are comparatively cheap, younger, and, more and more, extremely expert.
One other driving pressure behind Vietnam’s rising recognition is the nation’s assortment of free commerce agreements.
The RCEP, which got here into pressure on January 1, 2022, has additionally fostered the entry of products exported out and in of Vietnam because it reduces value, improves market entry in addition to presents streamlined customs procedures.
When it comes to regulatory and monetary incentives, Vietnam has grow to be more and more investor-friendly lately –the federal government has taken such actions as reforming its monetary sector, streamlining enterprise rules, and enhancing the standard of its workforce.
For the reason that mid-2000s, the Vietnamese authorities has supplied extraordinarily aggressive monetary incentives to companies in search of to arrange operations within the nation, along with a zero % withholding tax on dividends remitted abroad and a low company revenue tax (CIT) fee of 20 %. These benefits have enabled Vietnam to grow to be a premier “sourcing financial system” within the eyes of many corporations.
Present state of Vietnam’s financial system
Vietnam is seeing robust progress on a number of fronts. Of specific curiosity to buyers has been the persevering with progress of Vietnam’s home client market, which has been growing by leaps and bounds.
This progress is anticipated to proceed for a while to return – home consumption is predicted to extend at a fee of 20 % per 12 months. With a inhabitants of over 97 million and Southeast Asia’s fastest-growing center class, Vietnam clearly represents an essential marketplace for overseas items. In comparison with 2017, the US has overtaken China for being the most important export marketplace for Vietnam.
|Export Markets||Export Worth (2021)|
|South Korea||US$22 billion|
|Hong Kong||US$12 billion|
|Import Markets||Import Worth (2021)|
|South Korea||US$56.2 billion|
Supply: Common Statistics Workplace
Whereas Vietnam is extensively identified for being a major location for buyers working within the textile business, there are lots of different enterprise areas which are seeing vital progress within the nation. Curiously, Vietnam is nicely on its option to turning into a key location for high-technology manufacturing, with corporations like Samsung, LG Electronics, Nokia, and Intel making multi-billion greenback investments into the nation. Different enterprise areas embrace data and communications expertise, automotive, and medical units.
Bilateral commerce between Vietnam and the US hit a brand new file excessive in 2021, with a complete of US$111.56 billion, up practically US$21 billion year-on-year as per the Common Division of Customs.
The US additionally had the second-highest import-export turnover with Vietnam at US$100 billion, adopted by China.
|Prime Exports||Export Worth (2021)|
|Digital items/Computer systems||US$50.8 billion|
|Prime Imports||Import Worth (2021)|
|Digital items/Computer systems||US$75.4 billion|
|Plastics (in main kind)||US$11.7 billion|
Textiles and Clothes
Textiles constantly rank amongst Vietnam’s main export industries, with over 6000 textiles and clothes manufacturing corporations, using upwards of two.5 million staff. The expansion of the garment business has been spectacular and performs an essential function within the financial progress of the nation. In 2020, Vietnam surpassed Bangladesh to grow to be the world’s second largest exporter of prepared made clothes (RMG). Additional, the business had an export market share of seven.05 % in 2020, a rise from 5.54 % of 2016.
China is the one nation that surpasses Vietnam when it comes to internet garment exports to the US. Nonetheless, producers and buyers are pivoting in the direction of Vietnam; the circumstances for establishing store are extra economically handy than doing so in China.
Inside ASEAN, Vietnam is the strongest competitor for inheriting low value-added textiles and attire manufacturing from China. In distinction to different main textile exporters within the area (Indonesia, Thailand, Malaysia), the share of Vietnam’s textile exports in opposition to its whole exports has grown lately.
Vietnam has emerged as an essential electronics exporter, with electrical and digital merchandise overtaking espresso, textiles, and rice to grow to be the nation’s prime export merchandise. Samsung is Vietnam’s largest exporter and has helped the nation obtain a commerce surplus for the primary time in a few years.
Exports of smartphones and laptop elements now account for extra in export earnings than oil and clothes. Samsung has turned Vietnam into a worldwide manufacturing base for its merchandise, producing nearly a 3rd of the agency’s output. Samsung has invested over US$17.5 billion into the nation as of 2021.
Samsung has additionally agreed to cooperate with the Vietnamese authorities with a view to assist develop the nation’s home help industries. This represents a key enterprise alternative for overseas expertise corporations to arrange operations in Vietnam and promote their elements to corporations like Samsung.
The longer term seems to be to be very attention-grabbing for the pharmaceutical business in Vietnam. Vietnam’s pharmaceutical market is projected to extend to US$7.7 billion in 2021 and US$16.1 billion in 2026. Driving this market progress is the Vietnamese authorities’s purpose of attaining common well being protection, mixed with a rising market of customers who need accessible healthcare.
As per IQVIA (2021), as of 2020, the amount measurement for the business was US$6.4 billion. Throughout the nation, there are round 250 manufacturing factories, 200 import-export items, 4,300 wholesalers, and one other 62,000 retailers catering to the pharmaceutical business.
Vietnam is turning into an essential marketplace for auto gross sales: the Vietnamese car market is anticipated to promote 1.7-1.85 million items by 2035. Within the foreseeable future, an estimated 750,000-800,000 items are anticipated to be offered by 2025.
Though the nation’s fee of automobile possession per capita remains to be a lot decrease than different markets in Asia (solely round 5.7 % of Vietnamese households owned a automobile in 2020), Vietnam remains to be one of many international locations with the fastest-growing buying energy for private vehicles over the previous ten years. 9 % of Vietnamese households are anticipated to personal a automobile by 2025 – equal to the present degree of India and the Philippines. By 2030, automobile possession will attain 30 %. Tax reductions on imported vehicles and elevated revenue are attributed to the expansion.
Regardless of an more and more aggressive auto market all through the ASEAN area, Vietnam has said that it intends to work aggressively to construct up its personal home auto business. Among the many key causes for this purpose is that the auto business has the potential to create hundreds of jobs for locals and create a robust system of supporting industries.
Moreover, Vietnamese automakers, resembling VinFast have additionally began launching some first car fashions to the overseas market, signaling a promising way forward for vehicles exported from Vietnam.
Vietnam is presently, the world’s second-largest espresso exporter, behind solely Brazil. In 2021, the export worth for Vietnam’s espresso reached US$3.1 billion. The business performs an essential function in Vietnam’s agriculture financial system and is an export oriented business with greater than 90 % of manufacturing quantity exported. To extend its worth, the federal government has been selling the shift from exporting beans to processed espresso.
Many specialists consider that Vietnam has the potential to overhaul Brazil resulting from its favorable local weather circumstances and lower-cost manufacturing.
Vietnam is shortly turning into a major marketplace for overseas funding in e-commerce actions. The nation’s quickly rising financial system and center class are, in flip, spawning a robust client tradition and rising ranges of disposable revenue. The pandemic has accentuated the demand for digital retail as supply, ride-sharing, and e-wallets steadily grow to be a norm for the Vietnamese, particularly among the many youth.
Vietnam’s e-commerce enterprise elevated by 18 % to US$11.8 billion in 2020, making it the one nation in Southeast Asia to look at double-digit progress throughout the pandemic. This opens a booming outlook for the nation’s e-commerce progress.
Being a signatory to 13 FTAs, Vietnam additionally offers favorable circumstances for buyers to begin a enterprise in e-commerce with decreased or zero customs tariffs on commodities imported or exported from different international locations.
Vietnam Briefing is produced by Dezan Shira & Associates. The agency assists overseas buyers all through Asia from places of work the world over, together with in Hanoi, Ho Chi Minh Metropolis, and Da Nang. Readers might write to email@example.com for extra help on doing enterprise in Vietnam.
We additionally preserve places of work or have alliance companions helping overseas buyers in Indonesia, India, Singapore, The Philippines, Malaysia, Thailand, Italy, Germany, and the United States, along with practices in Bangladesh and Russia.