Vietnam's liberalised market will aid its possibility to become the next supply-chain hub.

Since 2018, the global business outlook is changing. As the trade war intensified between Washington and Beijing, many speculations have flooded regarding the changing global supply chain landscape. When the USA baited on Huwaei, the Chinese tech company banning its operations in the USA, the allies followed. Since then, many companies have shifted their investment and base in countries, which is ideal for their operations.

Vietnam, a south-east Asian country, has been amongst the preferred choice of investors. With a stable political scenario, secure infrastructure, investor-friendly policies and the government that is heavily backing tech start-ups, the investment in the country increased significantly. Vietnam was amongst the first country, which recovered from the novel coronavirus pandemic, resumed operations and opened the market.

Once amongst the poorest, the country has sustained many economic injuries since the Vietnam War. According to a report by the World Economic Forum, in 1980, the country's economic growth was stuck between US$200 and US$300, ranking the company amongst the frugal economies in Asia. But its growth over the past twenty years has been hailed many times. It did not happen overnight but was part of "Doi Moi," a series of many economic and political reforms that steered the country into becoming a "Socialist-oriented market economy."

Liberalisation and Increased Investment

Global supply-chain investment and operations are governed by the free market. And Vietnam has been a pioneer of promoting a liberalised market. In the past two years, the 6%-7% economic growth of Vietnam has rivalled with China's. As the trade war executed and escalated in 2019, companies like Samsung smartphone and Nike sportswear found a safe haven in Vietnam. Additionally, the country was swarmed by investments from many international tech organizations.

In 2019, the country entered into a Free Trade agreement with 13 ASEAN (Association of Southeast Asian Nations) countries. Moreover, the EVFTA report 2018, by the European Chamber of Commerce (EuroCham) in Vietnam revealed that 72% of its members believe that Vietnam to be a potential European business hub.

Moreover, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and European Union Vietnam Free Trade Agreement (EVFTA), further bolstered the foreign investments in the country.

In the past year, the demand for Vietnam's industrial parks has skyrocketed. Local reports indicate that Ho Chi Minh City parks' occupancy rate surged to 24% points, year-to-year to over 90%. Additionally, the country has witnessed a higher land leasing cost due to the escalated trade war. In 2018, the real state services firm CBRE released a report stating that the production facilities of many companies from China are now en route to Vietnam.

Moreover, the two oldest industrial areas of South Vietnam, Binh Duong and Dong Nai, remain the most desired destinations for new manufacturers.

Countries like South Korea, Hongkong and Japan have sought Vietnam as a leeway to expand operations. In the year 2019, South Korea became the top investor of Vietnam by spending US$7.92 billion, according to the data released by Vietnam's Ministry of Planning and Investment. The amount of Foreign Direct and Indirect investment in 2019, aggregated to be around US$13.89 for the year 2019. Despite the soaring trade war between the US and China, South Korea still remains the top investors of Vietnam.

Moreover, big tech giants like Apple have shifted their manufacturing operations from China to Vietnam. The company has set up plants in Vietnam for the production of around three million to four million units or around 30% of total AirPods.

Another Taiwanese tech company Pegatron, which partner with Microsoft and Apple, and is ranked amongst the top five global manufacturers that have invested US$1billion in the Hai Phong region of Vietnam. The company is seeking approval to build three plants that manufacture high-tech products. Moreover, the company is planning to move its research and development centre from China and Vietnam.

Outlook

The country's liberalized market provides a huge opportunity for Vietnam to the next global supply chain market. With the existing and unprecedented situation of the trade war, the outlook for Vietnam in Supply-chain remains optimistic.