Because of low wages, a skilled workforce, its strategic location, and weak regulations, Vietnam has become Asia’s best country for manufacturing.
According to data by the International Trade Center (ITC), Vietnam’s revenue from electronics exports amounted to US$38 billion. This may seem like a low number compared to China’s US$560 billion. But it let the country climb the ranks into one of the world’s top 12 electronic producers and exporters.
In fact, despite the prediction by market analysts that China will continue to be the world’s largest exporter of electronics for at least several decades, many global manufacturing companies have decided to base their factories in Vietnam. They cite an aging population and rising labor costs among their reasons.
Samsung’s largest mobile phone factory, for example, is currently under construction in Vietnam’s northern province of Thai Nguyen. Completion is expected in 2015 at a cost of US$3.2 billion.
Can Vietnam Stay the Best Country for Manufacturing?
Along with Vietnam, other ASEAN (Association of Southeast Asian Nations) member countries such as Thailand, Malaysia, and the Philippines are offering their own incentives to lure manufacturers away from China.
The result has been many companies shifting their investment toward other Asian markets. Especially Vietnam which has among the highest export growth in the world.
Foreign businesses say Vietnam has a more convenient geographic location than other Southeast Asian countries. Its eastern shoreline allows faster shipment to the U.S., Japan and Korea. A border with China makes existing supply chains easier to maintain.
However, low wages are still the main draw for most manufacturers. Factory workers in Vietnam are among the region’s lowest paid. Only Myanmar, Laos and Cambodian employees make less. But these nations don’t have some of Vietnam’s other advantages.
Will Vietnam continue to grow at a fast pace? It depends on whether the country can create more skilled jobs and manufacture higher-valued products. If Vietnam continues to invest in education, infrastructure and research, it will grow well into the future.
If not, Vietnam will only attract investment until its neighbors can outcompete it on cost and value.
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