As Asian supply chains shift, Vietnam is poised to benefit
A magazine read by ocean shipping and logistics chain specialists the world over has concluded that Vietnam is about to inherit much of Chinaâ€™s â€˜decade-long role as the worldâ€™s factory floor.â€™
The Journal of Commerce points to the nationâ€™s development of large capacity container ports southeast of HCM City and its low labor costs as keys to this transformation.
Journal of Commerce, or JOC, is an American publication widely referred to as the â€˜bible of the shipping industry.â€™ â€œVietnam,â€ it says in its June 14 cover story, â€œis emerging as a key supplier of lower-value components to China, which is also outsourcing production to Vietnam.â€ It adds that this theme was often touched on at the World Economic Forum meeting in HCM City early in June. Speaker after speaker, JOC notes, â€œsaid improved connections between Vietnam and China and other Southeast Asian nations would be pivotal to meeting the emerging manufacturing trends.â€
JOC forecasts that the volume of sea freight moving from Vietnam to the US will nearly double between 2009 and 2011, largely the consequence of direct shipping service initiated by seven trans-Pacific carriers. It foresees a similar surge in exports to Europe when, next March, Vietnamâ€™s first container terminal able to handle ships with a draft of 45 feet â€“ the standard on Asia to Europe routes â€“ is open for business, and shippers establish direct services.
Until last year, freight headed to and from Vietnam has moved on smaller ships to Singapore, Taiwan or Hong Kong, and there has been transferred to larger vessels; thatâ€™s typically still the case for goods moving from Vietnamâ€™s northern ports.
JOC analyzes that the opening of the big container ports at Cai Mep/Thi Vai, near Vung Tau, is timed perfectly to capitalize on multinational companiesâ€™ rush to shift production of many consumer goods and components from Chinese factories. â€˜Vietnam,â€™ it says, â€˜looks to be the strongest of alternatives.â€™
â€œMore US and European importers [are shifting] production of textiles, apparel and footwear to the rapidly growing country,â€ it explains. â€œThe shift . . . began in 2007 when Vietnam became a member of the WTO, [but] hit a brick wall last year as new foreign investment all but dried up during the Great Recession.â€ Even so, JOC notes, Vietnam maintained positive growth while other countries lost ground.
The shipping and logistics industry magazine takes particular note of a 41 percent jump in Vietnamâ€™s electronics exports in the first four months of 2010 and the pending start-up of Intelâ€™s huge HCM City plant. It quotes an expert as saying that â€œwe are seeing a very fast transformation of Vietnamâ€™s light industrial base. The big shift in the last two years is the rise of electronics.â€
Inter alias, JOC reports that Vietnam last year passed Hong Kong to become the number two exporter of womenâ€™s and infant wear to the US, after China, and is third in footwear exports, trailing China and Hong Kong.
Parallel to the development of direct shipping services, says JOC, air cargo operators are also building capacity.
Summing up, the magazine calls â€œthe rapid pace of [Vietnamâ€™s] maritime development is reminiscent of what happened when Chinaâ€™s trade took off ten years ago.â€ However, it notes that significant constraints on growth remain, citing in particular the nationâ€™s still poorly developed road and rail transport system and â€œnotorious red tape.â€
Because â€˜administrative proceduresâ€™ are so difficult, according to one of the magazineâ€™s sources, â€œcompanies that are looking into business [in Vietnam] should make sure they have a good logistics provider with local experience that can help manage the [domestic] supply chain.â€
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Tags: Asian supply chains, vietnam logistics