A worker checks CDs at Manutronic Vietnam Joint Stock Company. (Source: VNA) HCM City (VNS/VNA) - Southeast Asia, especially Vietnam,can expect to see more supply chains coming its way if itimproves production technology and capacity, as well as regionalcooperation, HSBC officials have said.
Supply chains are shifting to Southeast Asia due to the region’s growingeconomies and consumer markets, especially with trade tensions and risingproduction costs affecting other markets, according to the bank.
Pham Hong Hai, CEO of HSBC Vietnam, said: “The changes in global trade arecausing businesses to revisit their supply chain investment and capacitystrategies, but we have yet to see this convert into wide-scale shifts toSoutheast Asia, South Asia or other parts of the world.
Rather than see a wide-scale shiftto ASEAN, multinationals due to trade tensions have multiple supply chainstrategies with a mixture of localisation, offshoring and re-shoring activityemerging, according to Hai.
“Shifts in supply chains have been a multi-year phenomenon due to structuralchanges in production technology, labour costs, and emerging consumermarkets. Over the past decade, ASEAN and Vietnam have been perceived as astrong production option for multinationals given its role within existingsupply chains, growing consumer base, and strong trade and investment ties,” headded.
Countries where infrastructure and production networks are already in placesuch as Vietnam are likely to be the main beneficiaries of a shift inproduction capacity.
The hot buttons that will matter for both large and small firms include howASEAN and Vietnam can deliver competitive production costs, and how technologyand innovation are being introduced to improve productivity.
At a government level, this will require educating international firmsabout regulatory frameworks, tax incentives, and free trade zones, along withdemonstrating improvements in ports and rail and other transportinfrastructure.
It will also require ASEAN governments to demonstrate a pathway to longer-terminitiatives to remove the non-tariff barriers around the flow of goods acrossASEAN, the development of skilled labour; and intellectualproperty protection, cybersecurity, and movement of commercial data acrossborders.
ASEAN is the US’s fourth largest trading partner, with nearly 4,700 Americancompanies in the region. It is the top destination for US foreign directinvestment in Asia.
A recent US Chamber of Commerce report found that 80 percent of USfirms in Southeast Asia are looking to increase investment in theregion over the next five years.
The EU is ASEAN’s second largest trading partner and largest source ofFDI.
China continues to be ASEAN’s largest trading partner (15 percent of its totaltrade), while ASEAN is China’s third largest trading partner. – VNS/VNA
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