Vietnam remains an attractive destination for investors (Photo: Savills Read) HCM City (VNS/VNA) - With COVID-19and trade tensions driving the shift of production lines from China toSoutheast Asia, Vietnam, in particular, seems to have emerged as an attractivedestination for investors and manufacturers alike, experts have predicted.
“Vietnamremains a promising market with a growing trend of manufacturing companieslooking to set up operations in the country, which has been happening for anumber of years. Industrial park developers remain confident that demand forindustrial land will continue to grow and therefore land prices are expected toincrease in-line with the long-term potential of Vietnam’s industrial segment,”said Stephen Wyatt, country head for JLL Vietnam.
According toJLL, multinational manufacturers have been setting up operations in Vietnam fora number of years and this movement has accelerated over the past 12-24 monthswith companies looking to diversify their operations and supply chains due totariffs on goods exported from China to the US. More companies are expected tofollow suit as the cost of production rises.
Data fromthe US Census Bureau show a 35.6 percent surge in goods imports from Vietnamlast year, compared with a 16.2 percent contraction in goods imported fromChina.
“Data forthis year will be distorted by the effects of the coronavirus on global supplychains, but the trend of manufacturing moving from China to South East Asiawill continue,” predicted Stuart Ross, head of industrial for South East Asiaat JLL.
According toJLL’s latest market report, companies looking to diversify theirmanufacturing portfolio outside China are attracted to Vietnam thanks to itsproximity to China, Free Trade Agreements (FTAs) and the Government’s ambitionto establish Vietnam as a manufacturing hub for Southeast Asia.
The averageland price in the northern areas reached 99 USD persq.m, up 6.5 percent year-on-year in the first quarter of this year, while the southernareas recorded 101 USD per sq.m, up 12.2 percentyear-on-year in the last quarter last year. Ready-built factories recorded anaverage price of 3.5 - 5.0 USD per sq.m per monthfor both areas.
“In light ofthe current COVID-19 situation, the postponement of ongoing leasingnegotiations and new requirements will become more apparent if the situationdoes not improve soon. However, JLL believes that the market is likely torecover and grow rapidly after the epidemic is well under control. Thedisruption in the global supply chain caused by the virus outbreak is urgingbusinesses to diversify their manufacturing portfolios geographically, insteadof being overly reliant on one market,” JLL said.
The company,however, said that not all manufacturing can be easily outsourced to Vietnam.
“Manufacturingwages in China are now more than three times those in Vietnam,but skilled labour in China is also higher. The sheer scale of China cannot bereplicated: there are more migrant industrial workers in China than people in Vietnam.Furthermore, a large percentage of China’s manufacturing is to serve thedomestic market," Wyatt added.
China iscommitted to growing high-value industries. As a leading manufacturer of solarpanels, 5G networks, artificial intelligence and batteries, these industriesare generally more favoured by local authorities. Lower-value manufacturingchains are often seen as adding to environmental pollution. As China movestowards becoming more eco-friendly, a cleaner, less space-intensivemanufacturing sector will also free up land for rezoning to convert toresidential spaces.
According toJLL, many businesses are likely to rethink their supply chains in the long termto ensure continuity of their operations and to mitigate risks of futureshocks. Coupled with initiatives to improve the sustainability performance andlimit the environmental impact of wider operations, retailers may opt toproduce and house more stock locally./.
“Vietnamremains a promising market with a growing trend of manufacturing companieslooking to set up operations in the country, which has been happening for anumber of years. Industrial park developers remain confident that demand forindustrial land will continue to grow and therefore land prices are expected toincrease in-line with the long-term potential of Vietnam’s industrial segment,”said Stephen Wyatt, country head for JLL Vietnam.
According toJLL, multinational manufacturers have been setting up operations in Vietnam fora number of years and this movement has accelerated over the past 12-24 monthswith companies looking to diversify their operations and supply chains due totariffs on goods exported from China to the US. More companies are expected tofollow suit as the cost of production rises.
Data fromthe US Census Bureau show a 35.6 percent surge in goods imports from Vietnamlast year, compared with a 16.2 percent contraction in goods imported fromChina.
“Data forthis year will be distorted by the effects of the coronavirus on global supplychains, but the trend of manufacturing moving from China to South East Asiawill continue,” predicted Stuart Ross, head of industrial for South East Asiaat JLL.
According toJLL’s latest market report, companies looking to diversify theirmanufacturing portfolio outside China are attracted to Vietnam thanks to itsproximity to China, Free Trade Agreements (FTAs) and the Government’s ambitionto establish Vietnam as a manufacturing hub for Southeast Asia.
The averageland price in the northern areas reached 99 USD persq.m, up 6.5 percent year-on-year in the first quarter of this year, while the southernareas recorded 101 USD per sq.m, up 12.2 percentyear-on-year in the last quarter last year. Ready-built factories recorded anaverage price of 3.5 - 5.0 USD per sq.m per monthfor both areas.
“In light ofthe current COVID-19 situation, the postponement of ongoing leasingnegotiations and new requirements will become more apparent if the situationdoes not improve soon. However, JLL believes that the market is likely torecover and grow rapidly after the epidemic is well under control. Thedisruption in the global supply chain caused by the virus outbreak is urgingbusinesses to diversify their manufacturing portfolios geographically, insteadof being overly reliant on one market,” JLL said.
The company,however, said that not all manufacturing can be easily outsourced to Vietnam.
“Manufacturingwages in China are now more than three times those in Vietnam,but skilled labour in China is also higher. The sheer scale of China cannot bereplicated: there are more migrant industrial workers in China than people in Vietnam.Furthermore, a large percentage of China’s manufacturing is to serve thedomestic market," Wyatt added.
China iscommitted to growing high-value industries. As a leading manufacturer of solarpanels, 5G networks, artificial intelligence and batteries, these industriesare generally more favoured by local authorities. Lower-value manufacturingchains are often seen as adding to environmental pollution. As China movestowards becoming more eco-friendly, a cleaner, less space-intensivemanufacturing sector will also free up land for rezoning to convert toresidential spaces.
According toJLL, many businesses are likely to rethink their supply chains in the long termto ensure continuity of their operations and to mitigate risks of futureshocks. Coupled with initiatives to improve the sustainability performance andlimit the environmental impact of wider operations, retailers may opt toproduce and house more stock locally./.
VNA
