Vietnam: The Next Asian Tiger?
January 2, 2007 by SwizStick
Filed under 3PL, Supply Chain Management
We’ve talked about Vietnam before and linked to articles discussing Vietnam’s growing economy. I recently returned from a business trip in Vietnam last month and I was impressed with what little I saw (it was a short trip). Ho Chi Minh City is a city undergoing massive, rapid change. It reminded me of Shenzhen 10 years ago, which also was undergoing rapid economic development at the time (and still is). Once you leave Ho Chi Minh City and get out into the country things don’t seem to have changed much in the last 30 years or so, at least I imagine they haven’t as I had never been to Vietnam before: poorly paved, undivided roads, some areas without roads at all, old apartments and flats with cluttered storefronts underneath, etc. But dispersed amongst the outer provinces near Ho Chi Minh City are flourishing factories bustling with activity, manufacturing everything from garments, to ceramics, to bamboo houseware, and more.
This month’s issue of Air Cargo World has an article on Vietnam’s acceptance into the WTO (which ocurred while I was there):
Even without WTO membership, Vietnam’s momentum has been strong. Average economic growth of 7.4 percent over the past five years made it the fastest growing economy in Asia next to China. Its export earnings in the first nine months of the year climbed 24.2 percent to $29.4 billion, according to the country’s General Statistics Office.
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Much of the attention has been on the garment industry, but this sector may not be as buoyant as expected. In fact, the country’s largest garment maker recently predicted Vietnam’s $3 billion garment trade might see a surge of bankruptcies due to rising labor costs and competition from China. Moreover, fabrics for garment production are largely imported, which makes the final products more expensive than Chinese output.
The industry is Vietnam’s second-biggest exchange revenue earner after crude oil.
As the article points out, BAX and DHL have made large investments in Vietnam and believe electronics manufacturing to be the next big thing. With labor and other costs rising in China, look for more Chinese companies to outsource to Vietnam. Indeed, some of the production facilities I was most impressed with during my visit were Chinese owned and run.
Could Vietnam become the next Asian Tiger? It’s certainly possible, but outside of Ho Chi Minh City the country is still extremely rural and underdeveloped. Vietnam needs to make massive investments in its infrastructure which, like China, will have to play “catch up” for years as the economy continues to grow faster than the infrastructure can handle. Corruption is also rampant and a major problem to doing business. However, the Vietnamese people I met were extremely industrious and efficient – they put their heads down and work until the job gets done. Entry into the WTO will only speed up economic activity and progress and it seems clear to me that Vietnam has studied China’s development into a market based economy and is learning how to apply those lessons to their own.
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