Foxconn (Taiwan), TLC and Lenovo (China), Hanwa (South Korea) and Yokowo (Japan) are relocating their factories to Vietnam as a shelter from the ‘storm’ of the US-China trade war.
The trade tensions between the US and China, investment flow and next-generation FTAs, including EVFTA, CPTPP and RCEP (which is hoped to be completed by the end of 2019) , all have brought positive influences to Vietnam’s industrial market.
According to Savills Vietnam, Hanwa, which specializes in making airplane accessories, has moved to Hanoi. Yokowo, specializing in making equipment for motor vehicles, has moved to Ha Nam and Huafu in textiles and garments has moved to Long An.
The manufacturers relocating their factories from China to Vietnam include Goertek (Hong Kong) and TLC. The former, specializing in headphones and phone accessories, will move to Bac Ninh, while the latter, specializing in TVs and electronics, will set up a factory in Binh Duong.
The high population and population structure give Vietnam advantages in comparison with other regional countries. In 2018, Vietnam had 94.6 million people. Like Indonesia and Malaysia, Vietnam has a young population with the number of people aged over 65 just accounting for 6-7 percent, while the figure is 11-12 percent in China and Thailand.
Young people of working age (15-54) account for 60-62 percent of total population. The figure is nearly the same as Malaysia (57 percent) and Indonesia (59 percent) and Vietnam has to compete with the two countries to catch the eyes of big manufacturers considering where to move.
However, Vietnam has a big advantage – its GDP growth rate is the highest in Southeast Asia. GDP is expected to reach 6.8 percent in 2019, higher than the Philippines (6.2 percent), Indonesia (5.8 percent), Malaysia (4.5 percent), Thailand (3.5 percent) and Singapore (2.4 percent), according to ADB.
Meanwhile, according to WB, the labor cost in manufacturing sector is very low, just $237 a month in 2018, higher than the $190 in Indonesia, but much lower than $866 in China, $924 in Malaysia and $412 in Thailand.
The cost of building production workshops in Vietnam is very attractive, which is lower than China, India, Malaysia and even Indonesia. The rent of workshops and storehouses in Vietnam is $380 per square meter, while it is $400-580 per square meter in the other four countries.
Vietnam is also attractive thanks to its high industrial production growth index, 9.6 percent in the first seven months of the year.
Vietnam has a high export growth rate to the US. In the first three months of the year, Vietnam’s exports to the country grew by 40.2 percent. Textile and garment exports alone brought $4.42 billion and footwear $2 billion.