The high-tech segment, which accounts for the largest share of Vietnam’s intra-Asia trade, is one of the four key drivers of the country’s future trade growth.
Vietnam’s trade with 11 other major Asian markets could rise significantly in value by 2030, according to an industry study released by UPS. Clearing the Runway for Intra-Asia Trade sheds light on trade growth drivers, potential headwinds, and multistakeholder action required to unlock the 2030 opportunity.
Trade in just 12 key markets, known as the Asia 12, accounts for 88% of intra-Asia trade today and could more than double in value from USD 6.4 trillion in 2020 to USD 13.5 trillion in 2030. Vietnam has rapidly grown into an important regional manufacturing hub. The country is expected to leverage this position further in the coming decade and trade value with the rest of the Asia 12 is forecast to rise from USD 326 billion to USD 465 billion by 2030.
“Intra-Asia trade holds incredible potential over the coming decade, built off the immense economic success that key regional economies have accomplished in recent years,” said Michelle Ho, president UPS Asia Pacific, Middle East and Africa.
“Through the strength of our global network and extensive brokerage expertise, UPS has been helping Asian governments, industry partners, and our valued customers navigate global trade over the last five decades. This report combines that expertise with fresh insights to explore opportunities and challenges in intra-Asia trade for the next ten years and beyond.”
Product segments key to Vietnam’s trade growth
Four segments have driven the surge in trade among the Asia 12: retail, industrial manufacturing and automotive (IM&A), high-tech, and healthcare. In Vietnam, these segments accounted for 82% of trade with the rest of Asia in 2020.
The high-tech segment, a key export industry that constitutes 43% of Vietnam’s intra-Asia trade value, will drive future growth given the rise in digitalization across the Asia 12. The IM&A segment meanwhile accounts for 21% of Vietnam’s trade within Asia today, with this expected to double by 2030 thanks in part to government support to boost the manufacturing sector.
Additionally, Vietnam’s participation in trade deals such as the Regional Comprehensive Economic Cooperation (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) allows businesses to access a wider range of export markets and consumer goods with reduced trade barriers.
Multi-stakeholder effort needed for Vietnam to reach trade potential
While intra-Asia trade holds significant potential, there exist a number of barriers that, unless addressed, may stagnate trade within the Asia 12. Specifically for Vietnam, lack of progress on logistics infrastructure could constrain its ability to serve centers of demand in rapidly developing economies. The industry is heavily fragmented, with 95% of logistics enterprises being MSMEs, limiting its potential for innovation and large-scale investments as these smaller players would face difficulty in plugging industry-wide bottlenecks.
Multi-stakeholder action is required to reduce impediments to regional trade and harness the opportunities to steer intra-Asia trade towards take-off. Businesses with trade interests in Vietnam and those in the logistics sector must build resilience against potential headwinds while at the same time being ready to capture opportunities presented by the growth in intra-Asia trade. This includes diversifying supply chains, digitalizing completely, and integrating MSMEs into regional supply chains.
“Small businesses are vital to the Vietnamese economy, and one of the many things this report highlights is the importance of making sure our SMB customers are getting the support they need so that the full potential of intra-Asia trade can be realized over the next decade,” said Squall Wang, managing director UPS Vietnam.
“At UPS we’re doing that by helping businesses digitalize and simplifying the shipping process. We’re using our position as a customs brokerage leader to help businesses optimize their supply chains and explore new international trade opportunities. And we continue to add capacity to our air network, with several new flights out of both Hanoi and Ho Chi Minh City introduced in the past three years.”