Vietnam’s expanding role in high tech manufacturing

As one of the fastest growing emerging markets in Asia Pacific, Vietnam’s economy is dependent on exports, driven by the likes of the apparel, automotive and high-tech industries and this is likely to continue as more manufacturing moves into the country. Indeed, Dickson Ho, Principal Economist (Asian and Emerging Markets) for the Hong Kong Trade Development Council noted that foreign direct investment in Vietnam increased by 9.6% in 2014. He further notes that while minimum wage recently increased in the country, it is still lower than surrounding countries, particularly China.

That is likely among the reasons why various high-tech companies such as Samsung, Intel, LG and Microsoft have set up shop in Vietnam. In fact, Microsoft announced plans to close its Nokia mobile phone factories in China by the end of first quarter this year and shift its Nokia factories to Vietnam.

The Hong Kong Trade Development Council conducted research into Vietnam’s increasing role in manufacturing and noted that, since 2013, electronic products have been the country’s largest export sector. Research further indicated that electronics industrial clusters were focused in Northern provinces of Vietnam such as Hanoi, Thai Nguyen and Bac Ninh.

Free trade agreements are further boosting activity. For example, the Vietnam-Korea FTA was just concluded in December 2014. Korea is Vietnam’s third-largest trading partner, with bilateral trade reaching US$30bn in 2014. The agreement will remove import duties on more than 90% of tariff lines.

For logistics providers, this growing high tech manufacturing presents opportunities. In late 2014 Rhenus announced that it had founded an independent company in Vietnam with its headquarters in Ho Chi Minh City. The company had previously handled projects in Vietnam in conjunction with selected national agents. According to the CEO, “The country is an important and stable partner within the ASEAN association and it is opening up to an increasing degree. As a result of establishing this new firm, we´ll be able to offer an even more extensive network and continue expanding our services.”

In addition, Yusen Logistics expanded further in Vietnam with a multi–purpose warehouse complex in Hai Phong City while CEVA Logistics expanded its presence in Vietnam with a new branch office in Hanoi. The branch office in Hanoi will handle a range of supply chain and logistics services including air freight and ocean freight, contract logistics, warehousing and distribution, local transportation and other domestic value added services.

The formation of the ASEAN Economic Community will further enhance Vietnam’s position within the region, creating additional opportunities in domestic and regional transportation as well as warehousing services – specialized and general.