Vietnam chases after manufacturing giants

By Ha Phuong   September 29, 2016 | 04:30 pm GMT+7

China might lead the way, but Vietnam has big ambitions.

Manufacturing has seen rapid evolvement across the world in recent years, and earnings from the sector are encouraging nations to focus on developing technology-intensive infrastructure and education, Deloitte said in its Global Manufacturing Competitiveness Index 2016 (GMCI).

The top manufacturing hubs on this year's index belonged to China, the U.S., Japan and Germany. “Asian tiger” China has secured the top place since 2010. However, moving to 2016 and looking forward to the end of this decade, advanced manufacturing driven by a focus on innovation and advanced technology has become a new trend, hence, shaping a new battleground for global competitiveness. This competitiveness is likely to heat up toward 2020 when the U.S. is expected to pass China to become the world’s favorite manufacturing destination.

Manufacturing hubs can mostly be found in Europe, North America and Asia Pacific.

The world also witnessed a rise of the Asian “Mighty 5” (MITI-V), namely Malaysia, India, Thailand, Indonesia and Vietnam, battling to be the next Asian manufacturing hub after China. Those countries are among the top 20 most competitive on the index. The MITI-V have emerged as low-cost global manufacturing destinations.

Vietnam ranked 18th on the index this year, the same as three years ago when the last survey was conducted, but is projected to climb six places to 12th by the end of this decade.

Considering the current climate of sluggish economic growth, containing costs to boost profits remains a critical imperative for manufacturers. Vietnam has become a magnet for manufacturers due to its comparatively low labor costs, and has long been seen as an alternative to China when it comes to low-cost manufacturing. A young labor force is another factor that makes Vietnam outshine its competitors. Over the last ten years, Vietnam has raised its overall productivity, prompting manufacturers to invest in billion-dollar manufacturing complexes across the country.

When it comes to manufacturing exports as a percentage of total merchandise exports, Vietnam stands slightly below Thailand but exceeds Malaysia, Indonesia and India.

Manufacturing executives cited talent as the most important driver of a country’s ability to compete on the global stage, said the survey. However, the lack of talent working in the manufacturing sector is Vietnam’s long-term issue. Often, Vietnamese labor is hired especially for the final assembling of products to be exported, said Pietro Masina, Associate Professor of Economics at the University of Naples "L'Orientale", Italy, in an interview with VnExpress International. The country needs to enhance the quality of its human resources.

*Index methodology: The survey was conducted on 560 respondents from all over the world; respondents are mostly CEOs, CFOs/COOs and members of managing boards. Manufacturing executives were asked to rate the overall manufacturing competitiveness of 40 countries, today and in five years. The selection of the countries was based on the conclusions of a sampling of executives as well as subject matter specialists from Deloitte.

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