6 reasons Why You Should start to source from Vietnam
Vietnam is emerging as the clear leader in low-cost manufacturing.
Annual GPD growth of 7.1% in 2018, 7% in 2019 and even 2.8% in 2020 despite global economic melt-down is an indication economic strength and security.
Advantages in cheaper running costs and labour costs are attracting manufactures from all over the world to re-locate to Vietnam.
The population is young, increasingly highly skilled, salaries are upto 50% cheaper than china and comparatively low amongst neighbouring ASEAN countries.
The efficient control and containment response to the Covid -19 pandemic has further strengthened its global reputation and appeal.
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Strategic benefits for your business
There are many benefits to sourcing in Viet Nam and to highlight a few key strategic reasons we must compare with it’s larger manufacturing neighbour – China. They have a highly developed (online) supplier network and infrastructure, easily accessibility to everyone – large enterprises and small entrepreneurs. The down-side is this lowers the barriers to entry, dramatically increase competition and increases client risks to fraud, IP theft and un-ethical business practises.
After analysing some of the key issues our clients were experiencing when sourcing in China we noticed some reoccurring patterns:
- when items become popular an explosion of supplier appear overnight advertising the same “hot item” on Alibaba, crushing the profit margins and quickly increasing competition.
- competing with direct sales by the manufacturer often happens when orders start increasing.
- Difficulty Identifying legitimate suppliers.
Some of the benefits we provide our clients sourcing with us in Vietnam are:
- High barriers to entry and harder to find suppliers in Vietnam mean our clients reduce competition, maintain healthy margins and protect their brands. As many suppliers in Vietnam are not listed on Alibaba and have no intention of joining you don’t have to worry about your product being advertised and promoted to other businesses and entrepreneurs
- In Vietnam we often find unique items in product categories that often look identical in China
- Cheaper! We often deliver saving of around 20-30% for our clients. Particularly items that are labour intensive or that benefit from vietnams local resources.
* disclaimer: not all items are cheaper
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Vietnam has signed a lot of free trade agreements with countries and territories around the globe. They welcome foreign direct investment and make continues efforts to align with international standards; streamlining and harmonising exports and imports. Reduced or 0% tariffs introduced by free trade agreements can reduce your import costs considerably.
Currently the US and Vietnam have a well designed BTA (bilateral trade agreement) which is a comprehensive agreement inline with WTO standards. The new democratic administration in USA has expressed possibilities of re-joining the CPTPP* which will bring with it a huge boost for US-Vietnam trade.
* The CPTPP is a free-trade agreement (FTA) between 11 countries around the Pacific Rim: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan.
Vietnam is Canada’s largest trading partner amongst the ASEAN region since 2015 and entered into the CPTPP agreement in December 2018.
New Zealand is part of the CPTPP trade has an average growth of 14.2% annually since the establishment of the comprehensive partnership in 2009, reaching US$1.1 billion last year (2019). Two-way trade totalled US$1.4 billion in the first half of this year, (2020)
Australia is also part of the CPTPP and have a strong relationships with Vietnam with shared strategic interests.
The United Kingdom and Vietnam have just formalised a FTA similar to that in-place with the EU. 99% of all tariffs will be eliminated. Furthermore ministers have called for the UK to Join the CPTPP, watch this space UK!
EU FTA – 99% of all tariffs are to be abolished over the next 7 years. This will stimulate an additional 15 billion per year in exports to EU with the additional benefits of raising standards, trade protections and environmental protection standards.
Trade between Vietnam and UAE continues to rise, they have very good relations and are seeking preferential trade ties, possibly a free trade agreement in future. A newly established trade centre in Dubai is their first step in accelerating trade with the UAE.
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Vietnam’s optimistic future
As indicated by the positive growth rate of its real GDP, Vietnam’s economy is expanding due to growth in exports, domestic demand, and the manufacturing sector. Sourcing in growing economic climate expands opportunities and develops markets and infrastructure.
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In todays erratic political climate, stable leadership and governance has an increasing impact on even small business owners decisions on where to import from and do business. Our observations are that Vietnam doesn’t get involved in international conflicts and its government has strong leadership over the population creating a very stable atmosphere.
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Logistics and shipping
Vietnam has 44 seaports with a total capacity of 470-500 million tons per year. The major ports in Vietnam include Hai Phong, Da Nang, Qui Nhon, and Ho Chi Minh City. The government are rapidly expanding infrastructure to meet the increasing demand for exports and imports.
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Although unable to compete with the sheer size and number of factories in China, Vietnam’s list of quality factories is growing day by day. They are rapidly expanding in electronics, key consumer goods, furniture, plastics, packaging and more with keen entrepreneurial spirit and ingenuity they are able to supply a huge demand.