Vietnam’s Economic Outlook Is Broadly Positive

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According to the first ever trade report launched by Maersk Lines on December 10, 2013 in Ho Chi Minh City, Vietnam’s economic outlook still remains broadly positive with a steady flow of foreign direct investment (FDI) and increasing trade volumes. The report covers the first three quarters of Vietnam’s economy in 2013.

According to Maersk, Vietnam was not immune to the global economic crisis, with Europe and US trade growth slowing to between 0-5 percent. As a result, Vietnamese exporters had to divert more of their products to other markets such as Asia, Latin America and Africa. Intra-Asia is the fastest growing container trade in the world and Vietnam has one of the highest growth rates for the intra-Asia export trade. Mr Albert Van Rensburg, Country Manager of MCC Transport, Vietnam & Cambodia, said that Asia is a hotbed of opportunity with GDP growth out-pacing the rest of the world and FDI increasing year-over-year.

The report says that Vietnam is becoming more competitive with Trans-Pacific Partnership (TPP). According to Mrs Nguyen Thi Ngoc Bich, General Director of Maersk Line Vietnam & Cambodia, Vietnam continues to be an attractive sourcing destination with competitive advantages in low labor costs, a strategic geographical location, strong deep water port infrastructure, leading positions within agricultural exports, high GDP growth, long term political stability, and a government committed to enhancing economic stability and development

Vietnam is in the process of integrating into global economy by TPP, where it has the competitive advantage to become the new manufacturing centre of the Pacific Rim. Between the twelve TPP nations, Vietnam offers the lowest labour costs, making it among the most competitive countries within the bloc, particularly in the textiles and garment industries. The restructuring of this sourcing landscape will also give Vietnam a significant advantage over China.

Maersk Line highlighted that they have already seen an increase in foreign investment – specifically from China, Japan, South Korea and Taiwan – from textile manufacturers eager to take advantage of anticipated TPP provisions, as they will enjoy preferential tariff-free conditions compared to today’s high tax levels of 17-35 percent. There are, however, challenges that accompany the TPP, namely around managing growth, the lack of support industries and certain restrictions such as the ‘yarn forward rule of origin’. “Vietnam is heavily dependent on imported materials to produce its exported goods, and currently close to 90 percent of its raw materials and machinery are imported from other countries, including China and other non-TPP partners,” said Marco Civardi, Managing Director of Damco, Vietnam & Cambodia. Vietnam will need to build up its domestic industries in the next few years to reap the full advantages of the TPP.

Ports are one aspect of Vietnam’s infrastructure expected to gain from the TPP. Robert Hambleton, Managing Director of the Cai Mep International Terminal (CMIT), explained that CMIT currently serves the US, and any partnership that increases trade between Vietnam and North America will likely see the need for larger vessels to service those routes, and will ultimately benefit business at CMIT.

CMIT, along with other deep-water ports in Vietnam, is currently grappling with the challenge of oversupply due to the significant flooding of investment into the sector in the mid-2000s. However CMIT remains confident in Vietnam’s long-term growth potential, and the oversupply challenge will improve over time, with the country’s organic growth, trade pacts such as the TPP and cascading of larger vessels.

Maersk Line is the leading liner shipping company in the world with employees in 325 offices across 125 countries, and a fleet of around 600 vessels along with 3.4 million TEU containers. Maersk Line offers the most reliable feeder and mother vessel network between Vietnam, Cambodia and the world, including direct service from Vung Tau to Los Angeles within 18 days.

Duc Quan

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