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Vietnam leads way as giants’ trade spat bites
Vietnam is reaping the lion’s share of benefits from the US-China trade war as manufacturers transfer their supply chains to avoid US tariffs, according to one analyst.
“Thailand has gone up a bit in terms of percentage increase in US imports because of the US-China trade war, but little compared to Vietnam,” said Aditya Srinath, associate director of Asian equity research at J.P. Morgan Securities Singapore Private Ltd. “Vietnam is already a success story, and other countries in Asean need to stand on its shoulders to attract investment.”
Speaking at the CLMVT 2019 Forum, Mr Srinath reported that 37% of companies surveyed by J.P. Morgan said they were considering moving their supply chain, while 40% from that group were considering a move to an Asean country.
But while Vietnam has seen a large rise in exports to the US, Thailand saw only a fraction of those gains, with other CLMVT countries seeing even less in percentage increases.
Thailand saw a 5.98% increase (US$15.09 billion) in trade in the first quarter of 2019 compared with the same period in 2018, while Vietnam’s trade grew 34.93% ($24.06 billion) in that same period, according to figures from the US Census Bureau.
Ironically, a large portion of the increase in exports to the US from CLMVT consists of products that are not subject to new punitive tariffs against China by the Trump administration.
“Companies are starting to move value chains, not just because of tariffs but because of competitiveness,” Mr Srinath said. “And now it’s not all about costs but protecting intellectual property.”
Some US, Japanese and South Korean companies fear that their patented technology could be copied and reproduced, so countries with strict IP laws are gaining the upper hand in manufacturing.
At a following panel of ministers of commerce from CLMT countries, the ministers sought to learn from Vietnam’s example, while bolstering intra-regional trade and not just relying on exports to the US and China.
“Vietnam is a lesson for us to learn from, but its economy might be overheating, so the rest of the CLMT can take over some of the load from shifting supply chains,” said Pan Sorasak, Cambodia’s commerce minister.
He said Cambodia benefits from low-cost labour that could be ideal for foreign direct investment in manufacturing.
Laos shares the same low-cost labour, plus a wealth of natural resources.
“Vietnam is very successful at attracting foreign investment,” said Khemmani Pholsena, industry and commerce minister of Laos. “I would like to see more of it spread around to Laos and Cambodia.”
Chutima Bunyapraphasara, acting commerce minister of Thailand, laid out a grand vision of an interconnected Asean, with highways connecting Vietnam to India with China as the central hub.
“The value chains from this connectivity would improve many sectors,” she said. “It would not just bolster hardware, like railways and highways, but soft infrastructure in terms of rules and regulations.”
Source: https://www.bangkokpost.com/business/1701132/vietnam-leads-way-as-giants-trade-spat-bites