Q&A Session at The Webinar "Is "Made in Vietnam" the New "Made in China"?"

The webinar "Is "Made in Vietnam" the new "Made in China''?", hosted by FiinGroup and InCorp, has received many interactions, positive feedback, and questions about the manufacturing sectors in Vietnam.  

Let's discover some questions and insightful answers from our speakers. 

1. Why do local manufacturers not keep pace with FDI companies when it comes to export growth?  

Local manufacturers struggle to keep pace with FDI companies in export growth due to several key challenges: 

• Limited access to capital and technology: Compared to FDI companies, local manufacturers face more challenges in accessing capital and technology, making them less competitive in terms of investing in advanced machinery, automation, and R&D. 
• Smaller operational scale: FDI firms typically operate on a larger scale, benefiting from economies of scale that reduce per-unit costs, making their products more price-competitive in international markets. 
• Weaker integration into global supply chains: FDI companies are typically part of well-established multinational networks, giving them easier access to raw materials, distribution channels, and markets, where as local  manufacturers often struggle with connections and global market access. 
• Challenges in skilled labor and management: FDI companies often attract skilled foreign labor or offer world-class training to local workers, with the capacity to pay higher wages. In contrast, local manufacturers find it challenging to recruit and retain highly skilled talent, especially for technical and managerial roles, limiting their ability to scale and improve efficiency. 

2. China is getting more involved in FDI investment in Vietnam. Therefore, if the investment is not to avoid tariffs, it will go in a direction that is beneficial to Vietnam. Is this statement correct?   

The statement is partially correct but needs additional context. While Chinese FDI can indeed benefit Vietnam, it doesn't automatically follow that every investment, aside from tariff avoidance, will always be beneficial. The impact depends heavily on various factors: 

• Motivation behind investment: 

- Labor market access: Leveraging Vietnam’s competitive labor costs. 

- Portfolio diversification:  Chinese investors may seek to diversify their portfolios, and investing in Vietnam offers a valuable opportunity to do so. 

- Strategic regional expansion: Gaining access to ASEAN markets or regional trade agreements. 

- Local market potential:  With Vietnam's growing middle class, Chinese companies may establish local production to better serve both the domestic market and the broader region 

• Regarding the avoiding tariffs statements:  

- Given the US-China trade tension, Chinese companies may invest in Vietnam to bypass tariffs as a strategic move 

- The direction of FDI depends on the broader economic and trade conditions between the two countries. 

• Potential benefits for Vietnam: 

- Technology and skills transfer. 

- Job creation and income improvement. 

- Infrastructure and economic development. 

• Important considerations: 

- Not all investments equally benefit the local economy or communities. 

- The type of investment and sector involved significantly influence the actual impact. 

- Local regulatory frameworks and policies are critical to ensuring that FDI aligns with Vietnam’s economic interests. 

In conclusion, while many Chinese investments can benefit Vietnam, their impact ultimately depends on specific investment objectives, execution, and Vietnam's ability to manage and maximize local benefits effectively. 

3. What impact would tariffs imposed by the US have on this sector? Assuming the highest tariff imposed so far by the US   

If the U.S. were to impose the highest tariffs on Vietnamese imports, Vietnam’s manufacturing sector would likely face significant impacts, including: 

• Higher Production Costs: 

- Increased costs of imported raw materials and components. 

- Vietnamese exports become more expensive in the U.S., leading to the reduction in demand. 

• Shifts in Trade Patterns: 

- Manufacturers may seek alternative markets like Europe and Southeast Asia, but these may not match U.S. demand and could pose shipping challenges 

- Potential disruption in supply chains, prompting companies to relocate production elsewhere. 

• Reduced Foreign Direct Investment (FDI): 

- Vietnam may become less attractive to investors aiming to export to the U.S. 

- Multinationals might relocate to other low-cost markets such as Bangladesh, Indonesia, and India to avoid tariffs. 

• Economic and Employment Challenges: 

- Potential layoffs and factory closures, especially in electronics, textiles, and furniture sectors. 

- Slower growth in the manufacturing sector and overall GDP. 

• Currency Depreciation and Inflation Risks: 

- Possible depreciation of the Vietnamese dong to maintain export competitiveness, raising inflation risks. 

- Increased domestic prices for goods and raw materials due to higher import costs. 

• Increased Focus on Efficiency and Innovation: 

Manufacturers may invest more in automation, technology, and productivity improvements to offset higher tariffs. 

• Potential Diplomatic and Trade Negotiations: 

 Vietnam may negotiate with the U.S. to reduce tariffs through trade agreements, potentially offering concessions in areas like intellectual property, labor rights, or market access. 

Download the presentation HERE

#FiinGroup #FiinResearch #EnlightenTheMarket #LeadTheWayToSuccess #Webinar #Manufacturing # Processing #EntrySolutions #LocalInsights