Vietnam Preparing to Steer Supply Chains Away from China

Pandemic opens the door for Vietnam . . . 

The COVID-19 experience is making many countries wake up to the risk of putting all their supply-chain eggs in one basket, especially after production in China halted due to the COVID-19 epidemic. In addition, the finger-pointing over the virus’s origins has led to a steep deterioration in U.S.-China ties. Vietnam, which received global praise for its handling of the spread of COVID-19, is looking to take advantage of the current circumstances to attract foreign investment. For example, the country is ready to produce and supply 30 per cent of the world’s AirPods, as Apple has started diversifying its production beyond China.

How is Vietnam attracting investment?

After success in containing the coronavirus, Vietnam is positioning itself as one of the safest places to do business. Not only can it offer low labour costs, but it is also in a favourable location in the heart of Southeast Asia, with access to markets of half a billion people. Even though Vietnam has not announced any new measures to attract foreign direct investment (FDI), it has granted special permits for an AirPod assembler to assist them in setting up production lines during its national lockdown. Vietnam also approved the entry of Samsung employees, making an exception to its general ban on foreign travellers. In addition, Vietnam granted investment licenses to 758 new FDI projects valued at C$7.7B in the first quarter of 2020, an increase of nearly 45 per cent year-on-year.

Stiff competition . . .

Vietnam is not the only Asian country using the current circumstances to try to lure investors. India is looking attract businesses moving out of China by granting them an amount of land almost twice the size of Luxembourg. It is also trying to curb China’s opportunistic buyouts in India. Thailand has planned to accelerate foreign investment, especially in the medical sector, by providing tax holidays of up to three years. Other Southeast Asian countries are also introducing measures to incentivize FDI, and could compete against Vietnam in the post-COVID economy.