Vietnam's rising position in the global supply chain

The trend of globalization and the process of world economic integration after joining the World Trade Organization (WTO) has made Vietnam one of the vibrant markets of the global supply chain.

Vietnam is emerging as an important link in the global supply network. (Source: Industry and Trade Newspaper)

The attraction remains unchanged

The strong outbreak of the Covid-19 epidemic over the past three years has created major changes in the global supply chain.

The unprecedented challenge has created serious disruptions, disrupting the supply chain. This has caused every country, including Vietnam, to suffer heavy economic losses. However, this unexpected change has created challenges and opportunities for the world , including a new, more flexible and sustainable view of the global supply chain.

As the effects of the global trade contraction are felt, multinational companies are facing shortages of raw materials and a sharp decline in consumer demand, while businesses, consumers and even government agencies are struggling to procure basic goods and products.

From the urgent reality of needing to minimize risks, global businesses have turned to diversifying their supply sources, instead of depending on one source as before. This shift is expected to bring great opportunities to production centers such as Vietnam, India and Mexico.

Not exempt from negative impacts, the supply chain in Vietnam also experienced a crisis period due to disruptions. However, for that reason, Vietnam's role in the global supply chain was not reduced.

Before the pandemic, Vietnam was one of the important manufacturing hubs in the global supply chain, especially in the fields of textiles, electronic chips and automobiles.

During and after the pandemic, Vietnam's role in the supply and production chain has become increasingly important. Despite many difficulties, investors still have confidence in Vietnam's development and continue to choose it as a long-term investment market, expanding production. In particular, foreign direct investment in the industrial, processing and manufacturing sectors has increased, bringing many opportunities for Vietnam to increase its participation in the global supply chain.

The concrete evidence is the increasingly clear investment wave from multinational corporations from the world's leading economies, gradually making Vietnam an important location in the global supply chain. The first mark is the investment of Samsung (Korea) with 4 production facilities, contributing about 30% to the Group's total revenue. At the end of 2022, Samsung officially opened the Research and Development Center (R&D) in Hanoi, with the ambition to develop it into the company's strategic stronghold for large-scale research and development.

The next mark to mention is a series of leading American enterprises such as Apple, Intel, Ford, General Electric, Pepsi, Coca-Cola, Nike, Microsoft, Citi Group, P&G... have been increasing their investment and business in Vietnam. Notably, not only is Vietnam currently a major supplier in the textile and footwear sector for the world's leading market, the trend of diversifying production sources has made Vietnam a potential alternative location. Many large American enterprises such as Google, Microsoft, Apple are tending to shift production to Vietnam.

In a report, Australia & New Zealand Banking Group said: “The pandemic has not changed Vietnam’s attractiveness as a manufacturing hub, but there is still a lot of flexibility to promote economic recovery.”

Foxconn - Apple's equipment manufacturing partner has decided to invest a project with a total capital of 100 million USD in the WHA Industrial Park in Nghe An. (Source: Reuters)

An important link

In reality, the issue of sustainable participation in the global supply chain has become more urgent as global geopolitical tensions and the Covid-19 pandemic have caused significant impacts on the Vietnamese economy, especially in the supply chain sector.

According to the latest analysis by TMX Global, a business transformation consultancy, Vietnam has had the fastest growth in the past 25 years and has performed very well post-pandemic compared to other economies in the region. However, a large number of businesses have been negatively affected by disruptions in the supply chain. In general, these disruptions have caused a decline in business revenue, especially for businesses in the textile and electronics industries.

In addition, while Vietnam has benefited from manufacturers and businesses relocating their factories from China over the past year, it is also showing signs of slowing growth in exports. This comes amid a slowdown in global demand, making it more important than ever for Vietnam to strengthen its supply chain capabilities to better withstand economic pressures.

Therefore, the need to improve the ability of enterprises to participate deeply in the global supply chain is urgently posed, in order to maximize the opportunities to turn Vietnam into one of the world's manufacturing "factories". To realize these goals, there needs to be strong enterprises that play a leading role in connecting with other enterprises to become satellite enterprises participating in the global supply chain.

Another key element in building a resilient supply chain in the future is digitizing the relationship between buyers and suppliers. By effectively leveraging AI (Artificial Intelligence) and IoT (Internet of Things) technology, supply chains can quickly pivot to alternative suppliers when disruptions occur. Building a smart and time-saving supply chain is an important key to helping global trade weather the storms of the future.

Vietnam is increasingly integrating deeply into the global production chain. The increasingly important position of Vietnamese enterprises in the world supply chain has once again been affirmed in their analyses by international experts and organizations such as HSBC Bank, Japan International Cooperation Agency (JICA), Australia-Vietnam Policy Institute, etc.

In the latest report titled “Reclaiming the Glory of Victory”, HSBC Bank stated that, starting out as a country exporting low-value-added garments and footwear, Vietnam has gradually become an important manufacturing center in the technology industry, electronic products, mobile phone components, etc.

Expert Ishiguro Yohei, Senior Advisor of JICA, Vietnam Office, assessed, “In the context of the need to diversify the supply chain due to Covid-19, the role of Vietnam is becoming more and more important. It is not an exaggeration to say that Vietnam plays an important role in the development of Japan, so strengthening and further developing Vietnam's supply chain is extremely necessary for Japanese companies”.

In an analysis of the recovery of the Vietnamese economy after Covid-19, expert Raymond Mallon - Australia - Vietnam Policy Institute shared the same opinion that, "Vietnamese enterprises are increasingly integrating deeply into the global production chain. They promote investment and technology transfer to increase productivity and income".

Most recently, Nikkei Asia assessed that Vietnam has achieved the status of a global manufacturing center; the only economy with the scale and level of development to make it into the top 6 on Apple's list of desirable suppliers. "Vietnam's success in attracting businesses in the supply chain is also remarkable. In particular, the country has recorded a growth in technology exports that no significant competitor in Asia can match."

It is clear that Vietnam is emerging as an important link in the global supply network and has the potential to become one of the world's important manufacturing centers in the coming time.

Source: https://baoquocte.vn/vi-the-dang-len-cua-viet-nam-trong-chuoi-cung-ung-toan-cau-227617.html