By VIET NAM NEWS
ASIA NEWS NETWORK
HO CHI MINH CITY
Supply chains are shifting to Southeast Asia due to the region’s growing economies and consumer markets, especially with trade tensions and rising production costs affecting other markets, according to the bank.
Pham Hong Hai, CEO of HSBC Vietnam, said: “The changes in global trade are causing businesses to revisit their supply chain investment and capacity strategies, but we have yet to see this convert into wide-scale shifts to Southeast Asia, South Asia or other parts of the world.
Rather than see a wide-scale shift to Asean, multinationals due to trade tensions have multiple supply chain strategies with a mixture of localisation, off-shoring and re-shoring activity emerging, according to Hai.
“Shifts in supply chains have been a multi-year phenomenon due to structural changes in production technology, labour costs, and emerging consumer markets.
“Over the past decade, Asean and Vietnam have been perceived as a strong production option for multinationals given its role within existing supply chains, growing consumer base, and strong trade and investment ties,” he added.
Countries where infrastructure and production networks are already in place such as Vietnam are likely to be the main beneficiaries of a shift in production capacity.
The hot buttons that will matter for both large and small firms include how Asean and Vietnam can deliver competitive production costs, and how technology and innovation are being introduced to improve productivity.
At a government level, this will require educating international firms about regulatory frameworks, tax incentives, and free trade zones, along with demonstrating improvements in ports and rail and other transport infrastructure.