Lack of Cooperation Hinders Vietnamese Exporters in Cost Reduction

To celebrate the inception of the Association of Southeast Asian Nations (ASEAN) and the annual Asia Inc Forum 2007 held in Vietnam, we interviewed Ms Phan Dinh Tram Anh, Managing Director of Thanh Dat Trading Company, a global sourcing services provider in Ho Chi Minh City, Vietnam, about ways to fully realize the sourcing opportunities from ASEAN. and the annual Asia Inc Forum 2007 held in Vietnam, we interviewed Ms Phan Dinh Tram Anh, Managing Director of Thanh Dat Trading Company, a global sourcing services provider in Ho Chi Minh City, Vietnam, about ways to fully realize the sourcing opportunities from ASEAN.

 

Since the inception of ASEAN in 1967, the free-trade area created by the ASEAN has offered a highly potential market. I think there are 3 main factors which make the region attractive to global traders. They are rich natural resources, abundant and skilled labour and export industries concentrated in global high-growth sectors. Overall, the group’s ten member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) control 40 percent of oil and gas resources in the Asia-Pacific region. For global importers who are seeking suppliers which can meet the 4 criteria of cost of labour, capital, materials and productivity, I think the ASEAN market does emerge as an attractive option.

 

One interesting observation on ASEAN market is that the region offers a diversified export market. Each member country is strong at different export products. If we take a look at principal exports for each country, we can see for example, Vietnam is strong at agricultural products, Laos is good at wood products and Malaysia is at electronic equipment. From a sourcing perspective, this diversification or fragmentation gives grounds to support sourcing services to boost the flow of goods both within and outside the region.

 

In addition to a fragmented export market, other factors which make sourcing services critical in ASEAN include the divergence of consumer prices and different product standards across member countries. Sourcing services, by nature, can be seen as a “market intelligence” tool which enables global importers find the most suitable suppliers in the shortest time at lowest cost. So, as long as the ASEAN market remains fragmented, as price for the same goods vary across the region and there is lack of standardized products in the region, there will be strong demand for sourcing services which have in-depth local knowledge and presence.    

 

The integration of 10 economies has created a new consumer market which is comparable to China and bigger than any other market in Asia. So I think there are opportunities regarding sourcing potential in ASEAN.

 

Right now, global importers are expressing deep concerns about the quality of the products originating from China. Such concerns, in my opinion, to some extent reflect an awareness of the weakened competitive advantages by China. You see the series of events regarding the recall or return of products made in China in the past 6 months, does stress the importance of using sourcing via 3^rd party. In many cases, damages would have been lessened if there were local sourcing providers overseeing quality control. Consequently, it creates a great opportunity for the ASEAN market to effectively shift sourcing spending from China to our region. It is achievable as long as the ASEAN can assure importers of the size of the cost reductions they realize by sourcing products in the region, the quality of the products they buy and the fast pace to source products.

 

The lack of economic co-operation still hinders us in terms of the size of cost reductions compared to China. Besides, there still limits the number of sourcing service providers who actually have local presence and knowledge in all the members of ASEAN countries. I think global importers will consider the factors when deciding to shift sourcing spending.

 

With quite significant economic development, reforms in the past few years and hopefully continuing; also of course with the strong support from the members of ASEAN, the position of Vietnam in the world is rapidly rising.

 

The concept of global sourcing is relatively new to local producers, but it is quite familiar to global traders. Global importers tend to feel comfortable when making buying decisions if they can employ some kind of sourcing services to help them minimize costs and risks. As a result, the importance of utilizing global sourcing services will be quickly realized in Vietnam. In fact, sourcing spending here in Vietnam has been increasing dramatically in the past few years. And so is the quantity and quality of sourcing services provider here. The activities to set up local presence in the form of established sourcing partners and networks have been increasing. Without a doubt, the sourcing industry in Vietnam will boost trading activities.

 

As I mentioned above, ASEAN members have their own competitive advantages and disadvantages. What I hope is the economic co-operation in the region will be further boosted soon. I hope businesses and sourcing services providers in the region will not hesitate to come to each other and to be partners and alliances. In so doing, I believe the future of the sourcing industry in the region will be solid.