Vietnam Catches the Fancy of Global Manufacturers

Although the Asia-Pacific region remains the most attractive destination for global manufacturers, economic uncertainties in recent years have caused certain disturbances in production structure, like China, which has been always known as the world's factory but its higher labour wages have weakened its competitiveness. This is an opportunity for countries where the labour forces are young and cheap as Vietnam and Malaysia. Some manufacturers also consider returning factories back to Europe.

 

In the 2015 C&W ranking, Malaysia has retained top place in the main index on cheap business environment and magnet to manufacturers. This result has also reinforces the predominance of the Asia - Pacific region when seven countries in the region have secured Top 10 positions in the rankings.

 

After the jump a notch to take the top spot in the ranking "Emerging Manufacturing Index,” Vietnam continued to grow to become an ideal destination for manufacturing. The pace of growth in the country’s retail market continues to present opportunities to retailers and manufacturers of fast-moving consumer goods (FMCG) as the sector expands.

 

Alex Crane, CEO of Cushman & Wakefield Vietnam, said, “Rising production costs in China have benefited Vietnam. Foreign investment capital for production and processing industries in Vietnam doubled from 2012 to 2014 to reach US$11 billion, or 71 percent of total registered FDI capital. In the future, the Trans-Pacific Economic Partnership (TPP) Agreement is expected to not only enhance competitiveness in the midst of tax cuts but also introduce standards for improving the assessment of supply chains, creating a better framework for such issues as intellectual property and human resources, and raise the attractiveness for Vietnam."

 

According to C&W, as global operating costs are sharply rising, many big manufacturing companies are considering bringing their headquarters back to Europe.

Mr Richard Middleton, Head of Occupier Services in EMEA (Europe, the Middle East and Africa) and Asia Pacific, commented “Looking more broadly, there are still foreseeable volatilities. China still leads the world in production output and is benefiting from the scale of a direct production market but rising labour costs have forced some manufacturers to change their production and business strategies. This will not only benefit countries in the Asia Pacific region, such as Malaysia and Vietnam, but also create a possible tendency of ‘retreating to the departing market’: Bringing some manufacturing factories and equipment to Europe. This will help some European countries, particularly Turkey, at the crossroads of Europe, Asia, Russia and Africa, to restore its position in the world production market.”

 

Turkey has climbed three places to eighth position in manufacturing index. Meanwhile, Poland and the Netherlands secure No. 12 and No. 17 positions, respectively. The United Kingdom is currently ranked 15th.

 

After an unsuccessful stage of manufacturing sector in the US, it is believed that this market has slid into “free-fall” status. However, the trend of “retreating to departing markets" of manufacturers and the strong development of energy sector have sent the US to 4th place, 5 places higher than in 2014.

 

Mr Mark Wanic, Head of C&W Occupier Services for the Americas, said “Manufacturing is truly combing back to the US when global demand seems to have turned in another direction. Low price, the factor that caused manufacturers to leave departing markets for cheaper markets has reduced its weight. And, the US is regaining its competitiveness.

 

With its high competitiveness in price and security, the US is being added to the list of destinations for the manufacturing industry. Furthermore, the good management of supply chains is helping create a better outcome for the US, evidenced by its latest position on this ranking table.”

 

When consumers increasingly prefer specifically designed products, manufacturers must face pressures in quickly adapting to new trends and ensure products delivered meet consumer demands. The selection of production positions must ensure the service and communication with customers quickly and conveniently. Therefore, comparing conditions, risks and prices among markets is very important in relocation and expansion strategy.