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Bangladesh Is Becoming South Asia’s Economic Bull Case

The Ronin

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Bangladesh achieved an economic landmark last week, when the United Nations’ Committee for Development Policy recommended that the country graduate from the least-developed-country categorization that it has held for most of the 50 years since it became independent.

Bangladesh is notable in South Asia for being the closest proxy for the successful development models seen at various stages in South Korea, China and Vietnam. Export-led development has the best modern track record of moving countries from very low income levels into middle-income status.

Bangladesh’s exports have risen by around 80% in dollar terms in the past decade, driven by the booming garment industry, while India and Pakistan’s exports have actually declined marginally.

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As recently as 2011, Bangladesh’s GDP per capita in U.S. dollar terms was 40% below India’s. It caught up last year in large part due to India’s pandemic-related slump, but the International Monetary Fund expects the gap to stay more or less closed.

There are other factors in the country’s favor as far as its development model goes: a very young demographic structure, a continued competitive edge in terms of wage levels, strong and rising female labor-force participation especially relative to the rest of South Asia.

There are some meaningful potential hindrances, however. For one, Bangladeshi export growth is well below that of Vietnam or Cambodia, where exports have more than tripled and more than doubled respectively over the past 10 years. India’s exports boomed in the early 2000s and then stagnated, so a continued upward trend isn’t guaranteed.

The next step for Bangladesh would be to transition toward higher-value forms of manufacturing and exporting, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995.

Bangladesh also finds itself, like India, outside of major Asian trade blocs. It isn’t a member of the Association of Southeast Asian Nations, or the Regional Comprehensive Economic Partnership or the Comprehensive and Progressive Trans-Pacific Partnership. Diversifying its manufacturing exports would require greater participation in intra-Asian supply chains—and probably a closer economic relationship with its neighbors to the east.

Caveats aside, Bangladesh’s exit from LDC status is probably a sign of further progress ahead—and a shot across the bow of other South Asian neighbors taking a very different approach to development.

 

SpaceMan18

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Bangladesh achieved an economic landmark last week, when the United Nations’ Committee for Development Policy recommended that the country graduate from the least-developed-country categorization that it has held for most of the 50 years since it became independent.

Bangladesh is notable in South Asia for being the closest proxy for the successful development models seen at various stages in South Korea, China and Vietnam. Export-led development has the best modern track record of moving countries from very low income levels into middle-income status.

Bangladesh’s exports have risen by around 80% in dollar terms in the past decade, driven by the booming garment industry, while India and Pakistan’s exports have actually declined marginally.

View attachment 721678

As recently as 2011, Bangladesh’s GDP per capita in U.S. dollar terms was 40% below India’s. It caught up last year in large part due to India’s pandemic-related slump, but the International Monetary Fund expects the gap to stay more or less closed.

There are other factors in the country’s favor as far as its development model goes: a very young demographic structure, a continued competitive edge in terms of wage levels, strong and rising female labor-force participation especially relative to the rest of South Asia.

There are some meaningful potential hindrances, however. For one, Bangladeshi export growth is well below that of Vietnam or Cambodia, where exports have more than tripled and more than doubled respectively over the past 10 years. India’s exports boomed in the early 2000s and then stagnated, so a continued upward trend isn’t guaranteed.

The next step for Bangladesh would be to transition toward higher-value forms of manufacturing and exporting, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995.

Bangladesh also finds itself, like India, outside of major Asian trade blocs. It isn’t a member of the Association of Southeast Asian Nations, or the Regional Comprehensive Economic Partnership or the Comprehensive and Progressive Trans-Pacific Partnership. Diversifying its manufacturing exports would require greater participation in intra-Asian supply chains—and probably a closer economic relationship with its neighbors to the east.

Caveats aside, Bangladesh’s exit from LDC status is probably a sign of further progress ahead—and a shot across the bow of other South Asian neighbors taking a very different approach to development.

Cool , wake me up the day that Bangladesh becomes developed
 

Bilal9

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How many otber countries in Bar-e-Saghir were "least developed" for last 50-years other than Bangladesh?
Bar-e-Saghir is 'subcontinent' in Urdu, just so everyone understands.

Other than maybe Pakistan, Sri Lanka (tiny population) and India, all other ones I guess...
 

magra

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Bangladesh achieved an economic landmark last week, when the United Nations’ Committee for Development Policy recommended that the country graduate from the least-developed-country categorization that it has held for most of the 50 years since it became independent.

Bangladesh is notable in South Asia for being the closest proxy for the successful development models seen at various stages in South Korea, China and Vietnam. Export-led development has the best modern track record of moving countries from very low income levels into middle-income status.

Bangladesh’s exports have risen by around 80% in dollar terms in the past decade, driven by the booming garment industry, while India and Pakistan’s exports have actually declined marginally.

View attachment 721678

As recently as 2011, Bangladesh’s GDP per capita in U.S. dollar terms was 40% below India’s. It caught up last year in large part due to India’s pandemic-related slump, but the International Monetary Fund expects the gap to stay more or less closed.

There are other factors in the country’s favor as far as its development model goes: a very young demographic structure, a continued competitive edge in terms of wage levels, strong and rising female labor-force participation especially relative to the rest of South Asia.

There are some meaningful potential hindrances, however. For one, Bangladeshi export growth is well below that of Vietnam or Cambodia, where exports have more than tripled and more than doubled respectively over the past 10 years. India’s exports boomed in the early 2000s and then stagnated, so a continued upward trend isn’t guaranteed.

The next step for Bangladesh would be to transition toward higher-value forms of manufacturing and exporting, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995.

Bangladesh also finds itself, like India, outside of major Asian trade blocs. It isn’t a member of the Association of Southeast Asian Nations, or the Regional Comprehensive Economic Partnership or the Comprehensive and Progressive Trans-Pacific Partnership. Diversifying its manufacturing exports would require greater participation in intra-Asian supply chains—and probably a closer economic relationship with its neighbors to the east.

Caveats aside, Bangladesh’s exit from LDC status is probably a sign of further progress ahead—and a shot across the bow of other South Asian neighbors taking a very different approach to development.

Will moving out of LDC adverely affect BD's exports and thus growth, given many developed countries have lower custom's duties on LDC nations?
 

Old School

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Will moving out of LDC adverely affect BD's exports and thus growth, given many developed countries have lower custom's duties on LDC nations?
Isn't BD primarily an importing economy ? Their imports far outweigh their exports. How much actual % of their GDP does originate from export ?
 

mb444

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How many otber countries in Bar-e-Saghir were "least developed" for last 50-years other than Bangladesh?
The only reason india and pakistan was not classed as LDC when the classification was formed was political reasons.

The main criteria in the 70s that was used was population. BD chose to go along with LDC tag to get the special support that was offered it could have chosen not to be in that group. Post independence BD had a broken economy and low stability starting from scratch. India and pakistan retained better social cohesion. BD suffered double economic catastrophe in 1947 and in 1971.

Which country has ended up with better social barometers and which countries population lives the longest i wonder?
Isn't BD primarily an importing economy ? Their imports far outweigh their exports. How much actual % of their GDP does originate from export ?
Bangladesh exports of goods and services as percentage of GDP is 14.80% and imports of goods and services as percentage of GDP is 23.44%.

BD economy is primarily driven by its own internal momentum.
 
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mb444

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Will moving out of LDC adverely affect BD's exports and thus growth, given many developed countries have lower custom's duties on LDC nations?
There could be some effect in markets such as europe where we get trade concessions. BD has to diversify its economy more. On the plus side it can borrow funds at a much lower rate than it can now for investments. BD follows a conservative fiscal policy and our indebtedness compared to our GDP is really really low...mere 39.62% comparrable to indonesias at 39.4% rather than neigbouring countries such as india at 89.33%, pakistan at 87.2% or srilanka at 98%.

BD wages will remain competitive and in major markets such as US, we do not get any tarrif concessions now.

BD will have 5 years transition phase where LDC benefits will remain. BD has started to negotiate FTA/PTA with major trading blocks to prevent falling into WTO rules.

The issues are there but mitigation path also exists and are being pursued. Time will tell.
 
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Bilal9

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BD economy is primarily driven by its own internal momentum.
Hit the nail on the head there.

There comes a time in the annals of every country's economy, when the economy becomes self-sustaining because of internal consumption by its own citizens.

I don't know if this term (self-sustaining) applies to us now, but we are pretty close.
 

mb444

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Hit the nail on the head there.

There comes a time in the annals of every country's economy, when the economy becomes self-sustaining because of internal consumption by its own citizens.

I don't know if this term (self-sustaining) applies to us now, but we are pretty close.


BD economic sector is broken down as follows... Agriculture contributes to 14.23% of GDP employing 37.7% of working population, industry 35.66% of GDP employing 21.6% of working population and services contributing 50.11% of GDP employing 40.6% of working population.

The above figures are from wiki and the following article which gives further data on value addition by sector


Article


BD economic engine is going well. We still need remitence boost from our manpower export and will do so for the foreseeable future. BD is integrated to the global economy and is self sustaining as we can be.

Only really large nations with lots of natural resources such as US, Russia, brazil and to some extent china and india can be truely self sustaining..... the latter two is hampered by their massive population although they are also blessed by it as you need a population of size to consume and grow the economy.

BD is very much like india, our population allows our economy to become self sustaining but can also hamper how fast we can grow. Hopefully BD will fully realise its demographic dividend. Education, clear planning and execution of those plan is the key.
 
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Bilal9

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Which country has ended up with better social barometer and which countries population lives the longest i wonder?
I hate to toot our own trumpet, but the facts are what they are. Look at what Nobel-winner Bharat Ratna Amartya Sen spoke of.



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Old article but well-detailed.

What can India learn from Bangladesh's microfinance institutions?
Remarkable improvements in social and economic status of the rural poor in the past few years have put the country on a higher growth trajectory and ensured that growth does not breed inequality
twitter-logoPrasanna Mohanty | November 4, 2019 | Updated 11:05 IST


What can India learn from Bangladesh's microfinance institutions?

Bangladesh's microfinance operations began in the 1970s in which the Grameen Bank - which won the Nobel Peace prize along with its founder Muhammad Yunus in 2006.

Bangladesh has not only achieved structural transformation with manufacturing and exports driving its growth in output (GDP) and employment but, it has also seen a remarkable rise in social indicators, income levels and entrepreneurship in rural areas in which microfinance institutions have played a predominant role.

A World Bank study of 2014, which looked at the long-term impact of micro-credit programmes, concluded that they helped rural households earn more and consume more, thereby accounting for more than 10% of the total reduction in extreme poverty in a decade between 2000 and 2010. This has helped Bangladesh avoid an increase in income inequality that many developing countries have witnessed.

Also Read:India struggles but Bangladesh's GDP rides high on manufacturing, export boom

How did Bangladesh do it?
Bangladesh's microfinance operations began in the 1970s in which the Grameen Bank - which won the Nobel Peace prize along with its founder Muhammad Yunus in 2006 "for their efforts to create economic and social development from below" through micro-credit programmes - and BRAC (earlier known as Bangladesh Rural Advance Committee) played predominant roles and were later joined by others likes the Association of Social Advancement (ASA), transforming the rural social and economic landscape completely.

A Singapore Management University paper of 2008 sheds light on how the Grameen Bank and BRAC, in particular, did it.

For one, it says Yunus built a self-sustaining system of lending and borrowing without collaterals and with minimal default -achieving a repayment rate of 97% on an average. He focussed on village women and organised them to take collective responsibility for the business. Every member was not necessarily borrowing; some were depositing their surplus for lending.

Yunus went on to fund and establish a wide range of business enterprises, both for-profit and non-profit with a social mission - starting from knitwear to software. His efforts "ended up promoting a wave of entrepreneurial activity at the rural level, effectively changing the structure of the Bangladeshi economy". It is the Grameenphone, the telecom major that Yunus started, which brought telecom revolution to rural Bangladesh.

Similarly, the BRAC has played a critical role in transforming rural Bangladesh. Founded by the Magsaysay winner Fazle Hasan Abed, it progressed from rebuilding remotest villages where government aid did not reach to enter healthcare and contributed significantly to reducing child mortality. Abed also funded and established many enterprises running silk production, dairies, hatcheries and others to create employment and income for the rural poor.

Prof Selim Raihan of the University of Dhaka says more than 75% of the microfinance institutions have been found to be engaged in social development programmes with a major focus on education, healthcare, water and sanitation, women empowerment and (economic) development.

Why did no such transformation happen in India despite a huge presence of microfinance institutions?
That would call for a study. Prof Nisha Taneja of the ICRIER says it is remarkable the way these institutions connected at the ground level in Bangladesh, won people's trust and disincentivised default. It is replicable in India, she says, but that would require vision and commitment.

Women empowerment and social change
Women have been at the centre of Bangladesh's microfinance institutions.

Prof Kaushik Basu highlights this aspect while explaining Bangladesh's economic boom. He writes that starting with the efforts of microfinance institutions like the Grameen Bank and BRAC, and more recent work by the government, Bangladesh has made significant strides in educating girls, giving women a greater voice in the households and the public sphere.

A 2019 study by the World Bank says the country has made important strides in many dimensions of gender equality, creating opportunities for women and girl from all walks of life - reducing fertility rates, achieved gender parity in schooling and paved the way for millions of women to work in garments sector - in the past decade. So much so that today girls have a better chance than boys of completing school and survive to the age of 60.

It further says that the labour force participation rate for women (FLFP) of 15 years and above has risen from 26% in 2003 to 36% in 2016 "in contrast to most other South Asian countries, where these rates fell". For example, in 2017 the FLFP for India was 27.2% while that for Bangladesh was 33%, according to the UNDP's 2018 updated Human Development Indices and Indicators.

The share of women in Bangladesh's national parliament (with 50 seats reserved for them) has also increased and remains above the regional average of 19.4% in 2017 at 20.3%. Women's representation for the same year in India was 11.6%.

More women now own land and exert more economic control over agricultural land other assets like cattle, houses and non-agricultural land in Bangladesh. "There is marked improvement in society's attitude toward women's asset ownership, which bodes well for women going forward," says the World Bank report - reasoning that women's economic empowerment is linked to poverty reduction as they invest more in children and communities.

All these get reflected in the improvement in health and other indicators.




















The UNDP's 2018 report says Bangladesh's life expectancy at 72.8 years is better than India's 68.8 years (in 2017) and so is its infant mortality rate (under 5 years) at 34.2 against India's 43 (in 2016).
Even in key education indicators, Bangladesh scores over India.


















When the Global Hunger Index (GHI) by Severity report was released in October, Bangladesh continued to march over India. It scored 25.8 (and ranked 88 among 117 countries) while India's score stood at 30.3 (rank 102).

The GHI measures the level of hunger and under-nutrition on a scale of 0 to 100. Lower the score lower the severity of hunger and malnutrition. Both Bangladesh and India, however, continue to be in the "serious" category.

The graph below traces the movement of the GHI scores of Bangladesh and India since 2000.



















Another important report came out in October - the World Bank's first human capital index (HCI) - in which Bangladesh pipped India as well.

This index measures the productivity of the next generation of workers relative to the benchmark of complete education and full health. An economy in which the average worker achieves both full health and full education potential scores a value of 1.


















This is not surprising as Bangladesh has been devoting considerable resources for its social sector developments - on education, health, sports, women's welfare etc. - raising it from 4.4% of the GDP in FY10 to 9.8% in FY19.
 
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Destranator

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We are not in a position to "self-sustain" given the low level of industrialisation and heavy dependence on imports for basic, essential goods. Bangladeshi taka has no value outside of Bangladesh. The only thing protecting our economy from collapse due to massive trade deficit is remittances from workers mostly slaving away abroad.

This is not a sustainable model. Instead of getting giddy over shallow, fluff piece articles like these, we should focus on addressing deficiencies in industrial sophistication.

We are in for a rude awakening if we do not manage to curb import dependency and diversify exports away from garments (80% of exports).
 
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Bilal9

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We are not in a position to "self-sustain" given the low level of industrialisation and heavy dependence on imports for basic, essential goods. Bangladeshi taka has no value outside of Bangladesh. The only thing protecting our economy from collapse due to massive trade deficit is remittances from workers mostly slaving away abroad.

This is not a sustainable model. Instead of getting giddy over shallow, fluff piece articles like these, we should focus on addressing deficiencies in industrial sophistication.

We are in for a rude awakening if we do not manage to curb import dependency and diversify exports away from garments (80% of exports).
I agree - export diversification is the need of the day, and the govt. is not helping at all. They just focus one a few things. Like in 2020 they described Light Engg. as the "export focus" for that year and provided 15% cash back rebates. Light Engg. exports did go up some, but this is just one sector and it is just a start.

Piecemeal jabs and stabs like these won't do much. We need solid beneficial FTA's with first world countries and groups (EU, ASEAN) like Vietnam has done and will conduct in the future.

As a member of ASEAN, Vietnam already is in a favorable trading spot for acting as a source for low cost labor for the likes of Japan, Taiwan and Korea (They have FTA's with most of these countries).

But they want to move beyond being a source for low cost basic goods like shoes and clothes and move more into electronics, appliances, cars and medical devices.

Further they are also conducting FTA agreements with non-ASEAN trade partners like EU and also using their panoply of FTA's as attractions for attracting FDI (including Chinese FDI) to Vietnam.

The FTA with EU, which guarantees elimination of 99% of tariffs between EU and Vietnam, is a great way to ensure GSP like faciities, but still being a non-LDC entity. When our days of being an LDC are gone, we will definitely need FTAs, and we better start negotiating one now with EU.

Let's read the following strategy by a consulting firm connected with Vietnam's FTAs.

@Beast ands @FairAndUnbiased brothers, how does China contemplate handling trade competition with Vietnam (an ally of India and Japan) as it is rising in exports (volume still small in relation to China of course)?

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Vietnam’s Free Trade Agreements – Opportunities for Your Business

May 9, 2019

Posted by Vietnam Briefing

Written byDezan Shira & Associates

Reading Time:3 minutes

Free trade agreements (FTAs) are when two or more countries agree on the terms of trade between them. They determine the value of tariffs and duties that countries impose on imports and exports. In 2007, with Vietnam’s ascension into the World Trade Organization (WTO) – it took a significant step integrating with world trade and subsequently entering into several free trade agreements.

Over the past few years, Vietnam has been active in signing bilateral trade agreements with countries throughout the world. Additionally, due to its membership in the Association of Southeast Asian Nations (ASEAN), Vietnam has become a party to several FTAs that the regional trade bloc has signed.
Vietnam's free trade agreementsFTAs – The benefits
The benefits of the free trade agreements will enable Vietnam’s economic development to continue to shift away from exporting low-tech manufacturing products and primary goods to more complex high-tech goods like electronics, machinery, vehicles and medical devices.

This can be done in two ways – first, through more diversified sourcing partners through larger trade networks and cheaper imports of intermediate goods from partner countries, which should boost the competitiveness of Vietnam’s exports.
Second – through partnership with foreign firms that can transfer the knowledge and technology needed to make the jump into higher valued-added production. An example of this is the recently launched VSmart phone manufactured by Vietnamese conglomerate Vingroup.

Vietnam is touted as a low-cost manufacturer with several companies such as Samsung and Nokia setting up shop to manufacture and then export electronics, but the latest example shows how Vietnam can develop its own products from the transfer of know-how technology.

Such sophisticated business practices and technology will help boost Vietnamese labor productivity and expand the country’s export capacity.

With upcoming trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Vietnam – EU (EVFTA) – Vietnam seems to prioritize international trade integration trade partners outside ASEAN.
Once in effect, such trade agreements will allow Vietnam to take advantage of the reduced tariffs, both within the ASEAN Economic Community (AEC) and with the EU and US to attract exporting companies to produce in Vietnam and export to partners outside ASEAN.

The EVFTA Report 2018 by the European Chamber of Commerce (EuroCham) in Vietnam revealed that 72 percent of EuroCham members believed that the EVFTA will make Vietnam more competitive and turn it into a hub for European businesses.

Vietnam’s entry into these trade deals will also ensure alignment with national standards ranging from employee rights to environmental protection. Both the CPTPP and EVFTA require Vietnam to conform to the International Labor Organization’s (ILO) standards. Chan Lee from the ILO noted that this is an opportunity of Vietnam to modernize its labor laws and industrial relations systems.

Challenges posed by FTAs
The FTAs may also come with some added downsides. Such agreements are likely to trigger aggressive competition from foreign rivals on local businesses – particularly in the agriculture sector including meat and dairy products from the EU, Australia and Canada.

If local firms do not adapt, make use of new market opportunities and potential partnerships with foreign firms – they could find competing in the market challenging.

The Vietnamese government would also need to continue on its path of reforms – strengthening the banking sector, removing corruption, refining legal and tax structures, and improving trade facilitation.

Future growth from FTAs
Vietnam’s Ministry of Planning and Investment forecast that the CPTPP could increase Vietnam’s GDP by 1.3 percentage points by 2035, while the EVFTA could boost GDP by 15 percent. These trade deals along with already signed and upcoming FTAs are likely to ensure that Vietnam remains competitive in the short-to-medium term.
 
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Bilal9

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Here is another article about Vietnam export strategy.

China+1: The New Face of Manufacturing in Vietnam
April 4, 2018
Posted by Vietnam Briefing
Written byMaxfield Brown
Reading Time:3 minutes

Foreign companies outsourcing operations to reduce costs and improve market share is nothing new. The only things that seem to change are the companies changing the way that operations are relocated, and the countries that manage to attract capital inflows.

Among nations competing for investment over the last decade, Vietnam has rapidly emerged as a highly effective location for future relocation in Southeast Asia.

Capitalising on rising costs and increasingly complex regulatory compliance requirements in neighboring China—the former “factory of the world”, the Vietnamese government’s accession to the WTO, competitive costs and receptive investment environment have made it an ideal location for Chinese-based investors seeking to reduce costs and diversify supply chains.


China is not out of the picture altogether
Foreign investors and domestic Chinese companies largely view China’s production capabilities in a favorable light and place a considerable value on its deep talent pools, top-tier infrastructure network and excellent sourcing options.

Instead of abandoning the Chinese market, investors are choosing to supplement Chinese operations with low-cost inputs sourced from production facilities in markets such as Vietnam. While the structures of these operations differ greatly depending on the country in question, this production model has become widely known as China+1.

Vietnamese Competitiveness and China+1 Production
Vietnam’s close proximity to China, competitively priced labor and a strong network of trade agreements have proven critical to its competitiveness as a China+1 destination. Cities such as Hai Phong are just 865km away from China’s manufacturing hub of Shenzhen. While a considerable journey, this is much closer than alternatives such as Jakarta (3,300km), Bangkok (2,750km) or Kuala Lumpur (3,025km).

By situating manufacturing cost centers close to traditional hubs in mainland China, investors are able to reduce costs with limited interruption or delays to currently existing supply chains.

Foreign investors pursuing China+1 also generally benefit from cost reductions on wages, land pricing, and inputs. Vietnam again stands out in this respect, offering investors a minimum wage 59 percent of that found in China and 70 percent of that in Thailand.

Finally, and perhaps most importantly, Vietnam’s network of trade agreements is among the best that manufacturers will be able to find in a country at this point on the value chain.

Vietnam, unlike China which has historically used its low wages and large size to boost export competitiveness, has a wide network of trade agreements extending to key import markets across the globe.

Among this network are trade agreements with Korea and the European Union, as well as upcoming agreements with the European Union and, should everything go according to plan, members of the Trans Pacific Partnership (TPP). As a member of the Association of Southeast Asian Nations (ASEAN), Vietnam also benefits from the regional bloc’s trade agreements with China, Japan, Australia, New Zealand, and India. Together these agreements provide a significant advantage over China that more than make up for the potential downsides.

Choosing What to Outsource
Foreign investors who invest in the Vietnamese market need to have a clear understanding of the capacity and limitations of Vietnamese production. As of 2018, Vietnam’s education and infrastructure are better suited to assembly and relatively low value-add manufacturing than many of the higher value-added processes becoming popular in mainland China.

Foreign investors often choose to enter the Vietnamese market gradually as a result of these limitations. Basic components or assembly are usually the first aspects of the production to be outsourced to Vietnam. As companies become more comfortable with the capabilities of their Vietnamese counterparts, production can be ramped up and more elements of the supply chain can be relocated.

Knowing What to Watch out for
As mentioned above, Vietnam’s real competitive advantage as a China+1 destination lies in its network of trade agreements. However, access to these agreements is not guaranteed. Most agreements have been negotiated recently and include “rules of origin provisions” that place limitations on what goods will qualify for tariff reductions.

Most often, origin requirements relate to the value added to exports in the Vietnamese market. As a rule of thumb, investors should attempt to move as much value as possible to Vietnamese production facilities and ensure that assembly facilities result in significant changes between inputs and their final output.
 

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