Vietnam's ASEAN Advantage in the Lead Up to AEC 2015
Key Points:
- ASEAN Economic Community (AEC) 2015: Vietnam, aiming for full compliance with the ASEAN Economic Community by the end of 2015, is set to see significant tariff reductions following the implementation of the ASEAN Free Trade Agreement with China and India.
- Bilateral Trade Expansion: The ASEAN-China FTA will fully take effect in Vietnam from January 1, 2016, eliminating import and export duties on approximately 90% of goods exchanged between Vietnam and China. This is expected to significantly boost trade volumes with both China and India due to the elimination of tariffs.
- Vietnam’s Position in the Asian Supply Chain: As China’s costs rise, Vietnam emerges as an attractive alternative for manufacturers seeking competitive pricing. Its membership in ASEAN enhances its position in reaching markets across Asia and beyond.
China’s Rising Costs, Vietnam’s Opportunity
Key Points:
- Cost Dynamics in China: Amid rising wages and operational costs in China, manufacturers are exploring new sourcing locations within the Asian supply chain.
- China’s Middle Class Expansion: Although China continues to grow its middle class, the increasing costs of labor and operations make it less attractive for sourcing low-cost products.
- Vietnam’s Role in the Global Supply Chain: As a result, Vietnam is poised to become a key player in the global manufacturing sector, offering competitive pricing and access to the rapidly growing middle class in China and other ASEAN countries.
- Strategic Shift: The shift in sourcing strategies highlights the evolving nature of the Asian supply chain, emphasizing the need for adaptability and strategic planning among manufacturers and investors.
Conclusion
As Vietnam approaches its goal of full AEC compliance, it leverages its advantageous position within the ASEAN bloc to enhance trade relationships, particularly with China and India. Simultaneously, the rising costs in China spur a reevaluation of sourcing strategies, positioning Vietnam as a critical player in the evolving Asian supply chain. This presents significant opportunities for businesses and investors seeking to navigate the complexities of international trade and manufacturing.
