Firms seek supply chain lift

CA - Vietnam needs to make great improvements to infrastructure, support industries, and tax and land-lease incentives to grasp its opportunity to become the world's workshop, experts have said.

Rising labor costs, an appreciating currency, and tightening labor regulations continued to put pressure on manufacturers in China.

As a result, Southeast Asian countries such as Vietnam were the places where manufacturers were considering moving their production, participants heard last Friday at a press conference in connection with the upcoming Vietnam Supply Chain Congress this month.

Vietnam was attractive with its young labor force and labor costs that were 35-45 per cent cheaper than even in second and third tier China cities and 20-35 per cent cheaper in than Thailand.

Industrial construction costs in HCM City were 35-40 per cent cheaper than Beijing and Shanghai.

Vietnam had attracted several investors in the technology sector including Intel, First Solar, Nokia, Samsung, and Wintek.

It was also drawing strong interest from auto and motorcycle producers, with major companies likes Yamaha, Piaggio and Honda in expansion mode.

While foreign investment pledges had fallen sharply this year, investment that had been committed in industrial parks in the first half went up 15 per cent year-on-year to $3.32 billion.

They included $250 million by Kyocera Mita, $280 million by Nokia in plant its largest in Southeast Asia, $300 million by First Solar, and Samsung's increase to $1.5 billion from $630 million.

A strong supply industry for each industrial sector, national-level industrial development strategies, and improvements to infrastructure and legal framework would facilitate foreign investment.

Dr Eckart Dutz, general director of Cartridge World, said for major companies in the US, supply chain costs made up 80-90 per cent of total costs.

"While reducing cost by 5 per cent raises profit by 45 per cent, increasing sales by 5 per cent only raises net income by 5 per cent," he said about the effect of supply chain performance on business performance.