Why you should move your manufacturing base from e.g. China to Vietnam?
In this article of our blog explaining why manufacturers and investors should be looking at Vietnam as today’s number one destination in Asia, DEEP C studies a fundamental—wages.
The Vietnam government does not want its workers exploited, which in today’s media-contentious world is good news for manufacturers and investors. In November 2016, under government decree 153/2016/nd-cp (more details here), minimum wages were stipulated that came into effect from 1 January 2017 throughout all of the country’s economic regions and sub-regions.
They are, briefly, as follows:
• Region 1 (most of the country’s urban regions) —VND 3,750,000 (USD 165)/month
• Region 2 (sub-regions, including rural districts in Hanoi and Haiphong in the north) —VND 3,320,000 (USD 146)/month
• Region 3 (provincially-governed cities, other than those included in the first two regions) —VND 2,900,000 (USD 127)/month
• Region 4 (the rest of the sub-regions) —VND 2,580,000 (USD 113)/month
All are lower than the average hourly wage for exemple in China—USD 3.60 in 2016. That gives Vietnam an edge that even Chinese entrepreneurs are finding attractive.
Vietnam as a manufacturing base is further backed by the 2016 Global Manufacturing Competitiveness Index report (GMCI) from Deloitte Global and the US Council on Competitiveness.
GMCI, based on in-depth analysis of survey responses from over 500 CEOs and senior leaders of global manufacturing companies, sees: “The rise of the MITI-V nations [commonly called ‘The Mighty Five’: Malaysia, India, Thailand, Indonesia, and Vietnam] as “a trend to watch”.
“All of these countries are expected to be included in the top 15 nations by 2020 and could represent a ‘New China’ in terms of low-cost labour, agile manufacturing capabilities, favourable demographic profiles, as well as market and economic growth,” the report states, adding that (our italics): “All but Vietnam showed a drop in overall competitiveness between 2013 and 2016.”
That’s important. It shows that Vietnam has got it right. It’s not just in terms of wages either, as this news blog will clarify in future postings.
China may dominate manufacturing today, but labour shortages are now an issue, as is the working-age population—demographics that are not a problem in Vietnam.
What about education and skill levels though? Can Vietnam compete with China? That’s a question we’ll answer in the next blog.