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Vietnam rises as Asia's new manufacturing hub

Posted: 08 Apr 2015 ?? ?Print Version ?Bookmark and Share

Keywords:Vietnam? manufacturing? PMI?

Vietnam is Asia's new manufacturing star, joining the ranks of Thailand, South Korea and China, according to a report by DTI News.

HSBC and Markit Economics both stated that the country's benchmark purchasing manager's index (PMI) for manufacturing reached a reading above 50 and has increased consistently every month since August 2013, a feat unmatched by any other Asian country tracked by the two institutions.

Unlike Vietnam, China and Thailand's manufacturing PMIs have contracted for eight months in the same period and 22 months since January, respectively.

HSBC and Markit said in a statement that Vietnam's business conditions improved with growth in both output and new orders. Local firms secured more new orders from both export and domestic clients. Moreover, "falling commodity prices in world markets continued to feed through to lower input costs," DTI News quoted Markit senior economist Andrew Harker.

Vietnam's younger population, strategic location and lower costs compared to China have drawn big tech companies like Samsung Electronics, Intel and Siemens, as well as apparel and shoe makers. Last year, it also became the largest exporter to the United States among the 10 members of the Association of Southeast Asian (ASEAN) nations.

According to the International Labor Organization, Vietnam's lower wages compared with Thailand and China work in its favour. It has an average monthly wage of $197 in 2013, while the two others have $613 and $391, respectively. The country's population is also younger, with around six per cent above the age of 65, compared with about 10 per cent in Thailand and China, and almost 13 per cent in South Korea.

While Vietnam only holds low-end manufacturing in electronics, textile, furniture and garments today, this may soon change as companies pour in more capital in training and R&D.

What remains to be a challenge to the country's growing manufacturing industry is worker unrest. For example, thousands of workers at a factory in Ho Chi Minh City boycotted operations to protest a government pension change. This is the worst labour unrest since last May's anti-China riots, leading to the closure of some factories.

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