The Wall Street Journal: One of the burning questions about Asian economies is why their
exports remain so weak despite the synchronized recovery in the United
States, Europe and Japan.
Leave Vietnam out of that question.
Vietnam’s exports massively outperformed its peers’ over the 12
months through January, growing 15% on-year at a time when shipments
from many members of the Association of Southeast Asian Nations were
falling. Vietnam’s trade data for March is due out this week.
“Vietnam is benefiting from a lot of regional themes right now,” HSBC economist Trinh Nguyen said.
Low wages are attracting manufacturers looking for cheaper locations
than China, where labor costs are rising quickly. Vietnam’s demographics
are promising and literacy rates are relatively high, producing a
workforce with the drive and skills for factory labor.
And as neighboring Thailand implodes, Vietnam appears a beacon of
stability by comparison. Say what you will about the political or
economic management skills of Vietnam’s Communist rulers, but the
party’s grip on power appears secure.
“If you’re a foreign firm trying to offshore your production, one of
your considerations is whether or not the people in power, the
decision-makers, will stay the same,” Ms. Nguyen said.
Domestic demand in Vietnam has suffered in recent years as
authorities tightened monetary policy to fight inflation that had soared
above 20%. That has made exports a more important driver of growth,
just as massive investments by the likes of Intel, Samsung and others
have boosted Vietnam’s role in the electronics supply chain.
Vietnam has especially benefited from two trends in electronics
production, ANZ Bank economist Devika Mehndiratta said. For one, while
demand from the United States and Europe has generally been weak,
electronics sales are soaring in China.
Despite concerns about China’s economic slowdown, “so far it has
proved to be at least a small support factor for Asean exports because
of its strong demand for electronics,” Ms. Mehndiratta said. Just under
9% of Vietnam’s exports go to China, according to ANZ.
Second, even in the United States, where overall electronics imports
were flat last year, imports of telecom equipment were a growth area –
and handsets are one area where Vietnam has specialized. The U.S. takes
nearly 14% of Vietnam’s exports — the highest rate in Asia — putting it
just behind the European Union as one of Vietnam’s largest trading
partners.
“Vietnam just happens to be in the sweet spot in terms of
electronics,” Ms. Mehndiratta said. “In the last five or six years, from
pretty much nothing, that has taken off hugely.”
Vietnam’s electronics exports jumped nearly 68% in 2012, and another
35% in 2013. Exports of phones grew by 85% and 67% in those two years.
Of course, given the high statistical base that’s been established,
that pace is sure to fall. And plenty of challenges remain: Vietnam is
just beginning to clean bad loans out of its banking system, a process
that will take years. And given the government’s struggles to keep the
economy on an even keel in recent years, it wouldn’t come as a great
shock to see inflation spin out of control again.
Still, Vietnam seems likely to grab an ever-greater export share as
the search for cheaper alternatives to China gathers pace. HSBC’s
manufacturing PMI for Vietnam shows output rising and inventories at low
level, meaning new orders should quickly feed through to production.
The bank expects Vietnam’s exports to grow by 20% this year.
With a population of about 90 million who don’t yet earn enough to support a thriving domestic market,
“the way for Vietnam to grow in terms of income and productivity is to
supply goods to richer countries,” Ms. Nguyen said. “As you’ve seen in
China that strategy can’t go on forever, but for the next decade at
least it can continue.”
(http://blogs.wsj.com/economics/2014/03/25/while-most-of-asia-waits-for-export-bounce-vietnam-pushes-ahead/)
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