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More and more US-based businesses find Vietnam a good replacement for China

Hong Kong-based QIMA specialised in providing supply chain compliance solutions has just released a survey of over 700 companies across the globe. Of this, the number of US-based respondents selecting the Southeast Asian country as the leading sourcing location has doubled against four years ago, to 43 per cent in early 2021.

Similarly, 25 per cent of EU companies also listed Vietnam as one of the three leading sourcing markets in this year’s first quarter, down 15 per cent on-year but up 11 per cent against the same period of 2019.

Of all establishments switching to suppliers in new geographic regions last year to avoid COVID-19 impacts, nearly one-third revealed that the 100-million population country is one of their best options. For US-based business, the rate was even higher, at 40 per cent.

QIMA also forecast the trend to continue this year. Of the companies asked for finding new suppliers over the next 12 months, 38 per cent of US-based establishments and 28 per cent of those from the EU stated that they are planning to relocate some sourcing to Vietnam or buy more from current suppliers there. On the other hand, only 6 per cent of US-based brands and 11 per cent of those from the EU were looking for suppliers in China.

Also, US-based respondents showed some signs of dissatisfaction with Chinese sourcing. While one-third of them are planning to purchase more from Chinese suppliers in 2021, almost as many reported plans to completely stop buying from the market.

Nevertheless, words and actions often differ. Pointedly, in the survey, 73 per cent of companies said they had plans to look for new suppliers in 2020 but only 38 per cent were able to follow through on those schemes. For brands headquartered in the US, 93 per cent declared to diversify supply chains in early 2020 but only 49 per cent carried out these plans.

By Huong Anh

Many tourism establishments and some destinations in Vietnam are also implementing promotional campaigns as well as policies to attract new partners and guests for the local MICE segment.

Vietnam’s MICE tourism expected to explode after COVID-19

Vietnam has emerged as a MICE tourism hub thanks to its advantages of natural landscapes and many attractive destinations and accommodation facilities that can facilitate many tourists, including some 5-star luxury resorts with beautiful beaches, suitable for events and teambuilding.

According to the Vietnam National Administration of Tourism, the revenue from MICE tourism is about six times higher than from other types of tourism. Pre-pandemic, MICE tourists often have a 3-4 times longer stay than ordinary travellers and higher spending as well. On average, each European MICE tourist to Vietnam spends between $700-1,000 per day, while Asian visitors spend more than $400 per day. The number of MICE tourists coming to travel agencies were increasing from 10 per cent to 15 per cent per year up to 2019.

Dr. Nguyen Anh Tuan, director of the Institute for Tourism Development Research said, “Many international organisations predict that when all economic sectors are restored, MICE tourism will be one of the most developed tourism forms. Because companies, after a long period of inactivity due to the pandemic, will need to meet, exchange experiences, and promote investment.”

MICE groups at this time with a scale of several tens of thousands of tourists will bring a great source of income and promise to open a brighter future for Vietnamese tourism.

Nguyen Duc Anh, chairman of Vietnam MICE Club under the Vietnam Tourism Association (VTA), said that the plus point of MICE tourism compared to many other types is that it is less seasonal and can be exploited continuously during the year.

“MICE tours depend on business programmes and activities, which can take place continuously by month and quarter. In addition, for every event or conference held, there are additional tours for delegates,” he said.

According to Do Van Thuc, business director of Dat Viet Tour, many businesses often organise tours in the early months of the year to launch new operations and projects, while the end-year tours are mostly meant for commendation. Most foreign businesses in Vietnam also associate MICE tourism with team building to tighten internal solidarity and motivate and convey corporate culture.

Although the tourism industry is still facing difficulties as it cannot welcome international visitors, the potential of the MICE tourism market has stimulated local businesses to prepare new products and services for MICE guests.

Ngo Thi Nga, director of Postum Travel, said that this year the company will build high-end service packages with comfortable resorts and private spaces to organise MICE tourism. However, this year programmes will be shorter and combined with online meetings.

Meanwhile, the members of the Vietnam MICE Club are also designing more activities and experiences to stimulate tourism demand, such as tourism organisation associated with sports activities such as jogging, cycling, rowing, and others.

Seizing opportunities

Vu The Binh, deputy chairman of the VTA, said that MICE tourism has been serving large groups of tourists and requires high-quality services, so not all localities and accommodation establishments can meet the demand. “To develop this type of tourism, localities and business units need to have a strategic vision, invest in facilities, infrastructure, and upgrade services more professionally,” Binh said.

Moreover, to stimulate MICE tourism, most travel and hotel businesses are offering incentives and discounts for these target groups. Some localities have also issued special policies to attract tourists.

Danang is a model city when it comes to piloting such policies. The city has supported a budget of VND300 billion ($13 million) to attract 100 MICE delegations to visit this year.

The leaders of the Danang People’s Committee will issue welcome and thank you letters, as well as arrange cars for groups of visitors.

Plentiful options

A series of venues such as Ariyana, Furama, Naman Retreat, Sheraton Grand, and Grand Mercure Danang are also offering discounts and specials on facilities such as meeting rooms, accommodation rates, and free admission tickets, as well as transportation costs and reduced tour fees.

Some other localities with outstanding utility systems have gradually become favourite destinations selected by delegations.

In the north, Quang Ninh is considered a highlight of MICE tourism thanks to its heritage of Halong Bay and synchronous development of infrastructure with international-class resorts and hotels such as FLC Halong, Vinpearl Halong, Muong Thanh, Wyndham Halong, and Sun Group’s Quang Hanh Onsen.

In the central region, besides the traditional MICE tourist centre of Danang, Nha Trang, many other localities such as Thanh Hoa, Quang Binh, and Quy Nhon are also becoming prominent destinations for events and exhibitions.

This breakthrough comes from the synchronous infrastructure system, the beautiful natural landscape, and the system of high-end hotels and resorts that meet the rigorous standards of MICE customers.

In the south, Phu Quoc is the meeting point of many delegations thanks to its pristine natural scenery and diverse services, especially after the development of high-end hotels and resorts with conference rooms accommodating 500-1000 people.

MICE tourism could thus be a great opportunity to help travel units get out of the difficulties and finally recover from the pandemic. However, for this type of tourism to develop professionally and attract many tourists, localities and businesses not only need to modernise accommodation facilities but also train their human resources to be capable of organising events professionally – especially as Vietnam aims to welcome international tourists when the pandemic is globally under control.

VIR

Fig. 2: Exports & Imports of ASEAN-5 with selected partners(%), 2019-2020. Source: To Cong Nguyen Bao et al (2021), data extracted from WB (ASEAN-5 countries Indonesia, Malaysia, Philippines, Thailand, Vietnam).

Saigon Investment

The World Bank stated in its April bulletin that the Vietnamese government has continued to manage the COVID-19 health crisis well. As of May 5, the total number of confirmed COVID-19 cases has reached 2,996 cases with only 35 deaths. At the same time, Vietnam had received over 900,000 COVID-19 vaccine doses. The country expects to obtain 60 million doses of COVID-19 vaccines through the COVAX Facility and AstraZeneca in 2021.

“Vietnam is recovering from its COVID-19 shock, but this recovery has been uneven

Surging production and trade

According to the General Statistics Office (GSO), in April, Vietnam’s index for industrial production (IIP) increased 24.1% year-on-year “thanks to the effective control of COVID-19 and of free trade agreements helping stimulate local production,” in which the manufacturing and processing sectors created 80% of industrial growth, ascending 29.1% year-on-year.

The most dynamic sub-sectors include beverages as businesses are ramping up production to serve domestic demand in the summer. The manufacturing of metals, electronic components, electrical equipment, machinery, and motor vehicles also grew thanks to strong external demand. The Purchasing Managers’ Index (PMI) index rose from 51.3 in February to 51.6 in March, confirming the continued expansion of manufacturing.

In the first four months of 2021, the IIP climbed 10% year-on-year, in which the manufacturing and processing sector expanded 12.7% year-on-year – higher than the 9.7% year-on-year rise during the same period last year.

“After last year’s slowdown, industrial production is projected to gain momentum on the back of returning demand from key international partners. Despite the ongoing COVID-19 pandemic, the underlying strength of Vietnam’s industrial sector remains intact: Vietnam is an attractive low-cost base for manufacturing firms, including those looking to relocate from China due to US-China trade tensions,” said Spain-based FocusEconomics, which provides in-depth economic analysis globally, in its May report sent to Nhandan Online. “That said, a sluggish rollout of the vaccine, coupled with an uncertain development of the pandemic, pose a risk to the positive outlook.”

Spain-based FocusEconomics, which provides in-depth economic analysis globally, estimates that Vietnam’s industrial output will grow 9.2% in 2021, down 0.2 percentage points from last month’s forecast. For 2022, FocusEconomics Consensus Forecast panelists expect industrial production to expand by 8.4%.

Also according to the GSO, one of the clearest pieces of evidence for Vietnam’s surging industrial production is the soar in exports and imports in the first four months of 2021.

Figures showed that in the first four months, the economy’s total export-import turnover is estimated to hit US$206.51 billion, including US$103.9 billion from exports – up 28.3% year-on-year, and US$102.61 billion from imports – up 30.8% year-on-year.

Notably, in terms of imports, turnover of production materials is estimated to be US$96.31 billion, up 31.4% year-on-year, accounting for 93.9% of the economy’s total import turnover. The import turnover of consumer goods is estimated to be US$6.3 billion, up 22.5% year-on-year and making up 6.1% of the country’s total import turnover.

In terms of products, the most important contributors to the build-up of merchandise trade were computers, electronics, and machinery, which accounted for about one-third of total trade value. Their export and import grew last month by 45% and 26%, respectively, exemplifying the heavy reliance of Vietnam’s exports on foreign inputs.

Exports of textiles, garments, and footwear also rebounded, growing by 15.5% year-on-year and 19.2% year-on-year respectively, while those of mobile phones fell by 19.1% year-on-year.

The strong export growth was mainly driven by more resilient foreign-owned exporters. Their exports increased by 32.1% on-year, compared to a fall of 10.8% year-on-year in local firms’ exports. In terms of trading partners, the booming exports reflected strong demand from the US and China, as well as a rebound in demand from the EU market.

The higher level of imports is related to the growing procurements of goods from China, ASEAN, and the Republic of Korea.

Expecting higher economic growth

FocusEconomics wrote in its May report, sent to Nhandan Online, that looking ahead, economic recovery should gather pace later in 2021, with the second quarter’s results projected to be significantly higher than in the first quarter of the year. However, the still-high infection rates in Europe and the US and the associated limitations on international travel cloud the positive outlook somewhat.

Regarding the outlook, Dhiraj Nim and Khoon Goh, economists at ANZ, commented, “Vietnam’s first-quarter GDP print may have partly dampened the optimism regarding

FocusEconomics Consensus Forecast panelists expect Vietnam’s GDP to expand 7.1% in 2021, and 6.8% in 2022.

Meanwhile, according to the International Monetary Fund (IMF), a robust recovery is expected in 2021 despite some economic scarring.

“Growth is projected to strengthen to 6.5% as normalisation of economic activity continues, businesses recover, and private consumption and business investment rebound,” said a fresh IMF report on Vietnam’s economy. “Manufacturing and retail sales are expected to lead the recovery, while travel and hospitality services will remain subdued. Net exports will continue to contribute positively to growth as external demand picks up.”

The IMF suggested that priority should be given to improving the business environment and ensuring a level playing field. Reforms geared towards simplifying and reducing the regulatory burdens faced by domestic private firms, improving access to land and financial resources, particularly for small- and medium-sized enterprises, and reducing corruption could spur firm profitability, investment, and growth.

In addition, easing entry and exit costs for formal firms would allow for higher formalisation of new and young firms, reduce informality, and allow for a faster

According to the GSO, in the first four months of 2021, the economy saw nearly 44,200 newly-established enterprises with a total registered capital of VND627.7 trillion (US$27.3 billion), employing 340,300 labourers – up 17.5% in the number of enterprises, 41% in capital, and 7.8% in the number of labourers as compared to those in the same period of last year.

In particular, the average registered capital of each newly-established business in the first four months of the year was VND14.3 billion (US$617,400), up 20% on-year. If an additional VND792.9 trillion (US$34.47 billion) registered by 14,900 operational enterprises is included, the total registered capital inserted into the economy in the period is VND1.42 quadrillion (US$61.74 billion).

Furthermore, the first four months also saw 19,300 enterprises resume operations, up 8% year-on-year.