Favorable demographics and labor costs seen as driving forces for industry's improvement.
Vietnam is emerging as one of Asia's manufacturing giants besides China, South Korea and Thailand according to Bloomberg, citing information from HSBC and Markit Economics.
The Markit Group's Purchasing Managers' Index (PMI) shows that manufacturing has expanded every month since 2013 with a reading above 50. "Central to the latest improvement in business conditions were further rises in both output and new orders," HSBC and Markit said in a note accompanying the release of Vietnam’s March data.
Last year, Vietnam became the biggest exporter to the US among the 10 ASEAN members. And with its strategic location, younger population and lower costs than China, it has drawn the likes of Samsung Electronics, Intel and Siemens, besides various apparel and shoe makers.
In Vietnam’s favor, wages are still low, with the average monthly wage at $197 in 2013, compared to $391 for Thailand and $613 for China, according to the International Labour Organization. Its population is also younger; only about 6 per cent are above the age of 65, compared with around 10 per cent in China and Thailand and almost 13 per cent in South Korea.
Of course, much of Vietnam’s work now is in low-end manufacturing in textiles, garments, furniture and electronics. That may change, as companies invest in training and R&D.