Việt Nam business costs among the lowest in region: study

With its strategic location on top of the other factors, Việt Nam is poised to become the best option for the China+1 strategy in the region. — Photo courtesy of TMX

‘The Great Supply Chain Migration – Breaking down the Cost of Doing Business in Asia’ says Việt Nam has average operating costs of US$79,280-209,087 a month.

Its average warehouse rental is the fourth lowest at $5/sq.m/month behind only after Thailand, Myanmar and Cambodia.

This trend is expected to continue since the country is seeing a lot of warehouse construction.

In the report, experts also assess Việt Nam as having the "highest potential" in the region due to the Government’s strong commitment to reducing tariffs and tax regulations, and the country’s free trade agreements designed to support investors.

The country has a sizeable and affordable labour pool, and is the fourth most affordable labour market in the region with an average cost of $108,196 a month. Only Cambodia, Myanmar and the Philippines are cheaper.

But Việt Nam has a skilled and educated workforce, which is expected to improve further in the coming years as the Government continues to push for vocational education.

A series of existing and proposed industrial parks also makes Việt Nam a promising market for future relocation of foreign enterprises, according to experts.

Manufacturing and processing continue to be its key FDI magnets, accounting for almost 60 per cent of the investment in 2020.

Consequently, the Government is building industrial parks (IPs). As of May 2021 the country had 394 IPs with a total area of 121,900 hectares.

In 2021 HCM City allocated more than 300ha of land for tech IPs.

They are oriented to serve the needs of specialised industries, thereby shortening the relocation process when foreign investors decide to come to Việt Nam.

High adoption of automation, digitisation

TMX’s recent annual supply chain report, ‘Building Back Better from the Pandemic: A Look into Supply Chains in the New Normal’ said 60 per cent of Việt Nam's top business decision-makers are confident that there will be more application of digital tools and technologies in future, and 58 per cent agree on immediately adopting the latest digital solutions in their businesses.

These figures already reflect in the actual situation as even small and medium-sized enterprises are taking steps to invest in cloud technology (18 per cent), cyber-security (12.7 per cent) and upgrades to software and hardware for digital transformation (10.7 per cent), it said.

In general, the market is already taking major steps towards automation, it said.

Andrew Maher, head of TMX Vietnam, said: “As Việt Nam moves to adapting to the ‘new normal’ of business and bouncing back from the pandemic, we see a ripe opportunity for the market to really own the China+1 strategy owing to its strategic location, highly competent workforce, and reception to automation.”