Vietnam is best placed to benefit from the diversion of investment out of China, while Thailand and Singapore are also likely key beneficiaries, Australia and New Zealand Banking Group Ltd (ANZ) said yesterday.
The ongoing US-China trade spat has underlined the risk of concentrating production bases in a single country and is triggering supply chain reorganization, the bank said.
Vietnam stands out as the best performer in terms of labor costs, capability, trade facilitation, political stability and existing operations or industrial clusters, ANZ said.
A recent survey of US firms in China showed that one-third had either moved or were considering moving some production abroad amid the trade tensions, it said.
A separate survey of foreign companies from other countries found that half were considering relocation and Southeast Asia was their top choice, ANZ said.
Cheaper labor costs lend support to migration, and as a survey by the Japan External Trade Organization showed, the cost of hiring manufacturing industry workers in most Asian economies is lower than that in China, with Taiwan, Singapore and South Korea being the exceptions, ANZ said.
The availability of a skilled labor force would also carry significant weight, especially for businesses operating in sectors higher up the value chain, it said.
Singapore is the region’s strongest performer based on the World Economic Forum’s Global Human Capital Index, which ranks economies by education attainment, education quality, labor force participation and the availability of skilled employees, the bank said, adding that Vietnam and Indonesia are also in the top half of the list.
A robust supply chain infrastructure, which enables cost-effective and timely delivery of products to customers, is important, ANZ said
Singapore ranks high globally in the World Bank’s Logistics Performance Index, which grades economies on their customs efficiency, infrastructure, logistics services, timeliness, reliability and cost, the bank said.
Taiwan, Thailand, Vietnam and Malaysia are not far behind China and are in the top 25 percent of countries graded on the index, it said.
Participation in free-trade agreements (FTAs) would also add to an economy’s attractiveness as a production base as these pacts reduce or remove trade barriers, ANZ said.
Singapore leads the pack with the number of FTAs is has secured, while Taiwan, the Philippines, Laos, Cambodia and Myanmar are lagging behind, ANZ said.
The presence of existing industrial clusters would be a plus, as the bulk of the supporting infrastructure and networks would already be in place, the bank said.
Vietnam’s political stability and improvements in its human capital and logistics network make it an increasingly attractive manufacturing hub, ANZ said, adding that Vietnam’s participation in major FTAs is also a big draw.
A growing number of companies have announced plans to ramp up production in Vietnam or invest there, ANZ said.
Samsung Electronics Co, which is Vietnam’s top foreign investor and contributes close to a quarter of the country’s exports, has signaled plans to further expand its business in Vietnam.
Taiwan and South Korea are unlikely to benefit much from businesses relocating out of China because of their high manufacturing costs, ANZ said.
However, their highly skilled workforces and focus on high value-added products could make them a viable alternative production base for US firms looking to circumvent high tariffs to service the Chinese market, the bank said.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort