Why Vietnam?
Vietnam is becoming increasingly attractive and emerging as a serious alternative to other traditional sourcing hubs. There are a number of key advantages that make Vietnam stand out from the rest of Asia when the movement out of China is signifcantly happening, driven by both geopolitical and economic factors:
- Stable political environment and strong commitment of government to country's growth.
- Vietnam has competitive operating costs compared to other Asian countries.
- Workforce: young, high literate, willing to learn. Vietnam’s workforce grew to 52.4 million people in 2023 and the country is currently working to promote greater investment in training local workers.
- Better in protecting intellectual property (IP - patents, trademark, etc.).
- Strong work ethic and high commitment to quality.
- Working conditions and social welfares are judged to better than other cheap-labor countries (India, Bangladesh, Myanmar, Cambodia…).
- Easy to access to deep seaports.
- Available small to large production runs.
- Favorable trade polices: Vietnam has participated in many free trade agreements, bilaterial and multilateral. AFTA with ASEAN, ACFTA with Asian-China, AKFTA with Asian-Korea, AJCEP with Asian-Japan, VJEPA with Japan, AANZFTA with ASEAN-Australia and New Zealand, CVFTA with Chile, VKFTA with South Korea, VEAEU - Eurasian Economic Union, AHKFTA with Hongkong, UKVFTA with UK, EVFTA with EU, BTA with US, a member of WTO, RCEPT (Regional Comprehensive Economic Partnership), and CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific).
- More factories have migrated out of China and into Vietnam recently, and the tendency is forecasted to be continuously increased.
Products to source from Vietnam
The following made-in-Vietnam product ranges have been acknowledged of international competitiveness on prices and qualities.
- Furniture and wooden products: Vietnam's furniture industry has grown faster than that of any other country in the last 10 years. Vietnam’s furniture and wood products have been present in 120 countries and territories. There are about 5600 furniture and wood processing factories in Vietnam, 4500 of which are furniture manufacturers, employing more than 300,000 workers. The Vietnamese furniture and wood industry is definitely export-led with more than 90% of total production being sold abroad. In 2023, Vietnam exported $8.4 billion worth of furniture and wood products, turning Vietnam into the 6th biggest furniture exporter in the world, following China, the U.S., Italy, Germany, and India. 6 months in early 2024 witnessed the record growth rate at 23% of wooden products and furniture that giving high expectation in total 2024 exports in this industry.
- Garment and Textile: Vietnam's garment and textile industry has witnessed high growth rate - 15-20% annually, dropped a bit in 2023 but bounced back on 2024, which has made the country the world’s fourth largest garment exporter. The products have been exported to more than 180 countries and territories. More than 4.000 enterprises registered in the industry have generated 4.5 million jobs. About 85 percent of Vietnamese enterprises in the industry are focused on labor-intensive cutting and sewing (downstream sector), making the country an outsourcing hub for foreign fashion companies. CMT accounts for about 70 percent of the output of domestic garment and manufacturing firms, while the more advanced business models, like original equipment manufacturing (OEM) and original design manufacturing (ODM) account for around 30 percent.
- Footwear: Vietnam is the second largest exporter of footwear in the world, second only to China, with its estimated export volume accounting for 10% of the world’s market share. Currently, Vietnam has exported footwear products to 150 markets worldwide. As of 2022, Vietnam had over 2,200 footwear manufacturing factories, hiring around 1,5 million workers. However, nearly 80% of the export value of Vietnam's footwear industry still belongs to foreign investment (FDI) corporations Footwear production and exports from Vietnam are expected to continue to grow by at least 8.1% through to 2031, which would value its footwear export at around $40 billion.
- Luggages, Bags, Hats, Umbrellas: Vietnam is the third largest exporter of luggages, bags, hats and umbrellas in the world, after China and EU. The export turnover of this sector reached more than 4 billion USD in 2022, (though dropped by 7,8% in 2022), this sector has shown evarage annual growth rate at app. 10% in recent years.
- Toys, games and sport requisites: Vietnam Exports of toys, games, sports requisites reached US$4.2 billion in 2022, went up by 44% compared to 2021. Vietnam’s toys and sport requisites have been presented in more than 22 countries. Though it is new member of $billion club, the export revenue has rapidly increased, from $1.24 billion in 2017, $2.92 billion in 2021, then $4.2 billion in 2022.
- Plastic products: Plastic industry has been categorized as one of the most dynamic ones in the country. Vietnam is exporting plastic products to 160 countries and territories. Plastic export turnover has grown steadily over the years, from 3 billion USD in 2018 to 5,5 billion USD in 2022, with an average growth rate of 12 - 20%/year. Though, in challenging year 2023, Vietnam's plastic export turnover was down to $5.2 billion, the 2024 expect a bounce back to $5.5 billion. There are nearly 4,000 plastic businesses across the country, of which small- and medium-sized enterprises account for 90%. Plastic products associated with great competitive edge are packaging (50%), household products (15%), and construction and engineering plastics (35%). Vietnam plastic products are gradually reaching the point whereby they control the several countries’ markets. Overseas, Vietnamese plastic products have earned a reputation for their outstanding competitiveness. The industry’s manufacturing technology is judged the best in the world. Up to now, Vietnam can produce materials such as PVC, PP, PET, PS, PE with a total capacity of nearly 3 million tons/year. Vietnam's plastic industry is also expected to become less dependent on imported raw materials in the coming years thanks to the improvement of domestic plastic raw material production capacity from petrochemical factories. Many plastic enteprises are also increasing invest in “green production“.
- Crafts: Vietnam has a long tradition in craft making with more than 2000 craft villages and nearly two millions labors working in. A comprehensive range of art and craft products: wood carvings; lacquer, bamboo; rattan, rush and leaves; ceramic and pottery; silk and crafted textiles, embroidery and lace; weaving; metal arts and jewelry; handmade paper; stonework; horns and fine art has been popular throughout the world for their unique cultural characteristics, diversified designs and good quality. Vietnam craft products have been presented in 163 countries and territories. The export value grew by an average of 9.5 percent per year, from $1.62 billion in 2015 to $2.23 billion in 2019, nearly $3 billion in 2021, just dropped to $2.4 in the difficult year 2022. This sector has been projected to reach $6 billion in export value in 2030.
- Mechanical engineering: There are about 30,000 mechanical engineering enterprises in operation, the industry's turnover reached $70 billion and creates jobs for over 1.2 million workers. Machinery, equipment, tools and spare parts are currently the third largest export group of Vietnam (only after phones and computers). According to statistics of the General Department of Customs, in the period 2010-2021, Vietnam's machinery and equipment exports continuously grew with an average growth rate of 28.3%/year (the strongest growth in 2020 was 48.58%), reached reached US$57.78 billion in 2022, accounting for 15.6 percent of the country’s total export turnover. 2023 witnessed a drop in export value, however beginning of 2024 shown a sharp bounce back (increase 39% over the same period of 2023). Currently , domestic mechanical enterprises have quite good capacity in a number of fields such as manufacturing molds of all kinds, mechanical and plastic components, power cables, technical rubber. The demand of the supporting industry market is very high, so many businesses have boldly invested to improve production capacity to serve Foreign Direct Investment (FDI) enterprises, targeting at exporting mechanical products. Many mechanical enterprises are expanding their export markets, focus on three sectors: motorcycles and motorcycle parts; household mechanics and tools; and automobiles and auto parts.
- Electronics: In recent years, Vietnam has emerged as a main player in the global electronics marketplace, from a modest 47th positon in 2001 to 12th in 2019 in export turnover. Though 2023 shown 4.9% decrease in electronic export turnover, compared to 2022, down to $142, Vietnam's export value of electronics increased by 22% between January and February of 2024, targeting at over $149.3 billion in total year 2024 and $157.1 billion in 2025. The country's strategic region, skilled labor pressure, and favorable business environment have all contributed to the fulfillment of its electronics industry. Vietnam’s top 10 electronics exports in 2023 consist of: Telephone sets and smartphones: 21.17%; Electronic integrated circuits; parts thereof: 3.57%; Semiconductor devices: 2.03%; Insulated wires and cables: 1.69%; Monitors and projectors: 1.52%; Transmission apparatus for radio broadcasting or television: 1.45%; Electrical transformers and static converters: 1.08%; Parts suitable for flat panel display modules, transmission: 1.02%; Microphones and stands thereof, loudspeakers: 0.69%; Electric accumulators: 0.58%. Vietnam's electronics exports are predicted to keep their upward trajectory. The government has been proactive in supporting the sector's increase, investing in infrastructure, era, and personnel development to ensure that Vietnam remains aggressive in the global market.
- Food and foodstuff: Vietnam food and foodstuffs have been exported to nearly 200 countries and territories. The country has played a more and more significant role in global agricultural value chain, one of 15 biggest agricultural product exporter, ranking the second in Southest Asia. In 2023, the export $ billion club witnessed the products: rice over $4.78 billion, coffee: $4.18 billion, cashew: $3.6 billion, seafood over $9.2, fruit and vegetable $5.6 billion, spices: $1.26 billion. The nation now has more than 8500 industrial-scale agricultural product processing firms with an annual capacity of around 120 million tonnes of raw materials. Vietnam has issued a national action plan on building a sustainable food and food stuff system to 2030, with a goal of maintaining the export turnover of over $30 billion each year.
Why local sourcing agent?
Management of sourcing that spread over continents and time zones is challenging even for the experienced ones. Understanding difficulties when sourcing in Vietnam, you will see how extremely necessary to have a Vietnamese partner to help you in achieving efficient sourcing.
Many Vietnamese suppliers are not so familiar with international business practices, not so responsive and not so good in communication. Few of them are doing any form of international marketing. Manufacturing in Vietnam is fragmented, lack of supportive industries, and depends very much on imported materials. These shortcomings make it harder for Buyers to identify right suppliers. It is difficult and time-consuming to find out who is really doing what and where. Being alone, it very difficult and costly for you to achieve anything here. Face-to-face meetings between sourcing teams and suppliers, or audits, are critical. You think you are dealing with a factory when in fact it is just a go-between. Thus, finding a local company that you can trust and develop a long term business relationship is the key to success. A trustworthy Sourcing/Buying Agent will ensure you to access the original genuine supplies.
You will also face with challenges of small scale factories and limited capacities available. It is a complicated and costly to consolidate different suppliers yourselves instead of recruiting local partner specialized in dealing with all those things. A Buying Agent that has a broad network of contacts over the country and strong team available which each division specialized in certain products will enable the controlling and consolidation much more efficient.
Without support from a party who understand deeply about international trade practices and rules, only few Vietnamese suppliers are capable of giving complete quotation with samples or sales kits. In many case you will only be advised on true costs of product when really placing order. The poor net-work connection between suppliers themselves is also big obstacle for one supplier to give adequate offer. A Sourcing/ Buying Agent will help to communicate and enable smooth connection from Buyer to Supplier, Supplier to Sub-Supplier to get the completed offer package for Buyers' inquiries at minimized cost and time. A Sourcing/Buying Agent could also support suppliers to access resources that enable them to give Buyer comprehensive supplies.
Most Vietnamese Manufacturers have very little experience directly with the final foreign buying demands and expectations regarding product quality, performance and packaging to understand fully the impact when the product is not made and prepared to 100% of the Purchase Order Specifications. Nowadays, many Vietnamese Factories hire English speaking personnel, however the communication between the Buyer and the Factory can break down easily when it comes to artwork, printing, packaging, measurements, materials, compliance laws and regulatory laws from the Buyer’s country. It is not only language but also experience and capability matter. A professional Sourcing/ Buying Agent will ensure to get all those demands and expectations to be understood and implemented correctly.
As Vietnam is still a developing country, a lot of things that have been being taken for granted in more developed countries may not be available here. Nonetheless, barriers may be non-issue for the locals. That is why it is critical to utilize local partner strengths. Few suppliers have all the safety certifications or social compliances that international buyers need as first conditions for successful sourcing. However a Sourcing Agent can resolve it by having qualified specialists to consult suppliers in process of applying for and auditing to gain requested norms and standards.
It is not new lesson that an ounce of prevention is worth a pound of cure! The best insurance policy oversea Buyers can take is paying for QA and QC services. Having a local Agent to manage the Purchase Order oversight ensures no surprises when Buyer opens the shipment of goods. Having qualified team taking care of every step in productions line with eyes, ears and boots on the ground, a Sourcing/ Buying Agent will ensure the compliance with Buyer's norms and standards.