Supply chain bottlenecks in Vietnam

Supply chain bottlenecks in Vietnam

Vietnam's economy has fared better than that of almost any other country except China during the Covid-19 crisis. It grew by 2.9% last year while most other countries fell into recession.

One consequence of the crisis was that manufacturers realised the importance of diversifying supply chains, and many accelerated the China Plus One policies that they had initiated because of the US-China trade war. This led to a surge of investment in Vietnam from global manufacturers last year.

Economic activity was also supported by higher demand for certain consumer products as people around the world spent more time at home during lockdowns. Vietnam's exports of home furniture and accessories rose dramatically, as did exports of phones, computers and electronics.

While this was good news for the country's balance of payments, the increased activity put pressure on its supply chain which struggled to keep up with the demand. Other countries in Southeast Asia, including Thailand, also faced supply chain problems such as shortages of containers, long delays in shipping, backlogs of cargo and skyrocketing freight prices.

Problems worsened due to the New Year holiday when many truckers headed home only to face quarantine restrictions that created further delays and bottlenecks at regional ports.

These current difficulties won't deter global manufacturers from continuing to flock to Vietnam -- major multinationals including Apple, Samsung and LG Electronics are already outsourcing production to Vietnam as are other companies including those from Thailand. This is turn will boost regional trade as Vietnam will need to import many components from elsewhere in the region.

This situation highlights the need for more and better transport infrastructure connecting the region, and more overland alternatives to congested shipping ports and sea lanes.

Vietnam's government has prioritised infrastructure development to mitigate problems. About half a dozen projects are in the pipeline, including a new national highway and an airport that is being built outside Ho Chi Minh City. Local governments have also been directed to speed up their investment programmes and last year state investment rose by 14.5%.

Other countries in the region are also supporting Vietnam's infrastructure development. China, Japan and South Korea are investing in major construction projects, Thailand in energy development, and Singapore is supporting the modernisation of its logistics industry.

With growing economic connectivity, all the countries in the region have a keen interest in solving bottlenecks and supply chain problems -- our future economic prosperity depends on each other.

Suwatchai Songwanich is an executive vice-president with Bangkok Bank. For more columns in this series please visit www.bangkokbank.com

Do you like the content of this article?
COMMENT (1)

Jimmy Lai among five Hong Kong democracy activists jailed

HONG KONG: Media tycoon Jimmy Lai was jailed for 12 months on Friday along with four other veteran democracy activists for helping to lead one of the city's biggest-ever protests.

16:45

Road death toll

Twenty-nine people died and 310 injured in 313 road accidents on Thursday, the sixth day of the seven-day Songkran road safety campaign.

15:52

Shooting kills 8 in US city of Indianapolis

WASHINGTON: At least eight people were killed in a shooting in the US city of Indianapolis by a gunman who is believed to have then killed himself, police said.

14:45