Recent structural changes in China’s growth dynamics are providing Vietnam the opportunity to become one of the most competitive export hubs in the region.

China’s rising cost of labor and appreciating RMB is shifting international interest to Vietnam, where the cost of labor is already half as much as China’s and the currency has shown recent signs of stabilization.

By 2015, the decline of China’s workforce population will draw a close to the labor surplus that once ensured low wages. It will also lead China into an era of higher wages and consumption.

Vietnam is poised to benefit from this in a few ways. Multinationals looking for cheaper methods of production will come to Vietnam to develop new factories with updated technology, bringing welcomed growth and investment. This will translate into a possible shift away from raw materials exports, giving Vietnam an opportunity to reduce its import surplus with China. It will also give Vietnam a serious opportunity to establish a large foundation in growing Chinese markets.

Unfortunately, export growth will be restricted without drastic improvements to Vietnam’s logistics and infrastructure. Most say it will take as long a decade before Vietnam’s infrastructure rating even comes close to that of China’s.

Currently, State-owned enterprises operate most of the infrastructure development in Vietnam. For there to be any chance of catching up to China in less than 10 years, private organizations will need to play a larger role immediately.

As of late, the Ministry of Industry and Trade announced that plans are already in the works to strengthen the framework that would facilitate export growth, particularly to China. – VAM