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%.
There is a clear need for more and better transport infrastructure connecting the region, and more overland alternatives to congested ports and sea lanes
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.