Vietnam needs an improved marketing strategy
The global outbreak of the Covid-19 pandemic has made the world aware of the limits of the current supply chain, showing overdependence on a single link, which is a plausible reason for the collapse of the system.
|Fig. 1: Country exports and imports (%), August 2018-February 2121. Source: Haver Analytics|
The current ongoing pandemic is also providing time to ease the pressure on Vietnamese trade as the restructuring of the global supply chain is underway. Only countries that are well prepared and that have been successful in controlling and containing the pandemic will be able to see good results and macroeconomic stability in the future through an improved marketing strategy.
Supply chain disruption
The repeated border closures and immigration restrictions during the current pandemic have disrupted or disrupted business activities and global value chains, especially important supply chains to the United States, China, Japan , Germany and the European Union (EU). . All of these countries are reeling from the devastation caused by the Covid-19 pandemic. At the same time, the manufacturing and commercial facilities of 1,000 of the world’s largest suppliers have up to 12,000 units in Covid-19 quarantine zones, most of which are located in China.
This explains why there is a disruption in the global value chain (GVC) which severely affects business activities for almost 50% of international trade. In addition, the application of digital transformation in manufacturing and business activities has led countries to increase automation, in order to improve their production capacity and to withdraw from global value chains, in order to localize the economy. The disruption of global supply chains is also due to sanctions imposed during the US-China trade war, as well as rising protectionism. Industries around the world are too dependent on China, so major countries tend to pull out of what is seen as the world’s factory.
A closer link between the supply chain and the value chain is essential to facilitate control. The trade war between the United States and China had in part initiated and spurred this process when China believed it needed a strategy to undermine America’s leadership role in world trade. The pandemic is not the only reason that has caused a change in the structure of the global value chain, although it may have been the catalyst to accelerate the process. Since the global financial crisis of 2008, the intensive production of raw materials imported for export has declined sharply. Looking back over the past 30 years, the decentralized production system has been efficient and has greatly contributed to GVCs, but it still depends on the ability to trade, transport and implement the different trade policies of each country. .
At the same time, a new form of production in the global value chain is gradually emerging. With the development of digital technology, multinational companies are moving closer to consumer markets to reduce transportation costs and increase sales. The production activities of units in the supply chain will need to be restructured, forcing companies to consider strategies to reduce production fragmentation where cheap labor is available.
Increase Vietnamese trade
Vietnam had a record trade surplus of $ 19.1 billion in 2020, although the United States remains the largest export market with a trade surplus of $ 62.7 billion. Meanwhile, the trade deficit with China’s largest importer was $ 35.4 billion. When examining the trade activities of East Asian and Pacific (EAP) countries, it is easy to see that Vietnam has the highest growth in value of imports and exports (Fig. 1). On the export front, ASEAN-5 countries export more goods and services to the United States than China and other major trading partners, while importing the most from China (Figure 2). These trends are similar to Vietnam’s trade statistics in 2020.
|Fig. 2: ASEAN-5 exports and imports with selected partners (%), 2019-2020. Source: To Cong Nguyen Bao et al (2021), data extracted from the World Bank (ASEAN-5 countries Indonesia, Malaysia, Philippines, Thailand, Vietnam).|
The Covid-19 pandemic has also created an opportunity for Vietnam to access and participate more strongly in the global supply chain, so that it can become a new nucleus in the global value chain. Certain factors can contribute to this process. First, Vietnamese exports have now grown to around 53.4%. Second, the labor costs in Vietnam are lower than in China. Third, Vietnam’s business environment and competitiveness have improved since 2020, ranking the country in 70th place, up 23 places from 2010.
However, raising Vietnamese trade to new levels will not happen overnight, but will require systematic planning to prepare the right solutions as well as resources. As the world faces a multitude of challenges in unforeseen and uncertain ways, such as the current Covid-19 pandemic, the rise of unilateralism, the growing geopolitical rivalry between major countries and the advent of the era digital, there are many factors that need to be carefully considered.
There are now five basic principles that can shape Vietnamese trade strategy. First, we need to improve the business environment and strengthen competitiveness. Second, we need to strengthen our participation in global supply chains. Third, we need to improve value-added products for exports in the value chain. Fourth, we must apply digital technology to all of our economic activities. Fifth, we need to make cognitive changes to better adapt to global markets.
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