Do FDI firms in Vietnam benefit from US-China trade war?
In the first eight months, the US was Vietnam’s largest export market with a turnover of $38.6 billion, up 25.3 percent year-on-year, followed by the EU, China, ASEAN and Japan.
Is trade war benefiting FDI companies?
A recent report by financial data provider Fiin Group shows that foreign-invested firms account for almost all the increase in exports to the U.S. as its trade spat with China intensifies.
In the garments sector, for example, FDI firms accounted for 84 percent of the export value from June 2018-2019. South Korean garment manufacturers in Vietnam have been the biggest winners from the trade war, with 143 South Korean companies accounting for almost half of Vietnam’s garment export value in the period, the report said.
It said South Korean corporations were better placed to reap the gains because they have been in Vietnam since early 2000s and have well established supply chains in the country. "The majority of Vietnamese companies are still small-sized and do not meet foreign buyers’ requirements on quality, quantity and cost," the report said.
A similar situation could be seen in the export of phones and parts. South Korean and Taiwanese companies accounted for 98 percent of Vietnam’s total export of phones and parts in the year ending in June 2019, dominated by Samsung and Foxconn, a Taiwanese key supplier for Apple. Vietnamese firms only contributed indirectly to the export growth by supplying some parts for these foreign companies, it added.
Vietnam – an ideal investment destination for FDI firms
Free trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) should be the key growth motivators for Vietnam, as they will urge FDI companies to select the country for its "real advantages," not just as a safe haven during a trade war.
In the first six months, Vietnam was among the top 10 countries with the biggest trade surpluses with the US. Among these 10 countries, only Malaysia and Vietnam have not been hit with US trade defense measures. But while Malaysia and the other nine countries have seen their exports growth to the US decline in the period, only Vietnam’s grew 27 percent.