Buoyed by booming exports, Vietnam is on track to become Southeast Asia’s fastest-growing economy this year – but cargo could face choppy waters.
In stark contrast to China, Vietnam’s GDP grew at its fastest rate in 12 years for the first nine months of the year and is projected to grow by 8.5% in 2022.
According to the Department of Industry and Trade, which attributed the growth to “benefits from free trade agreements,” revenue from exports rose 17.8% to $265.3 billion as of September 15.
In fact, shippers say the EU-Vietnam Free Trade Agreement (EVFTA) has played a big role, with Vietnam’s exports to the EU up 20% in the first eight months of the year.
At the same time, exports to the US rose 25.4% between January and September, which some commentators have attributed to a shift in orders from China, where supply chains continue to struggle under the weight of Covid restrictions.
Jan Segers, general manager of Noatum Logistics Vietnam, said business is good despite the general slowdown in demand in ocean freight markets. However, he told The Loadstar: “Customers are moving from their NAC [named account] Service contract rates to FAK [freight all kinds] Tariffs, since FAK is cheaper than their contract tariffs.
“Estimated peak season from China post Covid period and lockdowns has been quite overwhelming so rates are falling, particularly for transpacific.
As a result, it is now “much easier” to find export containers in Vietnam than it was last year.
“We’re also seeing a shift in manufacturing and outsourcing from China to Vietnam – it’s slow but relevant. Vietnam will never be as big as China, but foreign direct investment in Vietnam keeps growing,” added Mr. Segers.
In the first nine months of the year, disbursements from these foreign investments increased by 16.2% to USD 15.4 billion.
Despite positive trade growth, concerns remain about exposure to economic downturns in target markets and the country’s reliance on China for commodities. For example, apparel and textile manufacturers have seen orders from the US and EU fall since July, after strong growth earlier in the year, according to local media.