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Vietnam remains top destination in Asia for MNCs' shifting production out of China

Microsoft and Google are stepping up efforts to relocate production of new devices from China to potential sites in Vietnam.

As of last October, of the 33 companies that had shifted production out of China since its trade spat with the US began, 23 have moved to Vietnam, with the rest relocating to Malaysia, Thailand and Cambodia, Nikkei Asian Review cited data from the World Bank.

 Vietnam remains top destination in Asia for multinationals shifting production out of China.

Indonesia ranks higher than rival Vietnam in the United Nation's Competitive Industrial Performance Index. Mean monthly earnings for both medium-skilled and low-skilled workers in Indonesia are lower than in Vietnam, according to the World Economic Forum.

However, Indonesia has historically struggled to attract foreign direct investment (FDI), which was equal to just 1.8% of the country's gross domestic product in 2018. That was a lower share than regional competitors Vietnam, Thailand and Malaysia.

"Economies that are more likely to benefit from such geographical diversification are those with higher degrees of export similarity [to] China, and therefore [have] supply chains already in place," Nikkei quoted a recent report published by the Citigroup. "Vietnam, India, Malaysia, Taiwan and Thailand could therefore be near-term beneficiaries."

Already US tech leaders such as Microsoft and Google are stepping up efforts to relocate production of new devices from China to potential sites in Vietnam and Thailand. Apple will produce millions of its AirPod wireless earphones in Vietnam for the first time this quarter.

FDI to Vietnam in May is estimated at US$1.55 billion, the highest monthly figure since February. The data indicates a positive sign that foreign investors are accelerating their projects’ progress as the Covid-19 pandemic has been initially contained in Vietnam.

Overall, disbursement of FDI projects in Vietnam totaled US$6.7 billion in the first five months of 2020, representing a decline of 8.2% year-on-year as impacts from the Covid-19 grew.

Prime Minister Nguyen Xuan Phuc on May 23 agreed to set up a task force that will help the country prepare for new wave of FDI inflows in the post-Covid-19 period.

This task force is responsible for promoting investments in the country, which can be done by approaching potential investors looking for new destinations and supporting those who are having difficulties in Vietnam.

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