India, Vietnam could emerge as key pillars of global supply chain initiative

Before that, supply chains were designed to keep costs low. In the post-pandemic era, supply chains are being readjusted to reduce the risk of future disruptions. The international community is looking to relocate the supply chain out of China to India and Vietnam.

China is the world’s largest commodity exporter and has two challenges: overcoming its vulnerability to the pandemic and ensuring that the trade war with the US does not increase supply chain vulnerabilities. response.

There are opportunities for low- and middle-income countries to work with developed countries to move supply chains out of China.

China has the largest share of labor-intensive exports in the world. It is estimated that China’s share of exports increased from 13.9% in 2000 to 26.9% in 2018. China’s economic development from 2000 to 2018 was also accompanied by a high standard of living. than.

Manufacturing wages in the three largest exporting provinces in China have grown by 11% to 14% annually over the past two decades.

The pandemic is a wake-up call for companies that rely entirely on Chinese suppliers. Diversifying suppliers is one way to increase resilience, which means that at least some production lines may have to move permanently elsewhere. But the practical aspects of moving supply chains out of China are complex.

According to QIMA’s recent Q2 report, Vietnam and India emerged as alternative sourcing locations. Vietnam’s reforms allow foreigners to own assets as well as majority shares in Vietnamese companies. Steady economic growth has made Vietnam attractive for foreign investment.

QIMA’s global sourcing survey found that 43% of US respondents describe Vietnam as among their top three purchasing geographies in early 2021, and around a third of buyers across Global.

The QIMA report also revealed that sourcing demand from India is growing, but the challenge remains that the latest wave of Covid-19 cases could slow down procurement from the country. India is a highly regarded market for promotional products, footwear, eyewear, jewelry and accessories. However, “this recovery in the moment seems to depend on how effectively India manages its ongoing battle against Covid-19.

The Indian government recently allowed up to 100% foreign direct investment (FDI) in contract manufacturing, with a focus on increasing the share of manufacturing investment in total FDI. In addition, a spending of about US$1.85 billion on infrastructure development at essential ports in the country is planned. The Government of India has allowed an additional 100% foreign direct investment (FDI) in port related projects and is providing a 10-year tax break for the construction and maintenance of ports and harbors, in order to increase investment.

The opportunities for India and Vietnam are clear, but so are the challenges. India has the experience of being part of the US supply chain hub because of its IT sector. The change of the supply chain must move from many countries. The US is planning to create an ‘Economic Prosperity Network’ with friendly nations that will operate on similar standards on everything from digital business, to energy, to infrastructure floors, etc.