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Having more than 10 years of import and export expertise between Vietnam and the EU. We are delighted to provide free answers to any of your import- and export-related questions.

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My pleasure to work with VIEC's sales team, especially with Niel, who is a really trustworthy person. VIEC has brought our LanderBrau brand to Vietnam. It took time to penetrate to Vietnamese complex beer market. But VIEC has successfully accomplished its mission. The Best yet to come...
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Asia Export Manager - Swinkels Netherland

Sourcing In Vietnam – The China Alternative

Table of Contents

As one of Southeast Asia’s economies with the fastest growth rates, Vietnam has made a significant change in many aspects in the last 30 years.

At the moment, according to Markets Insider, the country ranked 5th in the “Best countries to outsource to in the World in 2019” list.

Vietnam’s commodity exports recorded a relatively high growth rate. In the first 11 months of 2021, export turnover was estimated at $299.67 billion, increasing 17.5% over the same period in 2020.

Hence, nowadays Vietnam turns out to be the right destination for sourcing products.

I. Top 5 Advantages Of Sourcing In Vietnam

1. Low labour cost

When it comes to Vietnam, low labour cost is one of the biggest advantages when sourcing in Vietnam. Although the minimum wage rate in Vietnam has slightly increased recently, which is around $134 – $193 a month, it is still lower than the rates of some other nations in ASIA.

Moreover, this cost in Vietnam is still 90% lower than the rate in Europe.

This means that sourcing in Vietnam will help you save lots of production costs, and improve the margin for your business.

minimum-wage-in-asia

2. Young and well-educated labour force

Regarding the working-age population, there are about 72 million Vietnamese people in this group.

The golden population structure of Vietnam is expected to last until 2034 when the rate of unemployment and employment is around 1:2.

Moreover, the government also invest heavily in the education sector, which takes about 5% of the GDP. And this number is higher than the average of the world (3.4%)

Hence, the level of scientific and technical literacy is high, which can be shown by the literacy rate of 96%.

Also, there are 80% of graduated college students hold a degree in science, according to Vietnam Economic Times.

This factor makes Vietnam turns to be a promising which can produce high-quality products.

vietnam-graduation

3. Exceptionally low tariff for European enterprise

With the elimination of 99 per cent of all tariffs thanks to the EVFTA (The European Union and Vietnam Free Trade Agreement), European businesses and brand owners can now import goods from Vietnam at a lower cost.

Plus, the agreement also reduces regulatory barriers and overlapping red tape

4. The improvement in Ease of Doing Business

Unlike 20-30 years ago, doing business in Vietnam is frustrating for many foreign companies.

Nowadays, thanks to the improvement of the legal and institutional framework, importers are having a warm, welcoming and friendly business environment in Vietnam.

According to Worldbank, Vietnam was ranked 70th among 190 economies for Ease of Doing Business in 2020.

5. The development of technology

As one of the fastest growing countries in the region, technology and innovation play important role in the development of Vietnam. Thanks to the strong investment from the government.

At the moment, Vietnam ranked 44/132 in the Global Innovation Index in 2021 with more than 18 500 scientific and technological discoveries.

II. Sourcing In Vietnam And China, What Are The Differences?

Just like America and Canada in North America, the Netherlands and Germany in Europe. Due to the geography, Vietnam and China also share some similarities in certain aspects.

However, there are still differences between the two countries, especially when it comes to production cost, tariffs, product quality, and product category.

Labour Cost

First of all, one of the biggest differences between sourcing in Vietnam and China is the labour cost. Due to the wage growth in China recently, products “made in China” is not cheap anymore.

Meanwhile, the cost of labour in Vietnam can be as little as 1/2, or even 1/3 of China. In some regions in Vietnam, the minimum wages can be as low as $125, compared to the minimum wages in China is about $350 – $500, depending on the city.

manufacturing-labor-costs-per-hour-for-china-vietnam-mexico-from-2016-to-2020
Manufacturing labor costs per hour for China, Vietnam, and Mexico from 2016 to 2020 (Source: Statista)

Free Trade Agreement (FTA)

Secondly, thanks to the EVFTA (The European Union and Vietnam Free Trade Agreement), which has eliminated 99 per cent of all duties, European companies and brand owners may now import goods from Vietnam more affordably compare to China.

evfta

Product Quality

Regards to the quality, both countries produce very high- and low-quality products, it depends on the manufacturing, and business partners, who you working with.

Besides, it is also depending on the product category, that you are sourcing. Compared to Vietnam, sourcing in China has wider product categories and selection.

However, if you source products in these categories, there is a high chance Vietnam can produce high-quality products, at a more affordable price.

These categories include furniture, bamboo and rattan products, textile, clothes and footwear, electronic products, agriculture products, spices, coffee, nut and cashews.

Barriers To International Business

Lastly is the barrier to international business, both countries Vietnam and China have significantly improved the business environment in the last decades. However, the barrier to doing business in China is much lower than in Vietnam.

This is because nowadays, many Western businesses can easily access Chinese manufacturers, or suppliers online via Alibaba, or even Google. And besides, there are also employees who speak very good English working in these factories.

However, this is not the same case in Vietnam, to do sourcing in Vietnam, many foreign companies still need to do it via Vietnam sourcing agents to find the right manufacturers or suppliers. Looking for business partners via the internet could work, however, having assistance from the sourcing agent is much better because they can find for you some hidden gems in the country.

III. Challenges When Sourcing In Vietnam

As mentioned above, although there are improvements in the last decade, ease of doing business in Vietnam is still a big challenge, for foreign companies who want to find reliable Vietnamese manufacturers.

Language Barrier and Different Cultures

In doing business, language and culture play an important role. Each nation has its own language and culture, so the way of doing business approaches is also different in each country.

One of the biggest disadvantages when doing business in Vietnam is language and culture. There are still many good manufacturers that produce good products, and affordable prices but do not have people who speak fluent English.

And besides, there is a big gap in cultural differences between Vietnam and Europe. Europeans frequently place high importance on stable and consistent manufacturing. Vietnamese people have a propensity for flexibility, which occasionally results in unstable and inconsistent product quality.

istockphoto 1307714091 612x612 1

Quality Control

As mentioned above, due to the unstable and inconsistent product quality.

Having quality control is a necessary step to ensure that products have the right standard before any shipment.

To finish this step, besides having an expert in quality control. Choosing reliable manufacturers, and having clear communication in beginning is also an important step to stay away from trouble.

IV. Conclusion

In short, sourcing in Vietnam brings lots of benefits to European enterprises. However, there are also challenges during the sourcing and importing process.

To avoid mistakes, businesses should understand and have a connection with Vietnamese culture and language, which is necessary for dealing with Vietnamese manufacturers.

And these processes take a lot of time and effort, and in reality not every business have enough resource to do that.

For those reasons, a qualified and experienced consultant in the import-export industry will lift the heavy job for you.

Originally in Vietnam and having more than 10 years of experience in doing business between Vietnam and Europe, the VIEC sourcing agent can help your business find reliable and affordable manufacturers and suppliers in a short time!

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Comment (1)

  1. Duc Tri
    12/08/2022

    Very informative blog

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