Vietnam, Thailand team up to form supply chains

15:15 | 17/04/2015 Trade

It is quite possible that Vietnam could become the fastest growing economy in ASEAN over the next few decades and Thai businesses want to join forces and get a front row seat at the table.

Vietnam, Thailand team up to form supply chains

The Thai Garment Manufacturers Association (TGMA) recently revealed the formation of a business council with leading representatives of Vietnam’s business community to explore and advance business relations between the two nations.

The goal of the council is to create a solid and viable supply chain network of inpiduals and organisations with a common interest in initiating and spear-heading expanded trade and investment with other nations around the globe.

One of its initial focal points is on strategies to shore up the garment and textiles industry. Vietnam’s strategic location with its perch on vital shipping routes and its young hardworking workforce are good preconditions for this.

 

The nation’s proximity to China and its position as the number one exporter to the US market from ASEAN also contribute to making Vietnam a perfect location for the labour intensive work in the garment and textiles industry, said Malinee Harnboonsong.

“In the lead up to ASEANs launch in December of this year, it is particularly important for Vietnam and Thailand to put their heads together and find ways to cooperate in the industry.”

The Director of Thailand’s International Trade Promotion Centre added that Vietnam and Thailand should not view themselves as rivals but partners in a collaborative effort to promote their business communities and advance the social welfare of the citizens of their respective nations. 

As one example of the benefits of partnering she noted that according to official statistics of the centre, Vietnam’s two way trade in fibre, a basic raw material in the textile industry, with Thailand in 2014 was US$270 million. Vietnam exported US$76 million of fibre to Thailand while it imported US$194 million from its neighbour.

With the goal line for the Trans-Pacific Partnership (TPP) in sight and Vietnam’s top position for exports to the US, it just makes plain good economic sense for Thailand to position itself as the major supplier to Vietnam to compete more effectively in the US market, she stressed.

Phasiree Orawattanasrikul, vice chairwoman of TGMA in turn suggests that the joint venture model of cooperating is preferred by Thai businesses in the garment and textiles sector.

Most businesses in the industry aren’t interested in creating a new legal entity, which can be quite complex and costly she said, adding that they prefer a simple joint venture with the business relationship defined  pursuant to a cooperation agreement.

For his part, a representative from the Vietnam Textile and Apparel Association (VITAS) said joint ventures between Vietnam and Thailand would be a perfect match complementing the strengths and weaknesses of both nations.

“Vietnam has the strength of production and Thailand has the strength of material supply and design, creating an ideal pairing of capabilities,” the representative said.

The council is also contemplating cooperation in the automotive market.

The President of the Thailand Automotive Institute (TAI), made the suggestion that the automotive industries of Vietnam and Thailand should cooperate for common development rather than competing with each other during a recent meeting in HCM City.

Last year the automobile industry in Vietnam experienced solid growth of 35% in sales of 120,000 vehicles and that provides a solid foundation upon which to catapult sales, said Mr Vichai Jirathiyut.

According to Jirathiyut, Vietnam’s automotive industry could have the fastest growth in Southeast Asia over the next 20 years.

He hypothesized that Vietnam’s automotive industry could annually produce 220,000 units by 2020 and 1.5 million units by 2035.

Obviously, Jirathiyut’s comments received a lot of blowback as those familiar with the automotive industry aren’t going to buy his theories hook, line and sinker— but if there is an opportunity to develop the industry, Vietnam should latch on to it.

After all, brainstorming and exploring new business ideas and finding synergy of interest and effort between Vietnam and Thailand is what this new business council is all about.

                                                                                                                                                                      Source VOV News

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