Vietnam manufacturing shows strength in 2015

The manufacturing industry in Vietnam capped off 2014 with strong results, leading to optimism from sector stakeholders regarding performance in the New Year.

After final improvements in activity and output were recorded last month, manufacturing in Vietnam is now at its strongest since April 2014, according to the latest figures from Markit Economics. The Purchasing Manager's Index increased by 0.6 points in December, to reach 52.7. This is the highest result in around eight months and shows positive recovery continues in the sector.

Production and output were identified as the key drivers for this improvement, while new orders also showed increased performance. Customer demand is growing, which has helped raise the volume of work and resulted in higher activity. 

This result encouraged manufacturers to increase their staffing levels for the fourth month in a row. Taking on new staff was a crucial element in being able to meet rising demand and higher production requirements.

Rather than signalling the end of a positive movement, this trend is expected to run long into 2015. Economists from Vietnam have forecast continued expansion over the coming months, slowing only due to seasonal falls in demand over the Lunar New Year.

"Vietnam's acceleration of manufacturing activity stands in sharp contrast to decelerating momentum elsewhere. Demand for Vietnamese goods rose, both externally and domestically," HSBC Asia Economic Trinh Nguyen explained.

"We believe that the manufacturing sector will benefit from both wage cost competitiveness and lower input prices, thanks to declining global [oil]​ costs."

Foreign investment rises in Vietnam

In particular, three major Thai organisations have poured billions of dollars into the Vietnam economy, with much of the investment going to manufacturing projects and enterprises.

As at December 15 last year, investors from Thailand oversaw more than 370 projects, equalling around US$6.7 billion. The average investment sits at approximately $17.9 million, above the average foreign commitment value of $14.3 million.

Thai investors focus primarily on the industrial processes and manufacturing sectors, accounting for $5.65 billion – or 84.5 per cent of the total commitments.

Three major groups – PTT, the Central Group and Amata Corp – have proposed projects in Vietnam that will increase investment by up to 500 per cent. 

The projects include an expansion to PTT's $22 billion Nhom Hoi Economic Zone oil refinery project. This initiative will also be supported by PTT's drive to upgrade Phu Cat Airport into a facility that can handle international travel. This should make it easier for local businesses and the oil-refinery sector to export products and goods around the world.

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