VietnamCredit: Operating cost in Vietnam is the third lowest in Southeast Asia

Guest Post by BIIA Member VietnamCredit: Operating cost in Vietnam is the third lowest in Southeast Asia

Labor costs account for 55% of the total cost of doing business in every country. Vietnam ranks fourth among the most affordable labor markets, after Cambodia, Myanmar and the Philippines.

Features of the Vietnamese market

Vietnam is one of the markets with the lowest average operating costs in the region, third only to Cambodia and Myanmar. The average total operating costs in this country range from $79,280 to $209,087 per month.

Vietnam ranks 5^th in terms of of business environment, talent, logistics and digitalisation, behind Singapore, Malaysia, India and Thailand.

Regarding labor costs which account for 55% of the total cost, Vietnam is ranked as the fourth most affordable market after Cambodia, Myanmar and the Philippines with an average total labor cost of $108,196 per month.

As for warehouse rental costs, the second largest cost factor in the total cost, Vietnam is ranked as the fourth most affordable market with an average rent of $5/m2/month, after Thailand, Myanmar and Cambodia.

In terms of logistics costs, Vietnam is classified as a “high potential” market, which means that the country has relatively higher logistics costs but has good logistics expansion capabilities. To determine this aspect, countries are evaluated through two factors: the logistics cost per month of international shipping and the logistics efficiency score of that country.

Regarding utilities and telecommunications – accounting for about 16% of total costs in most countries, Vietnam is considered as the country with the most affordable phone costs. Vietnam is ranked mid-range in terms of telecommunications costs. It can be seen that the more developed the country, the lower the cost of telecommunications.

The overall production value chain of Asian countries

Countries excluding Singapore are classified into at least one of the three stages of the production value chain, including: basic assembly line, developing supply chain and early automation.

Countries in the early stages, including Cambodia and Myanmar, are the places to lay the foundation for production, suitable for businesses in areas such as textiles. On the other hand, countries such as the Philippines, Indonesia and Vietnam, which fall at the intersection of the first two phases, provide a good base for businesses in areas such as electronics that do not require sophisticated manufacturing or highly skilled workers.

The other countries at the “early automation” stage are good choices for businesses that have already started investing in smart manufacturing and innovation.

Megan Benger, Supply Chain Manager at TMX, said that each market offers different advantages and disadvantages, so businesses must carefully weigh their options before setting up a base in a certain location.

Although there is a lot of information about markets in Asia which is available on the Internet, this information can sometimes be contradictory or out of date. Therefore, businesses need to take advantage of the experience and up-to-date knowledge from local partners.

Source: TMX