Manufacturers are moving to Vietnam while the use of FTAs in Thailand has dropped because of COVID-19

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Manufacturers in garment, plastic and electronic industries are continuing to move out of Thailand to Vietnam to gain benefits from trade deals. 

Vietnam is now part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union Vietnam Free Trade Agreement (EVFTA). 

For Thailand, the government’s special committee said this week that the country will likely miss 2020’s CPTPP negotiation in August because they need more time to study the deal before negotiations can begin.

The FTA between Thailand and the EU will also take at least two more years to materialize, experts told Thai Enquirer.

With cheaper labour cost and more trade deals, it is inevitable for manufacturers to find Vietnam more attractive than Thailand in terms of production base.

More than US$12.33 billion worth of foreign direct investment has flown into Vietnam in the first four months of 2020 compared to Thailand’s $4.38 billion. 

Vietnam’s GDP has also expanded by 0.36 per cent in the second quarter of 2020. 

On the other hand, after seeing the latest economic numbers in May from the Bank of Thailand on Tuesday, Kasikorn Securities predicted that the Thai economy could contract by as much as 18.5 per cent in the second quarter. 

Panasonic Corporation told Thai Enquirer in May that it is shutting down its washing machine and refrigerator factory in Thailand and are moving it to a newer and larger one in Vietnam. 

About 800 Thai employees will be let go as a result.

Its Thai plant will shut down in October. An adjacent research and development center will be shut down by March 2021.

Apart from the electronic sector, labour-intensive industries such as garment and plastic have already made moves to Vietnam.

Srithai Superware, the world’s leading melamine producer, said in June that the company has set aside 300 million baht to expand its production base in Vietnam. They plan to export to the US and EU from there. 

Sanan Angubolkul, Srithai Superware’s chairman said that by moving to Vietnam, they are benefiting from the EVFTA and CPTPP with zero tariffs. 

For the first four months of 2020, nine new projects by Thai manufacturers worth $22.27 million have applied for investment incentives in Vietnam.   

This pushed the number of Thai projects in Vietnam to 567 projects, valued at $12.3 billion.

So far, more than 11 Thai garment factories have moved from Thailand to Vietnam over the past few years and more will join them in the near future, Yutthana Silpsanvich, director of Thai Garment Manufacturing Association told local news on Friday.

Some have closed down all of their operations in Prachinburi last week, such as Thai Parfun, which has led to 500 employees being made redundant.

The slowdown of the Thai economy since 2019 coupled with the sudden drop of demand due to the outbreak are all major factors for why they have closed down.

However, its factory of more than 2,000 workers in Vietnam is still hiring.

TGMA said the move from Thailand to Vietnam will lead to more offshore exporters in the future.  

Yutthana said the reasons for the recent exodus is because of Vietnam’s advantages in cheaper labor and the CPTPP and EVFTA trade deals that came into effect on July 1. 

Trade agreements

With a huge drop in exports, Thai businesses’ use of benefits from trade agreements has also dropped by 12 per cent in the first four months of 2020, the Department of Foreign Trade (DFT) said on Friday. 

Thailand’s export value has contracted by 22.5 per cent year-on-year in May which is contributing to a contraction of 3.7 per cent year-on-year for the first five months of 2020. 

Closed borders and other travel restrictions have contributed to fewer businesses using the benefits from the 11 existing free trade agreements (FTAs) to export and import products. 

The use of benefits from free trade has dropped by 12.08 per cent year-on-year to $21.34 billion in the first four months of 2020. 

Of that, the use of FTAs has also dropped by 13.3 per cent to $19.55 billion.

 

https://www.thaienquirer.com/15225/more-and-more-manufacturers-are-moving-to-vietnam-while-the-use-of-ftas-in-thailand-has-dropped-because-of-covid-19/

[Henryford]

With the Thai baht everyone will soon be leaving.

[CLS]

The baht is only one factor. The political stability, availability of a skilled workforce and liberties of doing business are more important. The FTA with the EU and the CPTPP is a big plus for Vietnam. But the lame duck called Thailand still has to study the documents. Maybe they are still looking for someone to translate them to Thai.

 

Vietnam managed to grow in Q2, while the prediction for Thailand is a contradiction of 18.5%. This tells volumes.

[thequietman]

But, but, but, but, but, but, but, but ......................

 

Thailand number 1. ????

 

It now appears that Thailand is NOT the centre of the universe. ????

 

Who'd have thunk it. It is outrageous. ????

Edited July 7, 2020 by thequietman

[Trillian]

It's not a one way street on this, Vietnam's economy is half of what Thailand's is plus the Dong is very unstable and the country is prone to inflation. The other aspect of course is that rule of law doesn't exist in Vietnam and that's an important aspect to western business who want to set up shop there. There are many plus points that favour Vietnam but the case that Vietnam is a much better place to do business has not been made.

[Trillian]

9 minutes ago, CLS said:

Vietnam managed to grow in Q2, while the prediction for Thailand is a contradiction of 18.5%. This tells volumes.

Once again, Thailand's GDP is twice the size of Vietnam's at USD 520 bill. vs USD 245 bill., corresponding rises and falls are therefore to be expected.

"Vietnam's gross domestic product expanded by 0.36 percent year-on-year in the second quarter of 2020, following a 3.83 percent growth in the previous period,"

"Thailand's economy contracted 2.2% quarter-on-quarter in the three months to March 2020, compared to market estimates of a 4.5% decline and after a revised 0.2% fall in Q4".

 

https://tradingeconomics.com/vietnam/gdp-growth-annual

https://tradingeconomics.com/thailand/gdp-growth

[Cake Monster]

15 minutes ago, CLS said:

The baht is only one factor. The political stability, availability of a skilled workforce and liberties of doing business are more important. The FTA with the EU and the CPTPP is a big plus for Vietnam. But the lame duck called Thailand still has to study the documents. Maybe they are still looking for someone to translate them to Thai.

 

Vietnam managed to grow in Q2, while the prediction for Thailand is a contradiction of 18.5%. This tells volumes.

All of this has been so predictable.

Covid19 has just given Companies a brush to clear out their Yard.

[dcsw53]

1 hour ago, CLS said:

For Thailand, the government’s special committee said this week that the country will likely miss 2020’s CPTPP negotiation in August because they need more time to study the deal before negotiations can begin.

Everyone was at the same starting line. Vietnam and the other countries got their act together and will now benefit. Our useless government once again fails to act and Thais will suffer. Jobs will continues to go in manufacturing, but there is a silver lining. The Baht will at last drop, making it cheaper for the hordes of tourists desperate to get here, and giving TV keyboard warriors one less thing to complain about.

[cerox]

4 hours ago, Henryford said:

With the Thai baht everyone will soon be leaving.

Not necessary, cannot even enter the country 555