Friday, October 25, 2019

Supply Chain Competitiveness


    India's supply chain competitiveness has arisen significantly over the last decade, The following tables give a flavor of its current position, with India ranking better than Vietnam in virtually every available index (including Infrastructure, Cross border trade & customs)). India and Vietnam also have the lowest wage rates in Asia. India has the only country that compares with China in terms of the size of its domestic market and the size of its Human Resources, a fact attested to by the fact that every Fortune 500 company has an R&D laboratory in India as do many of the Asian countries. It therefore seems that lack of credible information with potential supply chain investors is an important reason for India receiving a fraction of the FDI diversifying from China during the last 12-18 months.
 
Ease Of Doing Business : Rank








Economy Global Rank Global Score Protecting Minority Investors Getting Electricity Getting Credit Construct-ion Permits Resolving Insolvency Trading across Borders Paying Taxes Starting a Business Register Property Enforcing Contracts
Malaysia 12 81.5 2 4 37 2 40 49 80 126 33 35
Thailand 21 80.1 3 6 48 34 24 62 68 47 67 37
China 31 77.9 28 12 80 33 51 56 105 27 28 5
India 63 71.0 13 22 25 27 52 68 115 136 154 163
Vietnam 70 69.8 97 27 25 25 122 104 109 115 64 68
Indonesia 73 69.6 37 33 48 110 38 116 81 140 106 139
Philippines 95 62.8 72 32 132 85 65 113 95 171 120 152
 
LOGISTICS Rank









Country Aggregate LPI Customs Infra-structure International shipments Logistics competence Tracking & tracing Timeliness
Rank Score
China 27 3.6 30 24 18 27 28
29
Thailand 34 3.36 37 41 32 35 35
36
Malaysia 35 3.34 38 33 30 34 38
46

India 42 3.22 43 48 38 39 37
50
Vietnam 45 3.16 51 54 45 40 44
47

Indonesia 51 3.08 62 61 51 48 45
49
Philippines 64 2.91 70 71 39 64 58 83

Conclusion

      According to Economist Trinh Nguyen of Netexis, possible reason for Vietnam's success is targeted attraction & facilitation of key firms in the Global supply chain and successful creation of Demonstration and Cluster effects: 
       "Vietnam targets specific sectors (labor intensive like textile & electronics). To do so, it provides incentives like cheaper taxes, clearing land sites & building infrastructure (roads & access to airports etc). It targets big projects to get cluster effects. For example, identify a Massive Global firm like Samsung Electronics and give it tons of incentives. The bet is that if Samsung is successful other Korean firms will follow and smaller firms that are part of the supply chain’ll follow. After Samsung came to Vietnam, other South Korean firms like LG followed. Japanese firms have been around but big projects like Intel & Samsung Electronics are key as PR tools for smaller Taiwanese & other firms to follow.

      That, in turn pushes demand for trade infrastructure. Then you get investment in energy/electricity/transport/port/air infra, because people anticipate the sectors linked to production will demand more supply of electricity/better roads/deeper ports/etc. Cluster effect!"

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