What must Vietnamese rnterprises do to maintain their position in the global supply chain?

DNHN - Mr. Lu Wei Chieh, General Manager of Cathay United Bank – Ho Chi Minh City Branch, shared with Business & Integration Magazine key strategies that can help Vietnamese enterprises not only stand firm but also go further amid shifting global dynamics.

Amid escalating global trade tensions and increasingly complex tariff policies, how do you assess the role of Vietnamese businesses in reshaping global supply chains?

Mr. Lu Wei Chieh: Based on the insights from our recent Tax and Investment Seminar , the impact of US reciprocal tariffs on the Vietnamese market is more complex than a simple supply chain shift. While Vietnam initially benefited from the US-China trade war, the new US reciprocal tariff policy now presents new challenges for Vietnam itself.

In the past, as US-China trade tensions escalated, many multinational corporations shifted their production lines from China to Southeast Asia to avoid high tariffs. Vietnam became a top choice due to its stable political environment, relatively low labor costs, and active participation in multilateral free trade agreements, which transformed Vietnamese businesses from mere contract manufacturers into a crucial hub in the global supply chain.

However, the new round of US reciprocal tariffs has introduced new uncertainties into the Vietnamese market. Although Vietnam has negotiated a relatively low tariff rate (e.g., 20%), this is still significantly higher than previous rates.

Furthermore, the issue of transshipment has become a critical challenge. The US is imposing tariffs as high as 40% on products that are transshipped through Vietnam but are essentially of Chinese origin. This forces companies to track the source of their goods more rigorously and ensure their production activities in Vietnam have substantial added value to avoid being classified as transshipment and facing high tariffs.

Vietnamese companies are now adopting two distinct strategies in response to these changes. Those prioritizing access to the US market are increasing local sourcing to prove genuine Vietnamese origin, while others are deepening trade ties with China or expanding into new markets such as the EU and other Asian countries. This diversification reflects Vietnam’s growing role not only in global supply chains but also in intra-Asia trade.

The role of Vietnamese businesses in the global supply chain is shifting to a complex new landscape. This shift requires more precise management of rules of origin and a deeper local value chain. Vietnam must enhance its industrial technology and the completeness of its domestic supply chain to maintain its competitive advantage under the new tariff environment.

In your view, what are the biggest challenges currently facing businesses in Vietnam in the areas of taxation and investment? What recommendations or solutions does the bank offer to help enterprises adapt? 

Mr. Lu Wei Chieh: To attract foreign investment, the Vietnamese government continues to adjust its tax policies, such as the latest global minimum tax (Pillar Two). This poses a significant compliance challenge for businesses, especially foreign-invested ones, that are unfamiliar with local regulations. Companies need to invest substantial resources to track and understand these changes to avoid fines or tax risks.

While Vietnam's role in the global supply chain is growing, the completeness of its domestic supply chain is still relatively low. Many businesses, particularly in high-tech manufacturing, still rely on imported raw materials and components. This not only increases costs but also makes companies more vulnerable to global trade fluctuations.

Rapid economic growth has put pressure on Vietnam's infrastructure, including power and transportation. At the same time, the lack of high-level technical and managerial talent has become a bottleneck for companies looking to expand their operations.

For export-oriented manufacturers in particular, the challenges are compounded by external factors such as slowing global demand, rising competition from alternative production hubs like Mexico, and the increasing importance of ESG and carbon-related compliance in international trade. These trends are pushing companies to rethink their cost structures, market strategies, and sustainability practices.

To help businesses navigate these challenges, Cathay United Bank offers:

Providing Customized Financial Services: Beyond traditional lending, Cathay United Bank offers customized project financing services to meet companies' investment needs, such as for factory expansion or equipment purchases. For businesses seeking to localize their supply chains, the bank also provides relevant financing solutions to help them establish partnerships with local suppliers.

Hosting Professional Forums and Seminars: The bank regularly collaborates with professional accounting firms like KPMG to co-host tax and investment trends forums. These events not only provide businesses with firsthand information on regulatory changes but also use expert analysis to help them understand the practical impact of new policies and plan their strategies in advance.
Leveraging Group Synergy for Comprehensive Support: Cathay United Bank Ho Chi Minh City Branch utilizes the resources of its parent company, Cathay Financial Holdings, to provide a wide range of services including finance, insurance, and asset management. For companies investing in Vietnam, this means they can get one-stop financial solutions, including cross-border fund transfers, hedging tools, and professional advice on risk management, which effectively reduces operational uncertainty.

At the seminar, CUBHCM emphasized the importance of cross-sector collaboration. Could you please elaborate on the bank’s current initiatives or strategic partnerships aimed at supporting businesses in today’s volatile economic environment? 

Mr. Lu Wei Chieh: In the context of an ever-changing global economic landscape, we believe that no business can overcome challenges alone. That is why at Cathay United Bank, we not only provide financial solutions but also proactively foster cross-sector collaboration—seeing it as the key to creating sustainable value.

At present, we are implementing three core initiatives to offer comprehensive support to enterprises:

1. Actively Promoting Sustainable Finance to Support Green Transformation
With the growing global focus on sustainability, a green transition has become an inevitable trend for Vietnamese enterprises. Cathay United Bank can offer a Green Loan Program to provide financial support for businesses to purchase energy-efficient equipment, develop renewable energy, or improve production processes. This not only helps companies meet international standards but also enhances their competitiveness in the global supply chain.
2. Hosting Cross-Sector Seminars to Provide Professional Insights
Beyond traditional financial services, CUBHCM positions itself as a strategic partner for businesses. It regularly hosts seminars that bring together experts from various fields to offer clients comprehensive solutions. For example, in a recent "Tax and Investment Seminar," experts from KPMG were invited to discuss tax reforms and the impact of U.S. tariff policies on Taiwanese businesses in Vietnam. These events provide a platform for businesses to engage with professionals and gain strategic guidance that goes beyond conventional financial advice.
3. Leveraging Group Resources to Offer Comprehensive Services
As a core subsidiary of Cathay Financial Holdings, CUB utilizes the group's vast resources and network to provide a wider range of services to its clients. This includes offering cross-border financial solutions and strategic investment insights, helping businesses not only grow steadily in the local Vietnamese market but also expand internationally. By integrating the group's internal expertise and resources, CUBHCM is able to provide more comprehensive and customized support to help businesses navigate increasingly complex commercial challenges.

From the bank’s perspective, what potential opportunities can Vietnamese enterprises leverage in the remaining months of 2025 and into 2026?

Mr. Lu Wei Chieh: Amidst ongoing geopolitical shifts and trade tensions, the new manufacturing strategy has become a firm reality for multinational corporations. With its stable political environment, competitive labor costs, and active participation in free trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), Vietnam is playing an increasingly vital role in global supply chains.

There are several potential opportunities for Vietnamese enterprises:

Attracting High-Value-Added Orders: Vietnamese companies are likely to secure more orders for high-value-added products—especially in electronics, textiles, and furniture—from the European and American markets, further integrating into international supply chains.

Driving Industrial Transformation: Local enterprises can collaborate with foreign investors to adopt new technologies and management expertise, shifting from simple contract manufacturing to high-tech, high-value-added production models to enhance their competitiveness.

Targeting Domestic Demand: Vietnamese companies can focus on developing products and services tailored to local consumers, particularly in sectors like retail, e-commerce, and fintech.

Expanding Investment and Scale: With the government's continued push for public investment and infrastructure improvements, businesses have a prime opportunity to expand their production scale and update equipment to meet both domestic and international market demands in the future.

In addition, recent government initiatives, such as the launch of the International Financial Center (IFC), targeted incentives for the electronics sector, and increased support for green financing and SME development, are expected to create a more favorable environment for both foreign and local investors. These policies could help unlock new capital, accelerate innovation, and strengthen Vietnam’s position in the next phase of regional economic integration.

Vietnamese businesses in 2025 and 2026 should focus on these key areas. By implementing strategic plans and utilizing financial tools effectively, they can turn challenges into momentum for growth.

Thank you for your insights!

Thao Nguyen