News: Vietnam has opportunities to attract and develop the offshoring market

Vietnam holds significant potential to attract and expand its offshoring market, leveraging its robust growth, competitive labor costs, and government incentives.

The country has seen an influx of foreign direct investment (FDI), particularly in the high-tech and manufacturing sectors. With a stable political environment and strategic location in Southeast Asia, Vietnam offers a compelling alternative to traditional outsourcing destinations like China and India.

In the global context, the market is forecast to grow to $544.8 billion in 2032, reflecting an 8.5% compound annual growth rate (CAGR). Asia-Pacific is expected to record the highest CAGR globally at 10.2%.

For Vietnam, the offshoring market revenue is expected to reach $840 million with a 2024-2028 CARG of 8.78%, the report said, citing statistics from Statista. The country is ranked the 7th best global outsourcing location. The presence of major technology firms positions the country as a global digital hub.

According to Knight Frank’s report, global companies increasingly seek cost-effective solutions to minimize expenses. A growing number are now looking towards offshoring functions as a strategic avenue. Within the Asian-Pacific region, four markets – India, the Philippines, Malaysia, and Vietnam - offer the best offshoring locations worldwide.

Vietnam is a popular choice in Business Process Outsourcing (BPO), especially in the information technology industry, with skilled human resources just after India.

Vietnam also offers the highest value for business costs, specifically in terms of labor, together with a bright outlook for tenants when office rent, which can account for 10% to 15% of operating costs, is decreasing. Office rents in major cities in India are expected to be higher than rents in HCM City in the next three years.

Analyzing the trends and main factors developing the outsourcing market, Knight Frank experts said that Vietnam’s affordable labor force is the main factor in attracting outsourcing activities.?

The Vietnamese government has proactively improved infrastructure and digital capabilities to support this growth. Initiatives such as the National Digital Transformation Program aim to enhance the digital economy and create a conducive business environment. Additionally, various free trade agreements (FTAs) have been established, further positioning Vietnam as an attractive destination for international businesses looking to outsource their operations.

Consulting firm A.T. Kearney ranks Vietnam 7th in the Global Service Location Index (GSLI) for top outsourcing destinations.

However, Vietnam must address challenges such as skill development and regulatory improvements to capitalize on these opportunities fully. By investing in education and training programs, the country can ensure a skilled workforce capable of meeting the demands of global businesses. Enhancing the legal framework and business environment will also be crucial in attracting and retaining foreign investments.

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