BizNEWS

It May Take Years for Vietnam to Become Regional Production Hub

Many companies so far have relied on Chinese supply chain with many suppliers for different segments of production. But even up to now, Vietnam does not possess such integrated production supply chain.

It May Take Years for Vietnam to Become Regional Production Hub Photo: GettyImages
Diep Nguyen15:01 22/08/2019

Recently, when the US – China trade war has gotten more intense, more economists predict that there will be a trend of shifting production from China to Vietnam. But some other economists doubt that it may take years for Vietnam to become the production hub to benefit from the trend of shifting production from China to Vietnam.

As reported by Wall Street Journal in one recent article, the three reasons below may behind the case. Firstly, many companies so far have relied on Chinese supply chain with many suppliers for different segments of production. But even up to now, Vietnam does not possess such integrated production supply chain.

The Chinese model of the past 20 years thrived on suppliers being close to each other, making production quicker, less expensive and more efficient. Now, as operations become more fragmented, they are threatening to raise costs, stretch delivery times and expose companies to multiple tax and labor regimes.

Secondly, the hightech production need the capital intensive machines but Vietnam is still very limited in this segment. Vietnam production chain is still abundant with many low price machines which are not sufficient for high tech production.

Thirdly, for many years, Vietnam has been praised for low cost labor. When Chinese labor costs increases by approximately 20% per year, Vietnam enjoyed much lower increases and this help for satisfyting foreign investors.

But even in this category, Vietnam is losing competitive advantage. This is because the number of workers in Vietnam is going down in the phenomenum which is called degrading dermographics when the number of old people in Vietnam is getting stronger while the birth rate is getting lower year by year.

So far with the limited support incentives for working mothers, the birth rate in the urban areas in Vieetnam is getting lower while the same rate for the rural areas is still at high rate. However those rural workers have stronger tendency to go overseas to countries like Japan or Australia to seek better payments.

Tin bài khác