It seems that Vietnam is following the development path of China in the past, but China’s economic characteristics are far more than that. China’s market capacity, scientific research strength, product diversification, “full manufacturing” industrial chain, and international influence, Vietnam is completely incomparable.
Eight cents per acre!
This is the period in 2008 and 2009, when foreign investors invested in building factories and industrial parks in Vietnam. The quotations given by some local governments showed Vietnam’s “eagerness” for foreign investment. Such benefits have really made many companies and institutions look forward to Vietnam.
In 2019, the Sino-US trade war escalated again, and the impact of increased tariffs on related industries was also overwhelming. In order to survive, many companies are also considering finding a “buffer zone.” Some foreign-funded enterprises have also begun to withdraw from China and turn to Southeast Asian countries with relatively low labor costs, the most typical of which is Vietnam.
There have been four large-scale industrial transfers in the history of global manufacturing migration: at the beginning of the 20th century, the United States took over from the United Kingdom and became the hottest country in the global manufacturing industry. In the 1950s, Japan suddenly became the “factory of Asia” in the eyes of the West. In the 1970s, the Four Asian Tigers emerged and surpassed Japan. By the 1990s, China gradually became a veritable “world factory.”
Today, as more and more industries from Europe, the United States, Japan, South Korea and other countries are transferred to Vietnam, Chinese manufacturing companies are increasingly looking at Vietnam with admiration.
Will Vietnam really become the next “world factory”?
1 Vietnam has four major advantages in attracting investment
“Ten years ago, I went to Da Nang, Vietnam with some well-known groups in Shenzhen and the Shenzhen Federation of Industry. , developing China’s economic zones, the era of ‘8 cents per acre’ is a period of opportunity for enterprises.” Cao Hu, global partner of Kotler Consulting Group (KMG) and president of China, told “China and Foreign Management” Attractiveness of travel to Vietnam for global businesses.
First, Vietnam has a very good global trade interface. In layman’s terms, it has many deep-water ports. Vietnam’s long and narrow border and topographic features close to the coastline have created its geographical advantages in global trade. . Second, Vietnam is also undergoing reform and opening up, and Vietnam has always attached great importance to education. In Da Nang, a city with a population of 300,000 to 400,000 people, there are 6 universities. Third, Vietnam’s demographic structure is advantageous for the development of manufacturing. Almost half of the population is under the age of 30, and young people account for more than 50%, which means a huge labor market. This is something that many industrially developed countries, such as Europe, the United States, Japan, and China, do not have. With these outstanding advantages, Vietnam will become a prosperous consumer market in the long run. Fourth, Vietnam’s unique tariffs and global trade policies have created a value depression—Vietnam is one of the countries with the most regional trade agreements in the world. There are many trade agreements between Vietnam and ASEAN, Vietnam and China, Vietnam and Australia, New Zealand, Vietnam and Japan, and Vietnam and the United States, and they have obtained a large number of export trade preferences.
This is also the reason why many global processing and manufacturing companies go to Vietnam to seek “rebirth”. The first is preferential tariffs, the second is abundant labor and cheap human capital, the third is persistence in reform and opening up, and the fourth is convenient global trade and transportation.
The Vietnamese government’s attitude towards reform and opening up is quite proactive, which makes the economic growth trend promising in recent years. Statistics released by Vietnam show that Vietnam’s actual GDP growth rate in 2018 was 7.08%, a growth rate slightly higher than that of China.
Cao Hu, Global Partner and President of China, Kotler Consulting Group (KMG)
However, Cao Hu also Added: Although the Vietnamese government and local business circles very much welcome foreign investment, they also welcome foreign capital with an open attitude to bring advanced technology, cutting-edge ideas, and outstanding talents. But it has to be said that Vietnam has a relatively complicated and cautious mentality when it comes to investment in Chinese companies. On the one hand, Vietnam welcomes Chinese companies, but at the same time it is very concerned about China’s investment fields and technology output. This is also where Chinese companies need to think calmly.
2 Vietnam’s disadvantages can cause fatal injuries to enterprises
Just as the advantages are obvious and attractive, the disadvantages of investing and building factories in Vietnam are also It also makes many companies feel stuck in their throats.
“The whole process of setting up a factory and establishing an office there was not difficult. It took about three months to complete all the procedures. But now Vietnam has no advantage because the rent of the local factory has It’s almost the same as mainland China.” Affected by the tensions in the Sino-US trade war, Horizon Holdings Group, which mainly focuses on textile manufacturing, has begun to transfer part of its production capacity to Vietnam since 2018. In an interview with “Chinese and Foreign Management”, Zhang Handong, director of the development department of Horizon Holdings Group, described his actual experience of personally leading a team to develop and build a factory.
She said: Before going for the inspection, she learned that Vietnam has tax incentives for textile companies. In addition, some big-name European and American retailers also have offices in Vietnam, which undoubtedly makes marketing smoother and gives companies more confidence in long-term development. However, after actual operation, it was found that these policy advantages and the attractiveness of corporate welfare were gradually replaced by Vietnam’s “shortcomings”.
“The biggest flaw is that�The local supply chain and industrial chain are not perfect, and personnel are inefficient. “Zhang Handong is blunt.
Take the home textile industry as an example. Due to the lack of supporting industrial chain, the local area lacks large-scale weaving factories and dyeing factories. Because of the lack of weaving factories, most of the fabrics required for production require Shipped from China. Due to the lack of dyeing factories, although the sewing process can be completed in Vietnam, Vietnam lacks professional dye mixing and color mixing talents, let alone talents in charge of dye formulas. Therefore, weaving, dyeing and other links It can only be completed in China. Even the packaging cartons have to rely on Taiwanese companies that have settled in China earlier. Naturally, there is no cost advantage.
Labor efficiency is another flaw. Zhang Handong said: The salary of curtain processing assembly line workers in the same position in China is about 8,000 yuan, and they can make 200 products per day. Although they can be hired locally in Vietnam at relatively low wages. workers, but the actual workload per person per day is only 20 pieces. Sometimes when encountering urgent tasks, the company has to spend a lot of energy negotiating with the Vietnamese union to get local workers to agree to 2 hours of overtime. In this comparison, the average The labor cost invested in each curtain is actually similar to that in China, or even higher.
Regarding this issue, Cao Hu also added: Many industries require a complete vocational education system and long-term It is supported by industrial practice, while Vietnam’s local vocational education system is relatively backward, which is exactly what Vietnam does not currently have.
Moreover, Vietnam has not formed a complete supply chain for large equipment, large chemicals, and information products. , resulting in relatively few categories of advantageous products suitable for local production, and advantageous products are mainly concentrated in industries with short industrial chains, low labor costs, simple processing, and intensive processing. This results in that most of the locally produced products are relatively mid- to low-end products and are incapable of production. Products with relatively long industrial chains, such as vehicle manufacturing, large medical equipment, complex chemical equipment, etc.
In addition, due to the underdeveloped local financial industry, it is difficult to raise funds locally. In addition, the local consumption capacity No, we can only rely heavily on exports. Once global trade or export policies are turbulent, the impact on Vietnamese companies will be greater.
“For example, Japan’s Uniqlo only processes it in Vietnam and then ships it to the world for sale. Generally speaking, Vietnam is a processing base, not a key market. “Cao Hu explained with a simple example.
3 It is almost impossible for Vietnam to be the “world factory”
Not only for Chinese companies, but also for the world For companies in other countries, the move of industrial chains to Vietnam has also been criticized.
According to the New York Times: Although some U.S. companies are considering moving production out of China to Cambodia, Malaysia, and Vietnam and other countries to avoid tariffs. However, in these countries, American companies face some disadvantages, such as inconvenient transportation and inexperienced labor. Many problems prove that Chinese manufacturing is indispensable.
In fact, China Enterprises started investing in Vietnam very early, but they have never really gone deep and thorough. Currently, the largest number of investors in Vietnam are Japanese enterprises, followed by enterprises from Taiwan, the United States, the European Union, Australia, and then from China. Mainland enterprises.
“Made in Vietnam will never become the next Made in China, nor will it become the next world factory.” It is Cao Hu’s years of deep understanding of Southeast Asian business practices that make him even more convinced that his Viewpoint.
He analyzed: Many people have simply seen that Vietnam has entered a new round of economic development cycle and confirmed Vietnam’s status as a global processing center. But it seems that Vietnam is following the development of China in the past road, but China’s economic characteristics are far more than this. China’s market capacity, scientific research strength, product diversification, “full manufacturing” industrial chain, and international influence are completely unmatched by Vietnam. Therefore, it should be correct Positioning Vietnam: From a global perspective, it is an important component of the industrial cluster centered on China. It is a global processing base and a global processing trade export base, which is the core of Vietnam’s advantages.
In this way, it is too early to conclude that Vietnam will become the next world factory.
The Sino-US trade war is only accelerating this process. The Sino-US trade war will also develop like this in Vietnam. Because there are a large number of simple processing industries driven by reduced human capital, such as the plastic industry, simple auto parts processing industry, and the sewing link of the clothing industry, these are the most vulnerable to the global impact. Due to the impact of the epidemic, industries similar to “global nomadism” have taken the lead in moving to Southeast Asian countries such as Vietnam, Myanmar, Laos, Cambodia, Thailand, and Indonesia, and even to countries such as Ethiopia in Africa. This is all due to low labor costs.
The phenomenon of some Chinese companies relocating to Vietnam should be viewed rationally, because this is a natural result of global trade and global industrial division of labor.
Cao Hu suggested: For Chinese companies, if they want to enter the global market, especially the ASEAN market, Vietnam is the only place they must pass through. “I hope Chinese companies can have more systematic, in-depth, long-term strategic investment plans. Instead of investing with short-term opportunism. If Chinese companies want to truly go global, enter the ASEAN market, and develop the ‘Belt and Road’ industry, they must Transform the opportunity-driven mentality into a strategic mentality.”
Zhang Handong also said: From the perspective of becoming the world’s factory, it is impossible for Vietnam to replace China, and it will definitely not be achieved within 3-5 years at least. Unless the trade war continues, more Chinese companies will move to Vietnam and lead the development of Vietnam’s entire industrial chain. However, “My personal opinion is: Once the Sino-US trade war ends, many Chinese companies will withdraw to China.”
�A more in-depth, long-term strategic investment plan. Rather than investing with short-term opportunism. If Chinese companies want to truly go global, enter the ASEAN market, and develop the “One Belt, One Road” industry, they must transform their opportunity-driven mentality into a strategic mentality. ”
Zhang Handong also said: From the perspective of becoming the world’s factory, it is impossible for Vietnam to replace China, and it will definitely not be possible within 3-5 years at least, unless the trade war continues and there are more Many Chinese companies have moved to Vietnam, leading the development of Vietnam’s entire industrial chain. However, “My personal opinion is: Once the Sino-US trade war ends, many Chinese companies will withdraw to China.” ”</p
