Talent shortage hampers Vietnam’s move up the value chain

AFTER taking a page out of China’s playbook with its own Doi Moi reforms in 1986, Vietnam has ridden the globalisation wave to become a middle-income country within a single generation.

But Vietnam is not content to remain a subcontractor. In 2021, it announced a long-term development agenda: to become an upper-middle income country by 2030, and a high-income country by 2045. Its 2021-2030 Foreign Investment Cooperation Strategy aims to attract high-tech and high value-added projects.

But Norman Lim, president of the Singapore Business Group in Ho Chi Minh City, thinks that Vietnam’s ambition to move up the value chain “cannot be done within 10 years” as hoped. To him, the biggest obstacle is a severe shortage of professional and technical talent – and the education system required to overcome this cannot be set up overnight.

When a plant with foreign investment wanted to hire 100 engineers, “they couldn’t find a single engineer” out of 2,000 applications because none had the right qualifications, he recalled.

Automation as the answer

From 2016 to 2020, Vietnam’s minimum wage rose by an average of 7.4 per cent each year; from Jul 1 this year, it increased by 6 per cent.

Simon Lee, chief executive officer of Taiwan’s Wagon Group, said that compared to some other South-east Asian countries and India, Vietnam no longer has a labour cost advantage.

He sees Vietnam’s manufacturing industry competing with services for labour for the next 5 to 10 years. Given this difficulty in filling jobs, the best solution for foreign enterprises is either automation or relocating. Wagon’s business is primarily gift trading and production, and the company – which has factories in China and Vietnam – is looking at setting up in India.

Superior EMS is expanding automation at its Vietnamese plant to keep costs down while ensuring stable product quality, said director Charles Wong. Though Vietnam’s minimum wage is lower than China’s, the difference shrinks to only about 10 percentage points after adding social security payment and other items, he added.

See Yong Sheng, president of the Singapore Business Association Vietnam, is betting on the country’s economic development taking off soon. Based in Hanoi, See had worked in China for many years and witnessed the development of both countries up close. In his view, the gap between Vietnam and China has been reduced to about 10 years.

Crucially, Vietnam can avoid unnecessary detours in its development with the aid of 5G and artificial intelligence, he said. When China launched its reform and opening-up policy, it had neither the benefit of current technology nor models of development to follow. Vietnam, on the other hand, could follow China’s model.

“Deng Xiaoping talked about crossing the river by feeling the rocks, but Vietnam doesn’t have to feel the rocks – all it needs to do is watch how China does it.”

Sim Tze Wei is the Associate China News Editor with Lianhe Zaobao. This article is part of a collaboration on a series of weekly features translated from Lianhe Zaobao. The original story first appeared on Jul 24.