The trade conflict between China and the US is boosting the economic prospects of Vietnam, as some Chinese enterprises consider plans to get around US tariffs by moving manufacturing to the emerging country. However, many Vietnamese people don’t want their country to become a dumping ground for low-cost manufacturing and outdated technologies, disturbing the nation’s own economic order and its Industry 4.0 strategy.
Perhaps some other nations with low labor costs, such as India, are using the same logic in dealing with industrial transfers amid the trade war.
Vietnam is developing a national industrial strategy that would make manufacturing a new economic growth engine. As the emerging country strives to transform and upgrade its manufacturing industry toward a digitalized and intelligence-based model, it’s understandable that some people have a disdain for low-cost manufacturing.
In the global race to support the growth of advanced manufacturing and the digital economy, everyone wants to be a leader, but only a country with a sound industrial foundation can achieve that goal.
Vietnam’s strategy needs to be implemented step by step with patience. Most developing countries start with low-end manufacturing and build on that base. Vietnam will be no exception. Take a simple example. If Vietnam wants to develop a high-fashion sector, it needs to start with labor-intensive clothing production.
A lack of highly skilled workers is an obstacle in Vietnam’s ambition to move up the value chain. In the initial stage of its industrialization process, making Vietnam’s Industry 4.0 strategy a reality will not be an easy thing. The country’s key challenge is to enhance its competitive advantage in low-cost manufacturing.
If Vietnam skips over the initial stage of industrialization to focus on the development of an intelligence-based model in Industry 4.0, its competition with China will heat up. Competition is not necessarily a bad thing but both China and Vietnam need to be realistic and pragmatic.
If the complaint that Vietnam is becoming a rubbish bin for yesterday’s industries becomes a source of overwhelming discontent, it could undermine bilateral relations.
There is great scope for the two countries to boost their industrial connectivity and linkages. Vietnam’s low labor cost advantage has led some Chinese manufacturers to show an increasing interest in setting up assembly lines in the country. It is entirely possible that China and Vietnam can enhance cooperation as China extends its industrial chain to Vietnam. But achieving that goal means both countries must better coordinate their development strategies.