Foreign enterprises increase production shift to Vietnam
Foreign manufacturers, especially Chinese ones, are increasing recruitment to expand and shift production to Vietnam.
In the first six months of the year, recruitment and payroll firm Adecco received a 10% increase in recruitment needs for production and manufacturing personnel compared to the first half of 2023. Positions include experts, senior managers in quality and supply. A common requirement of recruitment “orders” is that personnel need to know Chinese.
“In the period when Vietnam strongly attracts foreign investment, the demand for recruiting workers fluent in English and other languages, especially Chinese, to increase connections with international partners is increasing,” according to Adecco.
Similarly, Navigos Search, a mid- and high-level human resource recruiter, said that Chinese-invested manufacturing enterprises tend to move and expand their operations to Vietnam. They require a diverse workforce, with a high priority given to experienced personnel (about 68.3%) and management skills (nearly 22%).
In terms of industry, they are shifting to high-tech industries, components, spare parts for industrial production, electronics, and automobiles. In particular, the demand for personnel who know Chinese makes the labor market for this language vibrant.
“The high demand for recruiting Chinese-speaking candidates at businesses has led to a limited supply,” said Ms. Tran Thi Hoan, Deputy Director of Navigos Search in the North.
The recent increase in demand for manufacturing workers, according to human resources firms, shows the clear trend of foreign companies shifting their supply chains to Vietnam. Among these, Chinese companies are moving according to the “China+1” trend, which means diversifying their production locations outside of China.
Among the 62 countries and territories with newly licensed investment projects in Vietnam, in the first 7 months of the year, capital from the world’s second largest economy was in the top. Accordingly, foreign capital from Hong Kong was 1.31 billion USD and from mainland China was 1.22 billion USD. These two investors accounted for 23.4% of the total newly licensed FDI capital.
In addition to China, the trend of global corporations choosing Vietnam as an additional production base is also clear . The General Statistics Office said that FDI capital in the past 7 months (new and increased) was over 18 billion USD, an increase of nearly 11% over the same period in 2023. Realized capital reached 12.55 billion USD, the highest level in 7 months since 2020.
New and expanded projects are mainly in the northern industrial zones. In the second quarter, Bac Ninh continued to be a bright spot thanks to many new projects such as the 14.26-hectare circuit board manufacturing plant worth 383 million USD of Foxconn Group in Nam Son – Hap Linh industrial zone. Or Amkor’s semiconductor equipment and materials factory in Yen Phong II-C industrial zone, with an additional capital of more than 1 billion USD.
In Hai Phong, earlier this month, Vietnam Industrial Park Group implemented phase 2 of the ready-built warehouse project at DEEP C Industrial Park, which will add more than 80,000 square meters of mixed-use warehouses and high-quality warehouses. Vietnam Industrial Park is actively seizing opportunities in the context that Hai Phong is one of the top three localities nationwide in attracting FDI in the first half of 2024, with the proportion of projects in the fields of high technology, processing, manufacturing, and logistics reaching more than 93%.
Some unapproved industrial parks have even had customers asking. At the 2024 Shareholders’ Meeting, Kinh Bac Urban Development Corporation (KBC) said that a Korean investor wanted to rent 20 hectares to build a battery factory and a Chinese enterprise wanted to rent 60 hectares to build a factory producing induction cookers and ovens, both in Trang Due 3 Industrial Park (Hai Phong). Meanwhile, Trang Due 3 is still in the final stage of applying for investment approval.tỷ USDVốn đầu tư trực tiếp nước ngoài vào Việt NamBảy tháng đầu năm giai đoạn 2020-202418.818.816.7216.7215.5415.5416.2416.24181810.1210.1210.510.511.4911.4911.5811.5812.5512.55Vốn đăng ký tăng thêmVốn thực hiện2020202120222023202405101520VnExpress | Tổng cục Thống kê
According to HSBC Bank in the report “Vietnam at a glance July”, Vietnam has the advantage of being “a good FDI destination, surpassing other Southeast Asian countries” in the trend of shifting production. This is thanks to favorable foundations in terms of competitive costs and labor quality.
In fact, over the past 20 years, Vietnam has emerged as a major manufacturing base and deeply integrated into the global supply chain. Exports have increased by an average of more than 13% per year since 2007, mainly from foreign-invested enterprises.
Historically, FDI flows have mainly come from South Korea, most notably Samsung. The efforts of these early entrants have encouraged other large technology corporations to invest in Vietnam. Last year, Chinese manufacturers alone poured in nearly 20% of all newly registered FDI.
In the “China +1” trend, competitive costs and supportive policies are the top attractive factors of Vietnam. Compared to labor costs in Asia, manufacturing wages here are lower than in China and other countries. Meanwhile, according to the PISA survey results, the general education level of Vietnamese people is highly appreciated. PISA is an international student assessment program that examines the knowledge and skills of 15-year-old students.
Other costs, such as energy prices, are also competitive. Vietnam has the second lowest electricity prices for business production in Southeast Asia. Diesel, which is widely used in industry, is relatively cheap. In addition, as of May, Vietnam had signed, implemented, and was negotiating 19 free trade agreements (FTAs).
Another reason for Vietnam becoming a production relocation destination, according to HSBC, is the active support from the Government through the tax system. Vietnam has a competitive position thanks to a corporate income tax rate of 20%. In addition, the Government has introduced many policies to exempt, extend or reduce taxes to support businesses.
“In fact, Vietnam’s participation in the global value chain has increased sharply over the years, and is now comparable to Singapore,” the HSBC report stated.
However, Vietnam is still mainly an import hub for finished assembly. Therefore, to maintain strong investment flows, HSBC recommends that Vietnam needs to move up the production chain and increase domestic value-added.
Along with that, some challenges in attracting foreign capital include the shortage of skilled workers. This leads to difficulties in developing production capacity in high-tech industries such as semiconductors, logistics and maritime transport.
Not to mention, the quality of infrastructure, digital capabilities to streamline trade processes and ensure stable energy… will also affect the investment decisions of multinational corporations in the coming years, according to HSBC.
Vien Thong
