Blog
Fostering Business Insights: Vietnam And Geopolitical Change
Posted Feb 09, 2019
From November 18th to 29th GIFT will conduct our flagship Global Leaders Programme in Hong Kong and Hanoi, Vietnam.
GIFT's best-in-class learning methodology leverages a real-world experiential project to test and train participants' leadership, teamwork and conceptual thinking skills. During the experiential component, participants will work with our project partner: REACH, a prominent and fast growing firm that provides upskilling and employment opportunities for Vietnam’s young under-skilled workforce.
GIFT last visited Vietnam in 2017, when we partnered with iCare Benefits: a social enterprise offering durable consumer goods, such as washing machines, televisions and smartphones, to factory workers. An innovative employee benefits programme, GIFT proposed an expansion to their product line focused on affordable healthcare products, including an insurance package serving the female migrant worker population. See the executive summary below for information on the proposal produced by our cohort.
GIFT worked with iCare to propose an expansion to their product line: affordable healthcare products, including an insurance package, specifically targeted at the country’s female migrant worker population. See the executive summary for information on what our participants produced.
What has happened since our last visit?
Even in 2017, Vietnam was already being considered as a target for foreign investment. Tightening labour markets in China and increased wages were pushing global manufacturers to look for cheaper alternatives. Vietnam was highlighted as an appealing possibility: the country has a large population, stable government, and an existing base to manufacture higher-end products, like electronics and consumer goods.
This shift has been accelerated by the trade tensions between the United States and China. With little chance in the short-term that tariffs on Chinese-manufactured products will be removed, manufacturers are looking to Vietnam as an alternative. FDI in Vietnam increased by 9.1% in 2018, specifically in garment production from China. China has jumped from the 7th to the 3rd largest source of FDI in Vietnam over the past two years. Large consumer manufacturers like Apple, Foxconn, Samsung and Nintendo have shifted production to Vietnam to avoid tariffs.
For the moment, Vietnam has successfully positioned itself between China and the United States in order to benefit from both countries. Vietnam has deepened both its economic and security ties with the United States (its former enemy), even allowing American naval ships to make port in Vietnam. However, Vietnam has also taken a softer line against China’s claims in the South China Sea than some of its Southeast Asian counterparts (though the dispute has re-emerged in recent months).
Vietnam is thus a country that presents exciting opportunities. Vietnam’s economic model continues to be successful, even as the world moves to a more resource-constrained era. According to a study from the University of Leeds, Vietnam remains the only country that comes close to achieving its environmental and economic goals at the same time.
Vocational Training
Despite this opportunity raised by the trade war, Vietnam is still much smaller and less developed than its northern neighbour, and thus will not be able to catch up overnight. For example, land is relatively more expensive in Vietnam than in China, so it can be difficult to build new factories to accommodate increased demand. Murky land ownership can also increase the cost of expansion.
In addition, Vietnam does not have the integrated manufacturing value chain that China does. While China can produce many components for electronic and high-end goods internally, Vietnam cannot. Even when Vietnam produces high-end components, they may still need to be shipped to China for final assembly.
However, one more immediate limitation is a lack of skilled labour. Higher-end manufacturing requires people with technical skills and experience working with more complex machinery. Even though Vietnam has a young population (with over 70% of Vietnamese under 50 years of age), 40% of FDI companies in Vietnam have reported difficulties in finding enough skilled labour.
The Vietnamese government is investing heavily in education and is taking steps to expand its vocational education and training programmes. Our programme will see participants help REACH capture the opportunities in Vietnam's skills gap and build much-needed capacity among its young workforce.
Vietnam presents promising opportunities for all companies seeking to grow in the region. Thus, up-and-coming business talents will benefit from experience in this fast-growing and well-placed economy. By working on this original experiential field project, participants will also get the chance to train their leadership skills, improve their effectiveness within teams, and test their conceptual thinking skills. We will be sharing more about the programme and project in the weeks to come, so stay tuned for more!
