With the rise of global sourcing and the quest for cost-effective production, manufacturing in Vietnam has become an epicenter for growth and opportunity.
The country’s ascension as a manufacturing hub is impressive, embodying the convergence of favorable economic policies, a burgeoning workforce, and strategic geopolitical positioning. This harmonious blend presents a practical alternative for investors that are reevaluating traditional manufacturing bastions.
Historical Context
Tracing back to post-reform Vietnam, the manufacturing sector’s evolution is a tapestry woven with governmental policy shifts, foreign direct investment (FDI) influx, and a determined leap into liberal trade agreements. Accelerated by the country’s Doi Moi economic reforms in 1986, the manufacturing industry has undergone transformative growth.
Furthermore, despite the global economic uncertainties, Vietnam has maintained an impressive level of economic stability, largely due to its successful containment of the COVID-19 pandemic and its commitment to free trade.
China Plus One
Manufacturing in Vietnam is an industry that benefited from the China Plus One strategy, a business strategy in which global companies diversify their supply chains in countries (typically ASEAN) aside from China. With the trade war between China and the U.S. causing uncertainty, more and more businesses are shifting their manufacturing needs to Vietnam.
There has been a noticeable increase in the manufacturing industry’s contribution to Vietnam’s GDP. A Statista report shows that in 2015, manufacturing in Vietnam made up 20.96% of the GDP. In 2022, the number rose to 24.76%.
Manufacturing in Vietnam makes up around a third of the country’s GD, writes a separate report by the Australia-Vietnam Enhanced Economic Engagement Strategy.
Key Strengths
Vietnam’s arsenal of strengths is led by its strategic geographic location snuggled between the South China Sea and several booming economies. Add the blend of abundant, low-cost labor, and government incentives tailored to entice investors; these attributes make it appealing for the manufacturing sector.
Skilled Labor Force
Another significant contributor to the success of Vietnam’s manufacturing industry is its skilled and dynamic workforce. The country has a high literacy rate, and the government’s focus on education has led to an increase in the number of technical and vocational training schools. This focus on skill development is ensuring a steady supply of trained workers for various manufacturing sectors.
The Tech Manufacturing Boom
The area that has garnered the most attention in Vietnam’s manufacturing scene is technology. Global tech giants like Samsung, Intel, and LG have set up production bases in the country, drawn by the availability of skilled labor and low production costs. This influx of tech companies has not only boosted the country’s manufacturing output but also spurred advancements in local technological capabilities.
Read more: Exploring The Thriving Vietnam Tech Industry
Varied Sectors
However, manufacturing in Vietnam offers potential beyond technology. From textiles to furniture, the diversity of sectors flourishing within its borders is a compelling argument for its multifaceted manufacturing prowess.
Investment Potential
Investors looking towards manufacturing in Vietnam are greeted with a plethora of compelling reasons to engage. From cost-effectiveness to access to a burgeoning ASEAN market, the narratives of success echo across the industrial valleys of Vietnam.
Opportunities and Challenges
While there are abundant opportunities, investors must also consider the challenges. Infrastructure remains a concern, particularly outside of major cities. Also, navigating through the legal and regulatory landscape can be complex. However, these challenges are not insurmountable and can be mitigated with a well-planned market entry strategy and a comprehensive understanding of the local market.
Employer of Record Services
Diving into the practicalities, an Employer of Record (EOR) service can be a consequential asset for manufacturing firms looking to establish or expand operations in Vietnam. These services can navigate the complexities of local laws, streamline the hiring process, and ensure compliance, allowing firms to focus on their core business activities.
Conclusion
Manufacturing in Vietnam is a thriving industry, blending tradition with progress and presenting a compelling viewpoint for the industrious future. The prospects are vast for investors ready to embrace Vietnam’s bold strides into a promising tomorrow.
Are you looking to expand into Vietnam? Check out the services that we at Eos provide or contact us directly here.
Featured photo by Andreea Popa on Unsplash
