Economic Development Challenges in Vietnam
First, among Southeast Asian countries, Vietnam’s transportation infrastructure is average.
The main mode of transportation in Vietnam is highway, with a total mileage of about 47,000 kilometers. National highways, provincial highways and expressways constitute the main highway transportation network. The total length of the railway is 3160 kilometers, the running speed is low, and the facilities and equipment are old. If you have been to Vietnam (in fact, several countries in Southeast Asia are similar), you will definitely be impressed by their beautiful natural scenery and infrastructure.
Due to the limited railway coverage, if you want to go from the famous Ho Chi Minh City in southern Vietnam to the town of Mui Ne in Binh Thuan Province next door (one of the must-see beaches in the south), although it is only 200 kilometers, you have to change from a car to a green train It takes a whole day to transfer to a long-distance bus. This is also the reason why Vietnam has increased infrastructure investment despite financial difficulties in recent years. The Vietnamese government will prioritize the development of public transportation and critical transportation infrastructure, with plans to expand the existing road network by more than five times by 2030. Air and water transportation also have certain development potential.
Second, education is backward, grassroots workers are lost, and there is an extreme shortage of mid-to-high-end talents.
In terms of education, Vietnam only began to universal nine-year compulsory education in 2001, which also means that most industrial workers only have primary school education, and it is difficult to engage in complex technical work, which is why Vietnam mainly undertakes low-end labor-intensive industries transferred from China.
There are very few mature middle and high-level managers in Vietnam, and many factories can only drop managers from the “home country”. A Chinese apparel manufacturer invested 500 million yuan to open a Vietnamese factory in Vietnam as early as 2019, but so far it has not cultivated a qualified local management team, so it can only be dispatched from China. In addition to the lack of mid-to-high-end talents, Vietnam’s grassroots workers are also losing. Like China, there are many migrant workers in Vietnam who go to the city to “drift north”. However, Vietnam’s wage level is low, and high prices and high rents will become a burden. The impact of the epidemic has exacerbated the loss of labor. Vietnam’s Ministry of Public Security estimates that more than 2 million people in Ho Chi Minh City have fled the city and returned home, and do not want to return to the city to work.
Third, the supporting industrial chain is not perfect, and there is still a gap in quality compared with Chinese manufacturing.
At present, Southeast Asia has formed a basically complete medium and low-end industrial chain in the fields of clothing, shoes and hats, luggage, furniture, tires and solar energy, and the labor price is much lower than that of China. However, many supporting components in the industrial chain need to be imported globally. Moreover, the logistics capabilities of Southeast Asia, including the operating efficiency, production capacity and stability of terminals and trailers, cannot be compared with China. In the field of medium and high-end manufacturing, Vietnam still lacks a large-scale and complete industrial chain, and the upgrading of industrial facilities cannot be completed in a short period of time. The foundation of low-end manufacturing is cost, and the foundation of high-end manufacturing is technology. Vietnam lacks core technical strength in manufacturing. Compared with Chinese manufacturing, there is still a gap in quality. Many foreign customers have cooperated with Chinese companies for decades, and it is not easy to transfer orders on a large scale. Moreover, large-scale order transfer means that it is necessary to re-open the mold and reset the quality inspection standards. A series of actions are costs for enterprises.
The challenges facing Vietnam are more than just a few of the above.
Although Vietnam’s political situation is relatively stable, and the government is also working hard to build infrastructure, improve the level of national education, and continue to implement free market reforms, any of the above undertakings will require more than ten years of investment or even a generation to achieve significant results. , the efforts of several generations. In general, the diversified layout of the global industrial chain may temporarily benefit the industrial development of some developing countries, including Vietnam. However, under the background that the cost of capital remains low for a long time, the replacement of labor by digital technology may change the traditional logic of comparative advantage, and green and low carbon will also become an additional constraint for late-developing countries to catch up.
There are various indications that the historical window for catch-up and overtake of late-developing economies such as India and Vietnam, and even those that are labor-intensive and high-carbon resource-intensive in the overall sense, may gradually close. The speed of this process depends on the development speed of digital and green production methods. In any case, compared with the past half century, the road to catch-up and overtake for the backward developing countries will certainly be more difficult.
The Southeast Asian country’s ambition is to become a high-income developed country by the 100th anniversary of its independence (2045).
The author argues that Vietnam’s rapid development depends on replicating China’s success at a faster pace, integrating itself more fully into the regional and global economy, and taking advantage of some of the advantages that China does not have and forging a “manufacturing powerhouse with Vietnamese characteristics.”