Global Times - 01.08.2019

(Jacob Rumans) #1

DEPTH


en using the Chinese
ade in Vietnam” labels.
domestic brand under
logy company Bkav, was
tnamese public when it
oducts were embedded
n systems. Khaisilk, a
mese textiles company,
Chinese imports under
were Vietnamese prod-

ntry still exploring its
international coopera-
in Vietnam’s manufac-
ead of the General Sta-
m noted after the Asanzo
ady become standard
to import near-finished
m as “Made in Vietnam”

after some simple processing locally.
According to a report by Nikkei Asian Re-
view, fingerprints from foreign companies can
be found everywhere under “Made in Vietnam”
labels. At the end of last year, Vinfast, a private
automotive startup under the real estate group
Vingroup began sales of their “Klara” electric
scooter. Like many other brands under the label
“Made in Vietnam,” Klara relies heavily on
foreign accessories and technologies. Roughly
200 German engineers are working in the
Vingroup factory, while an Italian company
that also works for Ferrari is responsible for its
product design. Klara allows a glimpse of the
kind of external help required to build Viet-
namese vehicles.
Vietnam has weak industry, particularly its
manufacturing sector, and many industries
are controlled by foreign capital, Jiang told the

Global Times. The manufacturing industry is
a holistic system that requires mature busi-
ness models both in the upstream and the
downstream. It is possible that Vietnam can

make breakthroughs in a specific area, but it is
a different story for systematic development.
From a professional perspective, Vietnam is
taking over cheap and basic production, but is
yet capable of more complex manufac-
turing. Such is the biggest challenge
faced by “Made in Vietnam.”

Agrarian economy?
Companies told the Global Times
that because of the trade war, some
of them are trying to relocate their
production lines to Vietnam, mostly
because of the free trade agreements
between Vietnam and many coun-
tries and regions. The agreements
mean import and of export costs from
Vietnam are lower, and companies can
evade trade barriers imposed on China
by the US.
However, many companies also
noted that moving production to Vietnam is
not a foolproof plan. Relocating the companies
might be easy, but relocating the industrial
chain is a different story. Due to its small popu-
lation and domestic market size, it is difficult
for Vietnam to establish a complete industrial
chain, which means companies still need to
import upstream accessories from China at
additional costs.
A toy manufacturer told the Global Times
that in the case of high-end toys, most acces-
sories are produced in Shantou and Dongguan,
Guangdong Province. The concentration of
production in these cities has generated a clus-
ter effect that companies cannot leave behind
without increasing costs. An entrepreneur from
East China’s Zhejiang Province told the Global
Times that one of his friends has been running
business in Vietnam for years with annual
revenue of only 500,000 yuan ($72,682).
Despite a relatively low average income,
Vietnamese people have demonstrated rising
purchasing power. In Vietnam, the sales of
high-end home appliances are fast on the rise,
providing excellent conditions for the growth of
the domestic manufacturing industry.
Earlier this year, the Vietnamese govern-
ment issued an order to speed up the technol-
ogy transfer process to realize its “industry 4.0”
plan. However, the plan, which aims to build a
foundation for Vietnam’s modern industrializa-
tion by 2020, might seem a little too ambitious.
A report from the US magazine Foreign
Policy shows that compared to South China’s
Guangdong Province, where one third of the
population come from other provinces ready
to join the manufacturing labor force, the
Vietnamese manufacturing workforce consists
65 percent of Vietnamese farmers who are still
much attached to agriculture. According to a
report by CNBC, Vietnam is still “an agrarian
economy largely focused on rice.”
Unlike China, which took over labor-inten-
sive manufacturing from the West, Vietnam is
keen to import cutting-edge facilities and tech-
nology. But that doesn’t mean it will be easy.
Although Vietnam has a population of almost
100 million, it is still lacking in infrastructure,
Gu told the Global Times. In automotive manu-
facturing, for example, it is difficult to gather
every accessory in one region. Vietnam will be
industrialized, but it is hard to replace China as
the world’s factory.
Zheng Xuan and Ding Yuqing contributed
to this story

e ‘winner’ of trade war


o keep up with relocated manufacturing demand


Page Editor:
wangyi@globaltimes.com.cn

Main: The sign over an export goods store in
Hanoi reads “Made in Vietnam”.
Workers busy at a production line in Hanoi
File photos: IC
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