Shifting production chains away from China, opportunities for Vietnamese enterprises

With the wave of shifting production chains away from China is taking place strongly for many reasons, Vietnam has become a potential destination in the eyes of foreign investors, capable of attracting FDI from China to Vietnam. However, in order to make good use of this opportunity, Vietnam needs specific solutions and strategies, suitable to the world situation. In the framework of the article below, RX Tradex will talk more clearly about the current trend of shifting from China to Vietnam, and mention priority strategies for Vietnamese enterprises to attract foreign investment capital and participate more deeply in the global supply chain.

1. Vietnam catches up with the trend of shifting production chains away from China

In 2018, trade tensions between the U.S. and China escalated, causing many investors to start looking for more stable and less risky production locations, while avoiding high U.S. tariffs. In that context, thanks to good control of the Covid-19 epidemic, Vietnam has been recognized as one of the best epidemic prevention countries in the world when it has publicly disclosed information about the number of infections, bringing transparency and reliability to businesses. This has created a positive impression and made Vietnam an attractive destination for investors, especially those countries that want to reduce their dependence on supply chains from China.

As one of the Southeast Asian countries with potential for development in the manufacturing industry, Vietnam is considered a bright example to attract investment due to the improving business environment, developed domestic market and rising living standards of its people.  create favorable conditions for investment and business. Besides, the cultural and political similarities with China, along with its favorable geographical location, also help minimize transportation costs and maintain close ties with existing manufacturing facilities in China.

Vietnam has also demonstrated extensive international integration in the fields of economy, trade, foreign affairs, culture, education and science and technology, creating a diverse and conducive environment for business and investment activities.

2. Advantages for Vietnam, but also great challenges

Although Vietnam has many advantages to attract investment and shift production chains from China, it also faces significant challenges. It can be mentioned as:

Investment environment and competitiveness are not thorough: Despite improvements, Vietnam's investment environment and competitiveness still pose some challenges. In particular, the issue of time and cost of carrying out administrative procedures is still a concern for international investors. Vietnam's industrial park infrastructure and logistics system still need to be improved to meet the requirements of businesses. At the same time, supporting industries also need to be developed more strongly to create balance and efficiency in the product supply chain.

Competition from neighboring countries: Vietnam is facing a stiff competitive environment from its regional neighbors such as India, Thailand and Indonesia, as they are also determined to attract investment flows from China. The governments of these countries have actively attracted investment by applying measures such as tax incentives, providing cheap land, supporting the training of skilled workers,...

Weak in technology and financial capacity: Vietnamese enterprises are facing technological and financial difficulties when they need to access capital to invest in technology and improve production capacity. hindering the participation in the supply chain of FDI enterprises, especially when faced with the requirement of standards and production performance. The increase in production of FDI enterprises in Vietnam also means great pressure on domestic enterprises, especially small and medium enterprises when facing competition from competitors with strong capabilities.

There are no practical relationships with big investors like Europe and the US: Although he has a lot of experience in cooperating with Asian investors such as Korea, China and Japan. However, Vietnam's key development goal is to focus on investing in advanced technology fields. To accomplish this goal,    Vietnamese businesses need to attract the interest of investors from Europe and the US, but access is facing difficulties because they have to compete with many other countries in the region.

3. Priority strategy for Vietnamese enterprises to attract foreign investment

Although Vietnam has the advantage of being eyed by foreign investors and considered as the first choice, Vietnam still needs specific solutions and strategies to optimize the ability to attract and retain investors from abroad. Here are some strategies that businesses need to prioritize to implement to attract investment.

3.1. Invest in modern and future technologies

The focus on applying and developing new technologies, 4.0 technologies such as artificial intelligence, robotics, big data and fintech can help businesses improve productivity, optimize production processes and provide higher quality products and services.

Using modern technology also enhances competitiveness and attracts the interest of international investors, especially from Europe and the US, which have a high demand for advanced technology solutions.

3.2. Transforming production towards green production

Apply environmentally friendly production methods and technologies, reduce the amount of waste and negative impacts on the environment. In this way, enterprises not only help protect the environment and natural resources but also create competitive advantages, meeting the increasing requirements of environmental protection from consumers and legal agencies.

The transformation of production in this direction also helps to enhance the image of enterprises in the international market and attract interest from foreign investors, creating opportunities to cooperate with international partners and build sustainable production enterprises  towards long-term development.

3.3. Infrastructure development

Investment in infrastructure is an important factor to create a favorable and attractive business environment for foreign investors. The development of infrastructure such as transportation, electricity, telecommunications, and industrial parks will provide solid facilities for production and business activities.

The improvement of infrastructure also facilitates the movement of goods and labor, which minimizes production costs and time, not only attracting foreign investors but also promoting the sustainable development of the local economy.

3.4. Training high quality human resources

Human resource development is an important key to improving capacity and expertise in production. By providing quality training programs and tailored to labour market needs, Vietnam can create a workforce with skills and a deep understanding of modern technology and manufacturing processes.

3.5. Strengthen management and supervision

Strengthening management and supervision requires strict law enforcement, monitoring of product quality and production processes, as well as ensuring compliance with environmental standards and occupational safety. By promoting transparency, honesty and accountability in business, Vietnam can create a stable and trusting environment for investors.

3.6. Facilitating investment in research and development

Investment in research and development (R&D), including the establishment of the necessary infrastructure for research activities, the provision of grants and tax incentives for research and development projects, as well as the creation of an open and flexible business environment that can attract interest and investment from international businesses It also encourages domestic enterprises to improve their research and innovation capacity, which not only helps promote innovation and progress in important industries, but also creates new products and services that can compete in the international market.

4. Summary

Vietnam is facing a great opportunity to attract foreign investment, especially in the context of shifting production chains from China. However, to fully take advantage of this opportunity, Vietnamese enterprises need to implement specific strategies and solutions. Investment in technology, green production transformation, infrastructure development, training of high-quality human resources, strengthening management are important factors that help create a favorable and attractive business environment for investors.

To seek development opportunities and attract investment from large corporations in the world, you can register to participate  in the Vietnam Manufacturing Expo 2024, taking place on 07-09/08/2024 at Viet Soviet Palace (I.C.E) 91 Tran Hung Dao,  Hanoi. This will be a place to meet, exchange experiences and connect between businesses and leading experts in the field of manufacturing, learn about new breakthrough solutions and discover the most modern machinery and technology products, gathering hundreds of brands from many different countries around the world.