VietNamNet Bridge - Becoming the world’s factory thanks to a cheap labor force is not a good outcome for Vietnam, according to Vietnamese economists. They say a “cheap labor force” implies a “low-quality labor force”.

ANZ has predicted that South East Asia would become the new world factory in the next 10-15 years. 

ASEAN is a vast market with the total population of 630 million. The region ranks second in economic growth with an average growth rate of over 5 percent. 

While the labor costs in Shanghai and Beijing are $450/month/worker, the figures are only $250 in other emerging countries in Asia and $150 in Vietnam.

However, Do Thien Anh Tuan, a lecturer at the Fulbright Economics Teaching Program, said that low labor costs must not be seen as the outstanding strength of Vietnam, saying that low costs could be a “double-edged knife”.

“Low labor costs mean low productivity and low-skilled workers,” he explained.

“The economies trying to develop by taking full advantage of their cheap labor costs will fall into the development trap,” he said.

“They will find it difficult to escape from the labor-intensive production model and they will not squeeze into high-value global supply chains,” he said.

Tuan went on to say that if ASEAN tries to attract foreign investors with its cheap labor costs, it will see investors leaving in five or 10 years, when they can find other markets that offer lower labor costs.

An analyst noted that becoming the world’s factory is somthing Vietnam should be proud of.

“When other countries are building up knowledge-based economies, Vietnam is trying to attract labor-intensive manufacturers which use outdated technologies and make low added value products,” he said. 

According to Tuan, the enterprises leaving China because of increasingly high labor costs are those without high competitiveness, or second or third-tier businesses. 

“This means that Vietnam could only attract second or third tier companies or enterprises which do not need highly skilled workers,” he said.

“China is keeping calm amid the deparute of many foreign investors. I think China is trying to restructure its economy by setting up higher requirements for investors, thus forcing incapable investors to leave,” he said.

Dr. Luu Bich Ho, a renowned economist, said that Vietnam would not become the world’s factory. Vietnam is striving to develop an economy based on high technology and developing supporting industries to ease reliance on import materials, he said.

“Vietnam still has to do outsourcing for foreign partners and for some more time. However, this needs to change once Vietnam successfully reshuffles its economy,” Ho said.

Lan Anh