US-China trade war leads to fierce battle for skilled labour in Vietnam

Companies shifting their manufacturing operations to Vietnam are facing a shortage of skilled labour, especially in IT and engineering

Only 12 per cent of Vietnam’s 57.5 million-strong workers are highly skilled, and analysts lay the blame on the education system

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Students at an industrial vocational training college in Hanoi, Vietnam. Photo: Reuters

Published: 1:18pm, 11 Oct 2019Updated: 1:45pm, 11 Oct 2019

A new front has opened in the US-China trade war as companies shifting manufacturing to Vietnam engage in a fierce battle for skilled labour, aggravating an existing shortage and prompting calls for education reforms to address the problem.

Vietnam has emerged as one of the largest beneficiaries of the trade dispute between Washington and Beijing. Exports to the United States were up 21.5 per cent in the first eight months of this year, and several companies including Google parent Alphabet Inc and Nintendo have announced new plans to open facilities in the country.

Hanoi’s trade deals, including its recently signed FTA with the European Union, have also become a draw.

“Fresh, unskilled people are plentiful, but even basic sewing workers will need training for at least six months, so patience is the key,” said Jef Stokes of Maxport, a Vietnam-based garments manufacturer, highlighting a lack of reform in the education system as part of the problem.

“It’s adequate, but not graduating highly qualified candidates in enough volume,” said Stokes. “This is the choke point.”

IT workers, engineers, and managers were already in tight supply, but additional demand from trade war refugees is increasing turnover among highly skilled workers, factory owners, consultants and recruitment firms say.

The lack of capacity should come as no surprise: Vietnam’s population is just 7 per cent that of China’s, it still lacks investment in infrastructure, and needs to spend an average of US$6.7 billion a year to expand its annual power generation capacity by 10 per cent between 2016 and 2030, according to the World Bank.