Given the fierce trade war raging between the US and China, a large proportion of the companies active in their production in China are trying to find a way out to protect their production. Due to the imposition of U.S. tariffs on manufactured products in China, companies do not give new orders to their production factories in China.
by Thanos S. Chonthrogiannis-https://www.liberalglobe.com
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The opportunity for Vietnam
China’s choice to date as the host and establishment of business production, were based on solely on the cheap labour costs (wages) presented by the labour market in China.
But the gradual phase of maturation that China’s economy has entered, reflecting on ever-increasing labour costs, which has been a factor in repositioning businesses in the presence of their production in China.
As an example, we could mention the South Korean colossus Samsung mobile phone manufacturing. Samsung due to increased Chinese labour costs and combined with the imposed embargo imposed by China in South Korea starting in 2017 due to South Korea’s participation in the US missile umbrella drastically reduced its net revenues.
The trade war between the US and China was the icing on the cake in Samsung ‘s decision to transfer its production to another Asian country.
Today an important part of global processing takes place in the factories located in Vietnam. 50% of the world’s production of Nike and Adidas is made in Vietnam.
Samsung will transfer its production from China to Vietnam while it intends to work with American Apple to build the new iPhone that will be made in Vietnam. Companies like Nintendo buy large tracts of land to build their production factories in Vietnam.
On the other hand, the Vietnamese government is trying to build and upgrade the country’s infrastructure, while at the same time it aims to improve its relations with the USA even more.
Photo by Author: ASDFGHJ, Source: Own work,
licensed Public Domain, https://en.wikipedia.org/wiki/Public_domain
What policies are needed to implement in addition from the government of Vietnam
But the Vietnamese government to grab the opportunity that opens it up and make Vietnam as the new Asian tiger should:
1. To accept the establishment in the territory of all kinds of multinational corporations without any restrictive condition and given that the Vietnamese people have decided to work hard both for their individual progress and prosperity and for the progress of their country.
2. In this case the government of Vietnam by accepting the implementation of the policy we mention in (1), with the installation of unrestricted multinational companies in Vietnam will be able to:
a) To develop to the fullest extent all services offered to executives and employees in these companies. This means the development of the hotels and restaurants industry, luxury transportation and entertainment services, wellbeing services etc. In this way, hundreds of thousands of new jobs will be created in all these industries.
b) Through this installation of multinational companies and technology manufacturers, Vietnam will be able to magnetize skilled labour that will come from both China and other neighbouring countries.
c) The government of Vietnam should upgrade its universities and anchor their research and development departments with multinational companies that will settle in Vietnam.
Through this policy will be able to produce in the future skilled low labour costs employees that they will absorb from the production process of these companies.
In addition, it should open the higher education market for the creation of private universities that will help to increase competition between state and private institutions. Producing highly qualified graduates will minimize the time they need to find a job in their expertise field.
3. At the same time as the implementation of all above policies take place, the Vietnamese government should privatize state agencies and open its markets to competition, e.g. privatizations in the production and distribution of electricity, airports, ports, etc.
Through this strategy, the government of Vietnam will succeed in acquiring significant capital-revenues by creating a fund to deposit them with the aim of either further financing for the construction or upgrading of infrastructure projects e.g. road and railway networks equally etc. or to use these funds in difficult fiscal years in the future in order to support the labour market.
With the reduction of state spending due to privatization and the outsourcing of state services and where all these is possible, the Vietnamese government should reduce the tax on its exports through the implementation of equivalent fiscal value measures in the economy with long-term aim to improve its trade balance. Furthermore, it should reduce taxation on the acquisition of raw materials in order to compete with its neighbouring countries.
4. Full liberalisation of the labour market.
5. Either the Vietnamese government itself should fund or incentivize construction companies to build housing-skyscrapers, which can house families of its citizens in order to increase the size of the land supply so that then the land market to become cheaper in the future.
At the same time, with this policy it will be able to alleviate the housing problem that exists in the country due to the large population and the small territorial territory of Vietnam, small territory in relation to the size of its population.
The opportunities are in the hands of Vietnam and whether its government will show the audacity to grab them by drastically improving the standard of living of its citizens.
Thanos S. Chonthrogiannis
