In recent years, Vietnam has successfully attracted a large number of foreign enterprises to build factories by implementing a series of preferential policies, offering cheap labor resources, and gradually improving its infrastructure conditions. These factors, working together, have made Vietnam a very popular destination for the global transfer of the manufacturing industry. Numerous enterprises, with their dreams and plans, have flocked to Vietnam to establish factories, hoping to take this opportunity to expand their overseas markets and effectively reduce production costs. However, in the process of factory construction, these enterprises also face a series of complex and thorny problems that require them to carefully consider and solve.
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First of all, an important factor we have to consider is the labor cost. In Vietnam, the wages of workers have doubled in recent years. Taking the areas around Hanoi as an example, if workers do not work overtime, their monthly salary is about 3,000 yuan, which is equivalent to about 10 million Vietnamese dong. This figure is approximately half of the average salary of workers in Dongguan. However, the labor market in Vietnam faces a challenge, that is, many workers need to receive training before taking up their posts because talents with a science and engineering background are relatively scarce, while the proportion of liberal arts students is relatively large. In addition, according to policy regulations, workers in Vietnam are required to work six days a week, with working hours from 8 a.m. to 5 p.m. If overtime is required, employers must pay additional overtime pay. These factors combined lead to the overall production efficiency in Vietnam being lower than that in China.
Factory construction of foreign companies in Vietnam can reduce labor expenses through the following means:
Wisely choose the location: Labor costs vary across different regions in Vietnam. As mentioned before, the factory rent in the industrial zones in the northern part is expensive, and the labor cost is also relatively high. However, the land and labor costs in the central region are lower. Enterprises should pay attention to these regions with lower labor costs and make plans in advance. With the North-South Expressway expected to be completed in 2025, the transportation in the central region will be improved. Enterprises will be able to enjoy lower labor costs and take advantage of the transportation advantages to expand the market, thus reducing expenses in overall operations.
Improve skills and efficiency: Many workers in Vietnam need to receive training before they can take up their posts, and there is a shortage of talents in science and engineering. Enterprises can cooperate deeply with local vocational schools and training institutions to carry out specialized skill training that is in line with actual production. For example, provide professional skill training such as electronic component assembly and circuit soldering for workers in electronics factories to improve their professional skill levels and thus enhance production efficiency. The improvement of production efficiency means an increase in output per unit of time. From the perspective of output benefits, the labor cost is relatively reduced. At the same time, formulate a reasonable incentive mechanism, such as setting up performance bonuses and full attendance awards, to encourage workers to improve work efficiency and quality and avoid the waste of human resources caused by low efficiency.
Improve the work system: Vietnamese law stipulates that workers work six days a week, starting at 8 a.m. and ending at 5 p.m., and overtime pay needs to be paid for overtime work. Enterprises can make full use of normal working hours, optimize the production process, reduce unnecessary links and waiting time, and increase work saturation. Avoid excessive reliance on overtime work, thus reducing the high costs generated by overtime. For example, through lean production management, arrange the production line reasonably so that the supply of materials, production operations, and product circulation are closely linked, reducing the idle time of workers.
Adjust the employee structure: In addition to directly hiring long-term employees, flexible employment methods can be appropriately adopted. For example, hire temporary workers or part-time workers during the peak production season to meet short-term labor needs, and reduce the number of employees during the off-season to lower labor costs. At the same time, reasonably match employees with different skill levels and salary requirements. For some simple and repetitive jobs, ordinary workers with lower salary requirements can be recruited; for key technical positions, experienced and highly skilled professionals can be hired. Through reasonable job allocation, while ensuring production quality, the overall labor cost can be controlled.
Factory construction of foreign companies in Vietnam may encounter the following difficulties:
The risk of currency value fluctuations: The exchange rate of the Vietnamese dong is not stable and is vulnerable to changes in the global economic situation and Vietnam's domestic economic policies. For foreign-funded enterprises operating in Vietnam, in the links of purchasing raw materials, selling products, and repatriating profits, exchange rate fluctuations may lead to inaccurate cost calculation, thus affecting the financial situation and profitability of the enterprises. For example, when the Vietnamese dong depreciates, the cost of imported raw materials calculated in foreign currency will rise, and the profit of exported products converted into Vietnamese dong may decrease.
Complex administrative review procedures: Although Vietnam is making efforts to improve the business environment, some foreign-funded enterprises have stated that when dealing with various administrative review procedures, they still face the dilemma of complex procedures and long review periods. From the planning permit and construction permit for factory construction to various qualification reviews during the operation of the enterprise, a large amount of time and energy need to be invested. This will not only delay the project progress but also may cause the enterprise to miss the best market opportunities.
Unstable power supply: The power infrastructure in some areas of Vietnam has not been fully improved, and problems such as power shortages and voltage fluctuations may occur during peak electricity consumption periods. For factories that rely on electricity for production, frequent power outages or unstable voltage may lead to production interruptions and equipment damage. This not only increases the production and maintenance costs of enterprises but also may affect the quality of products and the delivery time.
Insufficient protection of intellectual property rights: Vietnam's intellectual property protection system is not yet sound, and infringement cases occur from time to time, and the rights protection process is also relatively difficult. For technology-intensive foreign-funded enterprises, their research and development achievements and innovative products may face the risk of being copied or imitated, which is not conducive to the enterprise's technological innovation and brand building and may also put the enterprise at a disadvantage in market competition.
