Investigating the Opportunities and Challenges of Vietnam in Becoming an Alternative Outsourcing Destination

Abstract

This research examines Vietnam’s opportunity to be an alternative outsourcing destination amidst the COVID – 19 pandemic. The country’s greatest strengths are its low political risks, an abundant labor force with lower costs, deep integration with the global logistic networks, openness to trade and foreign investments, and developed SEZs – especially the immediate, effective, and stable response to the pandemic. However, SOEs dominating distinct sectors, inefficient labor participation, various underdeveloped domestic transportation locations, and lacks of specific foreign investment regulations are challenges. This research does not deny Vietnam’s opportunities to become a global manufacturing hub. Still, it shows that MNEs that can tolerate the disadvantages should highly consider the country to relocate their supply chain. Specifically, the manufacturing sector continues to attract FDI, with Foxconn, Apple, Google, Microsoft, and many other MNEs looking to expand businesses in Vietnam during 2020 – 2025. However, the research still has limitations. Many integrated but complicated sectors were not discussed because of proscribed information sources, lack of contemporary analyses within the industry, or the author’s inability to process data. Environmental degradation, shadow banking and regulations, e-commerce, foreign investment lobby processes, M&A activities, tax evasion, and financial reports of currently operating MNEs in Vietnam will improve understanding of Vietnam’s opportunities and challenges. Additionally, economic models can broaden the research, which is still relying on collected data and resources. The impact of variable changes in the future requires further studies.