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Case Study: Analyzing the Challenges and Opportunities of the Global Value Chain: A

Focus on Vietnam

Karanpreet Singh

Kiranjit Kaur

Manjot

Navjot Singh

Global Business Management, Sault College, Brampton Campus

GBM 105: Global Value Chain

Anthony Araujo

March 5, 2024
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Understanding the Global Value Chain (GVC) dynamics is now critical for

businesses, politicians, and academics equally in context of globalisation and the growing

interconnection of economies around the world. Global supply chains are vulnerable, and the

COVID-19 pandemic has brought attention to this fact, exposing the GVC framework's

advantages and disadvantages. With an emphasis on Vietnam, a nation that has become a

crucial participant in the global manufacturing scene, this study seeks to explore the

complexity of the GVC.

Vietnam has become a desirable destination for international investors looking to

profit from the changing dynamics of the GVC due to its strategic location, favourable

investment climate, and continuous economic changes. This article seeks to offer important

insights into the larger implications of global economic trends and the strategies used by

nations to tackle the complexity of the contemporary global economy by examining the

possibilities and problems encountered by Vietnam in the context of the GVC.

We shall examine the main obstacles to Vietnam's GVC integration in this paper,

such as weak supply chains, restricted infrastructure, and a lack of skilled labour. We will

also look at the potential for improving Vietnam's competitiveness and securing its place in

the global value chain that come from trade agreements, growing labour costs in China,

government efforts, and digital transformation.

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1. CHALLENGES FOR VIETNAM:

1.1 Infrastructure Limitations

Vietnam continues to experience difficulties with logistics and transportation

regardless of attempts to upgrade its infrastructure, which has an impact on how well its

supply chains operate. Vietnam's infrastructure quality is a major problem, according to the

World Economic Forum's Global Competitiveness Report, which ranks the nation 79th out of

141 nations (World Economic Forum, 2020). Ineffective infrastructure makes transit more

expensive and reduces Vietnam's ability to compete on the international stage.

1.2 Supply Chain Vulnerability in Vietnam

Vietnam's supply chain vulnerabilities were made more obvious during the COVID-19

pandemic due to its incorporation into the global value chain. Vietnam's manufacturing

industry was adversely affected by global supply chain disruptions due to its high

dependence on imported components and raw materials. The disruption of supply chains

caused production delays and decreased exports for Vietnam's clothing and textile sector,

which is a major source of the country's export earnings, according to the World Bank (World

Bank, 2020).

1.3 Skill Shortages

Vietnam has a huge and reasonably priced labour pool, which is beneficial but there

is a talent shortage, especially in high-tech businesses. Vietnam's education system is

having trouble producing the skills that the labour market needs, which is restricting the

nation's capacity to advance up the value chain, according to a study from the Asian

Development Bank (ADB) (ADB, 2021).

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2. OPPORTUNITIES FOR VIETNAM:

2.1 Rising Labour Costs in China

Vietnam is establishing itself as a desirable substitute for overseas investors as

labour prices in China keep rising. In 2020, Vietnam had a notable increase of foreign direct

investment (FDI) as a result of corporations shifting their manufacturing from China to

Vietnam, as reported by the United Nations Conference on Trade and Development

(UNCTAD, 2021).

2.2 Digital Transformation:

The quick adoption of digital technology in Vietnam offers enterprises the chance to

improve efficiency and production. A favourable environment for enterprises to use digital

technology is created by government activities to support e-government and the growth of

the digital economy (Vietnam Digital Transformation Alliance, 2020).

2.3 Trade Agreements

Vietnam has been aggressively pursuing trade agreements in an effort to improve its

economic integration. Vietnam may increase its market access and draw in foreign

investment through the EU-Vietnam Free Trade Agreement (EVFTA) and the

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

(European Commission, 2020).

2.4 Government Initiatives

To encourage industry and modernization, the Vietnamese government has put

policies into place. According to the Vietnam Government Portal (2021) vocational training

programmes attempt to address skills shortages while the "Make in Vietnam" policy seeks to

attract investment in high-tech companies.

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In conclusion, the study of Vietnam's Global Value Chain (GVC) prospects and

problems highlights the complexity of the nation's economic integration. Even with its

deficiencies in the supply chain, limited infrastructure, and skills lack, Vietnam still has a lot

of room to grow in terms of competitiveness and global value chain positioning.

The study made clear how critical it is to solve major issues including supply chain

vulnerabilities, infrastructural constraints, and a lack of skilled labour while taking advantage

of possibilities like trade agreements, growing labour costs in China, government efforts, and

digital transformation. Vietnam can effectively go through the complex dynamics of the

global economy and fulfil its potential as a significant participant in the global value chain,

hence promoting sustainable economic growth and development, by capitalising on these

possibilities and employing proactive measures.

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APPENDDICES

Appendix A: Foreign Direct Investment (FDI) Inflows to Vietnam (2020)

Foreign Direct Investment (FDI) Inflows to

Vietnam (2020)
3.5

2.97
3 2.84
FDI INFLOWS (USD BILLION)

2.5
2.07
2 1.87
1.58
1.5
1.23

0.5

0
Japan South Korea Singapore China Taiwan United States

COUNTRY/REGION

This bar graph shows, split down by nation or area, the amount of Foreign Direct

Investment (FDI) coming into Vietnam in 2020.

The components of the graph are explained as follows:

1. Country/Region: The names of the nations or areas from which Vietnam's FDI

inflows came are included in this column.

2. FDI Inflows (USD billion): The amount of foreign direct investment (FDI) that

Vietnam received in 2020 from each of the mentioned countries or regions is displayed in

this column.

3. Source: The information comes from the World Investment Report for the year

2021 published by the United Nations Conference on Trade and Development (UNCTAD).
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Appendix B: Vietnam's Exports by Sector (2020)

1. The distribution of Vietnam's exports by industry for the year 2020 is shown in this

figure.

2. Readers can better understand the relative importance of different industries in

Vietnam's export economy by looking at the chart, which shows the proportion of

exports assigned to each industry.

3. The Vietnam General Department of Customs, which oversees collecting and

distributing trade statistics for the nation, provided the information used in this figure.

As of 2020, phones and components accounted for 18.1 percent of Vietnam's overall

exports, making them the most valuable category. Its second-largest category of exports

was computers, electronics, and components, accounting for 15.8% of total exports.
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REFERENCES

Asian Development Bank. (2021). Vietnam: Education and Skills.

Retrieved from https://www.adb.org/sites/default/files/institutional-document/561121/

viet-nam-secondary-education-assessment.pdf

European Commission. (2020). EU-Vietnam Free Trade Agreement.

Retrieved from https://trade.ec.europa.eu/access-to-markets/en/content/eu-vietnam-

free-trade-agreement

United Nations Conference on Trade and Development. (2021). World Investment Report

2021.

Retrieved from https://unctad.org/system/files/official-document/wir2021_en.pdf

Vietnam Digital Transformation Alliance. (2020). Vietnam Digital Transformation Report

2020.

Retrieved from https://opengovasia.com/vietnams-digital-transformation-progress-

and-objectives/

Vietnam Government Portal. (2021). Government's Resolution on Making in Vietnam

Program.

Retrieved from https://vietnam.gov.vn/socio-economic-development-plans/socio-

economic-development-plan-for-2021-2025-12056314

Vietnam Macro Monitoring Washington, D.C.: World Bank Group. Vietnam Macro Monitoring

(English).

Retrieved from

https://documents.worldbank.org/en/publication/documents-reports/documentdetail/

129531591345518502/vietnam-macro-monitoring
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