1
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
2
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.
3
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).
4
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.
5
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.
6
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).
7
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.
8
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
9
