01 Vietnamese garment companies are afraid to take more orders due to labor shortages
Vietnam’s “Saigon Economic Times” reported on June 6 that clothing orders are pouring in, but some manufacturers are afraid to accept new orders due to insufficient production capacity. The biggest difficulty currently faced by Vietnamese garment enterprises is the shortage of labor and raw materials.
Export orders from many companies have increased, and the order volume is gradually filling up. Analysts predict that Vietnam’s textile and clothing exports this year are likely to exceed the established target of 42-43 billion US dollars.
According to Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (Vitas), Vietnam’s textile and apparel exports reached nearly 11 billion US dollars in the first four months of this year, a year-on-year increase of nearly 21%.
Among them, major markets for Vietnamese textiles and clothing, such as the United States, Europe, and Japan, have achieved considerable results.
It is worth noting that orders from export companies are quite stable. Nguyen Thi Xuemoi, deputy secretary-general of the Vietnam Textile and Garment Association, said that the export orders of member companies are stable and showing a good growth trend. At present, many companies’ export orders have been scheduled to the end of the third quarter, but companies are currently facing difficulties in recruiting more workers to complete new orders.
02 Labor is no longer “cheap”, no one applies for a monthly salary of 3,000
Leo Jins is a garment factory located in Dong Van Industrial Park in Henan Province, Vietnam. It is about 40 kilometers away from Hanoi, the capital of Vietnam. It needs to urgently hire 300 garment workers this year. However, after trying various methods, there is still no one. Recruit anyone.
Staff in the human resources department of the factory said that their salaries have reached 7 million to 10 million Vietnamese dong (approximately 2,100 yuan to 3,000 yuan), and their wages, bonuses and benefits are much higher than the levels in 2021.
The factory has used recruitment websites, social media, and even employment agencies to recruit people, but to no avail. Helpless, the factory put up a recruitment notice directly outside the factory gate, which said, “Urgently recruiting skilled garment workers. After verifying skills at the factory, you will be given 200,000 Vietnamese dong (approximately 60 yuan)!” However, it backfired, so “simple” The “rude” ad still didn’t attract anyone to apply.
Leo Jins is not the only Vietnamese company facing recruitment difficulties. With the surge in export processing volume, various parts of Vietnam have encountered varying degrees of recruitment difficulties, and behind this is not just a simple lack of labor.
Experts pointed out that in 2021, Vietnam’s economy suffered a heavy blow, and the government began to increase support. Now the economy has rebounded rapidly, directly leading to a labor gap. At the same time, due to the impact of the epidemic, most of the labor force has not been fully mobilized.
In a factory in Vietnam, human resources have offered very favorable conditions. The salary is between 8 million and 12 million VND, which is about 2,400 and 3,600 yuan. Novices can also join the job. The company will provide free training, and you can also choose by yourself. For day or night shifts, the factory provides two free meals. The factory manager said that after the pressure of the epidemic was eased this year, foreign orders continued to come in, so more workers were needed to work overtime to produce. However, three months have passed. The factory tried its best, but only recruited 20 people.
Relevant data shows that Vietnam’s labor force is now much higher than that of many Southeast Asian countries. The salary level of skilled workers is even more than twice that of countries such as Laos and Myanmar. The cheap labor force that the outside world calls does not exist at all. Can we recruit people? That’s good. In this regard, Vietnam’s Ministry of Labor, Invalids and Social Affairs has proposed a number of solutions to the difficulty in recruiting workers, including directly assisting companies in recruiting workers, providing labor employment subsidies, improving the quality of employee training, etc.
03 Vietnam’s industrial real estate rents and occupancy rates have increased
Data from the Vietnam Association of Real Estate Agents (VARS) shows that Vinhomes IZ (the industrial real estate subsidiary of Vietnam’s largest real estate group Vinhomes) increased its registered capital from 70 billion dong to 18.5 trillion dong (5.3 billion yuan) in just 2 years. , almost double the previously expected Rp 10 trillion.
There are currently 260 industrial parks in operation in Vietnam and 75 industrial parks are under planning. Most of the industrial areas are divided up by domestic real estate companies, while the rest are developed by Singaporean, Japanese and Chinese investors.
As of May, the average land rent price in industrial areas in northern Vietnam was US$109 per square meter per square meter per lease period, with Hanoi being the highest at US$139.9.
Ho Chi Minh City and the southern provinces lead the country in average rents at US$120 per square meter per lease term, an increase of 9% over the same period last year. Among them, Ho Chi Minh City had the highest price, reaching 198 US dollars. The current average price in the central region is lower, about US$34 per square meter, only 25% of that in the south.
The occupancy rate in the southern region is also the highest in the country, reaching 90%. The average occupancy rate in the five key provinces in northern Vietnam also reaches 85%, and the central region is as low as 67%.
But overall industrial land prices in Vietnam are still relatively low compared with Indonesia, Malaysia and the Philippines.
A large number of ready-made factories and warehousing facilities in southern Vietnam will also be completed this year, including SLP, BWID, Vietnam Industrial Park, JD.com and other well-known brands, adding 800,000 square meters of factory buildings and warehousing facilities to the market.
Due to strong demand, the occupancy rate of industrial parks in the southern region has remained high (90%), and the growth in supply has driven rents upward steadily. Long An Province, in particular, benefits from convenient transportation connections with Ho Chi Minh City.��Factory rental prices have increased significantly by 21-45% year-on-year.
With little land funds left for industrial parks in Ho Chi Minh City, Binh Duong, Long An and Dong Nai have become hotspots for industrial parks to attract investors.
By the end of 2022, two new industrial parks in Binh Duong and Dong Nai – Vietnam Singapore Industrial Park Phase 3 (VSIP III) and AMATA Long Thanh Industrial Park will be completed and ready for leasing. By then, the LEGO Group (Denmark)’s US$1 billion factory will be settled in Phase 3 of the Vietnam-Sin Industrial Park.
Also in North Vietnam, occupancy rates continue to remain high even as supply continues to expand. In the first quarter of 2022, the occupancy rate of industrial parks in the northern region reached 85%, a year-on-year increase of 5 percentage points, and the occupancy rate of ready-made factory buildings reached 98%. Industries with high demand for factory buildings include warehousing, electronics, building materials, furniture and medical equipment.
According to data from the Competition and Consumer Protection Bureau of the Ministry of Industry and Trade, as of mid-February 2022, approximately 63,500 hectares of industrial land have been planned in North Vietnam, and 238 industrial zones and industrial clusters are in operation and under construction.
Savills said that in the past period, industrial property developers have seized on the supply gap and are injecting complementary products into the market. Therefore, manufacturing companies will have more choices when choosing Vietnam.
It is worth mentioning that the supply of ready-made factory buildings in Vietnam reaches 6.2 million square meters nationwide, and the average occupancy rate has reached 79%. In the first quarter of 2022, the average rental price of ready-made factory buildings has returned to the level before social control was implemented during the epidemic.
The heating up of the ready-made factory market shows that the pace of investment and production by enterprises is accelerating, with two purposes: one is to expand orders, and the other is to transfer investment to maintain existing orders without losing their position in the supply chain.
04 Postscript
From the perspective of Vietnam, the biggest advantage is labor cost, followed by land cost. Apart from this, there are no other obvious advantages. When these advantages are gradually lost in Vietnam, I wonder how big the stage is for it to be used?
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