FDI, LLMs, and skills shortages

Since their respective openings-up, much of the early labour market literatures on China and Vietnam operated at the national level (Cooke et al., Reference Cooke, Xiao and Chen2021; Mori & Stroud, Reference Mori2021; Sheldon & Sanders, Reference Sheldon and Sanders2016). More recently, labour market research on China has paid much greater attention to the subnational level (Ouyang et al., Reference Ouyang, Liu and Zhang2016; Wang F et al., Reference Wang, Song, Cheng, Luo, Gan, Feng and Xie2016; Zhang & Peck, Reference Zhang and Peck2016; Zhang et al., Reference Zhang, Nyland and Zhu2010). A subset of this literature explains FIE experience of severe, enduring LLM skill shortages for manufacturing assembly workers and the resulting employee job hopping, employer poaching of labour, and rising wages (e.g. Li & Sheldon, Reference Li and Sheldon2010, Reference Li, Sheldon, Sheldon, Kim, Li and Warner2011; Sheldon & Li, Reference Sheldon and Li2013).

Such research does not fit easily within a broader international literature on skill shortages, itself focused predominantly on Western economies as well as on FIEs. That broader literature concerns itself largely with higher levels of the skill hierarchy: technical specialists; engineers; other professionals; and managers. In large part, this just reflects generalised organisational practices (see discussion in Sheldon & Li, Reference Sheldon and Li2013; Wotschack, Reference Wotschack2019). However, for FIEs that have set up manufacturing facilities in industrial parks in Vietnam and China, the challenges of skill shortages extend down skill hierarchies to process-assembly work carried out by the majority of their employees.

Much of the broader literature also remains heavily focused on FIEs’ strategies to meet their skill needs through their own human resource management (HRM) processes, including in-house training. However, research on FIEs’ LLM experiences in China looks beyond the ‘walls’ of the firm to examine the interplay between employer-level experiences and LLM dynamics, including local administrations and VET institutions (Li & Sheldon, Reference Li and Sheldon2010, Reference Li, Sheldon, Sheldon, Kim, Li and Warner2011, Reference Li and Sheldon2012, Reference Li and Sheldon2014; Li et al., Reference Li, Sheldon, Sun, Sheldon, Kim, Li and Warner2011; Sheldon & Li, Reference Sheldon and Li2013). Mori and Stroud (Reference Mori2021) have suggested the importance of a similar approach for Vietnam. Nevertheless, this general approach could benefit from a wider lens that also considers higher-level business–government relations linked to the national political economy.

Skill shortages in Vietnam and China have qualitative as well as the more obvious quantitative dimensions. Their emergence reflects intersecting factors. Quantitative shortfalls may start with a generalised unattractiveness of VET pathways to young people. In part, these result from Confucian cultural values in both societies that more highly value university educations over VET programmes (Cooke, Reference Cooke2005; Nguyen & Mai, Reference Nguyen, Mai, Hasegawa and Witt2019; UNESCO-UNEVOC, 2018; Wang, Reference Wang2022; Wang & Wang, Reference Wang and Wang2022).

As well, one unanticipated outcome of China’s policy of competitive economic decentralisation has been its particularly damaging effects on FIEs’ investments in training. This reflects how, structurally, local administrators’ own career successes are closely tied to the levels of economic development they can claim responsibility for. An important factor here is attracting ever greater levels of FDI, and ever greater numbers of FIEs, into the subnational territories they run, especially industrial parks. Those governments therefore often design industrial parks for advanced sectoral specialisation – attracting FIEs that produce similar products and use similar production processes and technologies. These more densely clustered LLMs inevitably generate severe, endemic skill shortages. One result is that by providing more training in transferable skills, FIEs enable their employees to job hop in search of better pay, encouraged at times by other employers’ poaching activities. Many FIEs then become reluctant to risk investing in more than the minimal necessary workplace-based training (Sheldon & Li, Reference Sheldon and Li2013).

Subnational governments in Vietnam and China have also largely failed to provide sufficient investment in local VET institutions to cater for the rising skills demands that their own FDI policies generate. Reflecting this failure in part, VET schools and colleges in both countries have appeared unwilling or unable to adapt to and keep pace with the technological changes that FIEs bring. These factors generate conditions in which VET graduates are then not able to meet FIEs’ qualitative requirements produced by their high-level, advanced production systems (Li & Sheldon, Reference Li and Sheldon2014; Li et al., Reference Li, Sheldon, Morgan, Sheldon, Kim, Li and Warner2011; Mori & Stroud, Reference Mori2021). For Vietnam, the main difference is that, reflecting its much smaller population and land mass, the national government continues to take a more active VET policy role (Australian Government, 2018; Truong & Rowley, Reference Truong, Rowley, Witt and Redding2014; UNESCO-UNEVOC, 2018).

The experience in Chinese industrial parks is that ‘newcomer’ FIEs, needing to hire a small start-up nucleus of leading assembly workers, are prepared to offer higher wages to poach highly trained and experienced workers from longer-established firms. The latter firms struggle to resist this competition. If they baulk at raising their wage rates, they suffer new entrants’ poaching. Should they meet the wage competition, but quarantine pay rises to particular groups, they shift their internal pay relativities with potentially negative effects on employee morale and retention. If, however, they offer wage rises across their own much larger workforces, the relative cost advantages of their FDI in that location declines. Each wave of new entrant FIEs provides the same challenge to the ever-larger number of firms that had set up earlier and then expanded their operations (Sheldon & Li, Reference Sheldon and Li2013).

Evidence from this research on China is that those FIEs – like Samsung – that have suffered job hopping and labour poaching have three main strategic options. The first, a ‘political’ option, is to try to pressure subnational or even national governments to limit entry of new FIEs into particular industrial parks where they are likely to become poachers. This would confront, at source, the main cause of skill shortages deriving from government policies. Here, it is not the number of new-entrant FIEs per se that matters but the number sharing similar product, technology, and hence skills profiles with the main body of existing FIEs in that LLM.

The second option is to influence relevant subnational administrations to invest sufficiently in VET institutions to relieve LLM skill shortages and, preferably, to increase skilled labour supply ahead of demand. This has become less difficult for more prosperous administrations. Nonetheless, progress in this direction has been tardy and piecemeal. In fact, those administrations generally expect FIEs to bring in and then reproduce the knowledge and skills as part of the anticipated technology spillover benefits (Sheldon & Li, Reference Sheldon and Li2013).

The third ‘associational’ option is for collective action among FIE employers, most obviously by organising themselves into an employer association. Such an association can develop initiatives to increase the supply of sufficiently skilled labour. For example, joint training initiatives share training investment costs and risks across many firms. An association can also develop a shared relationship with local or even more distant VET institutions to address supply issues. This could again share costs and risks across many firms. Another avenue is to work with the local administration to promote job fairs and the like to encourage skilled workers to move to that area. The evidence from China is that these can bring some if limited successes but are, once again, piecemeal and also delayed responses (Li & Sheldon, Reference Li and Sheldon2014).

A more direct but difficult associational path is to seek to constrain local FIEs from poaching behaviours, from hiring job hopping assembly workers and from otherwise contributing to raising LLM pay rates for assembly workers (Lee et al., Reference Lee, Sheldon, Li, Sheldon, Kim, Li and Warner2011). The difficulty here is that new-entry FIEs, while still small, prefer to be poachers than trainers. They, thus, prefer not to be members of local employer associations that would seek to constrain their poaching behaviours. Thus, any ‘older’ and larger FIEs choosing this path will need to negotiate on a number of ‘tables’ – with other FIE employers, often having diverse interests, as well as different levels of government – and not from a position of strength on any table.

This very situation faced a large Samsung subsidiary in a leading industrial park in China: Suzhou Industrial Park (SIP). In that situation, Samsung was instrumental in establishing and leading a local employer association. As evidence of the depth of Samsung’s frustrations in China, this activity occurred at a time when its own head office refused to join the Korea Employers’ Federation, the dominant organised employer voice in Korea (Jun et al., Reference Jun, Sheldon, Lee, Lee and Kaufman2018).

If the VET option is possible but unlikely to produce consistent improvements and the associational option presents, at best, only partial opportunities, what of the first option – to influence governments in shaping the profile of new-entrant FIEs? This would be akin to ‘engineering out’ the potential problems ahead of their appearance and could potentially render the other two options unnecessary.

Given China’s immense size and population and its system of competitive decentralised development, it is hard to see a path forward for this option. Subnational administrations face structural pressures – on their regimes and the individual careers of their leaders – to compete among themselves in expanding inflows of FDI and FIEs. As well, there would appear to be no domestic constituency for such an approach. Furthermore, the enormity and power of China’s own domestic economy and its central role in global manufacturing value networks have allowed it to increasingly dictate terms to overseas-based MNEs. From a negotiation perspective, the huge populations of China’s provinces and leading cities have long meant that their administrations enjoy lopsided influencing positions to the detriment of any individual MNE, or even a number of them.

This discussion suggests that whichever option an MNE – in this case Samsung – might choose, it will involve a series of complex and sensitive negotiations: with national and subnational governments in the host country and/or with its peer FIEs in any particular industrial park. For help in understanding what this might mean, theoretically, we turn to RDT, an influential theory for explaining how organisations can seek to influence their environments in order to pursue better their own interests.

Resource dependence theory

Central to RDT is an understanding that organisations necessarily choose to interact with other organisations in order to reach their objectives. They develop these relationships to secure supplies of important resources like finance, materials, personnel, information, and even legitimacy that they require but cannot supply alone. One goal for these strategies is to overcome uncertainty in access to crucial resources. Pfeffer and Salancik (Reference Pfeffer and Salancik2003, p. 68), who developed the theory, suggest that organisations intervene to reshape their external relationships (and hence environment), but only ‘when the uncertainty involves important interactions with other environmental elements that are important for the organisation. Uncertainty is only problematic when it involves an element of critical organisational interdependence’. Prior to developing their relationships, Samsung and Vietnam’s party-state each faced uncertainty in regard to securing resources important for their own very different organisational objectives.

For Samsung, a sufficient and certain supply of cheap but sufficiently skilled manufacturing labour is a critical organisational resource on which the success of its vast FDI depends. In learning from its experiences in China, Samsung in Vietnam has therefore sought greater LLM stability and predictability in the industrial parks where it has focused its FDI. In particular, it has worked to minimise risks to its training investment from LLM skill shortages that encourage employee job hopping and employer poaching. If able to achieve this, it could more confidently undertake the substantial and necessary training required for its rapidly growing workforces of electronics assembly workers. To this end, it has therefore worked at reshaping its environment through developing and deepening crucial external relationships – here, particularly with governments.

Vietnam’s party-state has had long-standing objectives for rapid industrialisation, modernisation, and a vastly improved export profile (Fforde, Reference Fforde2022). Only very large, advanced MNEs can supply the required levels and volumes of high-tech infusion and spillovers required for it to meet those objectives. Nonetheless, the state has faced uncertainties regarding the sociopolitical legitimacy required to open up Vietnam to global capitalism.

According to RDT, organisations can overcome resource uncertainty through adopting one or more of three strategies. First is the ‘controlling’ strategies that modify an organisation’s boundaries in order to manage dependence on key resources. Examples include mergers and acquisitions or organisational diversification, choices that bring inside that organisation exchanges previously only available externally (Pfeffer & Salancik, Reference Pfeffer and Salancik2003).

Where these strategies are insufficient or unavailable, as in Samsung’s situation in Vietnam, Pfeffer and Salancik suggest ‘negotiated’ strategies, including joint ventures. These leave an organisation’s formal boundaries unchanged but seek to reduce its dependence on key, externally located resources. Third, organisations can seek out legislative and regulatory changes to create a more favourable environment. For Samsung in Vietnam, negotiated strategies with additional recourse to legislative, regulatory, and policy changes have appeared to be most relevant.

In revising the power-oriented, political aspects of early RDT, Pfeffer later commented (Reference Pfeffer, Smith and Hitt2005, p. 441):

In relation to Samsung in Vietnam, the question for our case then is: how can each party offer the other what it needs – and also recognise the other’s priorities? For Samsung, Vietnam’s particular constellation of FDI attractions have come to include constructive access to national and subnational governments for particular policy settings. For Vietnam’s governments, the attractiveness of Samsung’s leading FDI profile includes its availability for a broader and deeper set of relationships. Here, the Vietnamese party-state can call on some of Samsung’s initiatives to earn legitimacy, consent, and cooperation from influential party-state constituent bodies such as party cadres, local popular committees, and administrators (Fforde, Reference Fforde2022). The rest of the article examines how both Samsung and the party-state have been able, in Pfeffer’s words (Reference Pfeffer, Smith and Hitt2005, p. 441) to ‘satisfy the demands of those external entities on which it depended’.

Research design and sources

This article brings together diverse literatures. Our purpose includes, in part, a goal to suggest and explain particular trends in reciprocal, strategic FDI decisions by corporate and party-state elites: Samsung and Vietnamese governments. The topic itself – FDI decisions and business–government relations – provokes great sensitivities among both those elites. Those sensitivities made direct and open-research access very difficult. In fact, those elites’ communication strategies largely limit themselves to declarations of positive expectations and outcomes, espoused values and, at best, opaque references to internal decision processes.

As we are interested in patterns of causation and underlying motivations rather than measurement, we use a combination of qualitative approaches to help interrogate those communications and third-party commentary. For this, we have relied on a combination of primary and secondary sources. Our research team has been able to rely on one member who is a native Korean speaker and support from a colleague with Vietnamese reading skills. We thus use published materials from Samsung – some in English, some in Korean – as well as Korean and Vietnamese reports in the business and industry media, often quoting Samsung and/or government sources. There are also some official Vietnamese sources available.

A difficulty with some primary sources – particularly those generated by Samsung as a corporation or via Vietnamese government ministries – is they have a particularly strong and acritical public relations quality to them relative to the amount of information they provide. In this, they also appear to reflect varieties of East Asian cultures as expressed through particular contextual filters: Samsung as chaebol and Vietnam as party-state. This makes some patterns of apparent causation appear opaque. We have attempted to correct for this in two ways. First, one of our research team has discussed these matters (in Korean) with Samsung executives – in Vietnam and in Korea – over many years. These discussions, a form of culturally appropriate open interviews, were available on the basis of the strictest confidentiality. The second method has been to work with the scholarly secondary literature, both that generated within Vietnam and that from outside.

In helping contextualise Samsung’s concerns and decisions regarding the supply of skilled workers, we refer to work on Samsung’s experiences in China, for example in SIP (Li & Sheldon, Reference Li and Sheldon2010, Reference Li and Sheldon2014; Sheldon & Li, Reference Sheldon and Li2013).

Vietnam: FDI, industrial parks, and VET

After the end of the Vietnam War in 1975, the Communist Party regime extended its centralised, planned economy across the re-united nation. Based on state-owned enterprises and collective enterprises, this economic model precluded FDI or domestic private ownership. In these ways, it largely mirrored China prior to Deng Xiaoping’s launching of his ‘opening up’ experiments in December 1978. Similar to China, Vietnam’s party-state eventually responded to that system’s widespread economic failure and grinding poverty with its đổi mới ‘economic renovation’ (henceforth, ‘opening up’). From 1987, a series of statutes, proclaimed every few years, experimentally and incrementally further opened Vietnam’s economy to FDI, encouraged its arrival and sought to shape its location, composition, and purpose. This was not a smooth process, and Vietnam’s FDI experience suffered a number of severe reversals (Giang & Low Reference Giang and Low2014; Nguyen & Mai, Reference Nguyen, Mai, Hasegawa and Witt2019; Truong & Rowley, Reference Truong, Rowley, Witt and Redding2014).

Yet, the party-state persevered in its desire for FDI growth. It continued offering MNEs, through successive legislative changes, ever more concessions and enticements. These laws also often mirror China’s path, but with a lag of 7 to 10 years. However, an important difference was that Vietnam’s 1987 Foreign Investment Law accepted wholly foreign-owned FIEs much earlier than in China, where MNEs had to content themselves with joint ventures with domestic firms until the national government began encouraging wholly owned FIEs 1991. Vietnam also shifted relatively quickly, with its 1992 legislation, to explicitly favour economic upgrading through attracting FIEs that offered more sophisticated, high-technology processes and products, R&D, and a greater orientation to exports (Nguyen, Reference Nguyen2022; Sheldon et al., Reference Sheldon, Morgan, Gan, Wang and Ramburuth2010).

The regime’s goal has been to raise living standards by rapidly industrialising an impoverished, agriculture-based economy and integrating it into the global economy. FDI was one mechanism; raising levels of exports was another. Increasingly, the party-state’s strategy was to seek FDI that would raise Vietnam’s export density of value-added manufactured goods (Truong & Rowley, Reference Truong, Rowley, Witt and Redding2014). By 2011, FDI accounted for over 25% of total investment in Vietnam (Nguyen, Reference Nguyen2022, p. 405) and, in 2014, FIEs contributed about 62% of Vietnam’s total exports by value. By that stage too, FIEs employed about 3.45 million people directly, or 6.4% of the total workforce (Nguyen, Reference Nguyen2022, p. 405).

There is substantial international evidence that well-managed industrial parks act as catalysts for regional economic development and transformation. Those run particularly effectively have contributed greatly to investment promotion (including FDI), export growth and diversification, GDP growth, technology spillovers that generate productivity enhancement, and increased government revenues. As well, they open up opportunities for rethinking law and policy as well as offering socioeconomic benefits of widening employment and income generation, including to women from rural areas (Zeng, Reference Zeng2016; Zeng & Jeong, Reference Zeng, Jeong, Jeong and Zeng2016).

In Vietnam, the party-state has sought to make its policies for FDI and industrial parks synergistic. Industrial parks were founded to help attract more and better FDI, and more technologically advanced and knowledge-based FIEs were to then help to develop industrial parks in which they resided. Industrial parks were also the primary mechanism through which Vietnam’s party-state sought to attract FDI, to test Vietnam’s emerging deregulatory form of state-guided capitalism and to seek to reinvigorate the country’s integration with the global economy (Nguyen & Cuong, Reference Nguyen, Mai, Hasegawa and Witt2019).

To promote FDI, the party-state launched a pilot model of export processing zones – forerunners of industrial parks – in 1991 following successful examples in Taiwan, China, and Korea. A small number of limited areas were set up, offering favourable business environments to attract FDI. The first regulation on industrial parks came in 1994. Despite slow growth in the first few years, the number of industrial parks in Vietnam has continually increased, reaching 328 by the end of July 2017 (Việt Nam News, 2017).

In both China and Vietnam, the party-states have also gradually decentralised their administrative processes and delegated much economic decision-making to subnational levels. At the same time, both have retained political control at the centre. In Vietnam, with the 1992 legislation, this process began very early – in relation to the rest of the opening-up programme. Nonetheless, there are important differences.

As the relational nature of decision-making within and by Vietnam’s much-decentralised party-state is crucial for our argument, we now very briefly outline Vietnam’s politico-administrative apparatus. It comprises three streams – legislative, administrative, and party structures – each configured through articulated tiers from national through province to district/ward/township and down to communes. A unicameral, popularly elected National Assembly appoints the president, who is head of state. The president then nominates, and the Assembly approves the appointment of the vice president and prime minister. The big ministries like education are relatively self-contained. Administration is largely carried out through 64 provinces, of which five are big city municipalities. The provinces/municipalities are subdivided into several dozen urban districts and hundreds of rural districts. Below those, some 10,000 communes comprise Vietnam’s lowest level of local administration. Each province/municipality, district, and commune has an elected People’s Council, overseeing the work of a People’s Committee elected by the Council.

FDI recruitment and management also came under this decentralisation and delegation, in turn affecting the experiences of FIEs located in industrial parks. Legislation in 2005 sped up these processes, allowing particular subnational administrations to craft investment and LLM institutions more closely to local circumstances (Nguyen, Reference Nguyen2022). These reforms have allowed Samsung to develop relationships at both national and subnational levels in order to help positively shape its own experiences.

China and Vietnam have also differed in their main sources of FDI. In China’s case, ‘overseas Chinese’ provided much of the early FDI. For Vietnam, other East Asian countries became the dominant sources of FDI, with Japan, Singapore, and Taiwan, the leading source nations (Nguyen, Reference Nguyen2022, p. 401). In Vietnam’s early years of FDI, most Korean-sourced FDI came through a great number of small and medium companies producing the sorts of manufactured products typical of early industrialisations. By 2014, as Vietnam’s government prioritised FDI upgrading and after the 2012 Vietnam–Korea Free Trade Agreement, Korea became the most prominent FDI provider, particularly through its chaebols. FDI from Korean then represented some 18% of total FDI, and Korean FIEs were responsible for 30% of Vietnam’s exports and 700,000 jobs. These figures remained largely unchanged by the end of 2020. Most prominent has been Samsung. Indeed by 2015, Samsung employed more people in Vietnam than it did in China (Nguyen, Reference Nguyen2022, pp. 405, 407, 409; Tibken, Reference Tibken2015, pp. 6–7).

Furthermore, there is a distinctly different cultural flavour to party-state decision-making in Vietnam compared to China. According to Adam Fforde (Reference Fforde2022), a leading scholar of Vietnam, Party cadres continue to view themselves as ‘radical change agents’ even if this no longer occurs within a state-socialist political economy. The implication here is that they need to feel involved in and important to the making and implementation of national economic policy. If those needs are met, that policy gains legitimacy and becomes worthy of their practical support. Intertwined with this, in some ways, is pervasive corruption among many government officials and Party cadres. Gueorguiev and Schuler (Reference Gueorguiev and Schuler2021) make a not dissimilar argument but couch it differently.

Thus, in an increasingly mixed economy, the party-state ‘faces little organised opposition but arguably lacks effective control over its own officials’ (Fforde, Reference Fforde2022, p. 93). If those party-state officials view policy as worthy and its implementation as practical, this raises popular acceptance for that policy. Drawing from his reading of the literature on Vietnam, Fforde (Reference Fforde2022) posits that policy-making under Vietnam’s party-state is more relational and requires a broader and more active consensus than is true under China’s more mechanistic party-state culture. Truong and Rowley (Reference Truong, Rowley, Witt and Redding2014, pp. 295–296) suggest that relational trust-building is also crucial in Vietnamese business.

Finally, and this is critical for our argument, Fforde (Reference Fforde2022) suggests that the party-state’s economic policies – including those with a heavily capitalist orientation, like attracting more FDI from MNEs – must demonstrably serve a greater societal purpose; they must positively affect a broader societal base than we might otherwise expect from FDI policies. Therefore, for FDI policies to gain popular authorisation in contemporary Vietnam, they must also deliver positive societal outcomes that lie well beyond traditionally touted expectations for promoting the entry of capitalist FIEs.

This is of particular importance given that Vietnam’s opening up coincided more strongly than China’s with economic decentralisation and delegation. That process has raised self-perceptions and expectations among subnational cadres and administrators; they have become local elites seeking inclusion even in national policy-making. This is the sort of influential constituency that Pfeffer and Salancik see as important in terms of achieving stable access to important resources – here legitimacy, popular authorisation, and constructive collaboration from within the party-state. This policy legitimacy has been crucial to the growing role of Korean FDI in Vietnam, particularly Samsung’s.

A crucial factor in MNEs’ decisions to switch manufacturing operations from China to Vietnam is to gain cheaper costs for labour and other factors. Wages in China have risen substantially with the country’s rapidly growing economy, as have rents and other prices. According to Tibken (Reference Tibken2015, p. 4), a technology worker in Vietnam ‘typically makes about a third as much as a Chinese employee’, when comparing pay rates in Hanoi to those in Beijing. The Vietnamese population has a substantially younger age profile than China’s and speaks English as the country’s de facto second language. These factors make for a cheaper, more adaptable, and amenable workforce (Nguyen & Mai, Reference Nguyen, Mai, Hasegawa and Witt2019; Truong & Rowley, Reference Truong, Rowley, Witt and Redding2014).

However, outside Hanoi and Ho Chi Minh City, this workforce has had very little experience in high-tech sectors. In the early decades of Vietnam’s opening up, the national government largely left responsibility for training these workers to FIEs bringing the new technologies with them. As a result, many of the LLM problems identified for FIEs in China – including skills shortages, job hopping, and employer poaching – have also emerged as serious challenges for FIEs in Vietnam (Cox & Warner, Reference Cox and Warner2013; Mori, 2011; Truong & Rowley, Reference Truong, Rowley, Witt and Redding2014).

Here too, supply-side VET weaknesses have meant rising demand has gone unmet. Neither the national nor subnational governments have been able adequately to address these shortages. Vietnam’s VET system is now governed by both the central government, via its Ministry of Labour – Invalids and Social Affairs (MOLISA) and provincial governments. Most VET institutions are publicly owned and run, but there is also a large sector of private VET institutions – about 30% of the total – including some VET institutions established and run by FIEs (Australian Government, 2018, p. 2; Truong & Rowley, Reference Truong, Rowley, Witt and Redding2014; UNESCO-UNEVOC, 2018).

The administration of many public VET institutions comes under central as well as provincial government agencies, including other ministries and provincial People’s Committees. (UNESCO-UNEVOC, 2018). As in China, education in Vietnam – including VET – has been very theory-based, top-down and lacking in sufficient practical, experiential, and flexible components. Thus, even after they graduate, VET students need additional training. This is where VET institutions run by and for leading global high-tech FIEs, like Samsung, have launched their own programmes to fill the gap in training their Vietnamese workers, a development that the Vietnam national government strongly encourages, including through providing material incentives (Tibken, Reference Tibken2015; Truong & Rowley, Reference Truong, Rowley, Witt and Redding2014; UNESCO-UNEVOC, 2018, p. 7). It is this familiar situation that Samsung has faced with its decision to invest massively in Vietnam. However, both Vietnam as context and Samsung’s own approach have reshaped their partially shared environments to remake those LLM dynamics.

Samsung in Vietnam: FDI for economic development, exports, and skills

Located near Hanoi in northern Vietnam, Bắc Ninh is the smallest province in Vietnam, by area, but hosts the largest concentration of FDI from Korea, the country which is Vietnam’s largest source of FDI. In 2015, Bắc Ninh had a population of 1,153,600, 60% of whom were of working age (Bắc Ninh Industrial Zones Authority, 2022). The largest industrial park in Bắc Ninh province is Yên Phong Industrial Park (YPIP), established by the party-state in 2005 and now managed by a former state-owned enterprise. Specifically established with the purpose of becoming a destination for Korean FDI, YPIP currently hosts some 20 Korean FIEs, many of them producing advanced manufactured products. Some are dependent component suppliers to Samsung.

Samsung entered YPIP in 2008, as Samsung Electronics Vietnam (SEV), a 100% Samsung-owned electronics manufacturer. Samsung’s goal for SEV in YPIP was improved global price competitiveness through its new, world-class, hi-tech mobile phone handset factory which was its first in Vietnam. Samsung soon became the major corporate presence there and across Bắc Ninh province (Bắc Ninh Industrial Zones Authority, 2018, 2022). By 2014, the new factory employed over 38,000 Vietnamese workers and, by 2017, SEV accounted for 75% of the province’s total export turnover (Vietnam Investment Review, 2017). As well, within this complex, Samsung established its first mobile phone research centre in Southeast Asia.

SEV’s success in YPIP encouraged Samsung to establish other very substantial manufacturing facilities in northern Vietnam. Thus, in 2009, Samsung Display Co. Ltd (SDI Co) built a mobile phone battery production factory in Que Vo Industrial Park, also in Bắc Ninh. In 2014, SDI Co began producing display panels at another new facility in YPIP, SDV. With that, Samsung’s total capital investment in Bắc Ninh reached USD 6.5 billion by the end of 2017, or over half of Bắc Ninh province’s total FDI (Bắc Ninh Industrial Zones Authority, 2018). In nearby Thai Ngyuen Province, Samsung Electronics Vietnam Thai Ngyuen (SEVT) built another high-tech production facility in Yen Binh Industrial Park. SEVT began production there in 2014.

Samsung’s enormous injections of high-level, electronics manufacturing FDI into Vietnam have increasingly overlapped with its dramatic exit from similar operations in China. Samsung has now closed most of its operations in China. Whereas in 2013 Samsung had some 60,000 employees in China, it only had some 10,000 left as of mid-2022. It has relocated some of this work back to new production facilities in Korea, but Vietnam has become the major home of operations previously located in China (Enright, Reference Enright2017; Jang, Reference Jang2022; Kim E-j, Reference Kim2022; Kim K-m, Reference Kim2022).

By comparison, in 2015, Samsung in Vietnam had more than 110,000 employees, and by 2018, 173,000. In 2018, they mainly worked at its two smartphone factories, SEV (42,000), SEVT (72,000), and SDV in YPIP (43,000). SEV and SEVT are two of Samsung’s largest mobile phone plants internationally. Together, they have made Vietnam Samsung’s mobile handset production hub. Samsung in Vietnam originally focused its mobile phone production on lower- and mid-level products; more recently, it has shifted to higher-end products and componentry. Indeed, Samsung now makes the majority of its Galaxy Smartphones in Vietnam (Enright, Reference Enright2017; Jeong, Reference Jeong2022; Tibken, Reference Tibken2015; Vietnam Investment Review, 2018). Those two smartphone factories alone also accounted for 27.6% of Vietnam’s GDP in 2018 (Kim, Reference Kim2019).

In Vietnam’s south, Samsung Consumer Electronics Ho Chi Minh City (SEHC) began its operations in 2016 in Ho Chi Minh City High Tech Park. It soon became the second largest manufacturer of Samsung’s TV screens and household electronic devices in the world, after its factory in Mexico. Indeed, soon after that, Samsung officially announced the relocation of most of the Samsung computer monitor lines from China to SEHC in 2020 (Kennemer, Reference Kennemer2018; Sidoni, 2021). By the end of 2021, Samsung’s total FDI in Vietnam had grown to USD 18.2 billion, some 27 times its initial investment with SEV in 2008. By then too, it was exporting around USD 65.5 billion worth of goods a year from Vietnam, or approximately 20% of Vietnam’s total exports (Jeong, Reference Jeong2022).

For Vietnam, Samsung is its largest source of FDI and exports and, more broadly speaking, a hugely successful FDI model, including through providing more advanced and generous employment conditions like free air-conditioned dormitory accommodation during a period of severe shortages of factory worker accommodation in industrial parks (Bắc Ninh Industrial Zones, 2018; Jeong, Reference Jeong2022). Samsung’s dominant presence in Bắc Ninh has also created spillover effects: indeed, a ‘Samsung effect’. Its business expansion in northern Vietnam has generated increasing demand for modern, high-quality, integrated industrial parks. As well, it has created demand for high-quality and dependable supporting companies, including some 80 component manufacturers and suppliers (Kennemer, Reference Kennemer2018).

Samsung is not the only major electronics MNE that moved its manufacturing out of China in recent years and not the only one to refocus on Vietnam. However, its shift has been the most dramatic and the nature of its embedding in Vietnam appears to be the most singular. Relative labour costs was one motivation for this enormous shift. Another has been perceptions of increasing difficulties in dealing with China’s subnational and national governments (Jang, Reference Jang2022; Jeong, Reference Jeong2022). In contrast, Samsung has found governments in Vietnam to be more adaptable and collaborative. Furthermore, by aligning its FDI foci with Vietnamese governments’ modernisation and export goals, it has benefited greatly from the very favourable terms and conditions they have provided, substantially reducing Samsung’s start-up and ongoing costs.

A major change that Samsung has sought in Vietnam – in response to its experiences in China – has been to influence the sectoral profiles of industrial parks in which it has invested. It wishes to avoid situations where Vietnamese authorities would pursue, for those parks, the sectoral specialisation strategy that had caused Samsung’s subsidiary so much frustration in SIP. Instead, Samsung has sought sectoral diversity. For example, in YPIP, SEV and SDV are the only major electronics FIEs with substantial facilities there. Elsewhere, the picture is similar. Furthermore, it has implanted alongside its leading subsidiaries, a constellation of their own ‘Tier 1’ component suppliers. These include other Samsung subsidiaries plus other Korea-based component suppliers tied to Samsung by relationships of monopsonic dependence (Enright, Reference Enright2017). More recently, and in line with Vietnamese government goals, it has also energetically fostered the emergence of domestic Tier 1 suppliers, again tied to it through monopsonic dependence (Jeong, Reference Jeong2022). Samsung has thus largely ‘engineered out’ much of the potential LLM competition for skilled assembly workers during a period of serious, pervasive skill shortages across Vietnam.

This has allowed it to invest in training its vast mass of assembly workers – nearly three times the number it ever employed in China – confident that it has greatly diminished damaging opportunities for job hopping and employee poaching. Alongside its greatly reduced uncertainties regarding these investments, it has heavily invested in training programmes for the middle–upper levels of its Vietnam workforces. In addition, Samsung has negotiated agreements with universities to advance the education and training of workers by allowing them to take free courses at night within Samsung factories. Courses involve studying languages such as English and Korean, as well as electronic engineering and accounting (Tibken Reference Tibken2015; Vietnam Investment Review, 2021).

As it has in China (Enright, Reference Enright2017), as part of projecting itself as both a central and worthy contributor to Vietnam’s economic upgrading, Samsung has also provided large-scale practical support for technology transfer plus leadership in upgrading of workforce skills beyond its corporate ‘walls’. In this, it has often had active support from Korea’s government. For example, in 2020, Samsung entered a 4-year agreement with Vietnam’s Ministry of Industry and Trade (MoIT) to train 200 moulding technicians. The intention is to support the development of Vietnam’s fundamental manufacturing industries. The agreement was for Samsung to hold two training courses every year; each was to run for 14 weeks, with 10 in Vietnam and four in Korea. Given that Vietnam’s moulding and precision engineering industries generate revenue of over USD 1 billion per year, for Vietnam’s party-state, this is a very important strategic contribution to the country’s economic development and export profile (Bắc Ninh Industrial Zones Authority, 2022; Communist Party of Viet Nam, 2019; Thuy, Reference Thuy2020).

Samsung’s upgrading initiatives focus particularly on the industrial parks it operates in and their surrounding provinces. These initiatives strongly support Vietnamese government goals of more rapid industrialisation, modernisation, and export growth. Thus, since 2014, Samsung in Vietnam has worked with MoIT on that ministry’s goal to see an increase in the number of Vietnamese businesses join Samsung’s production chains. Activities include workshops, exhibitions, and surveys. Indeed, the most senior executives within Samsung Vietnam have repeatedly and publicly committed it to being a leader in developing Vietnamese support industries (Bắc Ninh Industrial Zones Authority, 2018, 2022; Vietnam Investment Review, 2017, 2021).

Since 2015, for example, SEV has organised a consultation programme for local Vietnamese enterprises in Bắc Ninh to improve their productivity and ongoing effectiveness. It has also contributed via training and knowledge transfer to help local enterprises become more specialised, increase their labour productivity, reduce their operating expenses, and improve the quality and reliability. This ‘Samsung influence’ has also encouraged the development of local SMEs within its production and support chains. Thus, the number of Samsung’s Tier-1 Vietnamese vendors increased from four in 2014 to 29 in 2018. By then, SEV and SEVT localisation rates were at about 57%. Samsung’s objective was to reach 50 Tier-1 Vietnamese vendors by 2020 (Communist Party of Viet Nam, 2019; Vietnam Investment Review, 2017, 2021; Vũ, Reference Vũ2018). Samsung clearly has diverse reasons for broadening the ranks of its dependent, local suppliers, including gaining kudos from national and subnational governments. Such arrangements can further influence the rate and profiles of new firms entering those industrial parks, reinforcing its monopsonic LLM power.

Nonetheless, Samsung’s involvement in Vietnam goes beyond usual understandings of FDI by a large MNE in a developing country, even a far-sighted and purposefully embedded one (Giroud, Reference Giroud, Witt and Redding2014, Reference Giroud, Hasegawa and Witt2019). It has developed a multi-pronged approached to CSR for Vietnam. More traditional, philanthropic or charitable forms of CSR have included heavy involvement in COVID-19 prevention activities in Bắc Ninh, in partnership with a range of government, party, and para-party organisations (Communist Party of Vietnam, 2022). This is similar to some of its initiatives in China (Enright, Reference Enright2017), but in Vietnam, the scale, and in particular the relative scale – and hence the meaning of these initiatives, has been so much larger.

Crucial to understanding Samsung’s successful relationship with Vietnamese governments is its use of FDI as CSR. These initiatives appear unrelated to the operations of its FIEs in their various industrial parks. Quite diverse in terms of design, goals, and locations, they tend to heavily focus on educational programmes, including those related to VET. This is consistent with Samsung’s own global CSR focus on practically oriented education and digital technologies as enablers of material and societal progress. Some are part of very large, global Samsung programmes, but others have been designed more specifically with Vietnamese government priorities in mind. We discuss these in the next section before our Discussion section addresses our original research questions.

Samsung and FDI as CSR in Vietnam

Communications – whether direct or indirect – from both Samsung and Vietnam governments confirm that Samsung has been investing heavily and with creative purpose on broader social-purpose educational needs. The main targets of this CSR-related FDI have been people in remote areas, young people at risk, and children in schools. All these initiatives go beyond the typical FDI-focused programmes: in-house training, outsourced training for employees, or sending higher-level employees abroad or to universities. Furthermore, the four initiatives we discuss below are clearly not aimed at immediate, functional employer needs.

The first of these is the ‘Samsung Smart School’ programme, part of a global Samsung programme. Since 2012, Samsung Smart School has been supporting schools in rural and remote areas that lack digital educational resources. Thus, for example, it can transform the profile of a small, low enrolment remote school into an education hub. The programme has also assisted children with developmental disabilities, through virtual reality-enabled technologies, learn how to get themselves to school by bus. From 2016, the programme has been active in various Vietnamese educational institutions, including hospital schools, multicultural schools, and special needs schools. In support of its programmes, Samsung also provides selected institutions with Samsung smart devices and tailored educational resources and technology solutions for teachers ( Vietnam Investment Review, 2021).

The second programme is one where Samsung contributes substantially to the national government’s goal of embedding digital literacy and digital resources within the school system. Here, Samsung has been digitising books and has been sponsoring 50 ‘Smart Libraries’ in major cities and rural areas. Samsung has been working with the Vietnamese government to digitise textbooks, advanced reference manuals, and other books, which it then makes available through an Android app – usable only on a Samsung phone running the app (Tibken, Reference Tibken2015, p. 9). More recently, Samsung has entered into a collaboration with Google, to further promote ‘digital transformation of Vietnamese schools’ (Viet Bao, 2022).

The third programme is Samsung’s ‘Innovation campus’, part of a programme it launched globally and in Vietnam in 2019. Tailored to Vietnam’s particular situation, it provides an ICT education to broad sections of Vietnam’s youthful population, including unemployed students and youth. Along with core competencies such as Artificial Intelligence, Internet of Things, Coding, and Programing, the programme also trains participants in organisational communication skills (Vietnam News, 2022). The intention is to provide youth with improved job prospects in the STEM world, with a focus too on encouraging more girls and young women to enter that field.

‘New Hope Schools’ is the fourth programme, typically established through a memorandum of understanding with a subnational party-state welfare institution and the Korea Food Organisation for the Hungry International (KFHI). There are now five such schools operating in different parts of Vietnam. A New Hope School in COVID has been in operation since 2013 and one in Thái Nguyên since 2018. Each is ‘a school after school time’ built for about 300 disadvantaged students from primary to secondary school age. They have classrooms and welfare buildings, sporting facilities, and other outdoor learning and recreation areas. Students at these schools gain structured access to opportunities for physical, social as well as broad intellectual development; they also receive education and guidance for safe and healthy living as well as medical examinations and treatment (Viet Nam News, 2021).