In Industry 4.0 era, low labor costs don’t count

08:37 | 27/08/2018 Society

(VEN) - Most Vietnamese businesses remain at the starting point of preparations for Industry 4.0. To get ready for this revolution, the state and businesses need to take suitable measures and pay special attention to improving the quality of human resources.

in industry 40 era low labor costs dont count

Massive job loss

Vietnam has been dependent for a long time on foreign direct investment (FDI). Low labor costs, labor and resource-intensive industries, and preferences in terms of tax and land rent have attracted foreign investors to Vietnam. However, FDI flows tend to move to markets where Industry 4.0 technologies can be utilized. Therefore, low labor costs will no longer be an advantage and may even be a challenge.

According to Dr. Le Dang Doanh, former Director of the Central Institute for Economic Management, 86 percent of the workforce in the Vietnamese textile, garment, leather and footwear sectors is forecast to lose their jobs in the next 15 years. In the context of increasingly great importance attached to jobs that require high levels of creativity and skills, employers will need to recruit highly qualified candidates capable of adapting to changes in production mode, as well as new technologies. Therefore, the government, businesses and training organizations need to maintain tight coordination to enhance worker skills and enable their access to new job opportunities presented by Industry 4.0.

Low investment in technology

In late 2017, the Ministry of Industry and Trade carried out a survey to assess the impacts of Industry 4.0 and business readiness for this revolution. Survey results show that most industrial manufacturing companies remain at the starting point; 82 percent of businesses are interested in Industry 4.0, but 61 percent of them have done nothing to get ready.

Vietnamese businesses still show very low levels of readiness for Industry 4.0 in the six criteria measured: strategy and organization, smart factories, smart operations, data-driven services, smart products, and employees. The lowest levels of readiness were detected in strategy, organization and smart products.

At a recent workshop on solutions to promote smart manufacturing, Deputy Minister of Industry and Trade Do Thang Hai said strategy and organization is the most important dimension of Industry 4.0. However, survey results show that 81.3 percent of businesses still lack Industry 4.0 access strategies.

Although they are interested in Industry 4.0, investment in technology by businesses in the industry and trade sector remains limited. In the past two years, each company invested an average of about VND1 billion (less than US$50,000) in technology per year, and this level is forecast to remain unchanged in the next five years. Meanwhile, survey results show that 52 percent of businesses need to improve technology for smart factories. In terms of smart products and data-driven services, Vietnamese businesses scored only 0.08/5 points, with 93 percent not even in the ballpark.

Human resources investment

Currently, most training facilities in Vietnam are capable of meeting the requirements of Industry 2.0 and Industry 3.0, but cannot provide Industry 4.0 human resources.

Huynh Kim Tuoc, Managing Director of the Saigon Innovation Hub (SIHUB), said connecting and sharing data is specific to Industry 4.0, therefore, universities should equip their students with knowledge and necessary skills in science, technology, engineering and mathematics (STEM fields) by taking STEM approaches. However, only 12 among 350 Vietnamese universities have lecturers capable to teach with STEM approaches.

To recruit qualified employees, businesses have taken the initiative in cooperating with training facilities and assisted them in capability enhancement. Examples include cooperation models between foreign invested companies and Vietnamese universities, such as Mitsubishi Electric and Hanoi University of Industry, Toyota and Sao Do University, Bosch and training facilities in Dong Nai Province.

At the above-mentioned workshop, businesses shared their views and experiences in applying high technologies. Vo Quang Hue, Deputy General Director of Vingroup, said VinFast, a member company, will carry out manufacturing activities at five factories with Industry 4.0 technologies ordered from world-leading automobile manufacturers. However, Hue emphasized, VinFast considers human resources the most important factor to its development. Therefore, along with building factories, the company has opened a human resource-training center to ensure sufficient manpower for its manufacturing facilities.

Sharing Hue’s opinion, Nguyen Vu Luu, Head of Viettel Group’s R&D and Manufacturing Strategy Department, believes human resources are the key to business development in the era of Industry 4.0. In his opinion, Vietnamese students are strong in scholastic achievements but weak in working skills – requiring flexible training programs.

Deputy Minister of Industry and Trade Do Thang Hai: Developing digital factories is the focus of Industry 4.0 and also

a major priority of the industry and trade sector in the process of promoting smart manufacturing and developing

highly qualified human resources.

Thu Ha