Innovating Vietnam’s TVET system (VIETSKILL)

Project summary

Although Vietnam has been remarkably successful in attracting FDI in recent years, many observers argue that the impact of FDI on domestic firms has been disappointing. The expected spillovers of knowledge and technology from foreign MNEs have been limited, partly because few local firms have been engaged as suppliers and subcontractors to the MNEs. One reason for the lack of integration into global value chains (GVCs) is a severe shortage of skilled labor. Vietnamese firms do not have the skills and capabilities needed to meet the production standards of GVCs. This skills gap is also a threat to sustainable economic growth – there is a risk that many MNEs may leave Vietnam if labor costs increase without a corresponding increase in human capital and productivity.
The purpose of this project is to forecast the skill demand in the FDI-sector (including its supply chain) and to design innovative partnership models for technical and vocational education and training (TVET) in Vietnam. The forecasting will be based on information on GVC upgrading trajectories and skill demand at different stages of the value chain: in principle, the objective is to predict what types of skills the foreign MNEs would require in the medium-term future if Vietnamese labor costs were twice as high as today. Information will be collected through interviews with MNEs in Vietnam and from data sets outlining GVC upgrading patterns and labor demand in countries that have experienced sustained increases in income levels together with GVC upgrading and structural change. Using these demand predictions and data on the industry’s own training activities, we will evaluate the current capacity of Vietnam’s TVET system to meet these challenges, identify reform requirements, and propose new partnership models for TVET engaging a wide range of participants, including firms and industry associations, the public sector, private education firms, and other stakeholders.