Bac Ninh, a city just north of Hanoi, is undergoing a remarkable transformation as it emerges as a major manufacturing hub in Vietnam. The local economy has surged due to increased foreign investment, particularly from companies seeking alternatives to China amid trade tensions. This shift has been significantly influenced by former U.S. President Donald Trump’s tariff policies, prompting many factories to relocate to Vietnam.
Once celebrated for its rice fields and traditional Quan Ho folk songs, Bac Ninh is now filled with modern factories and bustling activity. The city’s evolution began in earnest around 2008 when Samsung established its first phone factory there, which has since made Vietnam its largest offshore manufacturing base. The influx of foreign companies has been bolstered by the region’s skilled workforce and evolving infrastructure, attracting not only South Korean firms but also a growing number of Chinese companies diversifying their operations to avoid U.S. tariffs.
Challenges Amid Rapid Growth
Despite its rapid rise, Bac Ninh faces significant challenges. Increasing labor costs and a shortage of workers are beginning to strain the local economy. According to a telecom equipment worker who wished to remain anonymous, labor costs have surged by 10% to 15% since 2024, with expectations for further increases. The competition for skilled workers has led companies to offer enticing incentives, such as higher wages, bonuses, and even free bus fares for employees commuting from other cities.
The infrastructure in Bac Ninh is also struggling to keep pace with the rapid industrial growth. Brian Bourke, global chief commercial officer at SEKO Logistics, noted that while large corporations are relocating to Vietnam for manufacturing, the country still lags behind China in terms of infrastructure and logistics capabilities. Bac Ninh is working to address these shortcomings, with the recent groundbreaking of an industrial zone aimed at high-tech manufacturing, including electronics and clean energy.
International Trade Dynamics and Future Prospects
The economic landscape is further complicated by international trade dynamics. In 2024, Vietnam recorded a trade surplus of $123.5 billion with the U.S., making it a key player in global supply chains. However, this has led to tensions, with Trump previously threatening a 46% import tax on Vietnamese goods before settling on 20%. The U.S. and Vietnam are currently negotiating to maintain these tariffs, as Vietnam seeks to balance its trade relations and attract foreign investment.
The Vietnamese government is keenly aware of the competition it faces from neighboring countries like Indonesia and the Philippines, which are promoting themselves as viable alternatives for manufacturing bases. To maintain its growth trajectory, Vietnam is shifting its focus from low-cost assembly to higher-value manufacturing. The government has introduced incentives such as tax breaks on imported machinery and reduced rents to support companies in upgrading their technologies.
As the nation aims to become Asia’s next “tiger economy,” it has set an ambitious goal of achieving significant economic growth by 2045. This vision includes expanding export markets beyond the U.S. to regions like the Middle East, Latin America, and Africa.
The situation in Bac Ninh reflects both the opportunities and challenges of this transformative era. As local leaders push for development, they recognize that the future will require navigating rising costs and competition while fostering an environment conducive to sustainable growth. Prime Minister Pham Minh Chinh emphasized the importance of innovation and expansion in his recent announcements about hundreds of new projects, stating that Vietnam must “reach far into the ocean, delve deep underground and soar high into space.”
As Bac Ninh continues to evolve, its journey will be a telling example of Vietnam’s broader ambitions on the global stage.
