Vietnam’s Industrial Automation: Drivers and Impacts on the Labor Market

with Omar Arias (World Bank), Daisuke Fukuzawa (World Bank) and Duong Trun Le (World Bank)

Robot adoption has rapidly increased in Vietnam, especially after 2017. This period has seen accelerated integration of Vietnam into global trade (through participation in FTAs) and through capturing trade-diversion stemming from the U.S.-China decoupling. The period also coincides with accelerated growth in the number of foreign owned companies (FOEs) and investment, such as industrial robots, with foreign manufacturers dominating the export landscape in the country. Investment by FOEs has been particularly strong in special economic zones (SEZs). Robot adoption concentrates in computer and electronics and electrical equipment industries, which are the most export-oriented and dominated by FOEs. We find that displacement effects of robotization has been relatively small, while the informal sector absorbed a significant fraction of the low-skilled displaced workers. We also find that robot adoption has had positive effects on wages, particularly for high-skilled and service workers. Importantly, districts more exposed to growing robot adoption also exhibit relative generalized employment gains and population growth, partly explained by a greater reception of migrants. Our findings point to complementarities between trade integration, industrial policy and foreign investment in promoting job creation and affecting population dynamics.