A NEW front has opened in the U.S.-China trade dispute as companies shifting manufacturing to Vietnam engage in a fierce battle for skilled labor, aggravating an existing shortage and prompting calls for education reforms to address the problem.

Vietnam has emerged as one of the largest beneficiaries of the trade spat between the United States and China.

Exports to the United States were up 21.5 percent in the first eight months of this year, and several companies including Google parent Alphabet Inc. and Nintendo have announced new plans to open facilities in the country.

Hanoi’s trade deals, including its recently signed free trade agreement with the European Union, have also become a draw.

“Fresh, unskilled people are plentiful, but even basic sewing workers will need training for at least six months, so patience is the key,” said Jef Stokes of Maxport, a Vietnam-based garments manufacturer, highlighting a lack of reform in the education system as part of the problem.

“It’s adequate, but not graduating highly qualified candidates in enough volume,” said Stokes. “This is the choke point.”

IT workers, engineers and managers were already in tight supply, but additional demand from trade war refugees is increasing turnover among highly skilled workers, factory owners, consultants and recruitment firms said.

The lack of capacity should come as no surprise: Vietnam’s population is just 7 percent that of China’s, the country still lacks investment in infrastructure, and, according to the World Bank, needs to spend an average of US$6.7 billion a year to expand its annual power generation capacity by 10 percent between 2016 and 2030.

Accelerating investment in the high-tech sector and companies re-considering their regional supply chains due to the trade war have re-ignited concerns about high-skill labor availability in Vietnam, said Michael Sieburg, of consultancy firm YCP Solidiance.

Only 12 percent of Vietnam’s 57.5 million-strong workforce are highly skilled, recruitment firm ManpowerGroup says.

This has created rising competition for talent among new investors, said Sieburg, who advises foreign companies looking to set up operations in Vietnam.

“I know that when companies are considering where to locate their facilities, they do review what other manufacturers are in the area and the associated risk of poaching.”

Nguyen Quang Anh, a 28-year-old software developer from Hanoi, said he was approached several times by headhunters before he even graduated.

Since leaving university, Anh has switched jobs four times, each time for at least a 50 percent pay rise.

“Because of the shortage, employers are willing to pay us at much higher rates,” said Anh. “If tech giants relocate to Vietnam as a result of the trade war, I’ll definitely apply for a position.”

(SD-Agencies)