<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published April 14, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Vietnam's economy hit by global slump
Foreign capital inflow is expected to fall by more than half this year
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(HO CHI MINH CITY) Just a couple of years ago, this city was among the hottest investment zones in Asia.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>Bypassed: Vietnam is losing out to China despite its comparative advantages of a motivated workforce, political stability and a young population </TD></TR></TBODY></TABLE>Multinationals as large as chipmaker Intel Corp and smaller companies such as Ampac Packaging, a Cincinnati-based maker of shopping bags for Gap and Target, flocked here and to other parts of Vietnam. They set up plants to complement, or in some cases, to replace facilities in China that were becoming increasingly expensive to operate. 'China plus one,' they called it.
Now, with the global downturn and China reasserting itself as a low-cost producer, Vietnam is feeling the effects of a different trend: 'China minus one.'
In central Ho Chi Minh City, also known as Saigon, an apartment tower that would have been one of the city's tallest buildings has been draped in green covering for months.
Pinched for cash, its owner, Daewon Group of South Korea, stopped work on the development even after reaching the top floor. It is one of many foreign projects in the region that have been halted or put off indefinitely.
Taiwan's Wistron Corp had planned to plough millions into building a laptop factory in Vietnam last winter, to supplement its main plant in the Shanghai area. 'Right now, it's just more or less on hold,' spokesman John Collins said.
Taiwanese investment in Vietnam in the first two months of this year was just one-fifth of what it was a year ago, said Catherine Chi, a senior director at Taiwan's chamber of commerce, one of the largest foreign groups here.
The Vietnamese government in Hanoi is expecting foreign capital inflows to fall by more than half this year.
Japanese companies such as Sony Corp and Canon Inc have closed operations in Vietnam. Chinese carmaker Lifan Group suspended plans to make cars here.
By other measures, Vietnam's economy is faring better than most in the region. Thanks to a rise in trade of consumer goods, government spending on infrastructure and numerous plant openings in the past, the country's gross domestic product (GDP), or total economic output, is likely to grow by 5.5 per cent this year. That would be the second-highest in East Asia after China, according to the World Bank.
Vietnam's comparative advantages include its motivated workforce, political stability and a young population. But the past couple of years also have been sobering to foreign managers. They have learned that Vietnam, with a population of 90 million, is not a smaller version of China.
Though it shares East Asia's Confucian values of education and family, Vietnam does not have China's command-and-control way of getting things done quickly. Businesses complain that, even after several years, workers still have not finished the highway from Ho Chi Minh City's airport to downtown. Unlike China, relocation of families is painstakingly slow.
Nor does Vietnam have the depth of skilled labour that some thought. While young Vietnamese show a penchant for learning, universities tend to be heavily theoretical.
Many of their graduates lack the practical and technical training needed to prepare them for careers at multinational companies.
In some ways, Vietnam's recent troubles have as much to do with China's improved business climate than with any particular failing of its own.
Over the past decade, Vietnam had looked more appealing as the US imposed anti-dumping duties on China-made products such as furniture and plastic bags. At the same time, Chinese wages soared, as did raw material costs. Labour laws stiffened. The Chinese yuan surged in value. And authorities thumbed their noses at labour-intensive businesses, eliminating export rebate taxes and cracking down on environmental and safety laws.
'The era of China as a low-cost, manufacturing- for-export market has come to an end,' the Shanghai American Chamber of Commerce declared in March last year, noting that nearly one out of five companies surveyed had concrete plans to relocate some of their China operations to other countries, notably Vietnam.
But the global credit crisis and ensuing recession changed all that. The Chinese government revived export taxes and beefed up infrastructure.
China's commodity prices fell, the yuan stabilised and officials backed away from pressing employers too hard, lest more plants close and jobs disappear.
The same chamber survey a year later found that the percentage of companies planning to relocate out of China had dropped by half, as had the number of respondents expressing concern about China losing its competitive edge.
'The larger companies that have had the experience of looking elsewhere have returned to China,' said Dean Ho, the Shanghai-based vice-president of Unison International, an investment and consulting firm.
Some of them could not find enough good workers, he said. Others found that rival countries had their own challenges. -- LATWP
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Vietnam's economy hit by global slump
Foreign capital inflow is expected to fall by more than half this year
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Print article </TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>(HO CHI MINH CITY) Just a couple of years ago, this city was among the hottest investment zones in Asia.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>Bypassed: Vietnam is losing out to China despite its comparative advantages of a motivated workforce, political stability and a young population </TD></TR></TBODY></TABLE>Multinationals as large as chipmaker Intel Corp and smaller companies such as Ampac Packaging, a Cincinnati-based maker of shopping bags for Gap and Target, flocked here and to other parts of Vietnam. They set up plants to complement, or in some cases, to replace facilities in China that were becoming increasingly expensive to operate. 'China plus one,' they called it. Now, with the global downturn and China reasserting itself as a low-cost producer, Vietnam is feeling the effects of a different trend: 'China minus one.'
In central Ho Chi Minh City, also known as Saigon, an apartment tower that would have been one of the city's tallest buildings has been draped in green covering for months.
Pinched for cash, its owner, Daewon Group of South Korea, stopped work on the development even after reaching the top floor. It is one of many foreign projects in the region that have been halted or put off indefinitely.
Taiwan's Wistron Corp had planned to plough millions into building a laptop factory in Vietnam last winter, to supplement its main plant in the Shanghai area. 'Right now, it's just more or less on hold,' spokesman John Collins said.
Taiwanese investment in Vietnam in the first two months of this year was just one-fifth of what it was a year ago, said Catherine Chi, a senior director at Taiwan's chamber of commerce, one of the largest foreign groups here.
The Vietnamese government in Hanoi is expecting foreign capital inflows to fall by more than half this year.
Japanese companies such as Sony Corp and Canon Inc have closed operations in Vietnam. Chinese carmaker Lifan Group suspended plans to make cars here.
By other measures, Vietnam's economy is faring better than most in the region. Thanks to a rise in trade of consumer goods, government spending on infrastructure and numerous plant openings in the past, the country's gross domestic product (GDP), or total economic output, is likely to grow by 5.5 per cent this year. That would be the second-highest in East Asia after China, according to the World Bank.
Vietnam's comparative advantages include its motivated workforce, political stability and a young population. But the past couple of years also have been sobering to foreign managers. They have learned that Vietnam, with a population of 90 million, is not a smaller version of China.
Though it shares East Asia's Confucian values of education and family, Vietnam does not have China's command-and-control way of getting things done quickly. Businesses complain that, even after several years, workers still have not finished the highway from Ho Chi Minh City's airport to downtown. Unlike China, relocation of families is painstakingly slow.
Nor does Vietnam have the depth of skilled labour that some thought. While young Vietnamese show a penchant for learning, universities tend to be heavily theoretical.
Many of their graduates lack the practical and technical training needed to prepare them for careers at multinational companies.
In some ways, Vietnam's recent troubles have as much to do with China's improved business climate than with any particular failing of its own.
Over the past decade, Vietnam had looked more appealing as the US imposed anti-dumping duties on China-made products such as furniture and plastic bags. At the same time, Chinese wages soared, as did raw material costs. Labour laws stiffened. The Chinese yuan surged in value. And authorities thumbed their noses at labour-intensive businesses, eliminating export rebate taxes and cracking down on environmental and safety laws.
'The era of China as a low-cost, manufacturing- for-export market has come to an end,' the Shanghai American Chamber of Commerce declared in March last year, noting that nearly one out of five companies surveyed had concrete plans to relocate some of their China operations to other countries, notably Vietnam.
But the global credit crisis and ensuing recession changed all that. The Chinese government revived export taxes and beefed up infrastructure.
China's commodity prices fell, the yuan stabilised and officials backed away from pressing employers too hard, lest more plants close and jobs disappear.
The same chamber survey a year later found that the percentage of companies planning to relocate out of China had dropped by half, as had the number of respondents expressing concern about China losing its competitive edge.
'The larger companies that have had the experience of looking elsewhere have returned to China,' said Dean Ho, the Shanghai-based vice-president of Unison International, an investment and consulting firm.
Some of them could not find enough good workers, he said. Others found that rival countries had their own challenges. -- LATWP
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