Vietnamese businessman Nguyen Nhu Khue looks at his country's recent decision to join the World Trade Organization and sees export opportunities; he's adding about 20 production lines to ship more plastic bags to Europe and Japan, and he's considering building a plant to make vinyl window profiles for the United States.
Nguyen and his company, RKW Lotus Ltd., are not alone. The country's plastic exports are booming, growing 46 percent in 2005, to $380 million, and are projected to top $1 billion by 2010, according to Vietnamese industry group figures.
Given Vietnam's $60-$80 a month base wages for factory workers, it seems likely that most of those exports will come in the form of commodity goods, toys and other lower-value goods, the kind of things that have been coming out of China for 15 years.
But the German-educated Nguyen, managing director of RKW Lotus, doesn't necessarily have his sights there.
Vietnam may have passed a milestone when it was accepted into the world trade body in early November, but Nguyen thinks it would be wrong for his country to try to out-do its neighbor to the north and Asia's export engine, China, in being the lowest-cost producer.
Even if it has some short-term advantages, he thinks his nation of 84 million ultimately will be unable to match China's 1.3 billion people as a source of cheap production, and says his country's manufacturers should concentrate on better quality and technology.
``For Vietnam, we are not as big as China,'' said Nguyen, speaking in a Nov. 17 interview from his 350-employee factory on the outskirts of Ho Chi Minh City. ``It is stupid to compete in the world market by price. You have to compete by quality and service.''
To that end, he took on foreign partners two years ago, selling 52 percent of his Vietnamese extrusion and bag-making company to one of Europe's largest plastic film extruders, RKW AG in Worms, Germany, giving that firm entrance to Asia and Nguyen more contacts in Europe. (Nguyen retained ownership in his PVC compounding plant and a machinery sales business.)
To boost technology, he's recently invested in multilayer film lines that will let him produce higher-quality shrink films and film for surface protection, which he hopes to sell locally to supplant imports.
Vietnam's local markets are getting more sophisticated and he wants to take advantage. Consumers have the money for better quality goods, whether that's vinyl windows, packaged meats in grocery stores, or premium sugar cane juice.
Right now, though, exports remain key. More than 80 percent of RKW Lotus' sales are sent abroad, chiefly to Europe and Japan, with some to the U.S.
It's perhaps a natural focus for Nguyen, who slips easily between fluency in English, German and Vietnamese while taking phone calls during an interview and eating lunch in his factory's canteen with a reporter and fellow Vietnamese and visiting German colleagues.
He left Vietnam in 1969 to study in Germany, and worked for 15 years for chemical maker ICI plc before returning to Vietnam in 1989, when the country started to loosen its economy. He started his company in the mid-1990s.
Even in its main commodity business, polyethylene shopping bags, Nguyen said its best export strategy is to focus on so-called boutique bags, rather than low-end products.
RKW also shies away from orders that are too large. He said it was approached by some major U.S. retailers looking for new production sources after Washington slapped tariffs on plastic bags from China, Malaysia and Thailand in 2004, but greets those requests skeptically.
U.S. buyers, he argues, tend to focus too much on price cutting and not enough on building longer-term relationships with suppliers.
``It's not my strategy to jump in the business from the U.S.,'' he said. ``The quality standards for the U.S. for plastics are not as critical as for Japan or Europe. The price fighting or price pressure is really very big.''
He wants his firm to grow, but he also wants the growth to be manageable and not too dependent on any particular customer.
There are challenges with Nguyen's approach, though, particularly around labor.
He said Vietnam's poor educational system means his company has to spend a lot of time training his employees, even those from the country's technical schools.
And he estimates that given China's weaker labor standards, a competing factory there could make similar bags with 200 employees, instead of the 350 at his plant.
Others have noted labor challenges in the country. The Vietnam Plastics Association last year estimated that 65-70 percent of the industry's workers are unskilled, calling it one of its major competitive challenges.
Still, RKW Lotus is definitely growing. The company plans to add 20 film extrusion lines in the next year, to the 45 it currently has, increasing its capacity to 19.8 million pounds, from the current 13.2 million pounds.
As well, Nguyen's PVC compounding business, Lotus Chemical Technology Ltd. in Haiphong, is seriously considering building a plant to make window profiles for export.