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December 29, 2006 01:00 AM

Thriving Vietnam catching up

Steve Toloken
Assistant Managing Editor
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    (Dec. 29, 2:30 p.m. EST) — You get the sense in Ho Chi Minh City, Vietnam's commercial capital, that the country is trying to make up for lost time.

    There's a frenetic pace, a constant buzz of people and motor scooters that can make even simple things like crossing the street an adventure.

    Money is pouring in. This year, the country attracted about as much foreign investment as India, which has 13 times as many people. Intel Corp. last month tripled its investment for a computer chip assembly plant in Ho Chi Minh, to $1 billion.

    Major Japanese and Taiwanese firms, including Formosa Plastics, are sinking sizable investments, partly as an insurance policy in case their sometimes testy relations with China worsen.

    They see Vietnam and its rock bottom costs as both a hedge if China's currency rises substantially, and as a manufacturing base for selling to the rest of Asia. Japan's Canon Inc., for example, exports printers from Vietnamese factories to China.

    Of course, that message is the go-go investment scenario.

    If you talk to people working there, you get a more nuanced feel. Take labor. One plastic film and bag factory I visited in Ho Chi Minh said its 350-person workforce would be more like 200 in China, because Vietnam's labor laws were friendlier to employees than China's.

    “The workers here in Vietnam, you cannot handle them like you handle the workers in China,” the head of the factory, Nguyen Nhu Khue, told me. The Vietnamese-born, German-educated Nguyen spent 15 years working around the world for chemical maker ICI plc, before returning home in 1989.

    Vietnam has challenges. According to one of its plastics industry trade groups, two-thirds of its labor force is unskilled, and the country lacks any sizable domestic technology base. Almost all of its resin and machinery are imported, creating sizable opportunities for foreigners.

    One European firm I met with, Danish injection molder and mold builder Phasion Group, sees its Vietnamese operations and its Danish headquarters closely linked.

    It envisions a future where Vietnam does the mold making and most of the manufacturing, and Denmark does the more sophisticated work, becoming in essence a rapid prototyping/design/engineering outfit.

    So far, the company has kept employment steady at its Danish offices, even as it has moved work to Vietnam. It took adjustment, though; it got rid of some employees and brought in a different, more skilled workforce in Denmark.

    For others, the rise of Vietnam looks too much like the rise of China — another booming Asian manufacturing hub where jobs will migrate. China's trade deficit with the United States rose from US$83 billion when it joined the World Trade Organization in 2001 to US$202 billion in 2005 — and they fear the same from Vietnam.

    You hear some of the same complaints you do about China. One Taiwanese company I talked to at a trade show said its machinery designs had been stolen and copied by Vietnamese firms.

    However people see Vietnam, though, it seems undeniable to me that the country wants a bigger place in the world. In the last century, its energies were absorbed with wars on its soil with France, the U.S., Japan and China.

    I was only there for a week, but I left with the sense that the country mainly just wants to catch up.

    Steve Toloken is

    a Plastics News correspondent based in Hong Kong.

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