Tag Archives: Vietnam workforce

The Opportunity in Vietnam’s Spat with China

Last week’s anti-China riots in Vietnam spooked investors, rattled the stock exchanges, threatened foreign business deals, and ignited conversation about whether that the political and economic risks in that region outweigh the potential rewards.  But where some see the unraveling of peaceful co-existence in Southeast Asia, others see a golden opportunity.

Are businesses and investors over-reacting?  Consider some of the more encouraging news coming out of Vietnam this month:

  • Samsung is going ahead with expansion of manufacturing in the northern provinces of Thai Nguyen and Bac Ninh.  As a result, about 50% of its smart phones made globally will be made in Vietnam.  Already, Samsung’s factory in Bac Ninh was one of its largest worldwide, and the company accounted for $24 billion in exports from Vietnam.  The Thai Nguyen factory opened in March will employ 16,000 workers and produce eight million units per month.
  • The Saigon port welcomed the largest ship ever docked there,  a 54,000 ton vessel able to navigate the river safely thanks to a mammoth dredging project that will allow ships of this size to save $500,000 a year in transit costs.  The port projects moving 120-150 million tons by 2025.

  • The investment ministry unveiled a proposed law that will cut red tape and streamline foreign investment by eliminating certificates for many projects, simplifying procedures, ending favorable treatment of domestic investors, and improving transparency.

  • Foreign investors have been snapping up stocks that domestic investors are rushing to sell in an over-reaction to last week’s riots.  Foreigners are taking advantage of sharp drop in the VN Index, which peaked at 610 points earlier this year and fell below 530 before climbing back to 544 today.

  • McKinsey released a study concluding that ASEAN, composed of Vietnam and nine other countries, will be the world’s 4th largest economy in 2050.

Business is getting done in Vietnam.  Opportunities abound.  The ugly events of last week are not likely to lead to war in the South China Sea.   More likely, they will turn out to have been an exchange of moves in a chess game of diplomacy that will help clarify the figurative boundaries between two of the world’s fastest growing economies.

Is Vietnam’s Economy Doomed?

Japanese economist Kenishi Ohno says Vietnam has fallen into the feared middle income trap — perpetual stagnation after stalling on the past to prosperity.
He says the country faces a social crisis because it failed to heed warnings six years ago.  Vietnam now faces:

  • Slowing economic growth
  • Low investment efficiency
  • Rising production costs
  • Little improvement in competitiveness

Ohno says productivity has grown 3% annually while wages rose 26%.  Competitiveness has dropped at an annual rate of 23%.

Vietnamese economist Nguyen Minh Phong says it’s too soon to conclude his country has fallen into the middle income trap.  He contends the government deliberately slowed Vietnam’s growth to enable economic restructuring to take place.

To stay out of the middle income trap, Phong says Vietnam needs to:

  • Prioritize development of information technology
  • Reduce exports of natural-resources
  • Support enterprises with market research
  • Explore niche markets
  • Help small enterprises get loans
  • Expand bilateral trade agreements
  • Reform education and training

Vietnam also needs to follow the examples of Japan, Taiwan, Singapore, and South Korea — all of which cultivated the private sector on their way to full economic development.

For several years, it has become increasingly obvious that Vietnam’s escape from economic mediocrity depends on the capacity of its own government to surrender control and permit the private sector to flourish.

 

 

 

The Race to Satisfy Vietnam’s Hi Tech Hunger

Vietnam’s science ministry reports four technology exchanges accounted for 5,482 service and equipment transactions worth $129 million last year — 34% more than a previous year, and far exceeding expectations.

In Haiphong alone, 40,000 people exchanged scientific views and searched for  technologies.  The Danang exchange has recorded 5,321 domestic businesses and 153 foreign companies registering 7,754 technology transactions over the past five years. 

These are signs that Vietnam is serious about being a global technology leader and consumer.   The government projects a 15% annual increase in technological product and service sales through 2020 as exchange projects expand countrywide and universities grow the country’s tech expertise.  

 These developments have generated a growing awareness among global technology leaders about Vietnam’s potential.  This week’s examples:

  • On Thursday the Vietnamese and Finnish governments signed a $14 million agreement to implement the second phase of their joint innovation partnership to enhance the capacity of Vietnam’s information technology system and increase activities in scientific research and technology development.
  • On Friday Microsoft formally agreed to a long-term partnership with Vietnam to focus on four technologies (1) IT infrastructure, (2) cyber security, (3) cloud apps development and (4) IT human resources.

The race is on to capitalize on hi tech hunger in a promising frontier market of nearly 100 million people.  

Dreaming in Vietnam on $1 a Day

Vietnam’s statistics office and the World Bank shed new light on income in the country — and quantify the  rural-urban gap.  They say the typical city dweller earns $142 a month compared to $76 for rural residents.  Average earnings for Vietnam’s poorest citizens are estimated to be $24 per month, a 39% increase over the highly inflationary period between 2010 and 2013.

This helps explain two things: (1) why the world’s multi-national manufacturers are flocking to Vietnam to source their products, and (2) why entrepreneurial dreams are flourishing in the world’s 13th most populous country.

Vietnam has a young, educated, eager — and, most important, plugged-in — workforce accustomed to wages far behind its peers in China and elsewhere in Southeast Asia.  Even citizens who earn $1 a day tend to be literate and have someone in the family who is connected to the Internet.

And despite urban migration that is spurring explosive growth in Hanoi, Saigon and other cities, Vietnam’s population remains mostly rural and the employment mostly agriculture.  In this sector, $1 dollar a day remains the standard wage — and a job offer from a Japanese or German widget-maker looks like an attractive stepping stone to the entrepreneurial dreamland that is the World Wide Web.

 

 

Saigon Galloping in Vietnam’s Year of the Horse

This is shaping up to be a break-out year for Ho Chi Minh City (Saigon), Vietnam’s business and financial center, and its most populous city — 9 million headed toward 14 million by 2025.

Sales and services revenue is up 12% this year and approaching $5 billion. February exports are up 15% to $1.8 billion.  Agricultural production is up 6%. The city hosted nearly 400,000 tourists in February, a 10% increase, and licensed 2,700 new businesses accounting for 25,000 new jobs.

And all of this precedes the conclusion of Trans-Pacific Partnership (TPP) negotiations that are expected to boost trade further between HCM City and the US, Australia, Malaysia, and Singapore, among others.

Perhaps the strongest sign of robust economic conditions in HCM City is the rise in foreign direct investment (FDI).  The city says it granted 12% more investment licenses so far this year than at this time last year (46) — with an aggregate of $164 million capital, up 267%.

This suggests the year of the horse will be powerful for the former Saigon — and as goes Saigon so goes all of Vietnam.

What Flappy Bird Tells Us about Vietnam

If you don’t think Vietnam has arrived yet as a player in the global economy, consider the case of Flappy Bird.  The sensational smart phone app dominated downloads of games on android and iTunes until its creator yanked it from the Internet last weekend.

The Flappy Bird inventor is a Vietnamese software engineer named Dong Nguyen, who lives with his parents in Hanoi.  He withdrew the app — even though it was bringing in up to $50,000 a day in ad revenue — because he was tired of the notoriety that was ruining his tranquil life.

A few years ago, millions of people in Vietnam didn’t have electricity, land lines, computers or access to the Internet — much less smart phones, and nobody in the Western world could have imagined a 29-year-old Vietnamese geek inventing a silly game that would consume hundreds of millions of hours that could otherwise have been spent on something more productive.  Yet that is exactly what has happened since Dong released Flappy Bird to the global economy last May.

Dong’s critics — and there are many of them — question whether he withdrew the game from the market as a publicity stunt to get people to focus on his next act.  He says the game disappeared because it is too addictive and because the international attention caused him too much grief.

A broader explanation might be cultural:  Vietnam has changed so dramatically and so fast that sometimes its ways of life cannot catch up with technology and market realities.  One of the cultural attributes of traditional Vietnam is a tendency not to bring attention to oneself — to be unassuming, modest, shy.  Could that be part of the reason Dong wants to get his life back?

The lesson for Western investors is they are well advised to learn the difference between cultural modesty and lack of initiative.  Vietnam is full of Dong Nguyens — millions of brainy entrepreneurs prepared to transform their own country and, in the process, infuse the world with Flappy Birds.

 

 

 

 

Being Oblivious to Vietnam’s Brainpower

American policy wonks this week are asking whether the US can compete globally in light of the OECD’s new PISA (Program for International Student Assessment) scores showing Asian teens out-distancing Westerners in math and science.  CNN and others suggested the ultimate insult to American education is that Americans have now fallen behind the Vietnamese.

That’s old news.  Actually the new scores merely document what anybody who has been paying attention to Vietnam has known for years:  Vietnamese children and teenagers have both the brainpower and the discipline to emerge later this century as a leading economy.  That assumes the country allows itself to unleash its potential.

The mean PISA score for 15-year-olds worldwide is 494 in math.  US  teens scored 481, ranking them 31st.  Shanghai was first at 613.  Vietnamese teens scored 511, ranking them 15th among countries tested — ahead of most Western nations, including United Kingdom, France, Norway, Italy, and Spain .

In science,  Vietnamese students scored even better compared to their classmates elsewhere in the world.  The mean score is 501 worldwide — 497 for the US and 528 for Vietnam.  Only seven countries fared better than Vietnam: China, Hong Kong, Singapore, South Korea, Japan, Estonia, and Finland.

In reading, the mean score was 496 worldwide — 498 for the US and 508 for Vietnam.

The new scores underscore the potential for Vietnam to accomplish in the 21st Century what Japan did in the 20th Century, emerging from economic obscurity to become one of the world’s leading economies.

It’s a story the Western world, and especially Americans, continue to ignore.  In fact, in reporting about the new PISA test scores, the New York City-based Wall Street Journal, as it typical of the newspaper that purports to keep American business leaders informed about global affairs, completely ignored the existence of Vietnam in its report and accompanying graphic.

Sooner or later, Americans will discover that Vietnam is the real story.