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 user 2010-04-11 at 5:40:01 pm Views: 117
  • #23792
    Vietnam Tycoon Lures China Companies With Cheap Labor
    Vietnamese property developer Dang Thanh Tam, one of the country’s richest men, is trying to lure companies from China to his industrial parks with the promise of cheap labor costs.Tam’s Kinh Bac City Development Share Holding Corp., Vietnam’s third-biggest publicly traded property developer, has attracted companies including units of Japan’s Canon Inc. and Sanyo Electric Co. Tam, 45, was one of Vietnam’s richest men at the end of 2009 based on his stock holdings, according to Thanh Nien newspaper.Vietnam has begun to export more higher-value goods to the U.S., with global camera equipment companies shifting some production from China, according to the U.S. International Trade Commission. Manufacturers can benefit from a weakening dong in Vietnam, which competes with China for the export of footwear, garments and furniture, amid pressure for the yuan to strengthen.“Production costs in China are becoming more expensive,” Tam, Kinh Bac’s chairman, said in an interview, citing higher labor costs in the world’s most populous country. “The transportation costs in China are also becoming very high.”The company operates industrial zones in and around the capital Hanoi and the northern coastal city of Haiphong, Tam’s birthplace. Two of Vietnam’s three largest ports, Cam Pha and Haiphong, are in the north, according to the Vietnam Seaports Association.

    Diversifying From China
    Japanese companies often regard the north of Vietnam as an extension of the Chinese economic zone, and may diversify production by adding output in Vietnam rather than moving altogether from China, according to Yoshida Sakae, managing director of the Japan External Trade Organization office in Ho Chi Minh City.“The north is very near China and it’s easy for companies in China to move to,” Tam said yesterday. “Kinh Bac wants to focus more on the northern provinces of Vietnam.”China’s Guangdong province, the nation’s richest region by gross domestic product, said yesterday it will raise the minimum wage by 21.1 percent to help resolve a labor shortage. More than 50 percent of manufacturers in the province, China’s manufacturing hub, are experiencing a lack of manpower, according to a Hong Kong Trade Development Council report released March. 16.

    Labor Costs
    “Labor costs in some places in China have increased 20 to 30 percent in the past three months,” said Shaun Rein, founder and managing director of China Market Research Group in Shanghai. Wages are “probably double what you have to pay in Vietnam.”Sanyo Electric last year started operating an optical-parts plant in a Kinh Bac park in a province bordering Hanoi, according to Yuko Hosaka, a Tokyo-based spokeswoman for the Japanese electronics maker.“We chose the location because it was nearby many of our clients’ bases,” she said. “Vietnam’s diligent workers were also among the reasons.”Tokyo-based Canon makes laser and ink-jet printers and scanners at a Kinh Bac park near Hanoi in Bac Ninh province, where the Vietnamese property company is located.

    Weakening Dong
    Shares in Kinh Bac, which by market value trails only Hoang Anh Gia Lai Joint-Stock Co. and Vincom Joint-Stock Co. among property developers, have increased 10 percent this year to 64,000 dong, compared with a 4.3 percent gain in the Ho Chi Minh City Stock Exchange’s VN Index.Kinh Bac reported net profit of 642 billion dong ($34 million) last year, more than double the 286 billion dong it posted in 2008. Tam’s stake of more than 30 percent makes him the biggest shareholder in the 12.4 trillion dong company.The company may benefit from a depreciating dong, especially as the U.S. pressures China to allow its currency to appreciate, said John Marron, managing director of Midas Clothing Ltd. in Ho Chi Minh City, which exports Vietnamese-made Zara and Converse apparel.“I’m making better margins now, and the weaker dong has definitely helped,” Marron said. “We pay our factories in dong and we get revenue in dollars.”

    Party Congress
    The dong has weakened 8.3 percent in the past year after Vietnam’s central bank devalued the currency twice. In contrast, the yuan, which is pegged to the dollar, was little changed in that period.In Vietnam, a Communist Party congress next year may cause the central bank to use currency depreciation to boost exports and create jobs, Standard Chartered Plc said in a report this month.U.S. President Barack Obama last week urged China to move toward a more “market-oriented exchange rate,” and the U.S. House of Representatives plans to hold a hearing this month on China’s currency policy.“Multinational manufacturers in China would want to diversify due to the risk for protectionist measures in the U.S.,” said Tai Hui, Singapore-based head of Southeast Asian economic research for Standard Chartered. “If you are only in China, you might want to have a plan B.”