*NEWS*FOLLOW THE LEADER TO……VIETNAM !

[Anonymous]

 follow my leader
MARCH 05

Canon’s plans to manufacture in Vietnam
have placed the spotlight on a new contender for China’s glory. How does it
match up?

Just last decade, Vietnam was likened to the American Wild
West – an expanse of badly-connected towns governed by little regulation. The
cause? Ravaging years of war and the loss of financial support from the old
Soviet Bloc.

So with such a solemn backdrop, news in December that Canon
plans to start manufacturing laser printers for export in Vietnam as of January
2006 (and inkjet printers as of June 2005)
still makes headlines. The tech giant, which has been making bubble-jet printers
there for export since 2002, has earmarked ¥5 billion ($48.7 million) to build a
large industrial park in the Bacninh province, at which it expects around 3,000
workers to knock out 700,000 units a month by 2007.

Indeed, modern day
Vietnam is a lot less wild and unruly than last time many of us looked. Since
the beginning of the decade, the Vietnamese authorities have reaffirmed their
commitment to economic liberalisation and attracting competitive, export-driven
industries. Vietnam is expected to achieve a GDP of 7.4 per cent this year, and
the industrial sector grew by a whopping 39.7 per cent in 2004.

But
although these figures are impressive, can Vietnam really market itself to
foreign manufacturers as a viable alternative to China?

Canon would say
so. A company spokesman told OPI: “From a strategic point of view, a Vietnamese
location offered many real advantages. At the top of our list was the perfect
match between the skilful, highly motivated Vietnamese workers and the cell
production environment we employ at our plants. For the production of printers,
Canon Vietnam is a self-sufficient operation.

“And although
manufacturing costs are comparatively low in Vietnam, the local wage structure
was peripheral to our decision to locate a plant there,” he adds. In fact, the
average salary of Vietnamese workers is about 60-70 per cent of that of China
and Thailand, according to Vietnamese minister of planning and investment Vo
Hong Phuc.

Certainly, the Vietnamese government is out to woo foreign
manufacturers. It has already lowered land rental fees; loosened approval of
investment licences for new factories from central to local level; and set out
plans to give foreign companies the right to mortgage their assets.

Trading environments have warmed too. And in the two years after the
US-Vietnam Bilateral Trade Agreement came into force in 2001, the export of
computers and electronic single parts to the US increased more than 480 times;
furniture and plastic products three times – good news for OP and furniture
manufacturers. And if Vietnam enters the WTO as scheduled this year – even
better.

But, despite the advantages, many manufacturers are still
reticent. According to a survey released in December on business sentiment among
115 foreign and 80 domestic companies conducted by the World Bank, the
Vietnamese government and the International Finance Corporation, a significant
number of businesses expressed concerns over uneven regulations, bureaucracy and
poor legal enforcement.

Furthermore, the country does not yet possess a
wide range of supporting industries that are able to provide manufacturers with
raw materials. Rather than import, OP manufacturers could be forced to look to
China where supply chains are more established.

But, according to
Desmond Wong, America’s coordinating partner for China at Ernst & Young,
Vietnam’s largest downfall is its limited domestic market. He says: “In China
you have a surging middle class with increasing purchasing power. Vietnam may
boast favourable conditions for manufacturers, but its market can never compete
with China’s.”

OP manufacturers, however, may be among the few that can
enjoy a market on their doorstep. With Vietnam’s services sector estimated to
have grown 38.5 per cent in 2004, a huge amount of new offices are springing up.

Wong agrees that OP manufacturers could find their niche in Vietnam. “In
general they make smaller products, which do not require a huge amount of skill
or an economy of scale.” he says, citing Canon’s printer cells and printer
cartridges as good examples.

Therefore, although Vietnam cannot compete
on an even keel with China quite yet, it should not be dismissed outright.
Vietnam has the benefit of learning from its neighbours and has proved willing
to implement the necessary changes to entice foreign manufacturers – although,
ultimately, they will judge the country on actions not words in the long
run.

[Author]

March 9, 2005 at 10:08 AM