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 user 2010-04-11 at 5:40:46 pm Views: 60
  • #23573

    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.

    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
    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
    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.”