The Rise of Vietnam Co

Posted by Kris | Saturday, January 26, 2008 | | 2 comments »

Honestly what is the first thing that comes into your mind, when people mentioned the country "Vietnam"? Growing up with a good dose of American movie during my childhood, vietnam is always remembered as the place where American fought against the Vietnamese Communist and lost. (The Vietnamese called it the Vietnam Liberation War though as the Americans was ousted out of the country).

Nevertheless , the country was left in ruins after the war. You still can see the effect of the Agent Orange on some of the older people affected by the war. It is amazing to note how Vietnam managed to pull itself out of the brink of destruction to become a potential economic powerhouse in ~30 years.

The picture on the left shows the revered Vietnamese leader, Ho Chi Minh who single-handedly steered Vietnam like a guiding star. (Coincidentally, the Vietnam's flag is a 5-edge star) You will be amazed to know how Ho Chi Minh, a man of humble origin, rose to become one the most influential personality and cult like status in the Vietnam's history.

With a population of over 85 million, Vietnam is the 13th most populous country in the world. The country is listed among the "Next Eleven" economies; according to government figures, GDP growth was 8.17% in 2006, the second fastest growth rate among countries in East Asia and the fastest in Southeast Asia. Late 2007, the ministry of finance said the GDP growth was estimated to hit a ten-year high record at 8.44% in 2007.

Here is an article on how fast Vietnam is catching up with the rest of the world. I had to agree with the writer itself on a few salient point (highlighted with yellow) after my 1st trip to Vietnam.

After China, Vietnam will be world's factory

Investors who see the boom in Vietnam’s two-wheeler market as a sign of Vietnam’s young labour force yearning for the tools it needs to plug into a global supply chain will win, says the writer

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By Andy Mukherjee
Published: 2007/12/06

THE four million motorcycles on the streets of Ho Chi Minh City offer a remarkable - if somewhat noisy - testimony to the prosperity that beckons Vietnam.

A US$900 (US$1 = RM3.34) Honda may not be everyone's idea of affluence. However, it has the same pride of place in this rapidly industrialising nation as a bullock cart in an agrarian society.
Young men and women - many of them migrants from rural areas - commute to large, modern factories on the outskirts of the city on bikes they are proud to own and scared to lose.

This mobility is so crucial to the workers' productivity that some employers in the city formerly known as Saigon have even begun buying insurance, at their own expense, against the risk of bikes being stolen from their factory premises.

Investors who take the boom in Vietnam's two-wheeler market as a harbinger of a burgeoning mass market may be disappointed for a few years. Those who see the lust for bike ownership as a sign of Vietnam's young labour force yearning for the tools it needs to plug into a global supply chain will win.

After China, Vietnam is emerging as the world's next factory of choice for labour-intensive goods.


One can see that in the changing composition of the country's exports. Rice and coffee - two of Vietnam's biggest agricultural exports - are now becoming less significant to the US$61 billion economy than textiles. Footwear shipments are gaining prominence over seafood.The other fast-growing export industry is furniture.Exports of wood-based products have grown 24 per cent from last year to more than US$2 billion.


James Koh, a Singapore businessman, makes dining tables and chairs in Vietnam for customers around the world, including Williams-Sonoma Inc's Pottery Barn stores in the US.Koda Ltd, of which Koh is the managing director, also has factories in Malaysia and China. Yet, it's Vietnam's lower costs that are prompting the company to expand capacity here by 25 per cent.
"The labour cost in Vietnam is half that of China, while worker productivity is about the same," says Koh.


Starting next year, the government will increase the mandated minimum wage for foreign-funded companies in Ho Chi Minh City and Hanoi, the national capital, by 13 per cent to one million Vietnamese dong, or US$62, a level that is still affordable, Koh says.


Chinese-made goods have become increasingly expensive in the US for the past six months. That gives Vietnamese manufacturers an opportunity to win a bigger share in their largest export market.


Vietnam's accession to the World Trade Organisation in January has provided its textile industry with quota-free access to the US. Joining the WTO regime has also caused a 37 per cent surge this year in overseas investment commitments to US$13 billion.

The biggest draw of the country is clearly its labour.
The median age in Vietnam is 25 years. The workforce isn't just young, but also literate and healthy: The proportion of people who are undernourished has been cut in half over the past three decades.The risk for Vietnam is inflation, which accelerated to 10 per cent last month, the fastest pace in three years.


In the short run, Vietnam must stand ready to sacrifice some economic growth to halt the increase in prices, especially of construction material.If left unchecked, inflation will become a drag on Vietnam's competitiveness even if the central bank doesn't allow the dong's nominal exchange rate to appreciate.

On the whole, though, Vietnam is on the road to prosperity.The swanky Louis Vuitton and Gucci showrooms that have sprung up in Ho Chi Minh City may be a bit premature in a country where the annual per-capita income was US$723 last year.

The time for the Vietnamese consumer will undoubtedly come.
With a population of 85 million, and an economy that the International Monetary Fund forecasts to grow more than eight per cent this year and next, the Southeast Asian country will soon represent a sizeable domestic market.For now, the Vietnamese producer is the bigger opportunity.


There is, however, no room for complacency.Cheap labour makes it relatively easy for a country to enter the global supply chain, but it has to work hard to stay in.Especially now, when a seemingly simple task like attaching four legs to a rectangular piece of American poplar wood and shipping it back to the US has become too complex to undertake without overseas capital and expertise.


First, there is a minimum investment in technology without which large orders from retailers are impossible to win. Each of the Taiwanese-built assembly lines that Koda is installing in its new Vietnam factory costs US$300,000.


Second, buyers in Europe are demanding more exacting environmental standards from their vendors, such as a minimum use of packaging material, Koh says. Americans, meanwhile, are getting fussy about making all shipments terror-proof.Most importantly, no retail store - European or American - wants a sweatshop scandal at any of its suppliers' units.


Like most developing countries, Vietnam is dogged by corruption and red tape. It must strive to improve its record now that it's getting the investments it needs for the workers to graduate from motorcycles today to cars in the future. - Bloomberg


(Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.)

Key driving forces to Vietnam's accelerated growth are: ( My 2cent take)

  1. Young workforce and a baby boomer population both provides cheap labour and growing internal consumer consumption especially in the big cities like Ho Chi Minh & Hanoi. Education & literacy level is also on the rise. Most of the young Vietnamese understand English to a certain degree.
  2. The government actively encourages foreign investments. There is even a programme to encourage foreigners to buy high end property in certain region of Vietnam. Something similar to Malaysia's My 2nd Home programme.
  3. A lot of cheap land mass for industrial development.
  4. There are still a lot of growth potential & opportunities in critical fields like banking, telecommunication, health care, insurance, etc.
  5. Political stability.

Going forward, i believe that in the not so distant future, Vietnam will become something similar to China due to its geographical,political proximity and similarities. So Asean countries (which Vietnam is a member also) really needs to think hard and buck up their own economy least they get overwhelmed by the rude awakening of a 2nd sleeping dragon in their own backyard. Especially *wink* the land where I earn my bread & butter *wink*

Visit Vietnam and you will see that Vietnam is no longer a very "ulu" and "kampung" place that we always perceived. (at least that is what i thought earlier :P)


2 comments

  1. Stargazer // 12:54 AM  

    Wow, long post. I hope you get rich :) And then you teach me how ;)

  2. Kris // 2:52 PM  

    haha... I also hope i can achieve that.Wasted too much time during my university years.

    Now playing catching up..lots of thing to learn.