Vietnam Is The Next China, Part II. Only If You Completely Ignore Political Stability.
Long-time client, a manufacturer of small steel products, has for months been "threatening" to move his factory to Vietnam, either to replace an existing factory in China or as an adjunct. Company was unhappy with China's increasing taxes and labor rates. Just spoke with client this morning (yeah, I know it's Sunday but he was about to board a plane for China) and I asked him about Vietnam. His reply was essentially as follows.
"Forget Vietnam. Too risky. We found we just can't handle the inflation and the politics. Yes, China is getting expensive, but I just feel it is more of a known entity for us. Not worth chasing a few dollars in savings."
Again, I am NOT saying Vietnam is the wrong place for business, because it most certainly is not and a number of my firm's manufacturing, food, and high tech clients have done quite well there. But what I am saying is that the next time anyone acts as though Vietnam is necessarily better than China for your business, make sure you look at all relevant factors, not just easily apparent costs.
For more on Vietnam's political risks, check out this Asia Sentinel article, "Hanoi Pain."
http://www.chinalawblog.com/cgi-bin/mt/mt-t.cgi/2882
Vietnam Is The Next China, Part II. Only If You Completely Ignore Political Stability.:
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I am always saying that my law firm's clients (virtually all of whom are SMEs doing business internationally) are not leaving China because of its new Labor Contract Law, not leaving China because of its increased costs, and not leaving China because V... []
Comments
What article from Asia Sentinel?
Posted by: Craig | October 20, 2008 1:58 AM
Makes sense. I tend to discount those "X is the next Y" assertions outright -- no two places or situations are similar enough for such comparisons to be very meaningful, particularly if you're risking/investing large sums of money.
Posted by: John Biesnecker | October 20, 2008 5:06 AM
Link to the article please?
Posted by: 尼克 | October 20, 2008 5:57 AM
Sorry, but the link the Hanoi Pain article at Asia Sentinel seems to have gone missing.
Posted by: chriswaugh_bj | October 20, 2008 6:28 AM
I wish I knew enough to give a definitive comment on this, but all I have to go on is what I read on the news and from a few of my friends who have been there. Here goes -
- Vietnam does not actually seem that much less stable than China. Certainly I have never seen or heard of anything happening in Vietnam that would not happen in China.
- Of course there are problems entering the market, if there is less certainty in transactions and less local experience of dealing with foreign companies this is only to be expected.
- That there should be logistics problems should surprise no-one, but these are bound to decrease with economic growth. Nor are these problems insuperable with a sufficient level of investment - it's just that this might be out of reach for small to medium sized companies. Depends on what you want to do.
- Vietnam is behind China in pretty much every metric I can think of. Is it really appropriate to go in there assuming that you can do things with only marginally more difficulty than in China?
Posted by: FOARP | October 20, 2008 3:02 PM