By Viet Ho
Vietnam is a communist country, but this Southeast Asian country is very entrepreneurial and business focused. Vietnam is taking over China's role as Asia's hot spot for foreign investment in manufacturing.
Over the past 15 years, Vietnam has become known for low-end manufacturing in the garment, footwear and furniture industries. An illustrative example is the growth of Nike’s manufacturing capabilities in Vietnam. In 2010, Vietnam surpassed China as the largest producer of Nike footwear and now Nike employs more than 333,000 in manufacturing jobs in Vietnam (30% more than China), producing shoes, apparel and equipment.
In the past five years, Vietnam has attracted more technologically advanced and higher value-added manufacturers in the power generation, automotive and consumer electronics industries. Vietnam is becoming the go-to place for manufacturers such as Ford and Toyota and for high-tech giants such as Microsoft, Nokia, Intel and Samsung. In addition to lower costs (labor, land and electricity) the government is providing a lower corporate tax rate for selected industries. For example: Samsung only pays 10% corporate income tax versus a standard 25% rate.
Two Illustrative Examples of Electronic Manufacturers in Vietnam
The Future for Vietnam Manufacturing
Vietnam’s lower labor cost received headlines and CEOs attentions. It is generally accepted that Vietnam is a serious alternative to China. The recent increase in territorial disputes and tensions between China and its major trading partners such as Japan and the U.S. will make Vietnam more attractive to companies with significant manufacturing capacity in China looking to diversify their risk as well as companies looking to start manufacturing operations in Asia.
It is my belief that Vietnam will need to work on its own “business case” to attract investors beyond the headlines and the “not China crowd.” Vietnam will need to make long-term investment in key areas such as infrastructures (port, road, utilities and reduce red-tape) to ensure total cost of operations is still low and education and training of young people to increase the skills and productivity of Vietnamese worker.
Vietnam is attracting both companies with a history in China and those fresh to Asia. It’s often part of a “China plus one” strategy in which firms maintain production in China but add operations in Vietnam to spread out such risks as supply chain disruption.
Viet Ho is the Chief Procurement Officer at Russell Investments, a global financial services firm. His team manages approximately $1 billion in spend. Viet has over 16 years of experience in Procurement and Supply Chain at major corporations such as JPMorgan Chase, Procurian/ICG Commerce, A.T. Kearney and PwC. He has built multiple procurement organizations at Fortune 500 companies with addressable spend between $900M - $1.5B. In addition to his CPO role, Viet is also the Head of Corporate Transformation at Russell.
Viet has BA and MA in Mathematics with Honors from Oxford University and an MBA with Distinction from Indiana University’s Kelly School of Business. Viet is a Certified Management Accountant (CMA) and a Certified Professional in Supply Management (CPSM) He is a subject matter expert and thought leader in outsourcing best practices in Vietnam. He managed offshore programs at Russell Investment and JPMorgan Chase. Viet received the ProcureCon and My Purchasing Center 2015 Excellence in Purchasing Indirect Categories (EPIC) Individual Award.
Viet is the author of the blog Offshore Vietnam, discussions and resources on outsourcing to Vietnam.
George E. Krauter
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