Valeria Fraschetti; “Affari e Finanza – La Repubblica, 06 july 2015” — Hanoi — Vietnam, the “star of the Mekong” shines. The GDP doubled in just six years
The country is the most brilliant of Asian South-East and continues to attract foreign investors: a new boom is expected now that there is no longer need to have a local partner for the foreign companies. Winning factor: the cost of labor is a third of the Chinese.
The rise of Vietnam is not only written on the labels of the sneakers. It is also on the boxes of printers, smartphones, electronic gadgets. And it overcrowd the hangars of the Noi Bai International Airport in the capital Hanoi, where, between cargo planes working at full capacity, the Korean giant Samsung will launch later this year a terminal of its own. Here it is, the awakening of the new Asian tiger: a manufacturing boom that makes the rural poverty ’80s seem distant, and exports favored by a windfall of foreign investment that would be the envy even in the more advanced Asian neighbors, such as Thailand and Indonesia. With something more: last week the Hanoi government has announced that there is not even more need for a local partner, the foreign companies who come to invest here will be 100% owned by foreigners from any country.
We’re not talking about a new China (the Vietnamese population is 7% of that of China). But at least a new Guandong. The GDP of Vietnam is today of 186 billion dollars: six years ago it was worth less than half. Exports rose from 96.91 billion dollars in 2011 to 150 last year. Towing it, are mainly clothing, footwear, electronic products. Only exports of mobile phones exceeded 35 billion in 2014. A rapid growth that looks set to last. Last year, the GDP grew by 6%. By 2017 will accelerate to 6.5% according to the World Bank. And Pricewaterhouse Coopers argues that Vietnam has the potential to become one of the fastest growing economies in the world by 2050. Its estimates foresee in fact that the country will continue to grow for the next 35 years an average of 5.4%. A pace that will be second only to that of Nigeria.
The original credit goes to the “Doi Moi” policy which in 1986 began the transition to the free market and that over the years has turned the communist nation into a business friendly country, with a reduction of red tape, tax relief and streamlined customs procedures. Geography and demography, however, contribute considerably to the luck of the small socialist republic. Near China, lapped by the most important routes of maritime traffic, Vietnam is young. With an average age of 26 years. Only 9% of the 90 million Vietnamese have more than 60 years compared with 13% of Chinese. And Vietnam benefits by the China loss of competitiveness. While the “world factory” attempting to climb the value chain, wages have gone up an average to $ 631. In Vietnam, the average is $ 181. “The cost of labor is relatively cheaper even than the larger part of the other Asean countries,” notes Vuong Quan Hoang from Hanoi, the consulting firm DHVP Research. “Only Cambodia and Laos have lower salaries, but also a much smaller population.” According to FDI Benchmark, service of the Financial Times, the operating costs of a biotech-pharmaceutical plant are lower by 50% in Vietnam and China. For a car factory the gap is 40%.
And so part of the manufacturing from China is moving on to the Mekong. One of the last giants who decided to do it, is the Japanese manufacturer Kyocera printers. It aims to quadruple its annual production in Vietnam, up to 2 million units by 2018, and because of this, it will move part of its operations from China in Hai Phong, to what will be the largest plant of the company.
At the end of 2014 similar announcement came from Unilever and Procter & Gamble also, the last is building a Gilette factory of razors of $ 100 million in Binh Duong, the manufacturing hub of the country. “Vietnam – said the Italian ambassador in Hanoi Cecilia Piccioni – now offers the so-called 3D-durable macro-economy, domestic consumption, demographic dividend that, along with the network of free trade agreements concluded or being negotiated (by year-end should to be signed with the EU, ed.) and the favorable taxation on business income and dividends, operate as powerful catalysts for foreign investment.” The latter in 2014 reached $ 24 billion. An increase of 31% which made it the second destination of FDI in Asia after China. 268 million dollars came from 31 projects in the Italian manufacturing.
But foreign capital not only choose Vietnam for relocation operations. The more than 500 thousand scooters coming out so far from the establishment that the Piaggio launched in 2009 in Vinh Phuc, 800 employees, are addressed only to the Asian market. The same applies to the print heads produced by the Italian Microlys at its plant in Ho Chi Minh City, located in one of the 30 “export processing zones” created by the government. “With a turnover of 4.5 million planned for 2015, the Asian market is our only business is growing,” says Lorenzo Ciofalo, to the company of Ivrea. Its 45 employees, all Vietnamese, found them thanks to recruiting agencies of the government. And now “some of them have become more skilled employees in Italy.”
For many reasons the country’s south-east Asia seems “the place to be”, as the Americans would say, that by historical enemies have become the main export market for the products made in Vietnam. But to continue to shine, the star of the Mekong, “will have to solve the structural problems of its economy,” says the consultant DHVP, for example? Lack of skilled labor in some areas, inadequate infrastructure, corruption. “Crucial – known Italian Ambassador – are developments of the restructuring of state enterprises and the banking sector, the completion of which is a prerequisite for the growth of a structured private sector.” And in this sense it is the government’s decision this year to accelerate the privatization of 280 state companies. The new openings are generating an increase of activities of foreign financial structures as the Italian SACE has guaranteed a loan of 200 million dollars in favor of the Nghi Son (a joint venture between energy companies Japanese Idemitsu Kosan and Mitsui Chemicals, Company Kuwait’s state oil and the Vietnamese PetroVietnam) for the construction of a refinery and a petrochemical complex in greenfield Vietnamese province of Thanh Hoa, 200 kilometers south of Hanoi. The amount guaranteed by SACE for the financing of the supplies allocated to over twenty Italian SMEs active in the production of equipment for the oil & gas industry, under a contract for Engineering, Procurement and Construction.
The complex of Nghi Son involves the construction of a refinery and a petrochemical plant greenfield production capacity of 200,000 barrels a day, worth a total of $ 9 billion. The plant of Piaggio in Vinh Phuc, the largest among foreign plants of the group so far have come out 500 thousand scooters intended exclusively for the Asian market. It was opened in 2009. As you can see from the chart, foreign direct investment know a slight decline from its peak of 2010-11, but now that was abolished the prohibition of having a local partner is expected to boom again.