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30 May 11

Thai firms weigh move to Vietnam

Written by Bangkok Post
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Cheap labour, a large workforce and the expected free flow of goods and services in Asean offer Thai companies more choice

Thai companies should consider expanding into Vietnam in preparation for a greatly expanded flow of goods and services under the Asean Economic Community in 2015, say some business leaders.


"Once the markets open up and there is free competition, companies that have not been outward-looking will have a tough time trying to compete," said Suwes Wangrunarun, senior vice-president of CP Vietnam Livestock Corp, at a recent seminar in Bangkok.


Mr Suwes, whose company has more than $1.2 billion in annual sales from its Vietnam operations, said Vietnam had one of the cheapest labour forces in the region, cheaper even than China's. With its large skilled and unskilled workforce, the country is poised to become a regional centre for trade and investments.


"CP Group has expanded over the years, and this year we are looking at opening two new plants there," he said.


Vietnam started to open up its economy only two decades ago, but the Ho Chi Minh City and Hanoi skylines already feature skyscrapers.


While total investments in Vietnam have dropped 40% this year to about $4 billion due to the uncertain EU economy, figures are expected to pick up as the country promotes itself, said Tran Van Lieu, chairman of the Binh Duong Industrial Zone Authority, a body similar to the Board of Investment of Thailand.


Panelists at the event said the cost of doing business in Vietnam was so cheap it would be difficult for countries such as Thailand to compete. Mr Suwes said the monthly wage of an unskilled labourer in Vietnam is about 2,500 baht a month against the nearly 9,000 baht that is paid in Thailand, while a new graduate in Vietnam would earn about 9,000 baht a month against the 15,000 to 18,000 baht that is paid in Thailand.


Soraya Runckel, vice-president of Runckel & Associates, is keen on investing in Binh Duong province, a one-hour drive from Ho Chi Minh City.


She said factories and shops can take advantage of lower wages, a young population and enthusiastic workers. Provincial officials have simplified foreign investment procedures by cutting regulations and advising on lending sources. Vietnam has a population of 84 million and establishing an export base there brings companies closer to China.


Ms Soraya said Binh Duong was well-known for its solid infrastructure, business services and transparency in policy and regulations. The current president of Vietnam _ Nguyen Minh Triet _ was born in the province and has given special emphasis to the region.


The province has six universities and colleges plus one new international university, Eastern International University. As Asia tries to cope with a shortage of unskilled labourers and managers, the industrial zone plans to establish training and vocational institutions.


Planners feel the kind of businesses that will do well in Binh Duong are supporting industries, food manufacturers, consumer goods, animal feed and medicine, high-tech, packaging, retail and other low labour-intensive categories. High labour-intensive industries, such as garments and textiles, which generally rely on very low wages, most often seek out provinces in the central part of Vietnam.


Binh Duong is in the south, where more consumers, bank headquarters and related supporting businesses are located. More than one-half of the business in the country takes place in the southern region, and it is expanding more quickly than other areas.


The growing number of middle- and upper-income families in Vietnam results in more consumer spending and the country's growth should continue. Research shows the urban upper class will increase from 7% of the urban population in 2010 to 12% by 2015. The middle class will rise from 52% to 69% by 2015. This rise is expected to increase the demand for consumer goods, appliances, consumer electronics and home furnishings.


With Thais' more extensive experience in management and exports than their Vietnamese counterparts, Thai companies could grow faster than their rivals by taking advantage of their broader international contacts.

 

Last modified on 30 May 11