Vietnam Is Becoming the ‘New China’ With Foreign Manufacturers
01
Feb
TAIPEI, Taiwan (TheStreet) — Vietnam may still be communist, but the Southest Asian country is all about business.
Helped by low costs and an eager government, Vietnam is taking over China’s role as Asia’s hotspot for foreign investment in manufacturing.
While China’s economy slows and labor becomes more expensive, Vietnam is becoming to go-to place for manufacturing, making cars for Ford (F – Get Report) andToyota Motor (TM – Get Report) . Offshore capital is expanding now into high-value, high-tech assembly. Hanoi is working on rules to bring in more of it.
Chinese officials, worried about pollution and dependence on foreign capital, are promoting private domestic investment and consumer spending instead.
“The Vietnamese government welcomes most sectors with open arms and market entry, so licensing and operating have become much simpler than in China,” says Ralf Matthaes, partner in the Ho Chi Minh City-based investment advisory Infocus Consultants.
There’s now significant foreign investment in tech in Vietnam. PC processor icon Intel’s(INTC – Get Report) has operated a $1 billion test and assembly plant in Ho Chi Minh City since 2010. Vietnam’s largest foreign investor, Samsung Electronics (SSNLF) , has made an $11 billion investment in production there. Apple (AAPL – Get Report) contractor Hon Hai Precision (HNHPF) makes smartphone parts in Vietnam, as well.
China’s government says Chinese economic growth fell to 7.4% in 2014, a 24-year low, partly on a modest 8.3% increase in industrial production, down from 9.7% a year earlier. The Chinese economy will grow 7.1% this year, the World Bank forecasts.
China still wildly outranks Vietnam in terms of total foreign direct investment. Its economy of $10.4 trillion, compared to Vietnam’s of about $170 billion, had pulled in foreign direct investment of $119.6 billion last year. But that’s up less than 2% over 2013.
Officials in Beijing are drafting a new foreign direct investment law to offer offshore projects more equal treatment alongside domestic peers. The law might scrap case-by-case reviews of foreign projects and let them into China with fewer restrictions, the country’s state-run media say.
But rising wages and land prices over the past five years have frustrated foreign investors looking to cut costs in China, while skittish consumer demand challenges companies trying to sell their products for long-term profit despite a massive Chinese population.
Vietnam’s foreign direct investment rose 60% year over year in the fourth quarter of 2014, to about $8 billion over those three months, the country’s statistics office says.
