Vietnam the Magnet for Investment
Automobile Manufacturing Identified as Pillar of the Economy
Aug 5, 2007
Scarcely a day goes by without bullish news about the state of the Vietnamese economy. Recent claims are that it will double in size between 2000 and 2010 and then double again by 2020. Inward foreign investment exceeded US$10 billion dollars in 2006, record-breaking figures which are set to be exceeded this year as interim figures show a nearly 20% increase in total inwards investment. In truth, a significant proportion of that investment is being redirected from Thailand, where concerns over the overly high rate of the baht and the irrational behaviour of its unaccountable military junta government. Japanese companies are quietly redirecting projects to Vietnam, while Thai firms in the garment and footwear industries are closing down with the loss of thousands of jobs – six thousand jobs have been lost in the first week of August alone. Some of those jobs may pop up again in Vietnam.
Investment in Vietnam is aimed both at export markets but also, increasingly, at the booming Vietnamese domestic market. Previously, urban Vietnamese rode on moor cycles and so there was a need for domestic production of the bikes. Now more and more Vietnamese are aspiring to owning a car and appropriate manufacturers are being approached to establish factories in the country. There has always been a small and select market for luxury imported automobiles in Vietnam for a tiny elite but now there is an increasing level of demand for a people’s car. One such manufacturer is Zhongda, which is a Hong Kong-listed Chinese company which has already entered into a joint venture with the Vietnam Motors Industry to build buses and chassis both with and without engines attached. Zhongda has the advantage of being able to locate in a special economic zone which unites Guangxi province of China and northern Vietnam that provides cost benefits, while also producing vehicles which offer low cost and decent reliability for a market for whom a new car would be the first one they owned. This is a market which may well live and die by the quality of after-sales service that can be provided. There are dozens of Chinese vehicle manufacturers in operation, most of them created this century on the basis of joint ventures with European or East Asian partners who have permitted their technology to be transferred to the Chinese partner in return for licensing fees and agreements.
The Vietnamese government is actively determining which industries will be the pillars of its economy over the next few decades. Automobile manufacturing and assembly has been identified as one such pillar. Expect to see Vietnamese automobiles in the show rooms of the world in the next decade.
