Rising wages in Vietnam are prompting many foreign investors in
labour-intensive industries to look to other countries with cheaper labour cost
to make investments.
A report recently released by
Japan External Trade Organisation (Jetro) shows that Japanese labour-intensive
companies in Vietnam are looking to expand investments in countries like
Cambodia, Bangladesh and Myanmar, where the labour cost is cheaper. The report
was based on the annual survey of Jetro on Japanese-affiliated firms’
operations in Asia.
“Japanese companies, especially
manufacturers, are highly concerned about Vietnam’s planned new minimum pay
rise from 2013,” Jetro announced in the report, cited this as the main reason
for the new investment trend.
This is not an attitude unique to
Japanese investors. Kim Jung In, chairman of Korea Chamber of Business in
Vietnam (Korcham), said many South Korean labour-intensive companies were also
eyeing Cambodia and Myanmar as potential investment destinations.
“Vietnam’s competitiveness of
investment in labour intensive industries is not as desirable as in the past,”
he said.
Both Japan and South Korea are
the biggest investing countries in Vietnam at this time, with 1,800 projects
from Japan and 3,159 projects from South Korea. Many of them have been
investing in Vietnam to take the advantage of the nation’s cheap labour cost.
The average wage of Vietnamese
workers in the manufacturing sector in 2011 was $123 per month, much lower than
$205 in Indonesia, $248 in Philippines, $280 in India and $306 in China,
according to Jetro’s report. However, Jetro pointed out that the average wage
in the manufacturing sector in Bangladesh was just $78 per month, Cambodia with
$82 and Myanmar $68.
Furthermore, Jetro also found out
that the pay rise in Vietnam reached the highest level among Asia nations, at
16.8 per cent during 2010-2011 and 17.1 per cent during 2011-2012. Meanwhile,
during 2011-2012, it was just 9 per cent in Indonesia, 10.5 per cent in
Bangladesh, 11.4 per cent in China and 12.2 per cent in Myanmar.
However, while labour-intensive
foreign companies are exploring relocation to other markets from Vietnam, the
foreign direct investment in high value added and modern manufacturing
industries in Vietnam has been increasing.
This year, for the first time,
cell phones, auxiliary devices, electronic appliances, computers and
machineries have ranked on the top of export categories in Vietnam, surpassing
garment - textile and footwear, according to the General Statistics Office of
Vietnam.
“This suggests that Vietnam is on
the stage of advancing into a high value-added industry instead of simply
exporting primary industrial products,” said In at Korcham, indicating that the
country’s economic structure was being quickly reorganised from primary
industry to secondary industry.
Foreign manufacturers in hi-tech
industries in Vietnam include US’ Intel Corporation, which is operating a $1
billion chipset factory in Ho Chi Minh City, US’ Jabil and General Electric,
Finland’s Nokia, South Korea’s Samsung Electronics, Japan’s Nidec Corporation
and Meiko Electronics.
Samsung in November this year
received an investment certificate for expanding its total investment capital
in Vietnam to $1.5 billion from the current $670 million. General Electric last
month also announced to build an engineering centre in Vietnam to focus on
product design, applications and services for the oil and gas sector.
“The investment outlook in
Vietnam for modern manufacturing companies is promising,” said Christopher
Towmey, chairman of Amcham.
Ninh Kieu | vir.com.vn
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