Photo: Viet Tuan
Samsung’s investments in Vietnam have given the country a boost in myriad ways.
Bicycles are gone, replaced by Honda scooters. Satellite dishes adorn village roofs. In Bac Ninh province in Vietnam’s north, the lives of many farmers have undergone a drastic transformation. Moving from rice paddies to production lines has given them higher wages, social security benefits like pensions and sick leave, and job security. Such is modern Bac Ninh, the country’s second-largest export center after Ho Chi Minh City, a place that, 20 years ago, was one of the poorest regions of Vietnam. Foreign investment now accounts for 60 per cent of the province’s economy and out of the 856 foreign companies that had invested a combined $11.9 billion in Bac Ninh province as at last June, more than half are related to Samsung.
In the 22 years since it arrived, Samsung has almost single-handedly helped turn Vietnam into an electronics manufacturing hub, with over $17 billion in investment. From just an ordinary TV manufacturing factory, Samsung’s plants moved into the northern provinces of Bac Ninh and Thai Nguyen and Ho Chi Minh City, manufacturing mobile phones, displays, battery and household electronic products. It is now Vietnam’s biggest exporter, shipping about $39.9 billion of electronics in 2016 and about 22.7 per cent of the country’s total shipments.
But why Vietnam? Perhaps the biggest factor in the country’s favor is its geography. Its border with China, a military flashpoint in the past, is now a competitive advantage. No other country is closer to the manufacturing heartland of China’s south, with connections by land and by sea. Samsung represents the first stage in Vietnam’s plan to take a slice of the manufacturing mantle held by China, which is losing makers of apparel, electronics and consumer goods because of soaring wages and costs. As Chinese wages rise, that makes Vietnam the obvious substitute for companies moving to lower-cost production hubs, especially if they want to maintain links with China’s well-stocked supply chains.
A relatively young population added to Vietnam’s appeal. Many other countries also boast young workforces, but few have had as effective policies as Vietnam. Since the early 1990s, the government has been very open to international trade and investment. “Largely engaged in the textile and garment industry, which is labor-intensive, foreign investors have been pouring investment into Vietnam because of cheap labor costs, preferential incentives from the government and more than a little love for Vietnamese culture,” Mr. HyunWoo Bang, Vice President of Samsung Vietnam, told VET.
And Vietnam’s workforce is not just young but also skilled. “Compared with the 24 countries that Samsung has research and development (R&D) centers in, Vietnam’s workforce ranks extremely highly in terms of potential and skills,” Mr. Bang said. Public spending on education is about 6.3 per cent of GDP, two percentage points higher than the average for low- and middle-income countries. Though some governments spend even more, Vietnam’s outlay has been focused, aiming to boost enrolment levels and ensure minimum standards.
Vietnam’s solid growth over the years has also given foreign companies the confidence to build their factories here. The country already has a strong, often underappreciated record. Since 1990, GDP per-capita growth has averaged nearly 6 per cent, second only to China. Thirty-one years of political and economic reforms have transformed the country from one of the poorest, with a per capita income of about $100, to lower-middle income status in just a quarter of a century, with a per capita income of about $2,100 as at the end of 2015.
Over 70 per cent of members of the American Chamber of Commerce (AmCham) in Vietnam believe its business environment is improving, even in the face of global headwinds and economic challenges, while the European Chamber of Commerce (EuroCham) has acknowledged the new government’s efforts to further improve the business environment and increase Vie