Five signs of Vietnam’s increasing global relevance

The AMCC Design Center

IT Giant Applied Micro Circuits Corporation opened a million-dollar design center last Tuesday in Ho Chin Minh City, its first overseas chip-design plant. Of several Asian countries which AMCC had been considering for the facility, Vietnam won out with its commitment to building a hi-tech workforce, ripe with skilled workers and world-class engineers. As a sign of long term faith, AMCC and Mentor Graphics, a U.S. software company, announced a grant to build hardware labs in Vietnam National University and Ho Chi Minh City University of Technology.

This state-run behemoth makes fully twenty percent of Vietnam’s garment exports. Now it will proffer US$500 million worth of bonds in its first overseas debt sale, according to its chairman, Le Quoc An. Deutsche Bank AG is in talks to arrange the bonds’ sale. The cash will be used to expand operations by building fiber-spinning textile factories. A successful offering will be a signal for other state companies to facilitate growth through foreign financing.

Retail monopolies rush to expand before foreign giants arrive

According to its membership commitment with the WTO, Vietnam must open its retail market beginning in 2009. Foreign consensus views Vietnam retail as the nation’s most attractive market, considering its significant young population and growing disposable income. In fact, Vietnam is fourth on the 2007 Global Retail Development Index (GRDI), behind India, Russia, and China.

As a result, foreign retail giants such as Carrefour and Wal-Mart are poised to step in and start grabbing market share. A slew of new outlets belonging to Vietnam’s top retail companies, Co.op Mart, Satra, Phu Tai and Hapro, are investing a combined sum well in excess of US$100 million to fund the expansion. Whether they can compete or not, the commitment of cash, as well as concomitant construction and job growth, bode well for a healthy Vietnamese economy.

Vietnam-Japan wire plant confirms Japan’s key economic partner status

Vietnam Investment and Development Group, along with Sumitomo Wiring System, signed an agreement March 19 committing US$90 million to building an electronic wire plant. Although significant, NA Chairman Nguyen Phu Trong called the sum modest compared with the potential for bilateral trade and investment.

The upcoming Vietnam-Japan Economic Partner Agreement aims to realize Nguyen’s claim that Japan has been and will continue to be Vietnam’s number one economic partner. He also confirmed that Vietnam’s legislative body was pushing to reform the legal system to meet international practice and discourage corruption, and expects a surge in Japanese investment into Vietnam.

Chu Quang Thu, the former director of Vietnam’s National Shipping Lines, has made an urgent plea to build an international transshipment container terminal. The project has been delayed by construction of a steel mill in Van Phong’s economic zone, but respected economist Biu Kien Thanh warns of the mill’s potential negative impact on the environment, while asserting that a container terminal would help the zone transform into a commercial/financial hub.

Chu himself has dismissed proposals to build the terminal elsewhere, calling Van Phong the logistic solution to dependence on Hong Kong and Singapore for transshipping services. Currently, domestic shipping services transport only twenty percent of Vietnam’s imports and exports, costing the nation some US$3 billion per year and accounting for ten to fifteen percent of the costs on its goods’ value. The container terminal will play a significant role in increasing Vietnam’s international competitiveness.