Be Careful: Vietnam Has Hidden Worries About Investment, And Localization Is The Key To Success.

The US China trade war accelerates foreign investment in Vietnam, and raises the cost of local labor and land acquisition. The analysis of Taiwan businessmen who has invested in Taiwan for many years shows that in addition to cost factors, labor supply and demand and cultural estrangement are also hidden worries. "Localization" is the key to success in business management.

With the increase of wages, land prices and stringent environmental protection requirements, many Taiwanese businessmen have already moved to Vietnam. After the explosion of the US China trade war, Vietnam and many countries have signed free trade agreements. They have the advantage of reducing tariffs and set off a new wave of investment boom.

However, Vietnam is no longer the same as before. It is no longer the virgin land. Wages and land prices soar. Some of the Vietnamese workers have poor adaptability in Taiwan enterprises. Many strikes and the exclusion of Chinese factories during the construction of Ha Tinh steel mill in Vietnam are still fresh.

The textile and garment industry is one of the main industries for Taiwanese businessmen to invest in Vietnam. Zhou Liping, chairman of poly garment industry, said that the tariff pressure of the US China trade war has increased the industry that we want to invest in Vietnam, especially from the mainland of China. Vietnam has a good location and high labor standards, and the Vietnamese government has signed preferential policies with many other countries to attract foreign investment into factories.

But after years of investment in Vietnam, Zhou Liping sniffed the hidden troubles of Vietnam's rapid rise in costs. He pointed out that Vietnam is the most productive region in the short term, accounting for 37%, Indonesia 33%, Kampuchea 20%, and the rest of Africa and Mainland China. The annual total capacity growth of poly Yang is 10%, but Vietnam will remain at 5%, and growth will slow down. Indonesia will be the main area of capacity growth in the future.

According to the polyyang research team, Vietnam's basic wage rose by 10% to 15% in 2016, rising 7% to 9% in the past two years. It is estimated that the industry will enter Vietnam to invest and set up factories under the factors of Sino US trade war, and the basic wage increase in 2020 may be even higher.

The research team pointed out that the average monthly salary in Vietnam is about 150 US dollars to 180 US dollars, but the monthly salary of Yang Yang payment including overtime and insurance premiums is about 300 US dollars to 360 US dollars, although it is only half of the mainland labor wages, but the annual wage increase rate of 10% will soon catch up with the wage level in the mainland of China. As the mainland of China is preparing for a wage rise in 2009, many factories are moving to Vietnam.

Luo Renjie, chief financial officer of cloth and clothing factory, also pointed out that the Vietnamese government has raised the basic wage 6% to 10% every year in recent years. If we want to strive for better quality workers, the salary scale will be increased by at least 5% than the government regulations, and the social insurance and the deposit should be paid. As for the price of plant land, it has risen from about $10 per square meter to more than 80 dollars to 100 dollars a decade ago.

Zhou Liping analyzed that the textile and garment industry used more manpower, and Vietnam seemed overheated. It was foreseen that there would be a shortage of labour and labour in the future, which was very unfavorable to the development of the garment industry. The quality of staff would decline if manpower demand was greater than supply, but land prices, factories, logistics, labor wages and prices were rising. It is estimated that the growth rate and scale of the future would be slowed down, so it would be better to consider increasing the layout of Indonesia or Kampuchea.

Li Li group, which mainly produces and processes silk and weaving fabrics, also wanted to set up factories in Vietnam to supply fabrics to downstream garment factories. Chen Hanqing, deputy general manager of Lili group, analyzed that the Vietnamese and Korean electronics factories and machine tool operators were stationed in South Vietnam, and their salaries were better than those of the textile industry. The labor intensive textile industry went to South Vietnam to set up factories, which would face the difficulties of high cost and difficult employment.

Li Li group also visited China and Vietnam. Chen Hanqing said that land and labor in China and Vietnam are relatively cheap, but there is no textile industry settlement. The delivery of products depends on trains or sea freight. The speed of trains is very slow, the port hinterland is small, and the congenital conditions are not suitable.

Taiwan's shoe making industry has been in Vietnam for over 20 years. The shoe factory, Fengtai enterprise, has set up factories in Vietnam since 1996, and is now the largest production base of Fengtai, accounting for 52% of the total shipment volume of the group. The factory director of Fengtai Vietnam factory is not Tai Chi but Vietnamese. This is the concrete realization of reusing local people, concentric force and localization.

Fengtai, who has ploughed Vietnam for more than 20 years, said that no matter the factories in Taiwan or the factories in mainland China, Vietnam, India and Indonesia all need to strive for deep ploughing. In order to successfully lead labor to contribute to the company, only one step of land management and integration into local culture can be carried out.

Fung Tai pointed out that the Vietnamese factories once offered labor meals and wages to the local price fluctuation too much, and the salaries would also be periodically assessed, and timely salary increase would help to take care of the basic life of the workers and enhance their centripetal force toward the company.

It is also the Baocheng industry of the sports shoes foundry. In order to avoid the excessive concentration of production lines in the mainland of China, the Vietnamese production base was established as early as 1994. In the face of the US and China trade war factories, Vietnam's factories have been set up to drive the cost of labor in Vietnam to rise. As far as Baocheng is concerned, compared with the manufacturing environment 20 years ago, the land construction cost and labor cost of Vietnam, including Mainland China and Indonesia, continue to increase.

Although labor and land costs continue to increase, Baocheng stresses that transnational operations will face more complex variables and challenges, and must understand and familiarity with local laws and regulations to overcome the barriers of language and culture. Through long-term running in and learning growth, Baocheng has established a management mode suitable for local operation, and also invested in establishing green building kindergarten area in Vietnam.

Compared with the continuous deepening of the production of shoes and textile industry, the science and technology plant has different attitudes, and more overall industry supply chain considerations.

In 2007, Ren Bao, a large foundries of notebook computers, went to Vietnam to build factories. After that, it was idle for many years because of the obvious fall in local labor conditions and demand. This time, due to the Sino US trade war, the tariff of mainland China exported to the United States greatly increased. In the second half of 2018, Ren Bao immediately restarted the Vietnam plant, produced the Netcom products, took the responsibility of selling the United States, and achieved good results. In the United States, after incorporating the pen into the tariff list, Ren Bao's regulatory plan will be shipped to Vietnam next year.

Some Taiwanese businessmen believe that the overall situation of Vietnam is still suitable for new investment. After all, Vietnam's economy takes off slowly and allows for new investment. In addition, the rule of law in Southeast Asian countries is still improving. The rule of man is still heavy. Many manufacturers have "invisible costs" to spend.

Those who invest in Vietnam for many years suggest that they should be familiar with local laws and regulations, establish a smooth communication channel with employees, and establish a suitable management mode in order to avoid conflicts caused by cultural barriers or different concepts and affect the normal operation of enterprises.