To date, multinationals operating in various industries such as automobile, hi-tech, retail, electronics and consumer goods production have set up shop in Vietnam, seeing the country as a large market with more than 86 million people as well as a good base for export production. Big names like Toyota, Honda, Mercedes-Benz, Intel, PepsiCo, Coca-Cola, P&G, Metro Cash & Carry and Unilever, are all present here. They have contributed large revenue to the national budget, brought modern technologies and created jobs for locals. They have also helped change the local economic structure from agriculture to industry.
Large revenue
A typical example is investment by Japanese firms Toyota and Honda in the northern province of Vinh Phuc. Their investment has helped change the agriculture-based province into one of the seven localities with the largest industrial production in Vietnam. Last year, Vinh Phuc became one of the top five provinces having the largest tax revenue in the country with more than VND10 trillion. The tax revenue paid by Toyota Vietnam alone made up nearly 65% of the total, with US$304 million.
Motorbike maker Honda has also contributed a large share to the local budget. Its market share in Vietnam in 2009 was more than 60%, behind only that in China, India and Indonesia. Encouraged by the success, Honda Vietnam has announced further investment of US$70 million to increase motorbike production to 2 million units a year to meet rising market demand, especially for scooters. Since beginning operation in Vietnam in 1994, the company has turned out more than 7 million bikes and its total investment has amounted to some US$423 million.
German automaker Mercedes-Benz Vietnam is also a big taxpayer in HCM City. Over the past three years, the company has paid an average VND500 billion annually to the local budget. Last year, the tax payment reached VND1.4 trillion, putting the company on the list of the top 10 taxpayers in the city.
Another German investor, Metro Cash & Carry, has seen Vietnam as a potential market and has been keen on expanding operation here. The company has so far set up nine large wholesale centers in big cities around the country and is planning more in other localities.
Besides the local market, multinationals also seek to export products made in Vietnam. In the middle of this year, Unilever Vietnam opened a household detergent factory with designed capacity of 180,000 tons per year in Tay Bac Cu Chi Industrial Zone, HCM City. The facility will export a large part of its output to 12 markets; among them are New Zealand, Australia, Hong Kong and Taiwan. Unilever has so far invested a total of more than US$60 million in its factory complex in the industrial zone. The factories, which employ 1,300 workers, have cooperated with 85 local material suppliers and service providers to produce a wide range of consumer goods such as detergent, shampoo, instant tea, food seasoning and toothpaste.
Honda Vietnam and Toyota Vietnam also export part of their products to some regional countries. Meanwhile, Metro Cash & Carry has supported local farmers in producing clean, high-quality products for sale in its wholesale centers worldwide.
The multinationals have also attracted satellite companies to Vietnam to produce and supply parts for their production.
Hi-tech production
Most multinationals operating in hi-tech production like information technology and electronics see Vietnam as a safe investment destination with a hardworking labor force and a large market as well. According to experts, their commitment to hi-tech production has played a large part in promoting Vietnam as a destination in the global hi-tech production chain.
Last year, Samsung, the world’s second largest mobile phone maker, opened a factory in Yen Phong Industrial Zone in Bac Ninh Province. With investment capital of some US$1 billion, the facility has the most modern technology compared with six other Samsung’s phone factories in the world. It will produce all categories of mobile phones, from low-end to high-end, with more than 90% of output for export. “Samsung aims to be the world’s number-one mobile phone maker. The Vietnam factory plays an important role in helping achieve this goal,” said Choi Gee-Sung, Samsung Electronics chairman. He said this year, the factory is expected to boost production by fourfold to some six million products per month and its labor force should increase to 10,000 workers. Upon full operation in 2012, the factory will turn out some 100 million products per year. For this year, the export target is nearly US$5 billion, putting Samsung on the list of the top exporters in Vietnam.
Samsung’s long-term investment in Vietnam has attracted many satellite companies of the group who have come here to produce parts to supply its production. In the long term, they will form a network of part suppliers for the IT and telecom industries in Vietnam, thus contributing to the development of the supporting industries.
Another hi-tech producer, Japanese electronics company Canon, has also made the same effort. Canon has invested in laser and color printer production in Thang Long Industrial Zone in Hanoi and Que Vo Industrial Zone in Bac Ninh Province. Canon satellite companies have also followed suit, coming here to make parts for the production, forming a supporting industry for the electronics industry in Vietnam.
Some years ago, U.S. chip giant Intel made headlines in the international media when it decided to invest US$1 billion in a chip assembly and testing plant in HCM City. Despite the global economic recession, the project has been progressing on schedule. Intel has also trained quality human resources to prepare for the operation of the plant, scheduled for October this year. The plant in Saigon Hi-tech Park, Intel’s seventh facility in the world, is expected to support the chip giant’s operations in Southeast Asia. It will also supply products for Intel’s global market, including big multinationals such as Dell, HP and Lenovo, original equipment manufacturers (OEM) and related customers.
The Intel project has attracted many material and part suppliers as well as service providers to Vietnam. Many leading Japanese companies have closely watched the development of the hi-tech industry in Vietnam and have chosen the country to set up shop. A typical investor is Nidec Corp., the leading producer of hard disk drives and motors for computers. The company has just received the license for investment in a US$70-million project to produce high-precision compact motors and motor parts. The Nidec Copal Precision Vietnam (NCPV) is the company’s fourth and also most capital-intensive investment project in Vietnam. Shinji Kondo, general director of NCPV, said the company has received many orders and is preparing for operation in April next year. The project will turn out high-precision motors for digital equipment like cameras, mobile phones, laptops, printers, hard disk drives and blu-ray drives. It is expected to generate annual export revenue of US$60 million in the first two years of operation and US$120 million later.
With this project, Nidec has increased its total investment in Vietnam to US$190 million as part of its commitment to pouring US$500 million into the hi-tech industry within the first five years of operation.
According to experts, other hi-tech multinationals like Foxconn, Teco and Compal will resume investment in capital-intensive hi-tech projects in Vietnam as soon as the global economy is out of the doldrums. Foreign investors still see Vietnam as an attractive destination due to high economic growth, low production cost, a stable labor force, strong growth potential and government support. However, the country should increase investment in infrastructure development and human resources to meet their demand.
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