Factories are Booming in Vietnam
Amata Vietnam Bien Hoa Industrial Estate Epitomizes Vietnam Boom
- Source: The Amata Times
Vietnam is among the world's most dynamic economies these days, growing by 7.5% a year over the past five years thanks in part to surging foreign direct investment. One of the epicenters of the boom is Amata City, Bien Hoa, the industrial estate near Ho Chi Minh City, whose sales grew by 186% in 2005. Amata hosts companies from all over Asia, Europe and America that are benefiting from Vietnam's new strengths.
|"For the past 10 years, foreign and local investors have looked forward to Vietnam fulfilling its high potential. Now it is really happening, due to many factors, including the government's efforts to reform laws and regulations as a step toward joining the World Trade Organization," said Dr. Huynh Ngoc Phien, president of Amata Vietnam.
The new Enterprise Law, for example, has helped create 200,000 new private companies over the past five years, while other pro-business measures include revisions to the Civil Code, Commercial Law and other laws regulating bankruptcy, competition, commercial arbitration, import/export duties, intellectual property, and the stock market.
Other investment attractions include Vietnam's low costs, highly motivated workforce, strategic location, and security. Retail sales have been growing at annual rates near 15% over the past five years, creating a bigger domestic market. With all these in mind, foreign direct investors have poured in sums ranging from US$4.3 to US$5.8 billion a year during the past two years, according to Vietnam Investment Review.
Like Thailand, Vietnam is proving to be a good alterative to China for many investors, thanks to lower costs and fewer problems with intellectual property rights infringement, according to Phien. "Korean Chamber of Commerce officials, for example, tell me that among Korean companies investing overseas, some 60% of their projects in Vietnam are profitable, compared to just 10% in China," he said.
Vietnam's workforce is young; some 62% of the populace is below the age of 30. "Investors often tell me their training costs in Vietnam are lower than expected. The reason is that these young Vietnamese workers are highly motivated to learn. Most have completed secondary school or entered university, so they have the proper background to study effectively," said Phien, who long served as advisor to the company before becoming its president in 2005. Prior to joining Amata, Phien was a professor of mathematics and computer science at the Asian Institute of Technology (AIT) in Bangkok, holding the position of dean for six years.
The new factories being built in Vietnam are increasingly sophisticated. At Amata's park, the tech-related investors include companies like Ritek of Taiwan, a world-leading maker of optical disks, and Japan's NOK, a leading auto parts maker.
Tech investors choose Amata City, Bien Hoa for strengths like infrastructure. "Our power, water and waste treatment services are the best of any industrial estate in Vietnam. Amata's roads are as solid as the runway of Ho Chi Minh City's international airport," Phien said. Investors purchased some 45 hectares of factory land at Amata Vietnam last year, and also leased many ready-built factories, increasing the year's sales to US$13.86 million.
Dr. Phien of Amata Vietnam The Bien Hoa location, too, is advantageous, near Ho Chi Minh City in Dong Nai province, the leading destination for foreign factories. Amata Vietnam has the only industrial park near Bien Hoa City with an ample supply of land. "Factories find it is easier to recruit employees there. Many young workers migrate from rural or semi-rural areas in the northern or central provinces, so Bien Hoa's urban lifestyle appeals to them. The city has good transportation and other services," Phien said.
Amata Vietnam has been able to lower its costs while raising standards for facilities and services beyond other industrial parks in Vietnam, Phien said. Excellent local connections and long experience help Amata source goods and services at the most competitive rates. "For construction work installing rental factories and infrastructure like roads, we call for tenders, so we set a verv sood strong reputation has helped it reduce spending on marketing. "We already have a good image, so we don't have to invest in promotion." Phien has worked to improve customer satisfaction and sales by offering more flexible payment terms. "Giving people several options is better.
Potential customers feel they have something to gain by talking to us, so they don't walk away." To increase cash flow, Amata began offering better prices in return for faster payment, an arrangement that is appreciated by such clients as Japanese companies, which often allocate all needed funds from the beginning of a project.
Meeting the needs of existing customers is a priority for Phien and his team. "We have always helped clients with repairs, permits, construction work and introductions to suppliers and officials. Now we work even harder at that, and do more to communicate effectively about our follow up, rather than simply taking care of a problem quietly, which is the usual approach in Vietnam," Phien said. He added that while there is still room for improvement, Amata's responsiveness has helped turn more and more clients into "ambassadors" for the firm, leading to new business. "Our customers' recommendations speak much more persuasively than our own sales pitch ever can, so we do everything needed to win their esteem."
Within the firm itself, Phien has tried to build teamwork and commitment. This year the firm will implement a "Success Fee" system that will reward staff performance with profit-sharing. He guarantees staff that all their ideas for projects and improvements will be carefully considered. "It's an open system, and they can contribute whatever they think is good for the company. If their proposal is not adopted, we owe them an explanation. Our team is coming up with some initiatives that I believe will help our shareholders and clients."
Amata Vietnam looks toward two new sources of growth in the future. Amata City, Bien Hoa will develop a 21-hectares commercial plaza with a hotel, serviced apartments, golf course, health club, cinema, restaurants and medical center. The Vietnamese government has promised Amata land to develop a major new industrial estate. To be called Amata Express City, it will be the company's second estate in Dong Nai province, with 3,000 hectares close to the new airport planned for completion after 2010. Phien expects the airport will attract factories there as seen in Thailand around Suvarnabhumi Airport.
Copyright, 2006 � Runckel & Associates