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March 05, 2007
Vietnam as an alternative to China
Back in the mid-1990s, then-Taiwanese President Lee Teng-hui tried to steer local companies away from investing in China by encouraging them to look at Southeast Asia. The “Go South” strategy was a bit of a bust. Despite the best efforts of independence-minded Lee and his successor, President Chen Shui-bian, the pace of Taiwanese high-tech investment in China increased. Today, pretty much all Taiwanese computer companies make their desktops and notebooks in China, with Southeast Asia little more than an after thought.
But maybe there’s something to Go South after all. Taiwan’s biggest electronics company, Hon Hai, has announced plans to invest $1 billion in Vietnam. (See here for instance.) Now the Taiwanese press – citing a report from Vietnam’s state-controlled media – is saying that Hon Hai is thinking much bigger. According to these reports Hon Hai’s investment in Vietnamese factories will total $5 billion. This comes at a time when labor costs in China are rising and Hon Hai has had to deal with embarrassing publicity, in both the foreign and Chinese press about working conditions at its factories there. So far, most of the other big Taiwanese electronics companies have not followed Hon Hai’s lead. But a $5 billion investment is bound to attract the attention of other Taiwanese execs.
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The move of investment is depended on the investors for their long-terms and predictions in one labor market to another. The different factors also influence these investors's making decisions as well - stable political condition, human resource, material resources, transportation system, and the ROI - tax rates are different in countries. Taiwanesses are trying to escape China as their shingrila of money making machines. Now they switch to Vietnam. The GDP of China can be a little affected if $100 billion investment moes to the South.
Posted by: Mark at March 6, 2007 08:58 AM
Actually, the Tainwannese enterpriser are as ambitious as Americans, they invested in China just becasue as the low labour wages and same culture origin. After the exposure of extreme bad working condition by China press, they feel the mainland is not a heaven as they thought before, mainland is paying more attention on increasing low income populaiton's welfare, in other words the lower cost advantage in mainland will be losing as China going up.
Vietnam which also a yellow skin country, can be seen as the 90s of China, absolutely an ideal place for the extra money earn from China
Posted by: shawn zeng at March 6, 2007 08:55 PM