Promises and pitfalls with investing in Vietnam – Sunday Business Post/RTÉ World Report

James Galvin and developer Chau Luu work on Cork Jazz festival iPhone app (Photo: Simon Roughneen)

By Simon Roughneen in Ho Chi Minh City. By the end of 2012 James Galvin hopes to employ 150 staff at Glandore Systems’ Vietnam operation. This will almost double the current 90 web developers working at the company’s office, a 40 minute drive from the centre of Ho Chi Minh City through frenetic motorcycle-addled traffic.

With headquarters in Cork, the company’s operation in the city known informally as Saigon focuses on software development, including iPad/iPhone applications. Part of the attraction is Vietnam’s low salary structure, with an experienced developer paid US$600 month at Glandore – above the local average according to James Galvin. “Unlike most European-based software operations, we can maintain enough staff to be able to to respond quickly to new opportunities and avoid being overstretched”, he added.

Speaking last week at the Ireland-Southeast Asia Business Seminar, Nguyen Trung Tin of the Ho Chi Minh City People’s Committee said that the trade and investment relationship between Ireland and Vietnam is low, when weighed against the potential links between the two countries. In Ho Chi Minh City, which attracts roughly 20% of the total foreign investment into Vietnam, the city authorities say that there are over 3900 such projects. In October 2010 Intel opened a new plant on the city’s outskirts, the largest Intel facility anywhere and a high-profile reminder of the country’s emergence as an investment target for multinationals.

Opening the seminar, Maeve Collins, Ireland’s Ambassador to Vietnam, said that Irish exports to the BRIC (Brazil, India, Russia and China) grouping had increased 12% over the past year, despite the economic crisis in Ireland. Analysts see this as reminiscent of the early ‘Celtic Tiger’ years, when exports drove Irish growth, prior to the ultimately-ruinous property bubble.

Maeve Collins, Ireland's Ambassador to Vietnam opens the Ireland-Southeast Asia business seminar (PhotoL Simon Roughneen)

With an 86 million population, Vietnam could in time join the ranks of these large-population, middle-income countries – a market as well as an investment destination in other words. According to World Bank statistics, Vietnam’s economy has grown at an average of 6% per annum since 2000. In 1986 the ruling Communist Party of Vietnam implemented what they called doi moi, a form of economic liberalisation similar to the post-Deng reforms in China. Doi moi eventually paved the way for large-scale foreign investment, with much of this coming after the normalisation of relations with the United States in 1995. As of 2010, Vietnam is just-about a middle income country, with average gross national income of US$1010 per head.

However this is well below other middle-income countries in the region, such as Malaysia and Thailand, and Vietnam’s potential is not without pitfalls. Year on year, consumer prices are up 18%, adding to concerns about inflation, but the Government appears reluctant to counter this as it aggressively pursues growth.

In a one party state that brooks no challenge to Communist Party rule, accountability remains a problem. Foreign investors in state-owned shipbuilder Vinashin say they are owed US$600million, after the company falsely-reported its losses to the Vietnamese Government, while amassing over US$4billion in debts. Dr Le Dang Doanh cited the controversy as a reminder that – despite the attractions of Vietnam as a low wage, low cost hub – “a lack of transparency and openness means that we have to ask, what else is in the pipeline?’

Delegates at the seminar (Photo: Simon Roughneen)

Assistance is available for Irish companies looking at options in Vietnam or elsewhere in southeast Asia. With a total population of around 600 million, southeast Asia is a diverse region encompassing a tiny but wealthy city-state in Singapore, the world’s fourth biggest country in Indonesia, and resource-rich but opaquely-ruled Burma, to cite three examples. Enterprise Ireland funded 50% of Glandore System’s initial 2008 investment in Vietnam, and James Galvin sai that the advice and assistance provided by agency’s Kuala Lumpur office was invaluable. “Foreigners could easily have a difficult time with the bureaucracy here otherwise”, he added.

This article was supported by the Simon Cumbers Media Fund. Roughneen was in Saigon in mid-May.


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2 comments to “Promises and pitfalls with investing in Vietnam – Sunday Business Post/RTÉ World Report”
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