Lately, globalization has been a hot button among US manufacturing managers. While there is currently much debate about creating production centers in China to lower costs, I propose that you look past China. Although China does offer cheap labor and materials, quality control is still a major issue. In addition, while government crack-downs are improving, Intellectual Property Rights (IPR) violations can found in every major city and they are much more difficult to control in a country as large as China. Then there is also the high level of corruption: you may need to pay manufacturers just to maintain quality levels. What manager wants to worry about these issues? There are two other Asian countries that also offer cheaper labor solutions, without as many IPR and corruption headaches. One of these countries is Vietnam, specifically Ho Chi Minh City. Known as the “Pearl of the Orient”, this city is growing at a rapid rate and it desires to “become a hub of industry, services, science and technology in Southeast Asia” according to city officials. Vietnam has the fastest growing economy in Southeast Asia, with a recorded growth of 8.4% in 2005 and a GDP growth of almost 50% over the last 5 years.
The opening of the Vietnamese economy, through accession to the World Trade Organization (WTO), will create extensive opportunities for US companies. WTO accession requires the Vietnamese government to promote transparency and eliminate corrupt practices in its effort to participate in the global rules-based system, effectively reducing your investment risk. Some people might argue that Vietnam is even more corrupt than China, but this is incorrect – Vietnam is a smaller country, less isolated from the West, and is taking the WTO much more seriously than China. In addition, Vietnam has finalized intellectual property regulations and legislation that is concurrent with the TRIPs (Trade and Related aspects of Intellectual Property Rights) agreement administered by the WTO – thereby safeguarding foreign companies from IP violations. These are only some of the implications of Vietnam’s accession to the WTO that could tremendously benefit your organization.
Another country that is receiving increased Foreign Direct Investment is Thailand. As a creation of the Thai Ministry of Commerce, the Department of Export Promotion (DEP) plays an essential role in the promotion of international trade with Thailand. The DEP seeks to boost exports in an effort to grow their national economy. To achieve its goals, the DEP is focused on developing the country’s core competencies to add value to locally produced goods and services. Additionally, the application of new approaches to international trade including the DEP’s 53 Overseas Trade Promotion Offices, have facilitated the growth of Thailand’s international trading network.
What could the DEP’s strategy mean for your company? First, by employing superior technology in manufacturing, product quality levels will increase. Global sourcing for raw materials, machinery, and other inputs will allow the maintenance of competitive production costs. Thai manufacturers will receive assistance from the DEP to raise product quality to international standards. And the elimination of trade barriers through numerous free trade agreements is streamlining all business activities. These are just few of the benefits arising from trade in Thailand.
While there are benefits to producing and sourcing in China, it is important to evaluate other viable alternatives. Vietnam and Thailand offer many benefits to foreign manufacturers and welcome foreign direct investment.
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For additional information, contact Kelly Kasic, President of GLOBAL ID, LLC. – a Management Consulting and International Market Research Company. http://www.identifyglobal.com/ (720) 334-6982
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