 |
Dr. Nguyen Thien Nhan, Vice
Chairman of HCMC People’s Committee, pushes
the high-tech
industry. |
| Courtesy HCMC People’s
Committee |
 |
| Upward trend: HCMC has weathered
the Asian financial crisis unscathed. |
| Courtesy Saigon Hi-Tech
Park |
More than elsewhere, investing in Vietnam can be
a question of location, location, location. Regional
governments have gained significant authority and
are using it. Not surprisingly, the business climate
differs widely from province to province.
The growth clusters are clearly demarcated around
Ho Chi Minh City and Hanoi. While it is unfair to
blame less stellar performance on provincial governments
alone – geography, natural resource endowment
and other unalterable factors play a role as well
– good governance is becoming more and more a
factor in attracting foreign direct investment (FDI).
One of the top business stories in the near future,
says Fred Burke, an attorney with years of experience
in Vietnam at Baker & McKenzie, is that an investor
can almost bypass the central government and deal
almost exclusively with provincial authorities. The
only fear, he adds, is that this could turn into a
race to the bottom.
At the moment, it seems more like a race to the top.
Since tax incentive policies remain the domain of
the central state, provinces cannot lure investors
with rock-bottom tax rates or overly generous financial
offers. Low or free land lease is as far as a province
can go with handouts. For the rest of the bidding,
quality service has to replace cash offerings.
It is a frequent occurrence that one can spot the
provincial border line when all of a sudden the country
road turns into a four-lane highway with a median
and traffic lights. In most cases, an industrial park
will show up along the road soon. You have entered
a province that is all business.
Aside from the hardware of attracting FDI, there is
the software as well. How long does it take to get
a license? In most cases, if an investor locates within
an industrial park, the government has set up an office
right there, and applications can get processed within
a day or a week, but certainly not weeks or months,
as used to be the case in the early days after Vietnam
opened its doors to FDI.
Bui Manh Lan, general director of Hung Thinh Joint
Stock Company, which owns one of the many business
parks in Binh Duong province just outside Ho Chi Minh
City, says that if a province treats investors well,
they will not only come, but tell others, their subcontractors
or friends on the golf course, about it. Binh Duong,
Lan says, “has made a breakthrough in administrative
reform.” The government guarantees that license
applications are handled within three days.
Binh Duong is part of the growth region surrounding
Vietnam’s economic hub, Ho Chi Minh City, and
benefits from its attraction to investors.
The city has been the engine of exports, FDI and progressive
policies for attracting foreign companies. While others
have copied the former Saigon’s policies, the
city remains the king of FDI and export trade in the
country by a long shot.
So far, deals worth $5.5 billion of FDI have been
signed or committed in Ho Chi Minh City, out of a
total of $38 billion in the entire country. From January
to April 2003, exports from Ho Chi Minh City companies
to the world totaled $2.4 billion, although April
was a slow month due to the aftereffects of SARS in
the region.
Ho Chi Minh City has gone the extra mile, investing
in telecom infrastructure, education and technology
incubators, while going on expensive trade missions
to make sure the world learns about these improvements.
Dr. Nguyen Thien Nhan is the vice chairman of the
city’s People’s Committee, roughly the equivalent
of a vice mayor. Nhan is widely credited with being
the driver behind the push towards high-end technology
industries. He says that when the city realized that
some of its economic drivers, such as food processing,
suddenly lost steam, while foreign-invested companies
moved along better than ever, he realized that low
productivity had caught up with Ho Chi Minh City.
Productivity is generally not perceived as a problem
due to extremely low labor and land costs, but in
the city, both are going up, in the case of land dramatically
so. Nhan drew the conclusion that in order to stay
competitive, the city needed to invest in technology
and the associated labor skills.
Ho Chi Minh City has five universities, but still,
the city sends 300 students overseas on its own
budget for Master’s and doctoral programs.
“This time we will not wait for a scholarship
program,” Nhan says in perfect English. “Fifteen
students have already gone to the United States
and Australia. This program will create a new generation
of city managers.”
Technology incubators
The second aspect of the innovation program for the
country’s commercial capital is the Saigon Hi-Tech
Park.
“We studied other countries, South Korea, Great
Britain, China, and found that hi-tech develops in
the vicinity of research facilities. We have five
universities in the city. What is needed is, one,
to create favorable conditions for workers and scientists,
two, a good infrastructure with good communication
links, and three, incentives to attract investors,”
Nhan says.
The park is designed as a technology incubator, where
companies whose work is certified as hi-tech get help
with turning their R&D into applications, which
they then manufacture in the park. In the case of
the Saigon Hi-Tech Park, Hewlett Packard has signed
up as an early partner, bringing in subcontractors
that will then deliver high-end parts to HP plants
worldwide.
Hi-tech is defined for the purposes of the park as
belonging to one of four sectors: microelectronics,
precision and automation, biotechnology and new materials
development, says Pham Chanh Truc, the president of
Saigon Hi-Tech Park.
The city has also built a software park, with financial
support for a feasibility study from the U.S. Agency
for International Development. So far, 47 companies
employ 2,000 people in the Quang Trung Software City
– after two years of operations. The hope is
that they will soon be joined by the first American
investor.
Ho Chi Minh City has the great natural advantage of
being an exciting metropolis where international managers
and software designers can while away their free time
without too much pain and suffering. This is an advantage
that remote provinces cannot duplicate. But even for
famous Saigon, it takes a lot of work to stay on top.
International investment is fickle, but so far, Vietnam’s
biggest city has offered what it takes to keep it
coming. |
