UKTI Event – Business Opportunities in Vietnam

I was speaking last week (Thursday 19th February) at the British Government’s UKTI event about investing in Vietnam during the economic downturn. My colleagues on the speaker’s table were Tim Brownbill, Head of UKTI in Ho Chi Minh City, Vietnam, and David Morton, deputy CEO of HSBC in Vietnam.

I thought it was an extremely positive event and I wanted to use my blog to share with you some of the key points that were discussed. There are also some video clips available (below) of myself and the other speakers being interviewed on the Vietnam opportunity.

Business owners, directors and managers from firms as diverse as boat builders, infrastructure engineers, software developers and bra manufacturers came to the event. Tim Brownbill of UKTI opened the session. As the Counsel General in Ho Chi Minh City and Director of UKTI in the region, he provided a clear overview of the current economic climate and emphasised one major competitive advantage that Vietnam boasts, its population size. At 86,000,000 and growing rapidly the Vietnamese economy requires the creation of 1,000,000 new jobs a year to sustain its people; more of this from me later.

I began my presentation by outlining that the Harvey Nash plc choice of Vietnam as an outsourcing hub nine years ago was a major strategic decision in our company’s history. It was not without risk, but the decision has really paid off. During our time there, Vietnam has become the fastest growing outsourcing hub in the World and has changed beyond recognition.

A key element behind the Harvey Nash decision to locate in Vietnam was its strategic geographic location within the South East Asian growth markets, as well as its service provision to the rest of the World. In the last three years we’ve seen a very positive shift in the growth of trade within the South East Asian region itself for Vietnamese goods and services. Trade with its neighbours has grown from less than 10 per cent of GDP in 2005 to over 30 per cent today.

For us, recognition from the World Bank of the business opportunity in Vietnam has been a welcome and reassuring sign continues to move in the right direction. It is becoming an easier place to do business and this point was reinforced to me by the Japanese Ambassador recently while I was on a flight with him. He used a great anecdote and finished it with a memorable phrase: “when the Vietnamese say they’re going to do something, they do it”. I wholeheartedly agreed because the dependability of all our people in Vietnam is something that I see every time I am there.

PwC has also been operating in Vietnam for some time and a recent report by them placed Vietnam at #1 in a list of developing countries to do business with. They felt Vietnam offered the greatest balance of risk and reward in the ASEAN region.

I agreed with Tim Brownbill of UKTI that Vietnam’s people are the key to its success. It is the size of the population that gives Vietnam its economic power, but it is the talent and skills of the Vietnamese people who add the extraordinary value as a business partner. Some very simple statistics that emphasise this for the work that Harvey Nash does in the country include:

• 80 per cent of all Vietnamese graduates take a science subject… great for creating a pipeline of software developers!
• Vietnam has a 20 per cent broadband Internet penetration, which is one of the highest in the region
• Vietnam has a 95 literacy rate, which is higher than most of the developed world!
• I am also especially proud that Vietnam is very good at mobilising the female workforce that makes up 52% of population, there are no glass ceilings, and in fact 80 per cent of the Harvey Nash management team in Vietnam is female.

A loyal workforce with low churn (less than 6% per year verses up to 30% from some of our Indian competitors) is another feature that many Western organisations will find appealing.

Challenges do exist of course. Middle management is an issue in such a young country, HR experience is lacking, but we have overcome this issue by bringing those skills into Vietnam while training local talent. Talent flows both ways from our investment in Vietnam!

Property is my single biggest challenge; it is not being built fast enough to cope with the level of growth. We are now opening our third office in the country and considering a range of new property options. So while there are challenges there is still huge opportunity for growth.

David Morton from HSBC has lived in Ho Chi Minh for two years and he agreed with me that Vietnam is a place you can very easily fall in love with. Despite admitting his presentation was a typical banker’s presentation, he filled it with anecdotes of the highs and lows of doing business in Vietnam. His presentation was frank and honest but you could clearly see the potential in the country from a financial services perspective.

Vietnam is a major investment hub for HSBC. They are the largest foreign bank in HSBC, with over 1,000 employees. HSBC is still positive about economic growth in Vietnam despite the global economic downturn.

Inflation will drop from 30% last year to 5% this year, this will support domestic consumption. Foreign Direct Investment is going up too, and if domestic growth increases in line with expectations, Vietnam will be in a great position going into 2010.

There has been an aggressive response from the Vietnamese Government in recent years to manage growth better, to encourage more local and regional investment. More Government spending is expected this year and credit liquidity is improving to support the ongoing attractiveness of the economy both regionally and internationally.

Vietnam is expected to be one of the big success stories of this recession. It is a low cost but highly skilled hub. As western countries shift production to lower cost destinations to cope with the global downturn they will likely increase capacity in Vietnam.

At the end of the event there were a large number of questions asked. I was pleasantly surprised by the intelligence with which they were asked and the research that people had clearly done on Vietnam before the event. I believe this is indicative of the level of interest in the country. With more and more events likes this happening across Europe, the United States and other developed countries, the future looks very bright for Vietnam.

Here are a couple of links to additional resources about Harvey Nash in Vietnam:

Vietnam: the Lotus blooms – an analysis of Vietnam’s economic attractiveness that was published in TCWorld magazine

Harvey Nash Safe Haven – a white paper by Harvey Nash on how Vietnam can be a safe haven in stormy economic times

February 23, 2009 02:15 PM | Permalink