Vietnam Is No Longer A Manufacturing Paradise Under The Economic Crisis.

Vietnam is not an investment paradise.

This year, affected by a series of economic crises, such as soaring prices and continued depreciation of the Vietnamese shield, manufacturing enterprises investing in Vietnam are suffering from an unprecedented strike wave and rising cost pressures.

Unbearable strike

Now in Vietnam, strikes are spreading around factories.

In the case of soaring prices, workers have been demanding wage increases in the form of strikes, and unstable people have repeatedly reduced factory productivity.

The Hong Kong capital Huajian group is an enterprise that manufactures footwear in Dongguan. As early as 2003, it invested in a shoe processing plant in Vietnam's Haiphong city.

A worker in Vietnam, a manager of Huajian, told reporters: "now workers are always on strike. It has become habitual action."

He reflected that in May 2008, 8000 workers in the footwear industry in Haiphong city had been on strike for a week, and the factory shutdown was a major loss.

Finally, the factory increased wages by 150 yuan per month to quell the strike, but eventually it lost more than 2000 workers.

In a strike in April this year, the shoe industry lost more than 600 workers.

In desperation, the footwear industry has started to turn to Thailand to explore the investment environment.

"After this vigorous shoe strike, factories around it have also increased wages due to pressure, otherwise workers in other factories will also make trouble."

The manager told reporters that in May, their factories also raised wages to 50~60 yuan per month for workers, but he estimated that they would continue to rise.

Last year, the factory increased its wages by 25 yuan per month.

The reason is mainly because Vietnam's prices have risen too fast, and the inflation rate of Vietnam in May 2008 has reached 25%, resulting in a sharp decline in the living standard of the Vietnamese people.

At the same time, the tight labor in factories also aggravated the strike because workers were not worried about not finding jobs.

A person who opened a factory in Vietnam said that the employment was rather troublesome and the workers were losing all the time. The first thing that the factory management met to ask was: "how is your factory, lack of workers?"

It is understood that the workers in Huajian Vietnam factory have also decreased from 700 last year to the current 450.

Waiting for a turnaround under "dead support"

In Vietnam, more and more people are beginning to feel disappointed.

At the end of 2007, Xiao General of Dongguan Jia Hao Hardware Products Co., Ltd. decided to go back to Dongguan. He sold the hardware factory that he invested in Vietnam for less than two years to a Chinese who lived there for more than 10 years.

He told reporters that the cost of opening a factory in Vietnam is not low.

Dongguan Jia Hao Hardware Products Co., Ltd. specializes in hardware accessories for furniture products.

"Our factory in Vietnam is located in Pingyang Province, which is equivalent to the Daling mountain in Dongguan. It is a concentrated area of furniture industry.

In 2006, China's furniture industry encountered anti-dumping in the United States, and 80% of the top 20 furniture enterprises invested in Dongguan's Daling mountain have set up production lines in Vietnam, and Vietnam has more shipments than Daling mountain, and we have entered Vietnam as a supporting enterprise.

Xiao Zong recalls.

But setting up factories in Vietnam is far more difficult than expected.

Jia Hao Hardware Products Co., Ltd. entered Vietnam, found that the local industry matching can not keep up with, for example, in Dongguan hardware and matching electroplating factory is very professional, but Vietnam's electroplating factory can not do their craft; and the original raw materials in Dongguan can be purchased from zinc alloy, all in Vietnam rely on imports, from China's container pport; in addition, the factory's skilled workers also have to take from Dongguan, Vietnam local workers can only do some elementary work.

Xiao Zong told reporters that when he first went to Vietnam to open a factory, the factory still had 30% gross profit, after deducting all kinds of operating expenses, the net profit was between 3% and 4%.

But by July 2007, he clearly felt that prices were rising and the cost of factories was rising.

In November 2007, he finally reluctantly sold the factory.

"Although we are only a small hardware factory of more than 100 people, we have lost about 300000 dollars in more than a year."

Xiao Zong reflected that when he first invested in Vietnam in early 2006, the monthly salary of the workers was 500 yuan, but it was already 850 yuan when he left at the end of 2007.

At present, the monthly salary of Vietnamese workers is almost the same as that of the mainland cities in China, between 900~1000 yuan, and the cost advantage is no longer there.

According to Xiao Zong analysis, in recent two or three years, many factories that he invested in Vietnam also lost money.

"Some enterprises also want to come back, but the fixed assets of factories must be connected with others.

Many enterprises are in a wait-and-see view of whether the Vietnamese government can survive the economic crisis.

But some people are optimistic.

Because factories invested in Vietnam are usually processed in the form of processing trade, raw materials procurement and markets are outside Vietnam, so this direct damage caused by Vietnam's economic crisis is not large, mainly due to the rising cost of inflation and the threat posed by instability in employment.

Economic analysts believe that if the shield keeps losing its value, investing in Vietnamese factories with us dollars may not be a bad thing for manufacturers.

On the one hand, the US dollar can be exchanged for more foreign guards to dissolve part of the inflation pressure; on the other hand, the depreciation of the shield will help improve Vietnam's export competitiveness.

The way out is blocked and the other side is sought.

However, the current economic environment in Vietnam still discourages investors.

At present, due to the change of RMB exchange rate and the implementation of the labor contract law, the cost of the PRD factories is increasing, resulting in the phenomenon of industrial pfer.

Many of Hong Kong funded and Taiwan funded enterprises have focused their attention on Southeast Asian countries, especially Vietnam, which is close to China.

But Vietnam's economic crisis is changing investor sentiment.

At the end of May 2008, the Dongguan Furniture Association organized a furniture business group to visit the investment environment in Vietnam.

Wei Tao, Deputy Secretary General of the association, told reporters: "this time we went to Vietnam, Hanoi and Hu Zhiming. We fully felt the situation of high inflation in Vietnam. Moreover, the local infrastructure was still relatively poor, and the furniture industry couldn't keep up with it, so the enterprises originally intended to invest have temporarily dismissed the idea."

Cheng Weilun, chairman of Dongguan Tian Ji timber company, also said that in March this year, his partner went to Vietnam to prepare for the pfer of some production lines, but because Vietnam's industrial chain couldn't keep up with it, the raw materials needed to set up factories there had to rely on imports, and the cost was too high.

Therefore, Cheng Wei Lun or turned to the mainland, is busy in Yunnan recently.

"At present, many enterprises in Dongguan have moved inland.

Several of my shoemaking friends went to Chenzhou, Hunan, Jiangxi and so on.

Xiao Zong reflects that most of these factories have opened a branch in the inland area and pferred part of the production lines.

After returning from Vietnam, he did not want to shift factories again. He chose to pform and upgrade his business in Dongguan.

"Before our company made only a single export hardware accessories, but now has developed new products to do domestic market, do domestic hardware fittings, and also intends to make hardware accessories on bathroom products.

The product will be rolled out with the mode of direct sales and distributors. At present, it is talking about cooperation with the home of the building materials supermarket.

Xiao Zong is very confident about this because he believes that the pfer is not a long-term solution, and that after pformation and upgrading, enterprises will gain more room for development.