180 Million Dollars! A Japanese Enterprise Plans To Invest In The Construction Of Yarn Factories In Vietnam.

Recently, Mr. Mitsuo Ohya, senior vice president of Toray Industries group in Japan, expressed his wish to build a yarn factory in Nam Dinh, Vietnam, to minister Chen Junying of Vietnam Ministry of industry and commerce.

Toray group is one of the largest textile groups in Japan. Currently, it operates in 26 countries in the world. Its revenue in 2017 was US $20 billion. Recently, Mr. Mitsuo Ohya, senior vice president of the group, met with Minister Chen Junying of Vietnam Ministry of Commerce and industry.

During the meeting, Mr. Mitsuo Ohya introduced the development of the group, and he expressed his hope to repair Nam Dinh in Vietnam. A yarn factory of about 20 billion yen (US $184 million 400 thousand) was built.

This will be the first production standard yarns in Vietnam, using the most advanced technology and putting forward a long-term investment plan in Vietnam.

Minister Chen Junying said that when the strategic cooperation between Vietnam and Japan has made many achievements, the visit of Mr. Mitsuo Ohya is of great significance.

On the other hand, the comprehensive and progressive trans Pacific Partnership Agreement (CPTPP), which came into effect at the end of 2018, has created tremendous opportunities for Vietnam's textile and garment industry, including foreign enterprises operating in Vietnam's textile industry.

In addition, the minister also said he would To build textile industrial parks in the coming period In order to promote the further development of textile and garment industry and strengthen environmental protection. It is reported that CPTPP will create a total of 500 million people, GDP total of more than 13 trillion and 500 billion U.S. dollars, accounting for a huge market of global GDP13%. CPTPP phased out 98% of tariffs on agricultural and industrial products, relaxed investment regulations and strengthened intellectual property protection.

The minister also affirmed that the Toray group will be one of the largest contribution to Vietnam's textile industry in the textile factories invested by foreign investors in Vietnam. It will provide raw materials that meet the requirements of production regulations in CPTPP and other free trade agreements (FTA) by improving their capabilities.

However, what investors should pay attention to is that although Vietnam is a hot spot for investment in Southeast Asia, we still need to pay attention to controlling investment risks and carefully selecting them.

Expanding reading: the next China, is it India or Vietnam?

Although India's per capita GDP in Vietnam is very close, the difference of economic development in urban landscape should be more than 10 years. For manufacturing, Vietnam is more likely to achieve expected output than India.

In 2017, India In the year of great heat, after the vigorous waste of money movement in November 2016, the GST tax reform was formally implemented in July 1, 2017, aiming at simplifying the tax system, promoting the unified domestic market and reducing the cost of trans state transportation. Almost all media call India's prime minister Modi "Deng Xiaoping of India". The waste tax and GST tax reform mean that India's reform and opening up has officially begun, and India is expected to copy the rapid growth period after China's reform and opening up.

and Vietnam? The rise of heat is mainly due to the difference of labor cost between China and Vietnam, and the sudden rise of Sino US trade war in 2018. Many enterprises began to consider the way of capacity relocation to avoid the promotion of tariffs and the rise of labor costs in recent years.

Of course, the labor gap actually exists, leading to the accelerated shift of the manpower intensive processing industry in recent years. With reference to the statutory minimum wage requirement, Vietnam's pay level still has a significant advantage.

From the perspective of population Pyramid, India is the most perfect triangle. As of 2015, the median age of China and India is 37, 30.4 and 26.7 respectively.

But from the perspective of the potential labor efficiency corresponding to the effective labor quality, Vietnam may be closer to China. The more intuitive reasons are mainly two points: the level of basic education and the equality of men and women.

After going to India in 2017, it was conscious of the strong competitive advantage of China, especially the nine year compulsory education formulated by the government and the national policy of equality between men and women after the liberation. This directly led to the "bonus of engineers" brought about by the effective labor force of secondary education and the popularization rate of universities after the reform and opening up.

In addition, Vietnamese official language is Vietnamese. At present, English is the compulsory first foreign language, and 4 foreign languages, such as Russian and Chinese, are listed as second foreign languages. In 2016, Vietnam's Ministry of education put forward a proposal for foreign language teaching. In 2020, it was proposed to incorporate Russian and Chinese into the 12 year basic national education course, becoming the first foreign language. From this point, Chinese enterprises will have more advantages in language communication and cultural management when they move to Vietnam. Chinese enterprises prefer to recruit Vietnamese local people who are graduating from Chinese schools when recruiting workers, so that they can facilitate communication and management. In addition, Vietnamese culture is closer to Chinese culture. We believe that similar culture helps to reproduce the productivity of domestic factories in terms of management output and corporate culture.

Another evidence for the effective labour force is the female labour force participation rate. India is significantly lower than China and Vietnam. According to our research feedback, India women, even with higher education, have a good job after graduating from university. They usually choose to be full-time mothers after having children after marriage. Although there is no law, the Convention is so. In the process of investigation, we can also feel that in the service industries, such as catering and retail, which can best sense the labor force, there are fewer women in India, while the proportion of women in Vietnam is very similar to that in Chinese streets.

Moreover, the Vietnamese people's overall desire for a happy life is higher than most of the Southeast Asian regions, and also significantly higher than that of India. And in social culture, more work and more ideas are more common. Vietnamese factory workers' willingness to work is close to domestic workers, and they are willing to improve their work efficiency to get higher pay.

In terms of the overall quality of labor, Vietnam can now say that it has been defeated in India, but there are still some factors that need to be considered when constructing factories. For example, the establishment of a factory in India only needs to consider whether the domestic market in India can support production capacity. However, the Vietnamese market must consider the domestic and export demand before considering the construction and operation of the plant.

Moreover, due to the shortage of manufacturing industry in Vietnam, the supporting capacity of industry is still limited. The Vietnamese government stipulates that the certificate of origin can only be issued if the proportion of the more homemade needs to exceed 40%. As far as household appliances industry is concerned, hardware, sheet metal, injection molded parts and packaging parts have been completed in Vietnam. The motor and electronic control products are still scarce, and the relocation of upstream supporting enterprises is needed. Therefore, products such as home appliances control parts need to be purchased at home. In addition, because Vietnam itself is not a resource producing country, most of the raw materials need unified procurement at home (which is more conducive to reducing the comprehensive cost). For example, the copper tube factory upstream of home appliances has factories in Vietnam, but it also needs to import copper from China, and so on.

Conclusion: in terms of quantity and quality of comprehensive labor supply, Vietnam is a more suitable destination for shifting manufacturing capacity than India, and its production efficiency is also higher. In the short term, it is constrained by the supporting capability of the industry, and the relocation of manufacturing capacity is still limited.