The trend is clear. It is called “China Plus One”, writes the Danish newspaper ErvervsBladet.dk.
The rising wage pressures in China, Danish firms are forced to move some of their production to cheaper areas like to Vietnam, but they continue working at the Chinese market. Now to sell “Vietnamese products” to Chinese consumers. Vietnam is now becoming the most popular production destination.
“Vietnamese sub-suppliers are much sought after at the moment. Its the first country Danish companies ask for when they come us”, trade adviser at Danmarks Eksportråd Erik Ovesen says, pointing to low-cost production, approachable authorities and a Vietnamese learning readiness as reasons why Vietnam has just been the new production oasis.
He has this year alone been contacted by ten smaller Danish companies, which will establish production in Vietnam, and thereby join nearly 100 other Danish companies that are already in the country.
Apart from major Danish companies like Carlsberg and Maersk its predominantly smaller companies which are trying their luck in Vietnam. That’s because, Erik Ovesen tells ErhvervsBladet.dk, that the establishment can be done relatively pain-free – it’s not subject to demands for high initial capital to establish them in Vietnam.
“The Danish company can establish a subsidiary in Vietnam with a single owner. The Vietnamese authorities only require that they can see where it originates, and who runs it. It’s easy and free of red tape and can be done within two months”, explains Erik Ovesen, who believes that although companies in the future might prefer to produce in the low-cost Vietnam, many will still stay in China to establish sales company.
“A large domestic market and Chinese purchasing power makes it attractive to stay”, he said to ErhvervsBladet.dk.
One of the companies that are already in Vietnam is The Rynkeby company, Orana, which produces fruit-based semi-finished products to, among other things, soft drinks and dairy products sold worldwide. They produced in Vietnam since 2003.
“One of the reasons why we began in Vietnam was the high custom tariffs. The Vietnamese low wages, and that the Vietnamese are hard-working, was other reasons. Finally we got shorter shipping time to our customers in Asia. For us it was a success criterion to have a good local partner who knows the Vietnamese system and bureaucracy and can overcome language and cultural barriers”, says Betina Mold Rasmussen, who is responsible for Oranas project coordination.
“Finally, the support from DANIDA was decisive. It meant that we could transfer technology from Denmark to Vietnam and train local staff. Investment Fund for Developing countries (IFU), who are fellow shareholder, has further helped us to improve the quality of the board”, says Betina Mold Rasmussen and stresses that help from DANIDA and IFU has been indispensable.
Erik Ovesen of Danmarks Eksportråd agree that we should seek appropriate advises.
“You have to ally itself with the Danish embassy or other consultants. On the whole, we must make every process thoroughly. You have to get acquainted with the Vietnamese culture and history, and we will investigate all circumstances. We simply owes that to the people”, said Erik Ovesen.
He estimates that Vietnam, which just 15 years ago was on the list of the world’s ten poorest countries, is geared towards the recovery by increasing production in the country will lead – with reservations though:
“When growth goes as fast as it does right now, there will be bottlenecks. The pressure can lead to bureaucracy in the application process, a slow start when it comes to time in production, and difficulties finding employees. But for those companies that are preparing thoroughly and invest in preparing for incursion into Vietnam, there are good business opportunities”, said Erik Ovesen to the Danish newspaper ErhvervsBladet.dk.
