Competitiveness: Thailand vs Vietnam! Who Wins?

Vietnam vs. Thailand, who wins ?

Friday, June 18, 2010

Vietnam’s $96 billion economy is far less centrally controlled than last decade, and the country, which boasts one of the youngest workforces in the world, managed to gain membership in the World Trade Organization in 2007. The country last year exported $12.3 billion of goods to the U.S., its biggest overseas market. Foreign direct investment is on the rise and could double, to $15 billion this year according to a May 31, report analysts at Standard Chartered Bank.

This fall, Intel will open a $1 billion chip assembly and test plant near Ho Chi Minh City. Taiwanese laptop PC and LCD screen manufacturer Compal also has a new factory in Vietnam. Arthur Chiao, chairman of the Taiwan Electronics & Electrical Appliances Assn., on June 7 said his group is helping Taiwanese companies find new manufacturing sites in Vietnam in the wake of rising labor costs on the mainland.

Compal Electronics is a Taiwanese original design manufacturer (ODM), handling the production of notebook computers and monitors for a variety of clients around the world, including Acer Inc., Dell, Toshiba, Hewlett-Packard, and Fujitsu Siemens Computers. Compal is famous for producing select models for Dell, Hewlett-Packard and Compaq. Compal has designed and built laptops for all of the major brands as well as custom builders for over 22 years. It is listed in Taiwan Stock Exchange. As of 2004 revenues were $6.32 billion USD, with a total workforce of 16,000. The company’s headquarter is in Taipei, (Taiwan), with offices in the People’s Republic of China, South Korea, the United Kingdom, and the United States. Compal’s main production facility is in Kunshan, China.

Political tensions in Thailand next door also are leading companies to Vietnam. Calm has returned to the Thai capital after May's deadly confrontations in Bangkok between anti-government protesters and the military, but it was one of many political outbursts in Thailand over the years

Is Vietnam Finally Ready for Foreign Investors? (BusinessWeek)

With a well-developed infrastructure, a free-enterprise economy, generally pro-investment policies, and strong export industries, Thailand enjoyed solid growth from 2000 to 2008 – averaging more than 4% per year – as it recovered from the Asian financial crisis of 1997-98. Thai exports – mostly machinery and electronic components, agricultural commodities, and jewelry – continue to drive the economy, accounting for as much as three-quarters of GDP. The global financial crisis of 2008-09 severely cut Thailand’s exports, with most sectors experiencing double-digit drops.

Since the 2006 coup, parliament has been battered and belittled. Two elected governments have been overthrown. More than 200 elected legislators have been banned from politics. A new constitution deliberately sets out to diminish parliament’s role. The consequences are now clear. The country desperately needs to reinstate parliament as a national forum.

In 2009, the economy contracted about 2.8%. The Thai government is focusing on financing domestic infrastructure projects and stimulus programs to revive the economy, as external trade is still recovering and persistent internal political tension and investment disputes threaten to damage the investment climate.

Thailand is running out of mechanisms for compromise. Various academic groups, business groups, peace advocates and elder statesmen have failed to gain any traction as potential conciliators. By loudly and repeatedly claiming to be defending the monarchy, the die-hard groups have eroded the institution’s old role as mediator. There remains only a slim chance for Mr. Abhisit to play a positive role in the emergence of the new political Thailand, rather than being a casualty in the collapse of the old order.

On the other hand Vietnam is a magnet for foreign direct investment. The success of doing business in Vietnam is greatly facilitated by the ability to put through effective corporate structure and financial management system to deal with foreign investment laws, taxation, accounting and foreign exchange issues in Vietnam.

The investment registration process and tax management in Vietnam is decentralized, with the municipal and provincial authorities having significant discretions on how businesses are established and managed from a tax and accounting angle. Having a good local partner, experienced staff and localized professional support would greatly assist in the initial start-up stage.

As an emerging economy, the regulatory landscape in Vietnam is dynamic, characterized by frequent changes in laws and regulations. Very often, the head office finance team is unsure whether the myriads of regulations in Vietnam are fully complied with, and is also troubled by the quality of financial and management reporting by their Vietnamese accountants.

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