Acknowledgments
I would like to thank the MSc Management academic team for all their efforts in making our trip one of a kind. I would also like to thank Paolo and Anastasia for planning and assisting us during all the trip activities. This trip has been a true eye-opener and I am glad I got the chance to be part of this extraordinary experience.
Discussion
Vietnam allowed investors into the country back in 1987, and after a few years it turned into an alternative for China and allowed nations to outsource basic factory operations to the country. The slow growth of China’s economy since 2011 and its deliberate change from low-value export manufacturing have made Vietnam remain competitive in areas for making garments and auto parts. The value added from production has led to the development of cities like Ho Chi Minh City (HCMC) making it attractive for various business transactions. According to PwC, the labor costs in Vietnam are relatively low compared to other nations like China. The country inhabits about 90 million people and has a rapidly shifting economy that presents substantial business opportunities (Nguyen & Rose, 2009).
Vietnam’s is ranked as the 47th largest economy in the world according to GDP. It is approximated to shift from $202 billion in 2016 to about $243 billion in 2019. In fact, the tremendous growth of Vietnam’s economy creates profound business opportunities. The economic development also ensures the constant growth of the country’s infrastructure and education sector, which are essential for international business expansion within the country (Raghunath & Rose, 2017). Since the permission of foreign ventures, Vietnam’s economic growth ranges from 5% to 10% annually. This situation positions it as a competitive destination for direct investments from overseas.
Vietnam participates in the Trans-Pacific Partnership (TPP), which is a free trade agreement between 12 nations. Thus, this allows Vietnam to ship a variety of goods without tariff charges to these countries, which form two-fifths of the global trade. Notably, this is one of the driving forces for international corporations to invest in HCMC as Vietnam provides excellent opportunities to the exports and imports of different products. HCMC in Vietnam contributes significantly to the nation’s economic growth and offers a profound atmosphere for high-tech investments like Intel’s (Tran, 2015). Vietnam’s primary competitors from either China or Southeast Asia have not joined the treaty, leaving Vietnam as the greatest beneficiary from the accord and therefore allowing it to attract international investments. The TPP also allows Vietnam to provide low-cost manufacturing thus improving the value-chain of foreign backers. Ultimately, this makes most of its cities like HCMC attractive for high investments. Vietnam is also attempting to ease the investment and tax policies, advance its infrastructure and push other deals while seeking to strategize itself ahead of the neighboring competitors like Cambodia and Myanmar. HCMC has also upgraded its transport infrastructure making it Vietnam’s financial hub.
Additionally, Vietnam plans to enter a separate free trade accord with the European Union (EU) by 2018. The agreement entails the lowering of the tariffs on several commodities to the nation’s biggest export markets. Furthermore, the Vietnamese bureaucrats are finalizing the regulations allowing foreign investors to completely own some of the locally listed firms to entice overseas investors further (Nguyen & Rose, 2009).
Intel Vietnam
Intel is an American multinational technology company that is the World’s biggest and greatly valued semiconductor chip makers quantified by its revenue generation. Intel supplies chips to many diversified computer system manufacturers like Dell, Lenovo, HP, and Apple.
Intel has recognized the demand for high-tech communication and computing devices and opened its semiconductor factory in HCMC. This investment of $1 billion dollars remains the only biggest American investment in Vietnam.
The plant concentrates on assembling chips into chipsets and testing their functionality. It is located in Saigon’s Hi Tech Park (SHTP), which provides great advantages for the firm. In fact, the capability, the management and the knowledge of the people in the SHTP have improved significantly during the years. This creates a localization of the supply-chain of the technology companies by clustering them in the same area. Thus, it allows them to cut their costs and benefit from the clustering of transport, labor and machinery.
Vietnam has placed technology at the heart of its growth and development target. Thus, the management team of Intel Vietnam perceives their investment and the entire technology ecosystem in Vietnam as a progress to raise the nation’s value string. Similarly, Vietnam recognizes that Intel will boost its strategy to build an advanced manufacturing base far from its production in garments and some first working assembly lines (Nguyen & Rose, 2009).
Intel is, therefore, optimistic to invest in HCMC whose economic growth seems to expand. The location of Intel’s plant ensured the training of approximately 1700 Vietnamese employees on the best ways to handle the new and complex products introduced to the market. Intel has confidence that the new plant in HCMC will contribute to the firm’s strong global supply chain and ensure the improved provision of job opportunities in Vietnam (Jennings, 2015). The completion of Intel’s operations will provide extensive employment in the high-tech industry and produce export income for the nation. In fact, according to Intel, in 2015, the exports of Intel Products Vietnam accounted for:
• 12.4% of HCMC total exports
• 19.9% of HCMC manufacturing exports
• 18.2% of Vietnam’s exports of electronic products and components
Moreover, Vietnam has adequate human resources to satisfy Intel’s demand. HCMC offers an excellent location for Intel’s operations and is strategic for the distribution of the products to other cities since it is a gateway for the Southeast Asian region (Jennings, 2015). The relocation strategy is also part of the company’s efforts to increase the manufacturing of Intel's products across Southeast Asia.
Vietnam believes that facilitating the process of overseas investments in the country is an explicit move to attract more foreign backers. In fact, the size of the firm would become a critical turning point for Vietnam’s economy. For example, more investors would be interested in operating with Intel in generating computers and other relevant accessories in Vietnam.
Though Intel’s investment in HCMC is still new, it's already transforming Vietnam through the creation of other new ventures from various global giants.
Steps for the Future
It is important to note that in order for Vietnam to truly flourish in the area of foreign ventures there are still important steps to be considered. First, Vietnam should continue on building stable infrastructures. It should work on improving the airport capacity in order to accommodate for the import and export of products in order to attract more FDI. Vietnam should also work on refining the power infrastructure available. The country should also build an ethical business environment. In fact, in 2014, Vietnam still remained red in the Transparency Index Survey.
Conclusion
Intel considered Vietnam’s infrastructure, the young labor force and the developing education system in relocating its facility to HCMC. Vietnam has recently focused on attracting more foreign investors through their appropriate trade legislations, progressive infrastructure expansion and culture for overseas investments. Intel will in turn help boost the development of IT programs and provide meaningful jobs for an increased economic growth.