Is it suitable to build a mold factory in Vietnam?
With increasing pressure to reduce costs, some of China’s factories are transferring part of their production to Vietnam. This also means that some investors in the production industry are considering investing in Vietnamese factories. My friends and I are considering building a new mold factory, so we set out to investigate the cost to set a mold factory in Vietnam. We went there a few days ago in order to explore the manufacturing status of in more detail. We wanted to specifically inquire about rent, labor, shipping and intangible costs.
Rent
First, we wanted to know the rent of factory buildings, so we confirmed the building rents around the industrial zone in Hanoi and Haiphong. After comparing it with China, we found that the rent for a factory building in Vietnam is not as cheap as expected; it was only 20% cheaper than China.
Labor
Second, we investigated the Vietnam labor costs. This was much cheaper than China, around 70% less. However, these were prices for Vietnamese local industrial workers, not skilled workers. If we build a mold factory in Vietnam, we would need to bring skilled workers from China. To bring these workers, we would need to raise the salary at least 20% or more, otherwise the Chinese worker will not go to work abroad. Thus, the labor cost would actually be higher than in China.
Shipping
Next we checked on he shipping situation of Vietnam, which showed bad results as well. The shipping schedule was much less frequent than China. There is only shipping once a week in the Vietnamese port.
Intangibles
If you are a big business, the Vietnamese government will be paying much more attention to you. This shouldn’t be a problem though because if you compare the costs of government corruption, bribery and other issues (the intangible costs) to your annual sales, it is unlikely to be a big amount as long as you are generally following the government’s policies. However, if you are small company, these kind of intangible costs will likely overwhelm your business.
More information about Vietnam
Economic Overview：
1. GDP of Vietnam increasing 7-8% per year following the policy of “Reform and Opening-Up.”
2. Gross domestic product of 2012 is about 140 billion US Dollars; Gross domestic product per capita is about 1,600 US Dollars.
3. Vietnam the policy of Reform and Opening Up" is basically to learn from China's policy.
4. Vietnam’s current economic status is roughly equivalent to the Chinese Economic situation 10-15 years ago
** Interior blocks of Hanoi (Vietnam Capital)
* Airport is crude in Hanoi
Security of Vietnam：
The public security is good, and Vietnamese are warm and friendly.
Northern Vietnamese are simple, while the Southerners are more open. The security of North is better than South. For example, Ho Chi Minh City in South Vietnam, is said to have occasional pickpocketing or mugging.
*Hanoi folk’s house
Conclusion
According to the above situation, although the GDP is growing and it is relatively safe, investing in a mold factory in Vietnam may not be a wise choice at this time.
Byron Wang
2014/03/25
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