Select an article in this quarter from the dropdown menu below.

Or jump to a particular quarter.

Jem Bendell
Adjunct Associate Professor,
Griffith Business School, Australia

Founder, Lifeworth, Switzerland

Lala Rimando
Business Editor, Newsbreak, Philippines

Tipping Frames: The Lifeworth Review of 2006
[ PDF: 2585kb | 54 pages ]

Appendices available in all PDF versions.

Understanding the Boom

Foreign investors started taking a second look at Vietnam since its leaders heeded efforts of former US president Bill Clinton, who visited in 2000 to normalize relations with the former enemy. In 2000, Vietnam signed a bilateral trade agreement with the US and launched the stock market. Thereafter, it introduced new laws simplifying requirements for registering companies and creating a level playing field for both local and foreign players.6 The timing was perfect. It emerged as the regional destination of choice for Western and Japanese investors aiming to hedge their exposure to China.

As China continues to gobble up about US$72 billion in foreign direct investments (making it the largest 'developing' country recipient of FDI), 7 foreign investors lured by Asia's low labour costs have realized that as political winds change in China, they need to spread their business risks. Vietnam has become the first choice for Japanese firms operating in China that want to spread their investment exposure to another country. The Japanese firms doing business in Vietnam include such giants as Toyota Motor, Sony, Canon and Honda.

Vietnam's labour is cheaper than its neighbours and even China. Shortages in available factory hands in some regions of China have been driving up costs to the point that a factory worker in the Mainland can earn up to five times the US$50 per month that Vietnamese workers in foreign-owned factories receive. 8 In addition, land is cheaper, with the most expensive land for factories fetching about half of what they do in China's priciest areas, and shipping from industrial capital Ho Chi Minh City is cheaper than from Thailand or Indonesia. 9

Nevertheless there is the potential for economic culture clash. The experience of Dutch bank ABN Amro, which has a branch in Hanoi, was revealing. In November, it entered into a US$4.5 million settlement to end a dispute over a transaction with a local state-owned bank (and, not incidentally, get four staff members out of jail). In its suit, the state-owned Incombank had blamed the four ABN Amro traders for the losses it incurred when they executed speculative foreign currency trades on behalf of an Incombank employee who was later found to be unauthorized to enter into such deals. Causing losses to a state enterprise is a serious criminal offence in Vietnam 10, and the arrests of the four traders has sent a chill through other foreign banks operating in the country, raising concerns about the risks of dealing with state financial institutions and other state agencies. Compounding the risks is the fact that foreign exchange trading - a routine transaction elsewhere - is not yet governed by international-consistent standards in Vietnam.

Next back to top

6 Freshfields Bruckhaus Deringer, Briefing on Vietnam new investment law, March 2006


8 Karl D John, Japan smitten by Vietnam, Asia Times Online, June 15, 2006

9 Frederik Balfour, Good Morning, Vietnam, Businessweek, March 13, 2006 (

10 Bill Heyton, ABN Amro makes Vietnam settlement, BBC News, Nov 27, 2006,

back to top