Vietnam set to become the new Silicon Valley?

Vietnam appears poised to become a global hub for electronics – and, possibly, even a rival to Silicon Valley – as its Communist leadership actively pursues a policy of attracting hi-tech foreign investment into the country.

Ho Chi Minh City, Vietnam
The Saigon Hi-tech Park (SHTP), under construction outside Ho Chi Minh City, will see Samsung begin operating a new $2 billion complex in the coming weeks.The government also recently issued an investment certificate to Malaysia's United More for a $21 million plant to manufacture high-precision plastic products for smart TVs.United More is the fifth foreign firm in the electronics support industry to be licensed at SHTP recently."These are continuing signs of an increase in the number of foreign-invested supporting industry companies and suppliers in Ho Chi Minh City and neighbouring provinces," reported Vietnam News."This is similar to what happened at some other places in Vietnam where major players like Samsung, Microsoft, and LG began large electronics projects. Late last year, the Hai Phong Economics Zone granted investment licences for three Korean electronics support industry projects.Vietnam exported $45 billion worth of electronic products during 2015, including computers and components, up 34 per cent from 2014. Much of this came from Samsung, which first started operations in Vietnam in 2009 and which, last year, produced a third of all its mobile phones sold worldwide at its plants in Thai Nguyen and Bac Ninh provinces.The nation's Ministry of Information and Communications said in a report last year that the presence of a growing number of major foreign electronics companies in the country was creating opportunities for the domestic IT industry to achieve rapid and sustainable development.Many Vietnamese companies are now intensifying investment in the electronics supporting industry, according to Thieu Phuong Nam, general director of Qualcomm Vietnam. "Vietnam will be the world's hub not only for producing electronic products but also, possibly, for designing them."The growth of hi-tech exports helped lift economic growth to 6.7 per cent in 2015 – the fastest rate in eight years – and analysts at HSBC believe the economy will expand at the same pace this year, led by a rise of more than 10 per cent in exports.Despite the fact that the country's recently-appointed leader, Nguyen Phu Trong, is described as "a true believer" in Communism, he is considered unlikely to block the drive to attract foreign investment, particularly in hi-tech, and has expressed his support for both a free trade deal with the European Union and membership of the US-led Trans-Pacific Partnership – the free trade agreement between America and, so far, a dozen Pacific rim countries, though its implementation hinges on approval by the US Congress.Carlyle Thayer, a leading commentator on Vietnamese politics at the Australian National Force Academy, commented recently, "All of Vietnam's leaders are committed to proactive international economic integration, a policy that is more than a decade old. That means they encourage foreign direct investment."According to Malaysia's Star newspaper, "The ruling Communist Party is betting that a combination of tax incentives, low wages and proximity to Chinese raw materials will prompt other electronic giants to follow Samsung and Intel – another early investor. That strategy may already be working: last year, LG Electronics said it will shift production of televisions to Vietnam from Thailand."The Nikkei Asian Review added, "The prospect of tariff-free access to the EU and TPP member states will drive foreign investment in Vietnam, after a record $23 billion in actual and pledged FDI flooded into the country in 2015. The same year, Vietnam cut restrictions on foreign ownership of businesses, another inducement to foreign investors keen to tap the country's youth bulge – 60 per cent of the 94 million population is under 35 – and low wages compared with China."

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