With our last day of site visits, we wrapped up our educational aspect of this trip about development in Vietnam by touring a park—not any old park with benches and swings, but an Industrial Park.
The first company we visited in the morning was Vietnam Singapore Industrial Park (VSIP), a state owned company including 30 subsidiaries. VSIP is considered the “Best Industrial Park Developer” in Vietnam. Basically what this means is that VSIP takes a huge plot of land and transforms it into a township or city that provides the ability for people to “live, learn, work and play”. In other words, this “park” is literally just a humongous city with many businesses and residential homes located in it. In a way, it is designed for you to never leave it since you have access to anything you could possibly need.
The many businesses that VSIP provides in the city development projects that they tackle are: infrastructure development, banking, healthcare, community projects, civil construction, process and manufacturing, and trading. Since VSIP focuses on nationwide development throughout Vietnam, the company has already created prosperous industrial parks, such as those in Binh Duong and Quang Ngai, their largest development projects in Vietnam to date. It’s also interesting to note that since projects in Central Vietnam are more challenging to implement due to social and economic reasons, the government has given incentives for development firms like VSIP to build industrial parks there. Thus, Central Vietnam is an emerging hub for development in the future.
As for VSIP’s business model, they are a one-stop service company. This means that they deliver their commitment to customers and investors regardless. Some of the services that VSIP offers to carry out these promises are: onsite approving authority, guiding investors in their ventures, park management, customer service, and amenities. By proving all of these services, VSIP has gained 709 loyal customers in over 13 countries, an impressive feat given that some of their partners are big name companies such as Microsoft and Proctor & Gamble.
If you noticed in the title of the company, you’ll see that Vietnam and Singapore are together. The reason is because there is a joint partnership between the two countries in regards to the industrial parks that are built by VSIP. This started when the partnership was proposed by Vietnam’s Prime Minister for the Singapore government to collaborate with Vietnam to help boost Vietnam’s economy. And ever since then, there has been a 20 year partnership between the two countries that has remained strong to this day. The only con to this arrangement is that both countries have to come into agreement on aspects of a project, but this is minuscule in terms of the impact that VSIP is creating for the country of Vietnam.
Further, what is unique about these kinds of partnerships is that the government of Vietnam does not interfere in any way. They trust these companies to work out any problems they may face and carry out their commitments in a timely manner. As a result, the government of Vietnam has entered in many of these types of deals with foreign entities since they have proven to be successful.
But that’s not all that we did in the never ending industrial park. After we ate delicious udon and shopped around a very chic mall in the park, we then proceeded to visit our second site visit for the day, II-VI.
II-VI is a vertically-integrated manufacturing company that primarily deals in engineered materials: photonics and electronics. With facilities in 14 countries and a total of 10,000 employees, II-VI has applications in numerous markets all over the world, such as: industrial, optical communications, military, life sciences, semiconductor equipment, and consumer markets.
Not only that, II-VI also provides a variety of different products, all grouped into three primary business units: laser solutions, photonics, and performance products. Within all of these products, we were able to get a behind the scenes tour into the main product segments that II-VI specializes in, Photop and Marlow. Photop are near infrared optics that are commonly found in NIR precision optic products. Marlow are thermoelectric components used in either cooling, heating, or power generation. Basically, the functionality of these products are far too complicated for my understanding but it was a neat experience getting the opportunity to see how everything is manufactured in these factories. I was amazed to learn that the company produces such a unique amount of products at such high volumes. The set-up they had going on in the factories was extremely efficient and products were being made constantly.
Now surprisingly enough, II-VI is actually headquartered in Pennsylvania. The main reason they built a facility in Vietnam and globalized their company is rather a long story. Initially based in the United States, costs started to escalate, margins slipped, and prices dropped, leading II-VI to make a decision to move their operations abroad. So they first built a facility in Singapore. Here, they learned that Asian countries experienced high volume and low costs. In addition, there was a protection of intellectual property which the U.S. lacked at the time. But eventually costs got too high in Singapore so II-VI moved to China. And then years late when corporate income taxes increased too much in China, they finally came to Vietnam in 2004. At this time, II-VI was in desperate need to expand manufacturing capacities, and Vietnam was the solution. And by doing business in Vietnam, II-VI was exempt from four years of tax after the first year of profitability. By moving faster than their competitors to utilize the worldwide workforce, II-VI’s decision to build a facility in Vietnam has paid off due to their greater marketplace share.
When it comes to the workforce, II-VI hires individuals of all backgrounds, whether it be engineering or business. In addition, by being based in Vietnam, II-VI has the ability to hire potential candidates all over Asia since they are cheaper sources of labor than back in the states. The only downfall to this is that an education here in Vietnam is not equivalent to one you would get in the U.S so those that are hired may not be as well-versed on everything that the company does. With that said, II-VI does a very good job of training their employees by putting them through extensive programs. For example, the first team that was hired to work in II-VI’s facility in Vietnam was taken to China to be taught. By training the workforce, II-VI is promoting the company from within and spreading their name out there that the company is a great place to work at.
But of course, II-VI also faces challenges when it comes to their workforce like any other company. Specifically during Tet Lunar New Year, II-VI experiences a turnover issue among its employees since many workers go back home during this holiday and stay there. They don’t come back until many months later and instead seek work elsewhere. This has caused a great deal of problems for II-VI over the years being in Vietnam, but recently they have been able to tackle this issue. By holding off salary bonuses and offering to pay transportation fees for returning back from vacation, II-VI has been successful in incentivizing employees to stay with the company. As a matter of fact, it now has one of the lowest turnover rates in Vietnam.
So to wrap this up, I would like to say that these company visits over the past two weeks have been such a great experience and opportunity to learn more about development here in Vietnam. We had the chance to tour such a diverse group of companies, and each one was truly interesting to learn more about. I definitely think that having these visits as a part of our program itinerary made the trip much more engaging and fun.
With that, I only have one more day left in Vietnam. Got to make every second count.
Until next time friends
-TK