Day 11: VIP’s in VSIP

The penultimate day of our journey was spent on two different site visits, our last of the trip. First, we traveled to the Vietnam Singapore Industrial Park, or VSIP for short, located in Binh Duong. After hitting some heavy traffic on the bus ride there, we were able to learn a lot about the company and its various projects.

Overall, VSIP is a joint venture company between the Vietnamese and Singaporean governments, and it is dedicated to building industrial parks and “integrated townships” throughout Vietnam. The agreement was formed in March of 1994. At this time, the Vietnamese government was making a lot of deals like this with foreign nations in an attempt to use foreign investment to grow their own budding economy. Presently, the government is not making as many of these deals, as it has started making the gradual progression towards increased economic independence. However, these deals are still very valuable and benefit both sides tremendously. For Vietnam, this brings in tons of foreign investment, and the companies that are stationed in these industrial parks boost the overall economy. For Singapore, not only do they reap some of the profits that the company brings in from the park, but they also benefit from a stronger Vietnamese economy as well.

Since the agreement was signed, VSIP has either completed or begun construction on seven different “integrated townships” throughout Vietnam. Our session leader made sure to stress this idea that VSIP does not simply build industrial parks but rather “integrated townships.” What this means is that while a normal industrial park will house only the buildings needed by the businesses, VSIP’s integrated townships are essentially like small towns for the workers. They build up all the infrastructure necessary as well as many amenities for the community such as schools, security, parks, banks, restaurants, and even sports facilities.  Having all of these additional resources goes a long way in attracting foreign and domestic businesses. After our discussion, we were given a brief tour around the Binh Duong site, which was the first to be completed by VSIP, and even got to eat lunch and explore in one of its major shopping malls.

The second half of the day consisted of a visit to II-VI corporation, a laser and optics company that is actually headquartered in Saxonburg, Pa (about a ten-minute drive from my house). Here we met Mr. David Baker, chief engineer, who gave us a lot of information about the company. For one, he explained why they decided to make the jump to Vietnam. He explained how the company originally made the jump overseas to Singapore, mostly due to a large labor pool, lower wage costs, and lower corporate taxes. From there, they hopped around from Singapore to China and then from China to Vietnam, each time chasing the lowest wages and tax rates.

Next, he explained some of the products that are made specifically in the Vietnam location of II-VI.  Since they have locations in more than ten countries worldwide, each plant tends to specialize in a certain product.  For this plant, and many of their Asian locations, the focus is on high volume low skill products, meaning the goods are produced in mass quantities and there is not a whole lot of skill involved in the process.  This mold fits here in Vietnam because while there is an abundance of workers, there is a limited number of skilled workers.  Thus, this plant can take advantage of the huge labor force, assigning them to more labor-intensive tasks that don’t require much specialization.  The more complex items that are made in smaller quantities are then left to sites in the U.S.

Lastly, Mr. Baker relayed to us some of the major challenges facing the company, particularly with their labor force.  According to him, every year there is massive turnover because after the lunar new year holiday, many of the workers simply don’t come back.  They travel home and stay there for a few months, and then go out and find a new job once again.  This is a huge problem here in Vietnam, but II-VI is doing some things to try to combat that.  Most notably, they are timing many of the bonuses so that the workers don’t receive them until after the holiday, but they are also covering the employees’ transportation costs to and from home.  This has made somewhat of an impact, but there is still much work to be done.  After the information session, we then finished up the day with a quick tour of two of the company’s buildings, where we got to see much of the production process.

Well, since this is my last blog post for the trip, it’s only right that I give it the proper sign off.  I’ve had a fantastic time so far here in Vietnam, and I can’t wait to see what our last day in country has to offer.  Thanks so much for following along!

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