SINGAPORE: Low costs, abundant labour and a huge market drew foreign companies to relocate their manufacturing operations to China some two decades ago.

But it seems some companies are beginning to look further south to Vietnam to extend their business operations.

SembCorp said China is still a much-coveted market, even though the company has also been pouring investments into Vietnam, such as the recently launched 3rd Vietnam-Singapore Industrial Park.

Japan's Fujikin, which makes gas valves and fittings for semi-conductor devices, went to Vietnam in 2002.

Apart from Japan, Ireland and the US, it also has investments in China – a factory outside Shanghai to serve some of its customers – but Fujikin said the operation there is getting costly.

Katsumi Kuria, Advisor, Fujikin Inc, said: "The wages are getting higher and there are many job-hoppers, which is very difficult for the high technology industry. In Hanoi, there are very, very few job-hoppers because they are satisfied with the money they are getting and the management."

Recent decisions by leading global corporate names such as Intel, Microsoft and Canon to invest in Vietnam show the country's drawing power.

Other firms – from those in the US to Hungary – are standing in line, scouting for opportunities. Some are seeking to reduce the risk of overdependence on China to hedge against the increasingly uncertain cost environment there.

Vietnam's economy is about one-tenth of China's but some analysts have pointed out that its growth strategy is similar to that of its northern neighbour, which stands it in good stead.


- CNA/so