Good morning, Vietnam: New day dawns

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Good morning, Vietnam: New day dawns

Is Vietnam the next Asian tiger in global economics? In the 1960s Korea sent its Fierce Tiger and Blue Dragon military troops to war-torn Vietnam in support of the United States. The Korean fighters were feared by North Vietnamese troops.
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Today, Korea sends its cutting-edge cell phones and oil refinery technology to the country in eastern Indochina. The socialist nation, ravaged by war for decades, is rising from the ashes and pushing economic development. Vietnam’s drive toward a better economy dates to the 1980s when it launched the “Doi Moi” policy, which means reform and opening. Decades later, Vietnam has climbed back and positioned itself for economic opportunity. Its growth is expected to accelerate ― on Nov. 7 Vietnam was approved to join the World Trade Organization. This week, Vietnam hosts the Asia-Pacific Economic Cooperation gathering, a meeting of 21 leaders from Pacific Rim nations. Korean companies are no foreigners to Vietnam. Korean companies such as conglomerates SK Group and Samsung have good reason to ponder business ties with Vietnam, a five-hour flight away. Foreign companies are welcome. The Korea Trade-Investment Promotion Agency’s Hanoi bureau last September said that Vietnam savored its total foreign investment of $5.15 billion, a 25 percent increase from last year. The bureau predicts that in 2006 Vietnam will have the biggest foreign investment in its history. A series of economic indicators substantiate the steady upward climb in Vietnam. One example is the Gross Domestic Product per capita, which reached $528 last year, a leap from $385 in 2003 and $453 in 2004. The economic growth rate rose from 7 percent in 2002 to 8.4 percent last year. Exports totaled $32.44 billion last year, almost double the 2002 figure of $16.53 billion. A driving force behind this growth is a low-cost, young labor force. About 60 percent of Vietnam’s total population of 84 million people is under age 27, according to the central bank of Vietnam. The Vietnamese government last February raised the minimum wage to $55 a month, still significantly less than the $71 monthly minimum wage in China. Korean business investors recognize that cheap labor force. From 2002 to 2004, Korean firms made up 17 percent of total foreign investment in Vietnam, up from 8 percent in the late 1980s. This year, Korean companies have invested $599 million in Vietnam, an increase from $550 million last year. SK Group chairman Chey Tae-won chose Hanoi and Ho Chi Minh, two major cities in Vietnam, as locales to meet with chief executive officers of SK affiliates. During the five-day meeting, Mr. Chey met Vietnamese Prime Minister Nguyen Tan Dung and made proposals for construction, telecommunications, information technology and oil refinery development in the country. SK Group’s six affiliates, including SK Telecom, Korea’s top mobile carrier, and SK Corporation, have made forays into Vietnam. The SK Group made inroads to Vietnam making contributions to society. Even before SK Group launched its business, it offered free surgery for Vietnamese children with facial deformities, starting in 1996. So far about 2,300 children have been offered treatment. Earlier this month, the group announced plans to build or renovate libraries in Vietnam. SK officials said the campaign is in celebration of SK Telecom service topping 1 million subscribers. The Korea Trade-Investment Promotion Agency said in a report on the Vietnamese mobile phone industry this year that 45 percent of city residents are cell phone users, and the number is expected to rise to 60 percent by 2007. The report said mobile phone demand will increase, especially among the “haves of Vietnam,” defined as those with more than $500 income a month. For Korean expatriates in Vietnam, SK Group also donated $500,000 to establish a Korean school. Slated to open in February of 2008 in Hanoi, the school is expected to serve the educational needs of the Korean community. Another Korean trailblazer in Vietnam is Samsung Group, Korea’s colossal conglomerate. Group chairman Lee Kun-hee visited Ho Chi Minh last summer. Samsung now has affiliates investing in Vietnam, such as Samsung Engineering, which operates a fertilizer complex in the Baria Vun-Tau region. Another affiliate, Samsung Life Insurance, launched a joint venture with Vietnam’s state-run insurance company in August. Samsung Corporation is also building vaccine factories, together with Korea Green Cross Corporation. Other Korean firms also are eyeing Vietnam. POSCO, Korea’s top steel maker, plans to build an iron mill near Ho Chi Minh City. The $380 million factory will produce 700,000-tons of steel a year. Kumho Asiana Group opened a tire plant last month. Chairman Park Sam-koo is promoting a construction project and wants to build a golf course. Lotte Mart, the Korean shopping mall, plans to open branches in major Vietnamese cities around 2008 in a joint venture. Korean stock firms are watching the market as well. Construction companies are moving vigorously. Construction sectors at conglomerates like POSCO and GS, and a consortium of smaller firms, are promoting new cities or apartment complexes. One notable construction effort on the drawing board features a consortium of five Korean firms, including conglomerate Daewoo. In January the Vietnamese government approved the consortium’s development of the Tay Ho Tay new town in Hanoi, according to the Korean ministry of construction. The Tay Ho Tay new town is expected to have a $900 million budget, with 490 acres for housing and a commercial district. Korean pop culture is also popular in Vietnam, which may help smooth the road for business deals. by Chun Su-jin
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