Dodging vietnam's economic woes

Lee Wang-chung, general director of a Taiwanese family-owned motor vehicle parts plant in Vietnam, has weathered one thing after another since the fast-growing economy started to crack in 2007.

The animated, coffee-chugging 41-year-old former salesman started the factory in 2003. That was well after the communist country opened to foreign investment in 1986 and became a cheap manufacturing alternative to China. The flood of foreign investment helped spur Vietnam's economy to grow by about 7 per cent a year in the 1990s.

There are about 5,000 foreign-owned companies operating in Vietnam now. Most of them are from Taiwan. Like Lee's company, Elma Vietnam Industrial, near Ho Chi Minh City, most of the foreign investors sought to take advantage of cheap labour and low land prices. His 20,000-square-metre factory employs more than 300 workers.

Since 2007, though, macroeconomic problems have become so severe that some foreign investors are shelving their expansion plans, and others are even considering pulling out of Vietnam. Direct investment pledges fell to US$20 billion this year from US$66.5 billion in 2010.

Inflation sometimes tops 20 per cent a month and wildcat strikes headline a list of labour problems. Labour groups logged 336 strikes in the first four months of the year even as minimum wages have climbed over the year to the equivalent of up to HK$575 a month.

The Vietnamese government blames fallout from the 2008-09 global financial crisis for its economic troubles, while analysts point to corruption, property bubbles and weak economic management.