Outsourcing hitting the right note

14:11 | 01/03/2011
Vietnam is emerging as an attractive outsourcing venue for foreign investors.
illustration photo

KPMG Vietnam representative Nguyen Cong Ai said Vietnam would continue to be a magnet for foreign investment with its huge domestic market consumption potential and low-cost workforce.

A recent KPMG survey showed that from 2011-2015, workers’ wages  were forecast to augment from $2.5 to more than $4.5 per hour in China, while in Vietnam it would hike from $0.5 to around $1.5 per hour only.

Labour costs reportedly represent more than 25 per cent of production costs, surpassing material expenses which account for 16 per cent. Therefore, with its competitive labour cost, Vietnam has appeared on foreign investors’ radar, particularly in labour intensive industries such as textile-garments and footwear.

Kim Soung Gyu ,an E-Land Vietnam executive, said labour costs in Vietnam’s textile and garment sector were less costly than in China and that was why E-land had moved its factories to Vietnam and only has  trade representation in China.

An executive of Ho Chi Minh City-based Taiwan-backed Pouchen Corporation, active in the footwear industry, said besides outsourcing facilities for Puma or Reebok in Ho Chi Minh City, the firm had opened production factories in southern Dong Nai province’s Bien Hoa city and Trang Bom district, or Tan Duc and Tan Huong in Long An province.

“Compared to China, Vietnam’s labour costs are much more competitive,” the executive said.

In respect to software outsourcing, Vietnam’s software outsourcing industry grew an average 30 per cent per year in the past decade.

Vietnam Software Association (Vinasa) figures show that Vietnam became Japan’s third largest partner in software outsourcing in late 2010 and eyed growth of 20 per cent per year for outsourcing orders from partners in US or Europe in recent years.

In terms of revenue, from 2005-2010 Vietnam’s software outsourcing augmented from $250 million to more than $1 billion. However, Vinasa deputy chairman Pham Tan Cong said the proportion of software outsourcing in the country’s GDP still remained low, far below that of China and India.

Dr. Nguyen Huu Le, advisory council chairman at TMA Solutions - one of Vietnam’s leading software outsourcing firms, said the world’s demand for software outsourcing was tremendous and it was now a golden opportunity for Vietnam’s outsourcing as weighty rivals, India and China, were facing challenges associated with rising labour costs.

An executive at Tinh Van Technologies Joint Stock Company attributed outsourcing’s small proportion in the country’s gross domestic product to its fresh presence and human resource problems.

According to Vietnam’s information technology human resources development master plan to 2015 with vision to 2020, Vietnam will provide businesses with around 250,000 intermediate-level and postgraduate IT workers during the period.

By Nguyen Duy


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