Foreign manufacturers maintain faith in Vietnam despite riots

Reuters

By Nguyen Phuong Linh and Donny Kwok

HANOI/HONG KONG, May 19 (Reuters) - Most large companies operating in industrial parks hit by anti-China riots in Vietnam last week have resumed operations, underscoring the irresistible pull of the country as a low-cost manufacturing hub with a relatively skilled workforce.

Manufacturing has increasingly shifted away from China in recent years as wages there are climbing and there is a growing shortage of labour. The speed with which companies have returned to work in Vietnam's industrial parks, which were the focus of rioting just last week, demonstrates the economic draw of doing business in the country, despite the risks.

The riots, which erupted after protests over disputed territory in the South China Sea, had sparked speculation that foreign investors could flee the country, but most say they have no plans to do so.

Vietnam has about 200 industrial parks and they have been a major driver of the country's economic growth, accounting for more than 30 percent of exports and attracting around $110 billion in foreign direct investment.

"Vietnam is one of the most attractive places to do manufacturing. It's a combination of people who are skillful and a good work force that is diligent and competent, and also wage levels that are competitive compared to the rest of Asia," Jerry Shum, a spokesman for Yue Yuen Industrial Holdings Ltd , told Reuters on Monday.

Operations at Yue Yuen, a $4.7 billion company that makes footwear for the likes of Nike Inc and Adidas , had returned to normal after production was temporarily suspended last week, he added.

Companies from Taiwan, Singapore and Hong Kong told Reuters that their investment strategy in Vietnam was unchanged, even though state-run Chinese media said Hanoi's commitment to foreign investors was in doubt.

Some business officials, in particular those from Taiwan, said they had stepped up security at factory facilities, with China Steel Corporation tightening measures at dormitories for its Taiwan and Chinese staff.

BACK TO BUSINESS

Eighty percent of the 326 factories at two Vietnam-Singapore Industrial Parks in the south that were hit by the violence have resumed operations, the parks' operators said. They are run by a joint venture between Vietnam's Becamex IDC Corporation and a Singapore consortium led by Sembcorp Development, part of Sembcorp Industries Ltd.

Taiwan's Formosa Plastics Group, one of the companies worst affected by the anti-China riots, told Reuters on Monday that work at its steel facility in central Vietnam had partially resumed and it hoped all operations would return to normal as soon as possible.

It would also seek compensation from the Vietnamese government for damages to its facilities, it added, although it did not provide details.

A spokesperson for Taiwan contract manufacturer Hon Hai Precision Co Ltd, which makes parts for Apple Inc's iPhone, iPad and laptops, said operations would return to normal from Tuesday and there were no changes to its plans in Vietnam.

Fabric maker Texhong Textile Group said in a statement in Hong Kong that operations at its Vietnam facilities had "substantially" returned to normal and there had been no material disruption.

Texhong Textile had halted production last week after its facilities were damaged, triggering a drop in its shares.

Singapore's Keppel Corp, which has been in Vietnam for about two decades, said its long-term strategy had not changed and it was business as usual for the company.

While most companies were focusing on resuming operations, it was clear the riots had dented sentiment among some Taiwan businesses, which bore the brunt of the damage.

Many of the rioters mistook Taiwanese companies to be owned by mainland Chinese.

"Apart from our factories and facilities being destroyed, the most damage is the sentiment of not only Taiwanese investors and labour, but also their families," Serena Liu, chairwoman of Taiwanese business association in Vietnam, said, bursting into tears at a business forum in Hanoi.

Ten percent of Taiwanese investors had already left the country as they were scared, she added, although she did not provide details and it was unclear if they had left for good.

(Additional reporting By Michael Gold in TAIPEI, Yimou Lee in HONG KONG, Yong Ren Toh in SINGAPORE; Writing by Anne Marie Roantree; Editing by Raju Gopalakrishnan)

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