Nicole Lim Thu, Jul
The fastest way to get from Ho Chi Minh City to Hanoi is by taking a two-hour plane ride, over a distance of 1,161km. This makes the capital city, Hanoi, geographically closer to mainland China and the rest of Asia Pacific; while the distance between the largest city and former capital Ho Chi Minh City and Singapore is about the same as it is to Hanoi.
For this reason, when Vietnam first became a contender for China- plus-one (China+1), which refers to the business strategy to avoid investing only in China and diversify business into other countries, many companies that had operations related to technology relegated their business to Hanoi in the north.
The narrative, according to Victor Ngo, chief executive officer of UOB Vietnam, is that for the decade from 2010 to 2020, investments in the country could largely be split into two parts. Higher technological manufacturing in the north and traditional textile manufacturing in the south.
Today, businesses from Japan, Korea and Taiwan have a large presence in the north. Electronic manufacturers such as Pegatron, Luxshare, Google, Microsoft and LG all either have a manufacturing facility or a branch office in four areas — Bac Giang, Bac Ninh, Thai Binh, and Haiphong. Samsung launched a US$220 million ($294.4 million) R&D centre last December while Apple has been producing millions of AirPods.
Meanwhile, down in Ho Chi Minh City, businesses in the textile and garment industry, as well as oil and gas, are something more of a typical sight.
The split looks something like 40% of businesses in the north and south and 20% in central Vietnam, says Ngo. But since global interest in Vietnam has once again renewed in the wake of disruptions to the supply chain following the pandemic and US-China tensions, there has been an “unstoppable transfer or at least relocation from mainland China into other countries’’, according to a report by The Financial Times. Companies are even considering land reclamation if there is enough demand.
The government has expanded its plans to capture businesses more evenly across the country. In June last year, it unveiled the Mekong Delta regional master plan, which underscores its plans to develop the southern region of Vietnam into an agricultural and industrial hub. This April, the national master plan was announced, with the aim of developing all parts of Vietnam into a “strong and prosperous country”.
An article by Vietnamese media said that the Mekong Delta master plan would include attracting investments in the areas of agriculture, renewable energy development, trade promotion, and culture and tourism in the next decade. Meanwhile, the national master plan takes on a more holistic overview of the development of Vietnam, where Hanoi and Ho Chi Minh City will be growth poles, the north and south will be locomotive zones, and Lao Cai-Hanoi-Hai Phong-Quang Ninh and Moc Bai-HCM City-Vung Tau will be economic corridors by 2050.