Tam's Kinh Bac City Development Share Holding Corp., Vietnam's third-biggest publicly traded property developer, has attracted companies including units of Japan's Canon Inc. and Sanyo Electric Co. Tam, 45, was one of Vietnam's richest men at the end of 2009 based on his stock holdings, according to Thanh Nien newspaper.

Vietnam has begun to export more higher-value goods to the US, with global camera equipment companies shifting some production from China, according to the US International Trade Commission. Manufacturers can benefit from a weakening dong in Vietnam, which competes with China for the export of footwear, garments and furniture, amid pressure for the yuan to strengthen.

"Production costs in China are becoming more expensive," Tam, Kinh Bac's chair, said in an interview, citing higher labour costs in the world's most populous country. "The transportation costs in China are also becoming very high."

The company operates industrial zones in and around the capital Hanoi and the northern coastal city of Hai Phong, Tam's birthplace. Two of Vietnam's three largest ports, Cam Pha and Hai Phong, are in the north, according to the Vietnam Seaports Association.

Diversifying From China

Japanese companies often regard the north of Vietnam as an extension of the Chinese economic zone, and may diversify production by adding output in Vietnam rather than moving altogether from China, according to Yoshida Sakae, managing director of the Japan External Trade Organisation office in HCM City.

"The north is very near China and it's easy for companies in China to move to," Tam said yesterday. "Kinh Bac wants to focus more on the northern provinces of Vietnam."

China's Guangdong province, the nation's richest region by gross domestic product, said yesterday it will raise the minimum wage by 21.1 percent to help resolve a labour shortage. More than 50 percent of manufacturers in the province, China's manufacturing hub, are experiencing a lack of manpower, according to a Hong Kong Trade Development Council report released March. 16.

Labour Costs

"Labour costs in some places in China have increased 20 to 30 percent in the past three months," said Shaun Rein, founder and managing director of China Market Research Group in Shanghai. Wages are "probably double what you have to pay in Vietnam."

Sanyo Electric last year started operating an optical-parts plant in a Kinh Bac park in a province bordering Hanoi, according to Yuko Hosaka, a Tokyo-based spokeswoman for the Japanese electronics maker.

"We chose the location because it was nearby many of our clients' bases," she said. "Vietnam's diligent workers were also among the reasons."

Canon, the world's largest camera producer, said Vietnamese workers are "industrious, quick learners and quick to catch on to new technologies," according to an e-mailed response from its Vietnamese unit to questions from Bloomberg News.

Tokyo-based Canon makes laser and ink-jet printers and scanners at a Kinh Bac park near Hanoi in Bac Ninh province, where the Vietnamese property company is located.

Weakening Dong

Shares in Kinh Bac, which by market value trails only Hoang Anh Gia Lai Joint-Stock Co. and Vincom Joint-Stock Co. among property developers, have increased 10 percent this year to 64,000 dong, compared with a 4.3 percent gain in the HCM City Stock Exchange's VN Index.

Kinh Bac reported net profit of 642 billion dong ($34 million) last year, more than double the 286 billion dong it posted in 2008. Tam's stake of more than 30 percent makes him the biggest shareholder in the 12.4 trillion dong company.

The company may benefit from a depreciating dong, especially as the US pressures China to allow its currency to appreciate, said John Marron, managing director of Midas Clothing Ltd in HCM City, which exports Vietnamese-made Zara and Converse apparel.

"I'm making better margins now, and the weaker dong has definitely helped," Marron said. "We pay our factories in dong and we get revenue in dollars."

Party Congress

The dong has weakened 8.3 percent in the past year after Vietnam's central bank devalued the currency twice. In contrast, the yuan, which is pegged to the dollar, was little changed in that period.

In Vietnam, a Communist Party congress next year may cause the central bank to use currency depreciation to boost exports and create jobs, Standard Chartered Plc said in a report this month.

US President Barack Obama last week urged China to move toward a more "market-oriented exchange rate," and the US House of Representatives plans to hold a hearing this month on China's currency policy.

"Multinational manufacturers in China would want to diversify due to the risk for protectionist measures in the US," said Tai Hui, Singapore-based head of Southeast Asian economic research for Standard Chartered. "If you are only in China, you might want to have a plan B."

Bloomberg - March 22, 2010