Taiwan Firms Warned About Vietnam

Early in the year we blogged about the exodus of Taiwanese firms from South China to Vietnam. Rising rents, increased minimum wages and the dropping of tax incentives made investing in China increasingly expensive. Many companies, including some tech companies, decided to move to Vietnam where the property and wages are both cheaper.

Recently, the Taiwan government warned against investing in Vietnam because of the devaluation in the Dong, the Vietnamese currency. China Economic News (CENS) reports:

Due to the sharp depreciation of Vietnamese dong, Taiwan firms in that nation are warned to be cautious, said P.C. Chiu, director of the Industrial Development and Investment Center of the Ministry of Economic Affairs.

The MOEA worries that the sharp depreciation of the Vietnamese currency might drive Taiwan firms to shut down as the devaluation could spark an Asian financial crisis like that in 1997.

C.Y. Chen, director of the Taipei Economic and Cultural Office in Ho Chi Minh City, said the Vietnamese government recently chose to raise interest rates and devalue its currency to check its overheated economy, which has sparked serious inflation. The Vietnamese consumer price index grew over 20% in May. Chen said, however, he believes Vietnamese economy would soon get back to the normal track.

MOEA statistics show that Taiwan is Vietnam`s second-largest foreign investor, only behind South Korea, with the number of Taiwan firms in Vietnam totaling 1,800 and overall investments reaching US$10.3 billion.

Digitimes reported however that both Compal and Mitac will remain in Vietnam. The report says:

Despite the sharp drop of the Vietnam economy recently and exchange rate fluctuations, Taiwan-based notebook makers Compal Electronics and Mitac Technology have both said they will continue their investment in the country, according to a Chinese-language Economic Daily News (EDN) report.

Compal pointed out that although the value of Vietnam's currency has dropped, from a investor's perspective, this means costs will be lower, noted the paper.

Mitac stated that since its plants in Vietnam will mostly produce products for export it will not see any major impact due to exchange rate fluctuations, added the paper.

Article 1: MOEA Warns Taiwan Firms in Vietnam Due to Devaluing Dong
Article 2: Compal and Mitac continue investment in Vietnam despite falling economy, says paper