Day Two

Wednesday 19 Sept '07

Itinerary:
1. TOTO Vietnam Co. Ltd at Thanh Long Industrial Park
2. KinderWorld Kindergarten & Private School
3. 1st Networking Dinner

TOTO Vietnam

TOTO Vietnam is located in Thanh Long Industrial Park. The signboard shows some other tenants of the park.

The host manager of the day was Mr Bao, the production manager of TOTO Vietnam. TOTO is actually a Japanese company which produces sanitary wares and has operations outside its home country (i.e. engages in international business). The company exports to various countries such as German, China, Korea, Japan and Taiwan. The competitive edge of TOTO lies in its Ceramic Fine Ion Technology (Cefiontech), which creates a smoother finish thus making it easier to flush waste particles. Besides this, TOTO products are also recognised for their water saving and flushing ability.

Like most factories, TOTO identifies the different ranks using colours.

• Red Manager
• Blue Supervisor
• Yellow Leader
• Green Foreman
• No tag Worker

Personally, I feel that TOTO has come up with a very good system of ensuring employee satisfaction. There is a suggestion box within the factory and workers will be rewarded for their innovation (only the outstanding ideas). Hence, employees are given a chance to voice out their opinions.

As sanitary wares are bulky in nature, TOTO exports its products by sea while trucks are used for domestic distribution. Mr Bao mentioned that TOTO does not use air freight as it is very costly. The company's product market is 40% domestic and 60% exports.

He also mentioned that the biggest problem of operating in Vietnam is human knowledge. As the production of sanitary ware requires experienced handicraft skills, it takes time to train such workers. In the product line, time is of the utmost importance and a minute less can result in monetary losses. However, the countryside people in Vietnam do not have this mindset.

In Vietnam, the government grants privileges and incentives in terms of land, tax (e.g. on exports), VAT, etc.

Business Opportunities:

Labour intensive companies like TOTO may take advantage of the cost-effective labour in Vietnam. By doing so, they will be able to produce goods at a lower production cost and reap a higher profit margin.

In addition, the government supports foreign investments by granting privileges and incentives. Such grants can snowball to a significant amount of savings for the company, thus potential investors may want to consider locating Vietnam to enjoy such benefits. The government is also very supportive of exports as it wants to protect the domestic producers. Export-oriented companies will thus enjoy further benefits.

KinderWorld Kindergarten & Private School

When we got there, we had trouble crossing the road as it was sardine packed with motorcyclists. The first impression I had when I entered the school was positive, the classrooms were nicely decorated. However, the downside was that the stairs and pathways were all very narrow, creating "human traffic jams" at certain corners while we were touring the classrooms.

KinderWorld is owned by a Singaporean, Mr Ricky Tan. The school provides training for industries in high demand and is planning to open an educational hub in Hanoi (target of 1 million students). The principals and teachers are mostly from Australia and New Zealand, and lessons are conducted in English.

In order to cope with students of different language standards, KinderWorld has English Second Language (ESL) programmes to cater to slower learners. The aim is to have a smaller focus group so that students learn better. Although the kids belong to different nationalities (over 10), there are no racial tensions and they get along very well.

Business Opportunities:

As highlighted by Mr Tan, there is a huge demand for educational services in Vietnam. Hence, there are several opportunities in the education arena. Vietnamese value education very much due to their strong belief in Confucius. Moreover, as mentioned by Canh, all Vietnamese parents are willing to spend money to educate their children.

By entering a market with demand, the chances of success are higher as the product/service caters to the needs of the consumers. IB companies may also be able to have a higher mark-up as consumers are willing to spend.

1st Networking Dinner (Hanoi)

There were 5 guests speakers and they were representatives from the Singapore Business Association Vietnam (SBAV). All of them were from different industries such as education, banking (Citibank), telecommunications (Singtel), etc. The guest at my table was Mr Dennis Khoo, who was in the education line.

In Vietnam, language is one of the most prominent barriers for foreign investors. Even if they were to hire a translator, the essence of what was originally spoken may not be brought across. Thus, it is difficult to establish mutual understanding and misunderstandings may arise.

For foreign companies setting up operations in Vietnam, only 3% of the total workforce can be foreigners. The remaining 97% must be Vietnamese. This regulation is an effort by the government to create employment for the local people.

Business Opportunities

Mr Khoo mentioned that there is a demand of international schools by the youngsters. Even if the parents are not rich, they see the importance of education for their children. For example, the education institution Mr Khoo works at has a waiting list of 3 years due to the high demand. Therefore, demand for a product/service plays an important role in dictating the ultimate success of the business.

With Vietnam's recent admission to the WTO, many bilateral agreements have been signed. This enhances Vietnam's attractiveness as an investment location as current laws and restrictions will be subsequently liberalized to comply with WTO requirements. Exporting from and importing to Vietnam will be more favorable as tariffs will be lowered thereby increasing the profit margin.

There are more private sectors (e.g. Canon) located in Southern Vietnam, thus the government is encouraging more business in the North. This is probably due to over-crowding in the South, for instance, the Saigon port is facing congestion.

As for the infrastructure in Vietnam, land and electricity are expensive. Due to the shortage of power, the government is encouraging foreign companies to set up hydroplants. Companies in the energy sector may want to take on this business opportunity while helping Vietnam to achieve a stable power supply. On the other hand, water supply is relatively cheap and labour is cost-effective.