I have been inundated the last few days with Google Alerts for PwC UK’s study on key business destinations in the emerging markets countries. I guess China is getting a little too problematic and expensive, and India is too “developed” and expensive, Moscow is PwC’s Achilles heel and Brazil is funky, so the advisory firm has to find the next new third-world country to exploit.
Manufacturers who chase low-cost labor will be constantly chasing their tail. Once a location becomes sexy, it becomes expensive and more savvy and so the world turns. The funny thing is that PwC is not at all shy about naming a country the “new new thing” on the basis of cheaper labor alone.
Mr. Ian Coleman
VietNamNet Bridge – Ian Coleman, Head of Emerging Markets, PricewaterhouseCoopers LLP, which released the well-known EM20 report in July 2007, explains why Vietnam tops the report as the most profitable emerging market for manufacturing companies.
VietNamNet Bridge briefs the conversation between a Tien phong reporter and Mr Coleman.
Reporter: In the latest reports released by the World Bank WB and the World Economic Forum WEF, Vietnam has fallen by several grades in the competitiveness index. Meanwhile, with EM20, Vietnam ranks first among the 20 emerging markets in terms of attractiveness as a destination for manufacturing companies. Is there a conflict in the reports?
Coleman: EM20 does not contradict WB’s and WEF’s reports, because the reports have been created using different methodologies.
In general, most of the reports are created based on the average score from the competitiveness indexes of many nations. Meanwhile the EM20 by PricewaterhouseCoopers (PwC) tries to reflect the actual viewpoint of the world on an economy by showing the potentials of the companies that are making investment in 20 emerging economies.This is the first EM20, and we will release the report annually; therefore, Vietnam’s competitiveness index will still see changes in the future compared to other economies.
Reporter: What factors persuaded PwC’s researchers to rank Vietnam No 1 in terms of the most attractive destination for manufacturing companies?
Coleman: The indices that always attract manufacturing companies are low production costs, corporate tax system, the cost for transporting goods to export markets, and scale of the market. I can say that the low labour cost, and the high economic growth rate are the two main reasons that help Vietnam rank No 1.
Reporter: Also in the EM20, while Vietnam ranks No 1 in attracting manufacturing companies, it nearly ranks at the bottom in the 20 emerging markets in terms of the service sector. Could you please tell us more about the contradiction?
Coleman: The indices in attracting companies in the service sector are based on how big the volume of the products in the service sector is that can be consumed in domestic markets.
The incomes of Vietnamese people remain relatively low, and the possibility that Vietnamese people spend money on the products of the service sector proves to be lower than the citizens of the rich countries in the Middle East or Europe. As a result, Vietnam’s score in terms of the attractiveness in the service sector is lower than the manufacturing index…
PWC is the world’s biggest business consultancy group, now operating in 150 countries and territories.In the EM20, Vietnam even exceeded the well-known BRIC (Brazil, Russia, India and China) in terms of attracting manufacturing investors. China also got 95 points, the same as Vietnam, but it ranked second since production costs in Vietnam are lower than in China. However, Vietnam just got less than 10 points in terms of attracting investors in the service sector.