Competition

Last year the Samsung subsidiary in Vietnam exported a whopping $12.5 billion worth of consumer electronics around the world.

The South Korean electronics giant opened its manufacturing plant in our Southeast Asian neighbor only about three years ago.

Samsung has a plant in Calamba, Laguna that manufactures optical disk drives for export, but the plant’s output does not come close to that of Samsung Electronics Vietnam Co. Ltd., which produces goods the brand is known for including smartphones, tablets and TV sets.

Recent news reports said the company is expanding its presence in Vietnam, raising its investment in a northern province by two-thirds or about $2.5 billion and constructing a $2-billion handset factory near Hanoi, the first of two in a $3.2-billion complex.

The expansion is being undertaken as Samsung moves out of China due to rising labor and other production costs. Analysts are sounding the dirge for the Chinese economic miracle, with The New York Times’ Paul Krugman writing recently, “You could say that the Chinese (economic) model is about to hit its Great Wall, and the only question now is just how bad the crash will be.”

Other manufacturing giants, notably Japanese firms whose government is feuding with Beijing over maritime territory, are also scouting around for new sites as growing prosperity raises the cost of doing business in China.

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An economic slowdown in China is bad news for the global economy and therefore for us. But we can take a cue from the Chinese and see opportunity in crisis. We should be attracting some of the foreign direct investment moving out of China, but our neighbors are doing a better job. Newly liberalizing Myanmar, with its tempting FDI incentives, may even beat us to it.

We should be taking advantage particularly of our recently approved free trade agreement (FTA) with Japan, which allows Japanese manufacturers to import their needed materials and equipment tariff-free. This is important especially for corporate giants such as Samsung, which last year imported $11.3 billion worth of goods into Vietnam.

We don’t have an FTA with South Korea, which is negotiating one with Vietnam. Corporate income tax in Vietnam is 10 percent. I was told that foreign ownership and land lease rules are also more attractive in that communist country than in the Philippines.

Our principal edge in the region, a skilled workforce, is becoming less attractive as our neighbors invest heavily in public education, technological training and English proficiency. In Vietnam, for example, kids are initiated into computer science in second grade, according to a recent news report.

Last year Samsung Vietnam directly employed 24,000 people, with downstream industries accounting for another 50,000 jobs. That should be a source of envy for any government hoping to attract more job-generating FDI to achieve inclusive growth.

Where their conglomerates go, so do Korean travelers. The Samsung operations have drawn about 130,000 Korean expats to Vietnam, and they are drawing more Korean tourists. That’s competition for us; foreign visitors to Vietnam, when they intend to go country-hopping in the region, tend to proceed to nearby countries such as Cambodia and Thailand. We’re located far from this grouping.

In the past years, South Koreans have consistently accounted for the largest group of leisure travelers in our country, with about a million of them visiting last year. It surely helped that we used to have the largest Korean expat community in the region, but the number is now down to about 90,000.

We should be increasing the number of visitors, and not just from Korea. Tourism Secretary Ramon Jimenez is doing a good job from his end – as acknowledged the other day by President Aquino – but the task of attracting visitors involves many other agencies.

Foreign investors are among the best endorsers of a tourist destination for their compatriots, and we have many good products for leisure travel.

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There were few specifics for attracting more FDI in President Aquino’s fourth State of the Nation Address the other day. Several investors told me they would have wanted to hear those specifics in that nearly two-hour SONA – the longest ever since the post-Marcos years.

P-Noy’s main concern in his SONA was to reassure the public that he intended to see his reforms sustained beyond his term.

He also sought to allay a growing perception that, as one prominent foreign businessman told me, there is political will – “but selective” – in fighting corruption, with administration officials accused of wrongdoing treated with kid gloves. P-Noy promised that authorities are looking into accusations of anomalies in the train supply contract for the Metro Rail Transit 3 (MRT 3) and the use of the congressional pork barrel.

Yesterday, the Department of Transportation and Communications announced that MRT 3 chief Al Vitangcol III had gone on leave pending the investigation of his alleged attempt to shake down Czech railway firm Inekon for $30 million in July last year.

In his SONA, P-Noy advised Pinoys to seize the opportunity for change, but it seemed he ignored his own advice when he turned down the resignation offer of Customs Commissioner Ruffy Biazon.

The customs chief made the revocable offer after his bureau stood out in the SONA for receiving the worst review from P-Noy.

To be fair, cleaning up the Customs bureau may take a superman. One interim measure being finessed is to make Revenue Commissioner Kim Henares concurrently in charge of Customs, until a larger reorganization of the bureau can be implemented with the passage of the proposed Customs Modernization Law.

Foreign investors are pushing for that law, but it was not among the priorities mentioned by P-Noy in his SONA.

Instead he warned that his anti-corruption campaign will now include even officials appointed under his watch.

That message is fine, but it needs to be accompanied by greater effort to stimulate investment. That is if P-Noy wants to create jobs, promote inclusive growth and make a dent in poverty alleviation in the remainder of his term.