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Viet Nam
Industrial Park Situation
Text by Saito Hiroshi
The 31st Pitfalls of Small and Medium-Sized Manufacturing Companies Entering Vietnam
As a trigger for Japanese small and medium-sized manufacturing companies to enter Vietnam, there are many cases where companies expand into Vietnam to provide employment for Vietnamese staff who have worked as trainees or engineers in Japanese factories for several years and are returning to their home country after their term ends.
In such cases, it is important to be cautious about the common practice of appointing staff who worked as trainees or engineers in Japan as the managers of the local subsidiary in Vietnam. While these Vietnamese employees diligently followed company policies during their time in Japan, there is often an emotional attachment that leads to their appointment as managers. However, this can lead to significant pitfalls.
1. They have no experience in managing a company: While they may be able to handle tasks in the factory without issue, their lack of experience in company management increases the risk of unnecessary costs arising due to their inability to manage expenses, oversee employees, and negotiate with vendors.
2. A factory should not be established in their hometown: Setting up a factory in the hometown of Vietnamese staff can create an environment prone to corruption, as they may hire relatives or engage in collusion with familiar vendors to receive kickbacks.
Solutions
- For at least the first one to two years after establishing the local subsidiary, it is essential to appoint a Japanese employee as the manager. Contracts with vendors should always be compared by obtaining estimates from multiple companies before making a decision. If it’s not possible to send a Japanese employee from the home company, hiring a Japanese staff member with experience in factory management in Vietnam is also an option.
- It is particularly important to have checks in place, as staff in the purchasing department are often prone to corruption. Regularly rotating staff between departments and re-evaluating vendors is crucial.
- The location for establishing the factory should avoid the hometown of the Vietnamese staff.
Many owners of small to medium-sized manufacturing companies in Japan tend to think from an optimistic perspective. However, when Vietnamese individuals return to their hometowns, they are often influenced by negative associates who may lead them astray. Even if they initially have no intention of engaging in wrongdoing, many can easily be swayed, so it is risky to place too much trust in them.
齊藤公(Saito Hiroshi)
Business Advisor
G.A. Consultants Vietnam Co., Ltd
After graduating from university, he joined a PHP research institute and served as the head of the New York office. He then worked on the “Nagoya Port Redevelopment Project” at a subsidiary of the Chubu Nippon Broadcasting (CBC) company. He later shifted his base to Asia, where he was involved in the launch of “FM96.3” in Singapore, and the creation of “Hello Vietnam” and “Invest Asia” magazines in Vietnam. He then joined BW Industrial Development JSC, Vietnam’s largest rental factory development company, where he was responsible for attracting Japanese manufacturing companies. Currently, he is active as a consultant for the entry of Japanese companies at “G.A. Consultants”, one of the longest-standing Japanese HR consulting firms in Vietnam.
