South-Western College Publishing - Economics  
Vietnam: The Next Hot Spot For Outsourcing
Subject Outsourcing
Topic Developing and Transitional Economies
Key Words Outsourcing, Wages, Skills, and Training
News Story

Vietnam has recognized the potential impact of being on the receiving end of the outsourcing phenomenon. Countries like India, Malaysia and the Philippines have been on the forefront of providing low wage, highly skilled workers to foreign firms looking to reduce costs by outsourcing parts of their operations.

These characteristics of low wages and high skills make Vietnam a perfect candidate for capitalizing on the outsourcing boom. Instruction in mathematics has long been a strong point of the Vietnamese educational system. Now the government is providing computer training to people all across the country to further enhance the skills required to attract foreign business.

"You're going to see Vietnam competing with India and some of the other countries doing this within the next five years," according to Pete Peterson, once a Vietnamese prisoner of war. Peterson later became the first United States ambassador to the country after President Clinton normalized relations. If Vietnam is successful in its pursuit, it can follow in the footsteps of other countries where hundreds of thousands of jobs have been created by a similar strategy. In the longer run, not only are lower-paying manufacturing jobs created, but better-paying jobs in computer programming have helped turn struggling economies into prosperous models of economic development as well.

Considerable obstacles still stand in the way of the Vietnamese attempt to match skills and wages with available opportunities. Vietnam is currently among the poorest countries on the earth; they remain under the governance of a communist regime that has moved even more slowly than China to embrace the notion of capitalism, and government bureaucracy and regulations remain pervasive.

The country is not yet attracting the large multi-national firms that provide thousands of jobs, but they are increasingly attracting small to medium firms. "You're not seeing the I.B.M.'s, H.P.'s, or Infosyses of this world charging in there," said Philip Hassey, the associate director for Asia and the Pacific at the International Data Corporation.

One company, World'Vest Base, employs 56 people in its Vietnam operation. World 'Vest Base director Mr. Philippe O. Piette was discouraged by sloppiness and poor quality in data entry operations in India. This encouraged him to investigate Vietnam. In addition to low wages and needed skills, he found plenty of French speaking people, some English speakers, and many people who spoke Russian and German. The company is now expanding its operations in Vietnam.

Chief executive of Exchange Data International Jonathan Bloch is a customer of World'Vest Base, and he said that he considers the data entry they provide to be inexpensive and reliable. "We outsource also in India and the Czech Republic," he said. "Vietnam compares very favorably; I think they're on par." With most indicators pointing in the right direction, Vietnam is likely to become the next hot spot for foreign businesses looking to outsource parts of their operations.

(Updated November, 2004)


Define outsourcing and discuss its effects on both the home base country and the country receiving the jobs.

2. Why do firms consider outsourcing as a part of their business strategy?
3. Why do countries consider outsourcing as a part of their economic development strategy?
Source Keith Bradsher, " Outsourcing Finds Vietnam", The New York Times Online, September 30, 2004.

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