Naturally inclined to turn towards the United States, Quebec companies sometimes look much further afield, including as far as Vietnam. First article in a series of five.
Long the darling of developed countries and their companies, China is now seeing them gradually turn away from it for economic reasons, but not only. This disenchantment – or, at least, this growing distrust – benefits other countries in the region, including its Vietnamese neighbor.
That morning, we had to go to an industrial district in the province of Binh Duong, about forty kilometers north of the city center of Ho Chi Minh City, the former Saigon, in the very south of Vietnam. As Quebec receives its first snowfall of the winter, the air-conditioned cabin of the car arrives as a providential refuge from the 35 degrees Celsius and the humidity that weighs on the Vietnamese metropolis.
It will take almost two hours to arrive at your destination because the traffic is so heavy, cars and SUVs from Japanese and European brands slowly and patiently making their way through a sea of scooters used for all kinds of purposes.
On this path, everything betrays an economy in full growth spurt. The futuristic glass towers that arise in the middle of the city. Brand new housing complexes that have replaced entire neighborhoods. Commuter rail, bridges and additional highway lanes under construction everywhere. The heterogeneous mix of small roadside stalls, modern shopping centers, workshops open to the four winds sheltered under simple tin roofs and factories planted in the middle of vast wastelands which will not remain alone for long.
Accelerator boost
That’s because the economy of the country of 100 million people has grown more than tenfold since the mid-1980s — and its real size is expected to increase by at least 40% in just 5 years, the World Bank predicts. . Rapidly growing, its middle class should then approach a third of the population.
This spectacular leap forward is notably a reflection of a liberalization of the Vietnamese economy set in motion by the communist regime at the end of the 1980s, following the example of China a few years earlier. This momentum would accelerate after the lifting of the American embargo on Vietnamese products in the 1990s. But things have been moving even faster recently, as developed countries and their companies have begun to distance themselves from its neighbor to the north.
Having been underway for several years now, as labor became more expensive in China and the country sought to move up in global value chains, this dynamic accelerated with the increase in trade tensions. and geopolitics between the Chinese giant and the West.
Some have spoken of a real economic “decoupling” between the two worlds, starting with strategic sectors such as high technologies. But in general, we don’t want to completely give up China’s production power and huge domestic market, so we instead talk about “risk mitigation” strategies and “China +1”, that’s that is to say, avoid putting all your eggs in one basket and look for other places where you could also do business, particularly in Asia.
Many foreign multinationals have thus turned to Vietnam, such as the sports equipment manufacturer Nike and the electronics giants Intel, Samsung and Canon, as well as the manufacturer of Apple’s iPhone devices, the Taiwanese Foxconn. Several Chinese companies have imitated them, thereby escaping the trade tariffs imposed by the United States on Chinese exports.
“The most popular girl in school”
Quebec and Ottawa were not mistaken when they, each in turn, recently unveiled “strategies for the Indo-Pacific” in which Vietnam is presented as a preferred business destination, particularly because of the dynamism of its economy, the trade agreements signed with it, such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), its membership in the Francophonie and the importance of the Canadian-Vietnamese diaspora. Quebec nevertheless admitted that Vietnam still part of its “blind spots” in the region, the opening of a simple commercial representation there, for example, is still pending, while British Columbia and Saskatchewan already have theirs there.
It must be said that, despite Vietnam’s strong growth over the past ten years (+440%), the value of its trade with Quebec still only amounted to a little over 2 billion in 2022, compared to 125 billion with the United States, 19 billion with China or 4.4 billion with Japan. Essentially a buyer of Vietnamese goods (2 billion), such as clothing and shoes, electronic products and seafood, Quebec sells in return, with difficulty and misery (120 million), flight simulators, products agriculture, pharmaceuticals and timber.
In Asia, the destinations favored by Quebec companies remain developed countries such as Japan, South Korea and Singapore, notes Marie-Ève Jean, vice-president of exports at Investissement Québec International. “But they’re not stupid. They understood that things move quickly in the region and that we have to know how to adapt. »
For the Consul General of Canada in Ho Chi Minh City, there is no time to lose. “Vietnam is the most popular girl in high school today. Everyone wants to get his attention,” observes Annie Dubé in her office located just opposite Saigon’s Notre-Dame Cathedral and the old central post office. The diplomat is also preparing a major Canadian trade mission in which around a hundred companies and 300 business people should participate. They will come in particular from the agri-food, clean technology, information technology and green infrastructure sectors.
The globalization of the bread bag
When we talk about major trends in international trade, we don’t naturally think of a Quebec manufacturer of bread bags. And yet, Emballage St-Jean is the very definition of a multinational, with around ten factories not only in Quebec, but also in five other countries. She has two in Vietnam, one of which we were heading to just that morning.
Wanting to maintain the flexibility afforded to it by its North American factories while gaining, for at least part of its production, the advantage of low labor and plastic costs in Asia, the company Quebec company set up its first factory in China in 2005, says its vice-president and head of operations, Mathieu Jeanneau. But seeing the growing hostility between the latter and its American export market, it added to its collection a first factory in Vietnam a few months before the election of Donald Trump in 2016 and transferred part of its production made in China there. Today, it has two factories and 185 employees in Vietnam.
“The speed at which Vietnam is developing is impressive,” says Mathieu Jeanneau. Our factories there are among our finest and the quality of production has nothing to envy of that in North America. »
It is not the only company to have adopted Vietnam, says the Port of Montreal, which signed a “strategic collaboration agreement” there last month. “In fact, almost every port in the world is interested in Vietnam at the moment,” he said by email to Duty his spokesperson, Renée Larouche, a month earlier. “Their manufacturing industries are booming. »
The Aldo Group has been manufacturing shoes in Vietnam for just over eight years. This was also, explains the company, “to diversify our manufacturing activities to ensure better flexibility in the event of a disruption in our supply chain and to reduce our dependence on other territories”.
A market to conquer
Aldo also has a little over thirty stores in the country and believes it can double its turnover in less than five years as the middle class is growing rapidly. “The growth potential in Asia is such that we do not yet know the depth of the lake in which we come to fish,” summarizes the vice-president for Asia-Pacific and Latin America of the Aldo International Group, Shawn Cohen .
Another sign of Vietnam’s dizzying economic growth, the route between its capital, Hanoi, in the north, and Ho Chi Minh City, in the south, is the fourth largest domestic air route in the world in terms of traffic, underlines Simon Azar, vice-president in training for commercial aviation in Asia-Pacific at CAE. The Montreal manufacturer of flight simulators not only sells its machines there, but has also opened a training center. “It’s important to be there to grow with them. »
Economic interest in Vietnam, as in the other nine countries of the Association of Southeast Asian Nations (ASEAN), goes well beyond conflicts between China and the West, argues Thi Be Nguyen, Managing Director for Canada of the Canada-ASEAN Business Council. The region alone represents a market of 700 million inhabitants, of which 200 million belong to the middle class.
Under cover of anonymity, business people say they are happy to be able to distance themselves from China. We complain, among other things, of the arbitrariness of its rules, its favoritism towards Chinese companies and its lack of consideration for intellectual property. But on the other hand, China has often unparalleled production and transport infrastructures, argues Investissement Québec International.
Vietnam has many advantages, including a young and plentiful workforce, but it is not without its flaws, say those who do business there. Its congested roads and ports reflect the difficulty of its infrastructure to keep pace with the growth of its economy. Several development projects are already blocked due to lack of sufficient production and transmission capacity for electrical energy. The country is also not impervious to lack of transparency, arbitrariness and corruption.
“Vietnam is not without its challenges,” notes Consul General Annie Dubée. But the beautiful thing is that, unlike other places, we make the effort to identify them and try to tackle them,” she says, citing the example of his anti-corruption campaign. “The country is arriving at a pivotal moment where it will soon be known whether it has what it takes to follow in the footsteps of countries like South Korea and Japan, and where those who have waited too long to take an interest risk missing their chance. »
Vietnam in a few figures
This report was financed with the support of the Transat-Le Devoir International Journalism Fund.