Following its recent decision to build a $1bn industrial technology park in Vietnam, Hon Hai Precision Industries, the world's largest contract electronics manufacturer by revenue, plans to invest an additional $4bn in Vietnam in the next few years, making it the largest private foreign investor in the country.
Hon Hai signed a deal in January to construct its third-largest overseas industrial park in Hanoi, with production likely to begin by the end of the year. Hon Hai, a contract maker of a wide variety of electronics and parts, including motherboards and connectors, currently has factories in Taiwan, China, Brazil, the Czech Republic and Ireland. In Vietnam, the company is planning to manufacturer digital cameras, printed circuit boards, cases for PCs and connectors. It will also set up PC assembly lines.
Terry Guo, the chairman of Hon Hai, made a trip to Vietnam last year and was reportedly impressed by Vietnam's general investment environment, characterised by low taxes, cheap land and a hard working labour force.
The Vietnamese economy is booming and since its accession to the World Trade Organisation (WTO) in January, the country has reduced its subsidies and opened its markets. Its textile export quota has been abolished, which is expected to encourage investment in the industry. Vietnam has also opened up its service industries, which is prompting Taiwanese companies to look at opportunities in the telecommunications and financial services.
Cathay Financial Holdings, Taiwan's largest financial holding company by assets, announced in February that, along with China, Vietnam has been identified as a key market for expansion. Cathay Life has applied for licences to open life and property insurance companies. Cathay United Bank, which currently has 13 business points in Vietnam, will open four to five new branches this year.
Meanwhile, Chunghwa Telecom has been looking at opportunities in the Vietnamese mobile phone market. At the end of 2006, mobile penetration rate was just 10% and it is expected to double to 20% by 2008.
Even though Taiwan accounts for the largest amount of foreign investment in the country, Vietnam, like with most of the international community, does not have official diplomatic relations with Taiwan and pressure from Beijing prevented Taiwanese President Chen from attending the Asia-Pacific Economic Cooperation (APEC) summit last year in Vietnam.
Morris Chang, the chairman of Taiwan Semiconductor Manufacturing Company, represented Taiwan at the summit. According to reports, Morris Chang was allowed to fly in the Taiwanese presidential aircraft, which bears the Republic of China's flag. This was the first time a plane bearing Taiwan's flag has landed in a country with which it does not have diplomatic relations.
Another area of cooperation between Vietnam and Taiwan involves their agreement to set up a joint "infectious disease laboratory" to help share resources and fight contagious diseases. The agreement, which was signed last year, allows for information to be shared between research institutes in both countries. The agreement is significant as Taiwan is not a member of the World Health Organisation.
According to statistics released by the ministry of economic affairs, Taiwan invested $8.26bn in Vietnam up to December 2006, making it the largest foreign investor in Vietnam. However, investment in 2006 ranked ninth, as companies from other nations piled into this booming market.