This South Korean-owned factory, which produces millions of Nike athletic shoes every year, employs ceiling fans and an open-air design to keep its assembly lines comfortable in the tropical heat. Workers strolling between buildings on the manicured industrial campus wear pastel-hued polo shirts. Nearby, cheerful managers lead upbeat training sessions in air-conditioned classrooms.
Yet, one of the biggest problems for Nike and its Korean partner is hanging onto employees. Every year, more than one out of five workers leave for another job in Vietnam's rapidly developing economy, where wages for some skilled positions are rising by double-digit annual percentages. "Because people have so many more options, it's harder to retain people," says Shirley Justice, Nike's chief representative in Vietnam.
Now enjoying its third consecutive year of better-than-8% annual growth, Vietnam is on its way to becoming the latest Asian nation to swap a history of colonial poverty for hard-earned prosperity. On bustling factory floors and crowded city streets, the Vietnamese are visibly leaving old ways behind and embracing the certainty of better days ahead. Outsiders are noticing: Commerce Secretary Carlos Gutierrez last month brought executives here from 22 U.S. companies, including Ford f, Dow Chemical dow and 3M mmm, to scout business prospects. "Our relationship is growing very rapidly. But it could be a lot bigger, and it should be a lot bigger," Gutierrez says.
As Vietnam seeks to attract more U.S. investment, however, investors such as Nike nke are increasingly concerned about the country's ability to surmount looming bottlenecks. Chief among them: a shortage of skilled workers and woefully inadequate roads, ports and rail links. "Costs are going up significantly in this country. … In a couple years, if they don't come through on some of the things they say they'll do with ports, there's definitely going to be a bottleneck here," says Justice, whose background in logistics led Nike to assign her here.
Vietnam is a key link in Nike's global supply chain: Last year, the Beaverton, Ore.-based company shipped 75 million pairs of shoes from its Vietnamese suppliers and expects to ship 81 million pairs in 2008. Nike says its footwear and clothing orders keep 200,000 Vietnamese workers employed, so its views carry weight here.
Long overdue economic growth
Vietnamese officials recognize the need for action but regard the problems as the inevitable consequence of rapid — and long overdue — economic growth. After Vietnam was forcibly unified by the communist North Vietnamese in 1975, it spent a decade mired in disastrous economic experiments that brought it to the brink of famine. In 1986, communist authorities launched doi moi, a policy of market-based reforms, which seemed to mimic China's earlier market-friendly moves. Like its northern neighbor, Vietnam is a one-party state whose leaders are more interested in economic change than in political liberalization.
Only in recent years has the economy begun to gather steam, averaging 7.8% annual growth from 2001 to 2006. A young, well-educated population of enterprising workers and eager consumers is drawing the gaze of multinational corporations, long mesmerized by China's much larger market. Foreign direct investment exceeded $10 billion last year and is on pace to top $12 billion this year, thanks in part to Vietnam's joining the World Trade Organization in January.