Outsourcing Finds Vietnam

By KEITH BRADSHER - NYTimes.com - World Business

September 30, 2004

HANOI - With a portrait of Ho Chi Minh gazing down benevolently opposite the doorway and fan blades making leisurely orbits above, the long green room looks as if it could still belong to officials from the Communist-controlled legislature here, its former occupants.

Instead, the room holds one of the more unusual outposts in the shift of clerical jobs to ever-poorer countries in the developing world.

Vietnam is making a big push to turn itself into an outsourcing powerhouse. Mathematics instruction has long been the strong suit of Vietnam's educational system, and now the country's government is trying to train people across the country in computer skills.

At the same time, wages remain extremely low: World'Vest Base hires recent graduates with accounting or finance degrees, but no experience, for a starting salary of $100 a month, little more than an unskilled factory worker earns in neighboring China.

Very low wages and strong math skills are a combination that has made believers of some experts.

"You're going to see Vietnam competing with India and some of the other countries doing this within the next five years," said Pete Peterson.

Mr. Peterson was a prisoner of war here for six years during the Vietnam War who went on to become the first United States ambassador after President Clinton normalized relations.

Yet Vietnam still faces considerable obstacles in its pursuit of the kind of low-skill jobs that now employ hundreds of thousands of people in India, Malaysia and the Philippines, let alone the higher-paid computer programming jobs that have helped turn Indian cities like Bangalore and Hyderabad into prosperous models of economic development.

With the approach of the 30th anniversary of the fall of Saigon next spring, Vietnam remains one of the poorest countries on Earth. It still struggles under a Communist government that has moved more slowly than China's to embrace capitalism.

Government bureaucracy and regulations remain pervasive, especially here in northern Vietnam. Skills in spoken and written English, a prerequisite for a lot of outsourcing work, remain weak, although skills in French, a legacy of colonial rule, remain fairly strong.

The road system is in poor shape, especially in comparison with China, and Vietnam lacks the tidal wave of foreign investment that has helped China build so many modern buildings and factories. Multinationals have built some factories in Vietnam, including small auto assembly plants to supply the local market, but have refrained from setting up big telephone call centers, computer programming operations or other service-sector outsourcing.

"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.

Yet a handful of companies have set up shop here. A growing number of Vietnamese who fled the country at the end of the war and afterward have begun to return.

Atlas Industries Ltd. has 100 people in Ho Chi Minh City, formerly Saigon, performing the technical tasks of turning architectural drawings from Britain into detailed blueprints that can be used by British construction companies. Joseph Woolf, the company's chief executive and founder, said that he preferred Vietnam to India because Vietnamese employees were more loyal and less inclined to change jobs repeatedly or seek work overseas, two problems some companies have encountered in India.

"People are more committed to the company, the country and the family," he said.

At the same time, Mr. Woolf, a former project manager for a succession of British oil companies, said that he was sensitive to concerns that his operation might be taking work from British architects. All his customers in Britain are successful architectural firms that are expanding and adding staff, not laying them off, he insisted.

Job losses may be occurring, however, at other firms that are losing market share.

At the 38-employee operation here of World'Vest Base, young men and women sit at computer terminals with high-speed connections to the Internet. Surfing the Web, they fill spreadsheets with prices from obscure stock markets in places like Kazakhstan and Mauritius, then distribute them to investors specializing in emerging markets.

For investors seeking gems in bigger stock markets, they glean financial data from French annual reports and comb S.E.C. filings. They also gather data from local companies seeking to prove their creditworthiness to international banks.

Nam Nhat Tran, 28, found the annual report of Groupe Global Graphics in France online and copied the company's cash reserves into a database; her screensaver is a photo of the red wooden footbridge that has long been a symbol of Hanoi and a rendezvous point for lovers.

Nguyen Cam Nhung, 23, an experienced hand after six months on the job, sat nearby and coached Tran Trong Tuan, 25 and newly hired. He scrolled up and down through an S.E.C. filing from the American company 3M, looking for depreciation figures from last year.

"I'm learning new things about finance," Mr. Tuan said.

Jonathan Bloch, the chief executive of Exchange Data International, a company based in London that distributes financial information to big investment banks and other customers, said that data from World'Vest Base was inexpensive and reliable.

"We outsource also in India and the Czech Republic," he said. "Vietnam compares very favorably; I think they're on a par."

In coming to Vietnam, Philippe O. Piette, the chief executive of World'Vest, who was born in Antwerp, the Netherlands, has followed an odyssey that says much about how far some companies are willing to look these days for cheap labor.

Trying four years ago to expand overseas, he initially considered Dubai because he wanted to sell market data from Arabic-speaking countries. But he found costs in Dubai were too high, and that few Arabs were available anyway.

"The labor pool was all Indians, Bangladeshis, Pakistanis and Filipinos - no Arabs," he said.

Mr. Piette considered India, but was discouraged by what he saw as sloppiness and poor quality in data-entry operations there. So he ended up opening an operation three years ago in Kuala Lumpur, Malaysia, a polyglot nation with many linguistic groups that were brought together before it gained independence from Britain in stages, beginning in 1957. But wages in Kuala Lumpur are still fairly high: $450 a month for a new graduate and as much as $800 a month for someone with a few months of experience. Even worse for Mr. Piette was the job-hopping.

"We lost a whole slew of people - we're the perfect training ground for the investment banks and brokerage houses," he said.

Mr. Piette, a naturalized American, wanted to offer more data from French-speaking countries and looked to former French colonies in Indochina. He called a diplomat to inquire about Cambodia, was told it was hopeless, and flew to Hanoi late last year instead.

Five decades after independence from France, Hanoi is still poor, with practically no skyscrapers and streets still filled with motorcycles and bicycles. When Mr. Piette tried to place an overseas call from his hotel, it took him nine hours to get an international phone line.

Dismayed but not deterred by the delay, he kept investigating.

He found that Vietnam had not only plenty of French speakers and some English speakers, but also lots of people who spoke Russian and German, having worked in the former Soviet Union and the former East Germany. While World'Vest Base still has 56 employees in Kuala Lumpur, its biggest expansion now is in Vietnam, where Mr. Piette now pays up to $400 a month to some of his first hires who are especially productive and have stuck with the company.

Being a native French speaker has helped in navigating the government bureaucracy.

"The whole country runs on who you know, not what you know," Mr. Piette said. "It's true of most countries, but it's particularly true here."

 

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