In the textile industry, companies are increasingly looking for lower cost countries that can provide outsourcing opportunities. The rising cost of land and labour are diminishing China’s labour cost advantage and Vietnam is increasingly seen as a low cost sourcing alternative to China. Estimates are that wage levels in Vietnam are about one third of those in China’s coastal region. Companies that are chasing lower labour costs are increasingly moving production to Vietnam. In a 2008 Booz Allen Hamilton survey 88 percent of companies originally chose China for its lower labour costs. Of the companies surveyed, 55 percent believe China is losing its competitive edge to countries such as Vietnam. The survey also indicated that 63 percent named Vietnam as their top low cost sourcing alternative to China. However, costs may be rising. The Navigos Group, a leading recruitment solutions provider in Vietnam, announced early in the year that there had been a 16.47 percent increase in Vietnamese workers’ average gross salaries between April 2008 and March 2009.

Low cost location

However, low cost labour is hardly a competitive advantage in the long term. Labour cost keeps changing and today’s low cost location is not necessarily tomorrow’s viable outsourcing location. If it is not China or Vietnam, it could be Bangladesh or Cambodia. Ig Hortsmann, a professor of business economics at the University of Toronto’s Rotman School of Management notes that Nike originally off shored manufacturing to Japan. As labour costs increased, manufacturing was later moved to South Korea and Taiwan. When labour cost increased in South Korea and Taiwan, it was moved to China and later also to Vietnam. Justin Wood, a Director of the Economist Intelligence Unit Corporate Network in Singapore makes the point that in the last 15 years Vietnam has moved from a low to a middle income country. The move towards a middle income will likely put additional pressure on Vietnam’s low cost labour status.

Intellectual property threat

For many companies outsourcing to Vietnam, intellectual property (IP) remains a concern. Within the fashion industry, IP is not as enforced as it is within the film and music industries. Designers can “take inspiration” and it is seen as a major driver for setting trends in the industry. The World Intellectual Property Organization (WIPO) has called for stricter intellectual property enforcement within the fashion industry to better protect companies and promote competitiveness within the textile and clothing industries. “It is a hard thing to take care of and you just have to be faster than everybody else”, says Rolskov. For smaller designers and labels it is much easier to switch manufacturing. However to prevent the copying of designs is a challenging undertaking.

Infrastructure development

For Vietnam to advance as an outsourcing location, the textile industry supply chain needs to be considered. Local logistics are influenced by direct and indirect cost. In Vietnam’s textile industry raw materials are often imported, which increases cost compared with those countries able to source locally. Managing reverse logistics can also be a challenging undertaking in Vietnam. Procedures, processes and infrastructure are sometimes not in place to manage repairs, returns and warranties.

According to a new market research report from Transport Intelligence (Ti) entitled Vietnam Logistics 2009, the high cost of logistics remains one of the biggest stumbling blocks in Vietnam. According to TI analyst John Manners Bell, logistics costs are estimated at 25 percent of Vietnam’s GDP. Even with cheap labour cost, poor infrastructure remains a major barrier for entry. This is largely due to Vietnam being in the early stages of infrastructure development.

Many experts believe that China’s advanced infrastructure gives it a major competitive advantage. Electricity and transportation costs will likely come down even further and and this will have a significant impact on the total cost, even if their labour is more costly. The Vietnamese government is aware of this dynamic and has invested billions of dollars in the country’s infrastructure. The government is actively encouraging foreign direct investment in the country’s infrastructure. This is visible with projects such as the Cai Mep Container Port in the Mekong River Delta and the new Long Thanh airport that’s projected to be completed by 2015.

Through assessing the overall supply chain, rather than a singular focus on labour costs, it is easier to identify where Vietnam’s opportunities and challenges lie in the textile industry. While small scale designers and manufacturers take advantage of a flexible environment, infrastructure and logistics processes will need further investment to make Vietnam an outsourcing destination and source for tomorrow’s fashionista wardrobes.

Vietnamese is a language in the Vietic group, Mon-Khmer branch and Austroasiatic language family. Vietnamese is an analytical language, and its grammar relies heavily on word order and sentence structure.

During the period from the 1st-2nd and 9th – 10th centuries Vietnam was ruled by the Chinese; proto-Vietic was influenced and borrowed much vocabulary from Han, Tai-Kadai and Nam-Dao languages and then became ancient Vietic, a monosyllabic language.

From the 10th to 14th century, with the end of Chinese domination Vietnam established an independent feudal regime. As the result of Vietic being used as a mother-tongue by common people and Han being used as an official language, Sino-Vietnamese (Han-Viet) words were formed by borrowing from Han. This particular means of borrowing was different across the regions, which split Vietic into two parts. These parts are said to be the Vietnamese and Muong languages as known today. Although almost 50% of words were borrowed from Han but most of them were changed so Vietnamese did not lose its own characteristic. For example, Chinese has 4 different tones but Vietnamese has 6 – mid level, low falling, high rising, mid dipping-rising, high breaking-rising, low falling constricted.

A character called “Chu Nom” was said to be created by some Vietnamese Confucian scholars to record Vietnamese spoken sentences based on Han (Chinese) characters. It is known as the first obsolete script for recording the Vietnamese language. Research suggests it was created as a complete writing system around the 11th century. It was then used more during the 13th – 18th centuries and nourished Nom literature and Nguyen Du’s Tale of Kieu.

From 16th century, missionaries from the West entered Vietnam and used Latin characters to record Vietnamese words and invented the modern Vietnamese script. Alexandre de Rhodes was the first person who printed the books in Quoc Ngu, which marked its first appearance.

Under French colonisation (19th century), French was taught at school instead of chu Nom. The French authorities also banned the use of classical Chinese (Han), leading to the decline of chu Nom since it is similar to Han. During the early half of the 20th century, it gradually died out whereas Quoc ngu grew more and more standardized and popular because it was simpler and easier to remember. At the same time, Vietnamese adopted many French terms into its lexicon, e.g. ga from gare [French] – train station, pho mat from fromage [French] – cheese or bup be from poupee [French] – doll.

However, the current Vietnamese scripts have been changed compared to the scripts at Alexandre de Rhodes’s time. For instance, the words beginning with tr nowadays are tl or bl. The person who received credit for creating the current Vietnamese scriptswas Pierre-Joseph Pigneaux de Behaine with his Annam-Latin dictionary.

The alphabet of chu Quoc Ngu has 27 Latin letters, with 6 tones. It replaced French, Han and Nom because it records Vietnamese phonetics in a simple and scientific way. After The Geneva Accords (1954), the North-South division caused the development of Vietnamese to differ regionally. While the North imported some spoken Chinese words, the South imported some English/American words into everyday language. Since re-unification (1975) Vietnamese has been more standardised.

There are various mutually intelligible spoken dialects of Vietnamese, with three main dialects being: Northern (including Hanoi), Central (including Hue) and Southern (including Saigon). The Hanoi dialect is accepted as the standard. The central dialect is markedly different from the others due to its local vocabulary. Although all dialects use the same spelling and written language, they have the different tones and consonant in a given word.