Vietnam, illegal immigration and gold

Illegal immigration from Vietnam surges
In Vietnam, many young people want to work in China because the pay is much better, Hai says. "I earn 800 yuan a month here. Back home, I could only get 450 yuan at most."

Foreign Workers Replacing Chinese Migrants
"It's not a new phenomenon; it has been going on for a while. However, it has been in sharper focus recently because of the so called labour shortages in the Pearl River Delta," says Geoffrey Crothall of the China Labour Bulletin, a non-government organisation.

In February, just after the Lunar New Year, the Pearl River Delta had more than 2m job openings, according to The People's Daily, the official Communist party mouthpiece. The Pearl River Delta in Guangdong has for many years been the centre of China's light manufacturing industry.

...While there are also many illegal workers from other south-east Asian and African countries, Vietnamese workers are preferred because they look similar to the Chinese and many can speak the language. Most are given work on assembly lines that require no technical expertise or skills.
On the Chinese side, economists are looking for wages to rise further. For Vietnam, the interesting thing is that it is trying to build its capital base by importing the factories, rather than exporting its workers.
Is Vietnam Finally Ready for Foreign Investors?
Hanoi is cutting taxes and improving infrastructure in hopes of becoming the low-cost alternative for new factories and outsourcing call centers

Not everyone sees a big manufacturing exodus from other parts of Asia to Vietnam, especially given China's economic scale and far more advanced infrastructure. Even though costs have gone up in southern China's Pearl River Delta, companies can acquire goods from factories in less expensive parts of the country, like Tianjin or Qingdao in northern China. Before relocating to Vietnam "you would have to exhaust all the places in China," says Dan Berman, director of Langton, a Hong Kong-based supplier of stuffed animals and other toys to customers like Tesco (TESO) and Toys 'R' Us.

Vietnam boosters disagree. Don Lam, chief executive of investment firm VinaCapital Group, which manages $1.8 billion in assets in the country, points to the new highways the government is building to connect northern Vietnam to southern China. Those roads will enable Vietnamese factories to become part of Chinese supply chains more easily, Lam says, with a cost base that's at least a third lower than across the border. With China-based employers likely to feel the need to match raises offered recently by Honda, Foxconn, and others, that wage differential is only going to grow larger, he promises. "If people are thinking of relocating," says Lam, "now is the time."
The Market Vectors Vietnam ETF (VNM) has been dead money this year, but that's not a terrible performance. The economy is relatively sheltered from the global financial markets, but inflation is quite high, and that led a lot of Vietnamese to abandon the dong for gold.
Gold is effectively a parallel currency, says Scott Robertson, a senior economist with Dragon Capital in Ho Chi Minh. “It is a form of savings, people transact in it and it earns interest on deposit,” he says.

Many Vietnamese banks were offering 4.5 per cent interest by weight on gold deposits last year, 300 basis points above the rate they were offering for dollar deposits, and banks took in some $3bn worth of gold deposits in 2009, more than double what they held the previous year.

There are no accurate surveys as to how much gold Vietnamese hold, but Mr Robertson estimates that “street gold”, sums held outside the banking system, amounts to about $30bn, or 29 per cent of gross domestic product, and more than triple the volume of “street dollars”.

The wars and vast political upheavals that have ripped across Vietnamese society over the past six decades created a disposition toward assets that are liquid, portable and hold their value independent of bureaucrats, Mr Robertson says.

But he also says that Vietnamese investors have become expert hedgers of their currency and of equity risks. He points out that there was a huge spike in gold imports in mid-2008, just before the world stumbled into the financial crisis, although he declines to say whether he thought the move was driven by good luck or good judgment.

Dollars are popular, but have a number of shortcomings. Many Vietnamese have lingering memories of January 1996, when the US Treasury introduced new $100 bills and local currency dealers began refusing to accept older bills at par.

That is not the only problem. “Dollars fall apart in a highly humid environment. They go off,” says Mr Robertson.
Vietnam has some interesting dynamics, for sure.

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