When Lego Chose Communist Vietnam Over Democratic Philippines As Its Asian Home

Vietcetera International Edition

It's something when the Philippines says it's a democratic country but it's got very restrictive economic policies. Meanwhile, Vietnam which also calls itself the Socialist Republic of Vietnam is actually embracing free markets (read here). Like the Chinese Communists of China, the Communist Party of Vietnam has decided to embrace foreign direct investment (FDI) as part of its policy. It can be said that the Philippines still embraces it but as what? Unlike the Philippines, Vietnam ironically doesn't place the 60-40 nonsense policy where FDIs can only own 40% of their shares. Besides, it's really very stupid to expect an inflow of FDI while saying that FDIs will need a Filipino partner and they can only own 40% of their net profits (read here). That's why I even wrote an article where I called the 60-40 arrangement to be nothing more than overpriced rent (read here).

What's with Communist Vietnam, really, that Lego chose to establish their factory there? I'd like to mention these words from Vietcetera International Edition. These words truly make me realize how the Philippines (as a democracy) has lost an edge against Communist Vietnam:

Danish toymaker Lego Group officially began the construction of the Lego factory on Thursday, following a momentous groundbreaking ceremony held in Binh Duong Province in southern Vietnam. The factory is estimated to cost $1 billion, the largest-ever investment by a Danish company in the country.

His Royal Highness Crown Prince Frederik of Denmark and Deputy Prime Minister of Vietnam Pham Binh Minh led the ceremony at the 44-hectare site. Lego’s Chief Executive Officer Niels B. Christiansen and Chief Operations Officer Carsten Rasmussen, as well as national and provincial officials, were also present at the event.

“We are grateful for all the support we have received to realize our manufacturing ambitions and look forward to working with authorities and partners to build our factory and have a positive impact on the local economy and community,” said Christiansen.

I still remembered how the late Lee Kuan Yew highlighted Vietnam in one of the chapters of From Third World to First. The great Communist, the late Nguyen Duy Cong (aka Do Muoi), decided to modify the economic model. Like Deng Xiaoping who died in the late 1990s--Do Muoi was the founder of the Doi Moi movement. I really commended the meeting of Lee with Do Muoi. Do Muoi, though a Communist, saw the beauty of the free market. It can be seen how Vietnam is now a manufacturing hub in Southeast Asia. A shame, really, that the Philippines has missed that opportunity as a supposedly democratic country.

Economist Andrew J. Masigan also wrote for The Philippine Star on why he felt Vietnam overtook the Philippines. Sure, I have differing political views from Masigan. However, Masigan has been making sense with how he gives criticism. I would like to share this excerpt from his opinion regarding how Communist Vietnam overtook the democratic Philippines:

The unfortunate reality is that our economy is not structured in a way that allows 7 percent growth. Ours is an economy driven by consumer demand and government spending, not by production. Thus, government needs to spend more to squeeze more growth out of the economy – but doing so would mean acquiring more debt.

However, our economic managers are not inclined to increase the country’s debt stock, as doing so may compromise our investment grade status. The last the Duterte government wants is to end its term with a credit rating inferior to what it inherited from PNoy.

It therefore comes as no surprise that despite an anticipated economic contraction of 9 percent this year, government allotted the lowest stimulus package in the region amounting to just 5.83 percent of GDP. For context, Vietnam’s stimulus package amounts to 10.12 percent of GDP. This means the Philippines will be left further behind in 2021 and 2022.

Our hope is that the leaders elected in 2022 will make that long overdue shift in economic policy.

The new leadership must curate the conditions to allow the millions of low income workers in the agricultural, hospitality and retail sectors to migrate to more sophisticated jobs in the manufacturing or technical services sector. When this is done, the country will naturally shift from being an economy driven by consumption and government spending to one driven by production. A national program must be carried out to widen our industrial base and expand the range of products we can competently produce. We must then climb the value chain in technological complexity, uniqueness and quality.

In short, the next leader must foster an era of rapid industrialization and it must be made a national priority. It starts with fundamental reforms to make our environment more conducive for manufacturing. Unless we pivot to industrialization, we will soon find ourselves falling further behind the development race.

Speaking of Vietnam, I did write about how Jollibee ended up opening its 150th branch in Vietnam. Good News Philippines had given these words regarding Jollibee's expansion in the Communist state:

Jollibee’s opened its first store in the country 15 years ago, one of the first international markets entered by the successful Filipino restaurant chain. The Filipino brand is the only QSR brand to have built and operated its own commissary in the country.

“Vietnam is one of the most important markets for us as it is among the fastest-growing economies in Asia and has a huge young and vibrant population. It is also one of the first international markets we entered in the earlier years of Jollibee. Even if the pandemic sparked many challenges, Jollibee Vietnam has managed to sustainably grow and exceed our expectations. The opening of our 150th Jollibee store is a testament to the special place this country holds in Jollibee’s history and heart,” said Ernesto Tanmantiong, Chief Executive Officer of Jollibee Group.

Jollibee has successfully captured the local market in Vietnam over the years, with 100% of its customers being Vietnamese. Alongside its bestselling crispylicious juicylicious Chickenjoy, Jollibee’s Sweet Chili Chicken has become a hit among the Vietnamese people, with its savory, sweet and mildly spicy Chili Glaze. Another fan-favorite is Jolly Spaghetti, served with its signature sweet-style sauce and beef sausage topped with generous cheese.

The Philippines has so much potential. Once upon a time, the Philippines used to house Vietnamese refugees. However, the great Communist known a Do Muoi made Do Moi. I guess the whole economic movement was named after him. Vietnam began accepting FDIs. Meanwhile, the Philippines was stuck for a long time with the "Filipino First Policy" which I call to be almost identical to Mao Zedong's failed economic policy. The aim of the Filipino First Policy was to make Filipinos hold the majority of the economy. That was also pretty much what Mao wanted--the Chinese to own the majority of the economy. However, the big problem is Filipino First Policy only caused the Philippines to fail. China tried it and the Great Leap Forward was a failure. Deng's economic liberalization and new Chinese socialist mindset worked. Deng got rid of the victi mentality and ended up saying, "Poverty isn't socialism. To be rich is glorious." Hence, began the movement called Socialism with Chinese Characteristics.

Now, it's left behind because of that--not because of corruption, political dynasties, or because of Ferdinand R. Marcos Jr. won against Maria Leonor Gerona-Robredo. It wouldn't matter if Marcos Jr. or Mrs. Robredo won if the Philippines will place remove the excessive restrictions against FDI. If only the Philippines decided to remove the negative list entirely. The Philippines will have more investment which means more income. It will also mean local businesses will have more opportunities to grow. It's time to let the Philippines be more than just a democracy--let it become an economically free democracy. It doesn't matter if the investors in the Philippines are Filipino or foreigners. What matters is that the investors provide jobs, teach new skills, and taxes for the country.

References

Books

"From Third World to First--The Singapore Story: 1965-2000) by Lee Kuan Yew

Harpers Collins Publishers

Websites

"[OPINION] Vietnam overtakes the Philippines. How did this happen?" by Andrew J. Masigan (November 5, 202)

https://www.philstar.com/opinion/2020/11/04/2054405/vietnam-overtakes-philippines-how-did-happen

"Business Times: Vietnam – A New Asian Tiger" by Rosy Huong (February 15, 2022)
https://vietnamtimes.org.vn/business-times-vietnam-a-new-asian-tiger-40033.html

"$1-Billion Lego Factory Breaks Ground In Vietnam" by Agnes Alpuerto (November 4, 2022)

https://vietcetera.vn/en/1-billion-lego-factory-breaks-ground-in-vietnam

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