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Prospect: Intel Corporation in Bangladesh - What can we learn from Vietnam?

By Abu Abdullah

Intel Corporation’s chairman Craig Barrett will visit Bangladesh during first week of September 2007. This could be viewed as an opportunity to develop partnership that brings a win-win platform. Craig made similar visit to Vietnam in 2002 which triggered the staggering investment afterward.

Intel Corporation entered the Vietnam market in 1997. Initial engagement was a sales office staffed by few employees and few thousand USD. Now in Vietnam Intel has Assembly and Test facility which will employ 4000 employee by 2009. Feb. 28, 2006 – Intel Corporation announced it will invest $300 million (US) to build a semiconductor assembly and test facility in Ho Chi Minh City. However, Nov. 10, 2006 – Intel Corporation raise its investment from the USD$300 million to USD$1 billion. The investment growth is phenomenon.

“Intel has enjoyed a strong, constructive working relationship with the Vietnam government, both at the local and national levels,” said Rick Howarth, general manager of Intel Products Vietnam. “We were very pleased that the discussions with the local authorities went smoothly so we could significantly expand the facility’s size.” The size increased from 150,000 square feet to 500,000 square feet.

For its part, the government of Vietnam is offering Intel incentives to locate there, including the promise of inexpensive electrical power and upgraded local transportation networks to get the plant’s thousands of workers to and from their job. The result will be a highly cost-effective facility for Intel.

Intel’s investment triggered a domino effect of FDI. “The real ‘Intel effect’ is starting to occur,” says Henry Nguyen, managing partner at IDG Ventures Vietnam. “Upstream and downstream partners and suppliers and customers it needs are coming.”

“In February 2006, Canon, Inc. announced it was spending $110 million on an ink jet printer factory near Hanoi,” Business Week reported. “Nidec Corp of Japan plans to build two plants to make electronic components, at a total cost of $940 million. Fujitsu Ltd. has invested $200 million and employs 3,200 people making circuit boards for PCs and phones. Virginia-based utility AES Corp. is negotiating to build a 1,000-megawatt power plant in the northern province of Quang Ninh that could cost as much as $1 billion. And Cisco System, Nortel Networks and Motorola are installing telecom equipment.”

Foxconn of Taiwan, also known as Hon Hai, the world’s largest contract manufacturer — with clients like Hewlett Packard (HP), Dell [DELL], and Apple [AAPL] — has applied for a license to invest up to $5 billion. It plans to manufacture electronics and computer products including digital cameras, personal computer printed circuit motherboards, and music players. Compal Electronics has unveiled plans to invest $500 million to build notebook PCs in Vietnam. It also plans to expand into LCD TVs, said Chairman Rock Hsu Sheng-Hsiung at an annual shareholders meeting in June. Compal is expected to receive its investment license this month.

A June report by industry research group iSuppli predicts that contract manufacturing in Vietnam will grow more than 100% annually between 2006 and 2011. The sector is expected to explode from $36 million in 2006 to as much as $1.8 billion by 2011 as more major manufacturers move in, making it the fastest-growing sector in the area. The most recent example of this trend is Jabil Circuit (JBL) of St. Petersburg, Fla., which in June began operations at its facility in Saigon Hi-Tech Park in Ho Chi Minh City, where it makes laser printers for HP. Jabil plans to spend up to $100 million on its operations in Vietnam, which is increasingly seen as an alternative to China.

At the end of July 2007 South Korea’s direct investment in Vietnam reached 10.33 billion dollars, according to the Korea Trade-Investment Promotion Agency. Singapore was second with 9.69 billion dollars, followed by Taiwan with 9.1 billion dollars.

If you follow the domino effect above, you will notice that starting from microprocessor packaging, motherboard, components, system, display, accessories all upstream and downstream partners are coming to the proximity to work collectively which will deliver a highly cost effective profitable product. That is globalization at work fueled by capitalism.

To summarize, with in a decade starting from a tiny investment Intel Corporation become the biggest foreign direct investor with 1 Billion USD in Vietnam in 2006. Employing talented citizens locally and indirectly bringing enormous amount of foreign direct investment which employing even more.

During Intel CEO Craig Barrett’s visit to Vietnam in August 2002, he challenged the country to “awaken the sleeping dragon” by increasing technical literacy in its young population. In my opinion Vietnam beat that challenge by setting up an investment friendly atmosphere which attracts this outstanding investment of Intel Corporation. In my heart I have no doubt that Chairman Craig Barrett will through similar challenge to the Bengal tigers if he visits Bangladesh near future.

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2. Some comparison between Vietnam and Bangladesh
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Although the culturally Vietnam and Bangladesh are two different country; however
Economically they are very close and possess similar value system.

In various economic indicators, World Bank and International Monetary Fund ranked Bangladesh and Vietnam next to each other. According to CIA world fact book estimate Bangladesh has per capita GDP (PPP) $2300 and growth rate 6.6% compare to Vietnam which has $3100 and 8.2% accordingly with same inflation rate.

Vietnam, being a Confucian country, places a high importance on education. Vietnam has 22 million students. That’s a quarter of the population, so at any given time, a quarter of the population is in class.

Bangladesh value education along that line and we have 18 million enroll in elementary schools, about a million appeared in HSC, SSC every year and at a given time there may be 20-30 million students in a class through out the education system.

Vietnam has long been known as a low-cost manufacturer of Nike (NKE) sneakers, blouses for Liz Claiborne (LIZ), and wooden furniture, not to mention its huge exports of coffee, catfish, and rice.

For more than two decades, Bangladesh has been exporting readymade garments (RMG) to Europe and USA for customers like Walmart (George), Target, JC Panney, last year’s world cup soccer’s outfit and merchandise for mega-store IKEA.

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3. Impressive partnership between Government and High Tech Company
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Intel has launched a university intern program in Vietnam to give university students three to six months of experience in the Intel work environment. The program also helps to develop a pipeline for hiring from Vietnamese universities. Intel expects to hire 70 percent of the employees for its new facility from Vietnam’s universities.

Intel helped by bringing the Intel® Teach program to Vietnam in 2004. This worldwide, free professional development program helps both experienced teachers and pre-service teachers to integrate technology into instruction and enhance student learning.

Intel has trained more than 5,000 Vietnamese teachers in the Intel “Teach to the Future” program since 2005. The company just signed an agreement with the Ministry of Education to train an additional 40,000 teachers through 2009.

Launched in 2000, the Intel Teach program has trained more than 1.5 million teachers in more than 30 countries. Teachers learn from other teachers how, when and where to incorporate technology tools and resources into their lesson plan. The program incorporates the use of the Internet, Web page design and student projects.

Since entering the Vietnam market in 1997, Intel Vietnam has been working closely with the Vietnamese government and the local information technology providers to spur adoption of information technology in the country. Some highlights:

Thanh Giong – This program targets increasing digital literacy among the young population, particularly in rural areas. Developed and led by Intel, and endorsed by the Vietnamese Youth Union as a Government-Assisted PC Purchase initiative, (GAPP) the program provided more than 100,000 affordable PCs to Vietnamese young people. It is one of the first GAPP programs in Southeast Asia.

“My First PC” – Endorsed and supported by the Ministry of Education and Training, Intel and 12 local PC system integrators and two local banks offered affordable desktop and laptop systems bundled with discounted ADSL broadband. The program offered one year interest free to families that were buying their first PC.

“Smart PC. Smart Business” – This program aimed at increasing PC and Internet usage in small and medium businesses (SMB), one the fastest growing segments in Vietnam. Developed by Intel and 12 local PC systems integrators, the Vietnamese Chamber of Commerce and Industry (VCCI) and the Ministry of Post, Telecom, and IT, the program offered choices of hardware and software solutions and ADSL broadband. The Government’s Bank (Vietcom Bank) provided one year-interest free financing to qualified business owners.

Internet access for farmers in Bac Ninh Province – Over 60 percent of the Vietnamese population works in rural areas, and many farmers lack critical information on market pricing, what products to grow, how to best grow them, and where to sell them for the highest profit. Intel and the government of the Province of Bac Ninh worked together to equip 200 community centers to provide Internet access for farmers.

WiMAX trial in Lao Cai – In perhaps the first program of its kind that involves Intel, the Vietnamese government, and the United States Agency for International Development (USAID), Vietnam’s largest information service provider (ISP) rolled out a WiMAX trial in Lao Cai, a remote province on the Vietnam-China border. The trial provides PCs and fast wireless Internet connection based on WiMAX technologies to schools, hospitals, government offices, small business, and citizens. The trial will help prepare the Vietnamese government to further extend WiMAX service in the future.

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Executive summary:
Starting a tiny sales office during 1997, Intel Corporation becomes the biggest foreign direct investor with 1 Billion USD in Vietnam in 2006.
Employee growth exploded from few sales and support to a staggering ~4000 heads of high paying skill jobs.
Intel Corporation directly investing to the local companies and incubators as well as the stock market.
Partnering with NGO’s and Government to improve education sector and helping PC ownership.
Indirectly bringing many more business as upstream and downstream partners and suppliers and customers are coming.

In Bangladesh we have a history of repetitions. We missed the train many times. We missed to connect to the fiber optics submarine consortium in early stage and thereby could not tap the opportunity that India in now enjoying in the outsourcing industry. This is another opportunity to foster a positive and “can do” approach. We are not asking for help, we want to help. We would ask to set up industrial plants like the one in China or Vietnam or India and will show that we can do better.
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By Abu Abdullah
E mail : abu.abdullah@intel.com