Intel in Vietnam – Solving Vietnam’s corruption logjam
Vietnam, a country riddled with corruption, is set to be a major target for foreign investors. Intel is setting an impressive precedent with its commitment to do business cleanly
The world’s largest electronic components manufacturer, Intel, has pledged to build its $1 billion factory in graft-ridden Vietnam without corruption. The company has even signed an anti-corruption agreement with state-owned Saigon Hi-Tech Park (SHTP), where its largest chip plant will be located.
Transparency International considers Vietnam, the second fastest growing economy in Asia after China, one of the world’s most corrupt countries. Last year, the watchdog’s corruption perceptions index ranked Vietnam 123rd out of 179 nations.
Property, construction and government contracts are reportedly riddled with bribery. And aid agencies, which have pledged $4.4 billion to Vietnam for 2008, have often complained about money disappearing. In one scam, in April 2006, transport ministry officials handling World Bank projects were caught betting millions of dollars from project funds on European football matches.
Since taking office in 2006, communist prime minister Nguyen Tan Dung has vowed to root out corruption, making it his top priority for 2008. In December last year he ordered all ministries and government agencies to step up an anti-graft drive.
Intel’s memorandum of understanding on “Business Ethics and Code of Conduct” with SHTP, signed in August last year, sends a powerful signal to other firms in Vietnam. It is the first such agreement between a multinational and a state agency. It gives Intel a certain moral clout in a state where bribery and lack of transparency are key concerns for foreign investors.
For the park, which is aggressively wooing major technology companies to come and set up, the agreement is a masterstroke, reassuring prospective investors that they can expect a favourable and transparent business environment. And anti-graft commitments will not stop with Intel. The park’s head, Nguyen Dinh Mai, says: “We will also encourage other investors to sign similar agreements to create a transparent business environment.”
Intel Products Vietnam’s general manager, Rich Howarth, told Ethical Corporation: “The memorandum will increase the effectiveness and competitiveness of Intel business in Vietnam by eliminating hidden costs of bribery and kickbacks. It has sent a clear message to government officers and potential suppliers that we do business fairly.”
Under the agreement, Intel and SHTP have committed to strictly abide by the Vietnamese Anti-Corruption Law and work together to detect and prevent bribery. Intel has also committed to work with its suppliers to enforce similar code of ethics. This can potentially create ripple effects as Intel will have nearly 400 suppliers in Vietnam, many of them long-time associates that will be setting up operations to support the upcoming plant.
Intel has made some dramatic moves in Vietnam. It was the first major information technology company to invest there, in 2006, despite the country’s weak infrastructure and lack of skilled workers. It soon tripled its original $300 million investment to $1 billion to become Vietnam’s largest foreign investor. When Intel’s facility at SHTP opens in 2009 it will produce 600 million chips a year, provide 4,000 jobs and bring in over $5 billion in annual export revenue.
Construction of Intel’s new factory was due to begin last month. But the company started building “social capital” almost four years ago when it started investment negotiations with the government. Howarth says: “Being an emerging economy, Vietnam offers a multitude of opportunities for willing companies to make a difference to the local community.”
The company agreed to help the Communist Party to set up a laboratory for testing and developing open-source software for government computers. It is helping Vietnam to run pilot projects using WiMax – a cutting edge wireless technology – to connect rural areas and provide public services such as advice on healthcare and farming. Intel has also trained the local customs bureau to run an electronic database to clear import shipments more efficiently.
Observers say Intel has managed to build tremendous goodwill long before building the factory. Dividends are likely to be handsome for the company, as Vietnam targets economic growth of 9 per cent this year, following 8.5 per cent in 2007. Chris Muessel, the chairman of the American Chamber of Commerce Vietnam in Ho Chi Minh City, is encouraging his member companies to sign similar anti-corruption agreements as a way of improving business relationships in the country.
Vietnam’s government is taking note of calls to tackle corruption, one of the primary complaints of businesses operating in the country. After a series of scandals, Communist Party leaders now consider corruption a threat to the survival of the system.
An anti-corruption drive last year unearthed 584 cases, with 1,299 people arrested. The government has launched a website where citizens can report corruption to the authorities online. It is preparing to ratify the UN Convention against Corruption and has signed an anti-corruption pact with the Association of Southeast Asian Nations.
Most of Vietnam’s foreign direct investment – more than $20 billion last year, up from $16 billion in 2006 – is from South Korea, Taiwan, Singapore and Japan, where corporate responsibility is still not an integral part of doing business.
Big names with major investment plans in Vietnam include Canon, Sanyo, Matsushita, Sony, Fujitsu, Toshiba, Nidec, Alcatel and Siemens. Intel has set them an example to follow.
By Rajesh Chhabara - Ethical Corporation (.uk) - February 11, 2008.