HANOI -- The atmosphere inside the offices of Vietnam's Garment 10 became strangely charged when the news came in that Donald Trump had been elected president of the U.S. Than Duc Viet, deputy general director of the state-run textile company, broke into a rousing speech. "If the TPP falls through, we can always look to Europe or South Korea," he told managers. "After all, we haven't been making all these improvements just for the TPP!"
Duc was referring to the Trans-Pacific Partnership, the comprehensive, 12-nation trade pact that would have given Vietnamese exports easy access to a vast market. Unfortunately for Hanoi, Trump has vowed to scrap the deal on his first day in office.
But while this is a setback for Vietnam's industrial policy, resourceful companies already have their own plans for going global well underway.
Garment 10, or Garco 10 for short, is a symbol of Vietnamese industry. Revolutionary leader Ho Chi Minh toured its factory on the outskirts of Hanoi in 1959. During the Vietnam War, workers manned anti-aircraft guns on the roof when they were not busy sewing. The company is taking the likely failure of the TPP in stride, confident that the improvements Duc referred to will serve it well.
The garment maker's main factory, now staffed with 400 workers, is the very embodiment of continuous improvement. In 2010, the company chose eight highly skilled workers and tasked them with reporting on new ways to boost productivity.
The company has also invested in physical capital. Affixing buttons and ironing, tasks previously done by hand, were automated in 2014, more than doubling productivity. A year later, an automated distribution system was put in place on a dress-shirt line to deliver to each worker exactly the number of garments that he or she can effectively handle.
Both are state-of-the-art technologies in Vietnam. Veteran worker To Thi Hien said that in the more than 10 years she has been with Garco 10, productivity has risen consistently, leading to higher output and greater quality even as the number of employees stays the same.
As an alternative to TPP nations, Garco 10 is setting its sights first on South Korea. A free trade pact between that country and Vietnam took effect in December 2015. Next is the European Union, which is slated to have a functioning free trade agreement with Vietnam by 2018.
Vietnam has trade agreements with more than 10 economies, including Australia, Chile and the ASEAN Economic Community, which links the country to fellow members of the Association of Southeast Asian Nations. Unlike the TPP, these deals do not include rules of origin for products and materials, so exporters can compete on quality alone, Duc said. This means vast opportunity for Vietnam's textile industry, which combines low wages and high quality, he added.
Since the Doi Moi reforms of the 1980s aimed at turning Vietnam into a fledgling market economy, the country has sought to attract foreign investment by deepening bilateral ties with certain countries.
Perhaps its biggest success in this regard was with South Korea's Samsung Electronics, which built a massive factory in Vietnam's northern province of Bac Ninh and another in Thai Nguyen. The two plants made a combined 30% of the 420 million mobile phones Samsung produced worldwide in 2015. Samsung has invested upwards of $7.5 billion and employs some 110,000 people in the country.
Lacking key exports, Vietnam suffered a trade deficit every year since it joined the World Trade Organization in 2007 until Samsung helped it achieve its first trade surplus in 2012. The company accounted for nearly 20% of the value of Vietnam's total exports in 2015.
Of the $68.3 billion in foreign direct investment inflows from 2013 to 2015, South Korean corporations provided 28%, or $19.1 billion. And most of that appears to have come from Samsung.
But the Galaxy Note 7 debacle exposed the risks of depending too heavily on one company. Samsung ended production of the flagship smartphone after a number of the devices caught fire. This could put an even bigger dent in Vietnamese exports in 2017, according to an official at the Ministry of Industry and Trade.
Vietnam, with its small domestic market and underdeveloped native industry, has more reason than ever to seek the benefits of freer trade. The country has envisioned itself becoming the Southeast Asian hub for such labor-intensive manufacturing as electronics assembly and garment making, securing steady growth for years to come.
The TPP would have been a big step forward for that strategy, but even without that boost, Vietnamese companies are finding opportunities for foreign expansion, including in other ASEAN countries.
The country's largest dairy producer, Vietnam Dairy Products, or Vinamilk, in May began operations at a processing facility in Phnom Penh, Cambodia -- its first major plant in a country where nearly all diary products are imported. In addition to Cambodia, Vinamilk likely envisions branching out into Thailand, Myanmar and other markets linked by overland routes.
The launch of the ASEAN Economic Community at the end of 2015 paved the way for such a move, abolishing import tariffs within the bloc on raw milk and materials. In 2016, Vinamilk scaled up sales of powdered milk for infants in the Middle East.
Vinamilk CEO Mai Kieu Lien said the company has conquered its home market thanks to world-class product quality, adding that there is no reason to think that success cannot be repeated around the world. The company's dairy farm in Nghe An Province became the first in Vietnam to receive certification under the internationally recognized Global Good Agricultural Practices program in 2014.
BRANCHING OUT FPT
Chairman Truong Gia Binh leads the country's largest technology company. During a break at a Dec. 8 economic seminar in Hanoi, he could be seen plugging FPT and Vietnam's tech industry as a whole to multinational executives, including Wouter Van Wersch, CEO of GE ASEAN.
FPT opened a sprawling 5.9-hectare information technology services complex in Danang in late April. By 2020, the company aims to employ 10,000 engineers and pull in IT orders from around the world, with a focus on the emerging field of connected devices known as the internet of things.
Even agriculture is taking a global approach. In 2015, Starbucks began selling Arabica coffee grown in Da Lat, Lam Dong Province, at select U.S. locations, and it could offer the beans in over 50 countries in the future. A senior coffee specialist at the U.S. company reported being "delighted" by the quality of the coffee.
Last July, manufacturer and trading company Cao Thanh Phat became the first company to sell Vietnamese-grown dragon fruit in Thailand. Vietnam shipped 4,608 tons of fruit to the U.S., Japan, South Korea, New Zealand and Australia in the six months through June, up 81% from a year earlier. Dragon fruit made up 70% of that amount, placing it alongside rice, pepper and catfish as one of Vietnam's key farm and fishery exports.
Still, only a few Vietnamese companies are ready to compete on the global stage. For all the Doi Moi sloganeering, the country has dragged its feet on numerous economic reforms. No longer able to count on the TPP, Vietnam's leaders must chart a new path for growth.