Silk Road International Blog

Like Junior Soprano claims, “things like this come in 3’s.”  Maybe it’s true.

For the first time today I saw a Bangkok license plate on a car in China.  (I can’t upload the photo for some reason, you’ll just have to believe me that I saw it.)  Now I know that the Bangkok traffic is a mess, but this is a bit of a stretch, don’t you think—and a in Citrone?  I’ve got a French supplier in Taiwan who told me straight out “I’d buy an American car before I bought a French one.”

Next, an actual news article on Lao.  The only other two “mainstream press” pieces I’ve ever seen on Lao were one on poorly built Chinese motorcycles taking over the Lao markets and the NYT’s claim that Lao was “The Destination” of 2008.  I’ve been there twice and would hardly call it a “destination.”  I have also tried for years to get my wife and friends to join me on a drive from Shenzhen to BKK; but to no avail.  Any takers?

Lao ranks at the bottom of most international lists, and for good reason.  While it is resource rich, it’s very mountainous, has been connected at the hip to Vietnam for 30 years and has less than half the number of people (6.5 million) than the Lao population of Thailand (about 15 million).  Quick myth-busting side note: despite what I’ve heard for decades from Thai/Lao friends in the US there are NOT more Lao in the US than in Lao.  The US Lao/Hmong population is only about 350K. Until 2002 there was really no economy to speak of in Lao.  But today, Lao is the “land-link” of Southeast Asia with China, Thailand and Vietnam all vying for influence and access.  Most fascinating to me were the trade numbers.  Lao-Vietnamese trade is almost to $1 billion annually.  With a GDP of $12 billion and only 6 million people, there are a lot of very rich government officials (and 30% of the population living under the poverty line).

And finally, I had a conversation with a potential client last night that included a discussion about “not wanting to be in Communist China.”  Her words, not mine.  I have no problems with other peoples’ politics or reasons for wanting to be or not to be in China or anywhere else.  My position is that it’s their call—but once the decision has been made there are cost/consequences associated with that choice. Sometimes China is cheaper than the ASEAN countries and sometimes it’s not.  China’s government has a bad name (communist/socialist), serious social problems but a vibrant economy.  Thailand’s government, on the other hand, has a good name (Constitutional Monarchy) but rampant (political) corruption and a relatively strong economy as well.  Thailand and China are both ranked in the same general level of corruption in Transparency International’s 2007 report.  So corruption and social ill’s are, like I told the client, are pretty much par for the course in this part of the world.

The Guardian has a good set of pieces, photos and video (in Thai) on the conflict in Bangkok.

Coincidence or harbinger of things to come?

Tags: Business, Culture, Politics, Thailand by david
No Comments »

So let me get this straight…
1.    If my factory makes a mistake I get stuck paying for it or lose my deposit or go to court just to get what I contracted for?  Right.

2.    If my factory can’t hit the quality standards specified I get stuck with lower quality goods, or no goods and no refund?  Right again.

3.    If my factory can’t understand the language in the contract but sign it anyway, I’m at fault for not realizing what they could/couldn’t do before the contract started?  3 for 3!

4.    If my factory is late because of the 0lympics, a typhoon, government raids, not enough laborers, blackouts 2-3 days a week, underestimated schedule or overzealous sales department commitments I’m stuck dealing with missed shipping dates because there is no way in China, to get them to pay penalties except going to court?  Yup.

5.    If my factory runs out of money because of the bad economy (non-paying domestic clients) I’m forced to pay early to get my product completed or just lose everything?  Uh huh.

6. If I want to send samples to a domestic factory or to the US, the (concluded) 0lympic security says that we can airmail flocking but not glitter, and we can’t airmail semi-precious stones, batteries or electronics?  Is it selfish to already be dreading the Shanghai Wold Expo in 2010?  Or the World University Games in Shenzhen in 2011?  Yes to both.

One more point on shipping in China, and this has nothing to do with recent security.  We have accounts with all the big three express shippers but typically only use one of them.  This account has been based in the US for years now.  But this last year we have been getting “hints” from the local office that they’d like the billing to be run through them and not the US.  Hints like, late delivery, hang ups when we call for customer service, double billing, and now outright threats to stop service if we continue to use the US account/billing.  We’ve called the US office and they claim they talked with HQ in Guangzhou and there is no problem.  But the local delivery office in Shenzhen (who I’ve talked with personally about this a number of times) is insistent that they can’t service our account properly unless the billing goes through them directly!  Don’t ever discount the power of a good extortion play.  So if we have 3 accounts why do we continue to use this one?  Well first, it’s actually a bit cheaper to bill though China.  And second, the express provider has a great international network set up.  Much better than the other two.

So despite the extortion our account will move to China–I guess you could say this is economics with Chinese characteristics.  Or maybe just a lesson in getting the same results in a culturally appropriate/different way.

Yes, all of these are questions or situations that we’ve either been in or been asked to solve for others these last couple of months in China.  Still think it’s not worth it to hire someone to represent you in Asia?  No way you can solve any of these problems without being here, on the ground, 24/7.

But it could be worse.  You could be in Bangkok.

1.    The new airport really sucks, and it’s getting worse.

2.    It’s annual protest season again and that means that hundreds of trucks blocked trains, roads and airport access (ok, that’s not so bad) and generally made the GDP sucking BKK traffic even worse. Poor Aussies.

Thailand is unique in that they seem to be able to have total political chaos every couple of years and still maintain a relatively stable work envornment, albeit for the week or so of major protests.

Here’s my take: The protests will get worse next week, there will be a settlement of some type.  Taksin will not be returned, investor confidence will remain high, exports will continue as will economic growth, old PM will step down, a new PM will be “elected” and by October, things will be back to normal.  In the meantime, getting to and from the office or the markets in Sampeang will be tough, but other than that (and wading through all the new political slogans and bumper stickers) things will pretty much go on like it has for the last 25 years.  Sabaay, Sabaay.

3.    The crisp clean smell of teargas is in the air.

4.    Inflation is up.

5.    So are interest rates.

6.    But don’t worry about the economy, political instability is now the biggest concern.

At least the beaches haven’t washed away.  Yet.

*The title is from a client who was visiting a factory and hired SRI to try to solve some QC issues.

Tags: Business, China, Thailand by david
1 Comment »

I’ve written a number of times about Inland Western China vs. Eastern Coastal China and the advantage and disadvantages of each and how to decide where to locate.  There are certainly hundreds of other city and country specific comparison pieces online too.  Some of the best are at the All Roads Lead to China blog, in particular the reports on China’s Other Cities.  This last week, once again, Richard Brubaker at the All Roads Lead to China blog has listed out some great questions and comparisons between China and Vietnam.  Read the full post here.  Dan at (China Law Blog) beat me to commenting on this.  His post is here.

We regularly get requests for info and pricing/production options for factories in Vietnam and other SEA destinations; we have an office in Thailand to take advantage of these very opportunities.  In the last couple of years we’ve done work with factories in Thailand, Vietnam, Malaysia and Cambodia (as well as China, Taiwan and South Korea).  Each project not done in China had a specific reason: some for tax/tariff issues, some for publicity, some for price and availability of materials, some for quality concerns and some because of existing relationships.

Regardless of the product though, the process of supplier (and city, country) selection is one of the most important things you can invest in pre-production.  Oddly enough, I find that it’s often a secondary thought for folks coming to Asia for the first time.  Often times visiting a trade-show is given more time than selecting the correct local for manufacturing.  I can’t stress enough how important the location you select can be–it will affect everything from price to how you negotiate that price; from what materials you use and their quality to the quality and experence of managment and labor.  This decission should be investigated and invested in (yes, spend $ on chosing your supplier) as a major priority in the production process.

Brubaker asks several great questions of those considering a move:

1. What’s your China platform?  This is a serious question and the one that most people get wrong.  Honestly, are you here for a single production run, to buy stock items, or to set up a manufacturing base/logistics and sourcing center.  More than one of the “fix it for us” projects we’ve done is because someone that should have a presence here is using a HK trading company to manufacture custom product.

2. Where is your market?

3. Where are your competitors?

4. Where are your suppliers?  News flash–moving to an ASEAN country is not going to get you away from Chinese suppliers.  In fact, the Chinese are probably both the suppliers to and the largest investors in your ASEAN factory.

5. Is your product high tech or high labor?

6. Were you previously compliant?

I would add a couple of additional questions to this list.

1. Why are you considering moving?  Really.

2. What are the domestic and international tax/tariff structures where you are considering moving to?

3. Can you find the professional support (staff, legal, IT, translation, etc.) that you’ll need?

4. Are there outside factors (environment, social compliance, media) influencing your move and will these really be resolved by moving somewhere else in Asia?

There are of course tons of other product specific questions that you’ll need to ask (and answer) yourself.  But Brubaker’s advice on the various areas within China and his comparisons in his post give you a great starting point.

Tags: Business, China, Thailand by david
No Comments »

First, Google News in China today:

And this article about Thailand–um…banking on the stars?  Ok, we did have Nancy Reagan, but this is the defacto-PM himself.  Scary.

Tags: China, Thailand by david
No Comments »

One visa for all countries in ASEAN—great idea! The fact that you’ve got Thailand,Malaysia and Vietnam all fighting over the same pool of potential business clients and ton of tourists going to both Cambodia and Thailand (and to a lesser degree Vietnam) this is a great deal for Thailand—as the largest regional city/airport Bangkok becomes more and more the de-facto hub for all SEA travel. With the new road connections from China, this would boost travel and investment into Lao too, no doubt. Now if ASEAN could just do something about Burma…

A very interesting perspective on Thai culture and the lack of any real political progress in the last decades. Even more interesting now that there are signs of yet another coup in the works this week (more here). If you could clean up the sex trade and straighten out the government processes in Thailand, it might just be heaven on earth. Dare to dream…

Wow!! Let me get this right…thousands of factories close in China in the previous two financial quarters and Thailand, as the regional investment hub for SEA, has 5.7-6% per quarter growth! Well, fancy that. If you’ve ever done business in Thailand you know a couple of things. First, it’s a great place to go on vacation. Second, Mandarin and Cantonese are just as useful as Thai when talking with most factory management. And third, investment, ownership and raw materials are, in large part, all coming from China.

2008 Global Competitiveness Rankings. China and the rest of SEA are just eating up the European countries and Singapore may just knock the US out of it’s 15-year top spot next time around. Brief article here. Methodology and details here. The world it is a changin’.

And finally a not-directly-related-to-SEA piece of news; more on the impacts of the quake to Chinese and global finance here.

Tags: Business, Culture, Thailand by david
No Comments »