Hanoi firm hopes trade spat will furnish further opportunities

Hanoi firm hopes trade spat will furnish further opportunities 1

For Hanoi-based furniture company Xuan Hoa, the intensifying trade war between the United States and China is manna from heaven.

After Vietnam’s government sold its stake in the company in 2016 as part of a privatisation drive, Xuan Hoa pumped millions into training and equipment to yank the one-time state-owned bicycle maker into modernity and tap foreign markets.

The strategy appears to be paying off. As trade talks between the US and China were on the verge of collapse two months ago, Ikea approached Xuan Hoa to make officechairs and desks. The company last made furniture for the Swedish furniture maker 16 years ago before it ended the relationship to focus on the domestic market.

An Ikea order may be in the offing by August, the company said. Under the conditions of the government sale, Xuan Hoa had to retain its 650 workers and retrain them to use million-dollar equipment. This Xuan Hoa had to do while retaining its customers such as Japan’s Sankin, which sources its garden sheds from the company, as well as automotive interior maker Toyota Boshoku, for which it has been making car seats for nearly 25 years.

“The trade war is a momentous opportunity,” Mr Le Duy Anh, the company’s general director, told The Straits Times through an interpreter. “It’s taken a lot of money and a lot of time, but the result is very encouraging.”

Vietnam is in the throes of a privatisation drive with the government aiming to reduce the number of companies of which it is a 100 per cent owner to roughly 100, from about 580 in 2015 when it started the current push.

The state-owned sector accounts for most of the country’s bad loans while employing only 5 per cent of the workforce, said Mr Matt Busch, a researcher at the Lowy Institute, a Sydney-based think-tank.

“There’s a call for action on state-owned enterprises because they are so dominant. They (the authorities) appreciate the need for more private competition when they see big prized companies being sold off,” said Mr Busch.

But the process is messy. Besides the national level stateowned companies, there are many more that are owned by provinces and cities. Others may be privately owned in name only because they were sold to government insiders, Mr Busch said.

When Xuan Hoa was a stateowned enterprise, it barely broke even. In 1995 it dropped bicycles to take a 30 per cent stake in the joint venture with Toyota Boshoku.

Last year, the public-listed company posted a profit of 54 billion dong (S$3.2 million). “Twenty years ago we had a big transition. Now we’re looking to make another transition from a state-owned enterprise to a privately owned outward-looking company,” Mr Anh said. “That will take many steps in the right direction.”
Jeffrey Hutton

Xuan Hoa Viet Nam Joint Stock Company

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