On the 4th November MASCOT’s factory in Vietnam will receive a large and important Danish Business Delegation. It is actually not the first time members of the European Business Community have visited MASCOT in Vietnam. The factory, which was inaugurated in spring 2008, has attracted much attention in the Western business world – and not just because it was built in record time.
It was also, to the last decimal point, built to budget and is the first foreign business to get a license to have a bonded warehouse.
This time, however, the visit includes, a special visit from the Danish Royal Family. Her Majesty Queen Margrethe II and His Royal Highness Prince Henrik have chosen to visit 4 Danish organisations. MASCOT, who produces workwear and safety footwear is in good company, the other organisations are Grundfos, Mærsk and Carlsberg.
MASCOT’s building is interesting for Western businesses and in particular for potential investors for several reasons. “Most people who visit our factory in Vietnam are surprised by the positive outcome of primarily two things”, tells MASCOT’s Managing Director Michael Grosbøl. “The fact that we met the budget and that construction was finished after only one year, is seen as the biggest achievement when western business visitors, who know about Asian investment, evaluate our production facilities”.
MASCOT’s 15,000m2 large factory is located 50km from Hanoi on a piece of ground that until 2007 was a paddy field. Today, it employs 700 people in the factory, that houses a sewing factory, quilt production, a raw material warehouse together with administration. “We are not surprised but obviously extremely pleased that we have succeeded”, admits Michael Grosbøl. He reveals the secret behind the success, “It is all down to extremely careful and detailed preparation – and never taking shortcuts” says Michael.
If you are a potential investor in Asia, read further, MASCOT is happy to share experiences of how to get started. MASCOT’s Danish Director for the Vietnamese operation, Thomas Bo Pedersen, has been involved since the moment MASCOT decided that the large investment should be in Vietnam. “The first thing we did was recruit a well experienced “right hand”, a Vietnamese who had solid experience with developing foreign investment projects in Vietnam. In this way we got the right advice from the outset”, explained Thomas Bo Pedersen, who also believes that the cost of the best qualified Vietnamese Lawyers and Accountants has been well worth the money. “At the same time we used a lot of time to build up a network in the local area where the factory should be built. The Danish Embassy, also decided, that their part in the building project had been a success”.
Thomas Bo Pedersen has lived and worked in Vietnam for many years. He has therefore a great knowledge of the countries laws and rules. It was however, necessary to turn every single stone to be on the safe side and ensure we did not run into any unpleasant surprises after entering contracts, on for example, purchased land. “Everything from tax laws and environmental laws to investment conditions, rules about infrastructure and water and electricity connections have been thoroughly reviewed. It has been time consuming, but I am sure that it has contributed to the fact that we have not been unnecessarily delayed because of disagreements or misunderstandings”, estimates Thomas Bo Pedersen.
When looking at the reasons why the actual construction went well, the recipe is the same - preparation and thorough follow up. The actual construction process has also attracted large attention from the local authorities as MASCOT has set new standards for safety on the construction site. “We demanded from day one that the building was done following European Safety Standards. The Chief Engineer and the four Construction Companies, by law, all had to live up to our demands. Furthermore, we integrated special safety training for all workers together with a penalty scheme that was constantly enforced. “Yellow cards” for the first offence and “Red Cards” if it occured again,” explains Thomas Bo Pedersen. As a result MASCOT built a building, using half a million man hours without any accidents. As building site accidents are a large problem in Vietnam, the Vietnamese Authorities have repeatedly used MASCOT’s case as an example in relation to similar projects.
MASCOT is the first and so far the only foreign company in Vietnam with its own bonded warehouse. The Vietnamese Authorities normally only give licenses for bonded warehouses to Vietnamese Companies or to joint-ventures with Vietnamese majority shareholding owned companies. MASCOT’s license to drive its own bonded warehouse with an in-built quality control of raw materials is therefore a completely new concept in Vietnam.
There has also been both a sustained lobbying effort and a good amount of patience to get the license through. Thomas Bo Pedersen tells, “The license was given after a year and a half lobbying with massive support from the official Danish side. Among others, the then Industry Minister Bendt Bendtsen, and the Danish Trade Council promoted our case. We signed a contact with the Danish Embassay in Hanoi that they should be our consultant in this process and they have been really effective. The Danish Embassador Peter Lysholt Hansen and his staff have been very valuable in the lobbying process, so the money has been well spent. We therefore consider our project as an example of what can be achieved out of the dynamic collaboration between the Danish Authorities and a private investor like us.”
Having their own bonded warehouse is crucial for MASCOT. Raw materials come quickly in and out of Vietnam. “The raw materials can only come in duty free, provided that we re-export them as finished goods or as raw material to other production sites. If we did not have a bonded warehouse we would have to pay large penalties to the Vietnamese Customs Service, which would be unworkable”, says Thomas Bo Pedersen.
The expectation of getting the license for the bonded warehouse was therefore very influential in deciding where MASCOT should build its factory. Managing Director, Michael Grosbøl tells, “Vietnam has a really good investment climate. The Vietnamese Authorities have recognised for a long time that their country has a very strong interest in attracting foreign investors, and they do a lot to live up to expectations. Vietnam has in recent years conducted a comprehensive modernisation of business laws and it means that things function much better than in most other developing countries. There has also been much improvement in the country’s infrastructure. Last but not least the Vietnamese are extremely well educated, hard working and willing to learn and this means that their work force is of a very high quality.” At MASCOT’s Vietnamese factory there are only a few of the 700 employees that are not of Vietnamese decent.
When the Royal Couple and the large business delegation come to visit, they will be shown around a Western functioning operation on Vietnamese ground. “I would like to give the guests a glimpse of how a global company operates, and that it can actually work to drive a company in Vietnam under western principles. We place great emphasis on social responsibility for our employees. As a natural consequence our employees have free meals in the canteen, membership of a union and healthy living advice amongst other things. We can see that CSR pays for itself many times over in the form of a well functioning, competent and loyal work force”, concludes Michael Grosbøl, who also receives the guests together with Thomas Bo Pedersen and the rest of the workforce in Vietnam.