With economic growth averaging over 7% annually for the past five years and scheduled to join the WTO by the end of the year, Vietnam's future looks bright.  Foreign enterprises are scrambling to invest in this new Southeast Asian hot spot. Intel recently built a $300 million microchip assembly and testing plant in Ho Chi Minh City, and many medium to large sized companies are following suit. The Vietnamese government aims to double electronics exports over the next three years, and exports of everything from coffee to shoes are also rising at a rapid pace. This flurry of economic activity is leading HR managers at foreign-invested enterprises (FIEs) to become increasingly concerned over the prospect of wage inflation.

Wage inflation was indeed cause for concern in early 2006 among FIEs operating in Vietnam.  The government acted then to increase the minimum wage by as much as 40% for foreign-owned firms in some sectors. These wage increases were sparked in part by growing labor organization and strikes in Ho Chi Minh City. On October 10, 2006, the national minimum wage was increased by 33%. HR managers should not, however, consider this cause for alarm. Wages in Vietnam remain significantly below those in neighboring provinces in southern China, which are, in turn, inexpensive in comparison to prosperous Chinese coastal cities such as Shanghai and Beijing.