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“VIETNAM BUSINESS NEWS”
The Economic Mirror Indochina’s
May 2015
Economy, International Cooperation, Business,
Investment, Markets & Prices
We report about the latest prime business news from various fields, as well as the
economic environment. We publish the informations, news and reports of the leading
news sources. Our theme of the month shows the topic. All what appears of special
interest for "Western Business People".
INDEX:
Subjects after Country marked:
V = Vietnam. C = Cambodia. M = Myanmar. L = Laos. O = Other Country's.
Topic of the Month
V - Vietnam synonym for the world’s new workshop gets also Asean’s number one retail
marketplace
Economy & Business
V - French expected to ratchet-up current investment
V - New rich drive Vietnam luxury boom
O - Reform in China - The quiet revolution
O - In ASIAN the world’s most dynamic region, family companies occupy the commanding
heights of capitalism
O - China growth lowest since 2009 as property and manufacturing drag
L - New Asian markets driven by youth
O - European Parliament assesses Vietnam’s readiness for FTA
V - Big international companies buying top Vietnamese brands
V - Electronics industry: Playing field for foreign businesses
V - Vietnam to be Asia's new manufacturing powerhouse
V - New wave of M & A's for Vietnam
V - Asia’s About to Spawn a New Tiger Economy: Good Morning, Vietnam
V - Vietnam tops outsourcing location index
Int'l Cooperation
O - Productionservice-Vietnam the business partner on site
O - Deputy PM affirms closer VN-France cooperation
O - Vietnam, Italy universities helped to seek partnerships
O - Vietnam remains Hungary’s key market in Southeast Asia
Investment
V - The play of Chinese-speaking economies
O - Corporate takeovers are booming once again
V - US invests in 17 industries in Vietnam
O - Nokia exit: Is China's 'golden age' of foreign investment over?
V - Vietnam, ASEAN Well Positioned as Investors Relocate from China
V - Not only Vietnamese Industrialists pour money into agriculture
V - Footwear material production needs investment
O - Foreign investors scampering for a share in garment industry
V - Domestic firms target agribusiness
V - A new wave of FDI inflows to Vietnam
V - Vietnam to benefit from new wave of Japanese investment
V - LG inaugurates largest industrial complex in ASEAN
C - Coke to build $100M plant at PPSEZ
Finance & Banking
O - Vietnam Indochina Asean: Unbeatable prices by R&D Production Export
V - Foreign banks see opportunities in Vietnam
V - WB upgrades VN’s economic growth forecasts
C - ADB Expects Cambodian Economy to Pick Up
Markets & Prices
V - VivoCity Saigon opens doors
V - Foreign retail giants compete for big projects in Vietnam
V - More than 48% of businesses to expand operation
V - Supermarkets tap into domestic retail sector
V - Tariffs to go on hundreds of Vietnam farm products by 2018
V - Shinsegae Vietnam prepares for launch
V - Domestic Medicine Producers Struggle To Lift Market Share
V - Piaggio to roll out superbikes in Vietnam
V - Vietnam automotive industry to grow fastest in ASEAN: Thai industry insider
O - Leading Italian machinery firms visit Vietnam for business opportunities
L - Markets in Laos attract regional interest
C - Fast Food Chains Hungry for Cambodian Market
Export-Import
V - Vietnam Procurement Import Export. Distribution by Representative Office or
Trade Agency
V - Smartphone imports up 57%
C - Increasing Vietnamese goods in Cambodia
Particular Reports
O - More European businesses are coming under Chinese ownership
O - Political priority, economic gamble
O - Emerging markets
All Fairs & Exhibitions 2015 in Indochina
O - Fairs & Exhibitions 2015 in VIETNAM - CAMBODIA - LAOS – MYANMAR
REPORTS:
Topic of the Month
V - Vietnam synonym for the world’s new workshop gets also Asean’s
number one retail marketplace
By Dipl.-Ing. Alex Narr, April 28th 2015
From 2015 Asia is the world's largest free trade zone
This case studies of consumer electronics via shop and online, food chains, super- and
hypermarkets, fashion stores, as well as ongoing shopping mall activities underline that
foreign investors see Vietnam as the coming market-place in South East Asia. The years of
abstinence are thanks Doi Moi and joining WTO long gone. “Now live the consumption”.
A survey by German market research firm GfK Group projects sales in Vietnam electronics
sales will total more than US$600 million in 2015. Vietnam is the only Southeast Asian country
ranked in the top-five, with Indonesia and the Philippines coming in at number nine and 10,
respectively, on the list, reports the Hong Kong Trade Development Council.
In Vietnam, overall spending in the electronics sector in the first quarter of 2014 was up 27.5 per
cent on the same period in 2013. Other markets in the region also saw increases, but at a lower
rate, with Indonesia up 10.6 per cent and Singapore up 7.3 per cent year-on-year. Smartphones
and tablets remain the standout products, with phones accounting for some 40 per cent of total
expenditure in the sector. The big players in the smartphone business in Vietnam are the FPT
Group and Mobile World. The single biggest player in the electronics retailing sector is Nguyen
Kim, in which Thailand’s Central Group recently acquired a 49 per cent stake.
In the first six months of 2014, FPT recorded steady growth in the software export sector, with its
revenue up 21 per cent compared to the same period in 2013. In telecommunications, its revenue
was also up; a 17 per cent rise exceeding expectations by a staggering 108 per cent.
FPT’s retail and distribution divisions also showed considerable improvement. In particular,
revenue from the distribution of iPhones was almost four times higher in the first half of 2014 than
in the same period in 2013. (FPT is now an Apple retail partner). Meanwhile, the company’s bid to
expand its retail chain has also met with some success, with retail sales in the first six months
rising 81 per cent. In 2013, its retail arm actually recorded a loss.
Last November, Mobile World JSC was ranked 409th among Asia Pacific’s 500 largest retail
businesses. This list is based on success in meeting various key criteria, notably sales, retail
locations, total retail space and revenue per square metre. “We are excited that we remain a
major retailer, not only in Vietnam, but in the region as a whole,” said Tran Huy Thanh Tung,
head of Mobile World’s Supervisory Board. “This is a well-earned acknowledgment of our
success in raising the levels of convenience and service we offer our customers.” In a busy
month for Mobile World, November also saw the company open three new superstores.
Apart from the smartphone and tablet sectors, demand also grew for other items, especially
electronic/digital (televisions, speakers), refrigeration (refrigerators, air-conditioners), and
electrical appliances (cookers, microwave ovens). These sectors enjoyed an across-the-board,
20 per cent year-on-year increase in sales for the first quarter of 2014. According to industry
sources, Vietnam’s electronics sector is expected to remain buoyant in 2015, attracting several
new foreign firms to the market.
Samsung is already among the highest-grossing and most popular mobile phone brands in
Vietnam, with the country now also home to one of the South Korean giant’s biggest global
production centres. In 2013, Samsung Vietnam shipped more than 100 million units, with 97 per
cent of its output being exported.
“Obviously, there is very high potential in the electronic products market. It is also one of
the reasons why foreign direct investors in the electronics sector are increasingly
focusing on Vietnam.” Vietnam is already the world’s fifth fastest-growing electronics
market – and the fastest-growing in ASEAN.
Top consumer electronics retailer plan for Vietnam chain. Having bedded
down its acquisition of 49 per cent of Vietnam’s Nguyen Kim electrical goods retailer,
Thailand’s Central Group has now revealed the partnership has a five year business plan.
The companies say they want Nguyen Kim to become “the top consumer electronics retailer in
Vietnam and the Southeast Asian region”. That plan includes expanding the store network from
the current 20 nationwide to 50 by 2019. The two did not reveal ambitions for the brand outside
Vietnam, but Central already owns the PowerBuy brand in Thailand giving it unique experience
and insight into the regional market, not to mention strong relationships with leading electronics
brand internationally. Powerbuy has 80 stores across Thailand, including flagships in Central
Group Malls, including Bangkok’s CentralWorld, Asia’s largest shopping centre.
Central, whose Vietnam operations chief now takes on the role of CEO of Nguyen Kim, also plans
to expand the product range on offer at the Nguyen Kim stores, adding products other than
electronics. It wants to achieve 50 per cent growth in online revenue this calendar year. Central
Group already has a strong presence in Vietnam through ownership of the SuperSports, Crocs
and New Balance retail stores and the recently-debuted Robins department stores in Hanoi and
Ho Chi Minh City, a localised version of its Robinsons department stores in Thailand.
Foreigner buys stake in Vietnam supermarkets. Japan’s Aeon has taken
strategic shareholding in two Vietnamese supermarket chains, extending a strategic
alliance established last year.
The company has bought a 49 per cent stake in Citimart which has 27 supermarkets, mostly in
Ho Chi Minh City. And it has taken 30 per cent of Fivimart, another chain with 20 stores in Hanoi,
the capital.
Aeon formed strategic alliances with both chains last year, supplying its house branded products
to all the stores, which added the Aeon logo to its signage and shopping bags. At the time Aeon
stressed there was no capital tie-up with either business. Aeon used the alliance to build brand
awareness and volume of house brand products in a market where it has opened two shopping
centres, anchored by sophisticated western style hypermarkets. A third will open in Hanoi before
the end of the year.
Confirming its investment plans this week, Aeon said the deal would allow it to increase its
working knowledge of Vietnam’s FMCG retail market and of procuring stock locally. Citimart and
Fivimart will benefit from Aeon’s expertise in supply chain logistics, quality control and modern
retailing disciplines.
Aeon considers Vietnam its second most important Southeast Asia market behind
Malaysia. It plans to eventually build a network of 200 stores in the nation.
British bag brand eyes Asia. It plans to make inroads into Asia as its young brand
gains international awareness.
Zatchels was established in April 2011 and has its manufacturing base in Leicester, UK. A multichannel retailer, it has shops in York, Westfield London and now Bath. Now it says it wants to
enter Vietnam, Thailand, Cambodia and Singapore to make the most of their young populations
and a growing love of products made in Britain among southeast Asians.
The manufacturer already exports a third of the designer satchels and bags made at its factory
near Leicester’s city centre to around 90 countries. It makes more than 25 styles of bags, turns
over £3.5 million annually and employs 70 people in manufacturing and retail.
Zatchels said Vietnam is one of the fastest-growing retail markets in the world and there is a huge
demand for products as consumer spending power grows. “It has a young and dynamic
population – with 60 per cent under the age of 30. I am impressed with Zatchels’ hugely
ambitious approach to exports which has placed them at the top of their game and I’m keen to
help them develop their business in Vietnam.”
Caffe Bene’s new face. Korean-based coffee shop franchise Caffe Bene has named
famous Korean actor Kim Soo-Hyun as its global face for the next year.
Korean film and television drama has massive following throughout China and southeast Asia
making Kim Soo-Hyun a recognised personality throughout the region. Caffe Bene will use the
actor’s image in TV commercials, print advertisements and online, promoting its brand in 13
countries, with particular focus on Vietnam, Taiwan, China. The franchise plans to run a total of
140 cafes in the region by 2017.
Caffe Bene is the largest coffee franchise in Korea, based on store numbers, and now has 1500
cafes in Korea, China, Taiwan, Vietnam, the US, the Philippines, Indonesia, Saudi Arabia,
Mongolia, Malaysia, Cambodia, Singapore and Japan.
Lotte Vietnam boosts investment. South Korea’s Lotte has acquired a majority
share in a Ho Chi Minh City shopping centre, office and apartment complex as it protects
its Vietnam beachhead.
Lotte Vietnam has bought out another Korean business’ 70 per cent stake in Diamond Plaza, a
high profile 20-story tower housing a multi-level department store, foodcourt and other retail
facilities, along with offices, a medical centre, cinema and apartments.
It was one of the first modern era shopping developments in the country’s largest city, although its
footprint is dwarfed by more recent developments such as Vincom and Union Square, also in the
CBD, and Crescent Mall in the Asian-expatriate hub of District 7.
Lotte already has extensive investments, and reach, in Vietnam, operating Lotte Mart
hypermarkets, cinemas, a hotel on the Saigon riverfront and a chain of Lotteria fast food outlets
which was well established before US rival McDonald’s debuted in Vietnam in late 2013.
Diamond Plaza was opened in August 2000, then valued at US$60 million. It was a joint venture
between local developer Construction Corporation No.1 and Korean steel company Posec, a
subsidiary of steel maker Posco. Lotte has bought out Posec’s interest for an undisclosed
amount. In another transaction not officially released, Lotte has purchased two Pico Plaza
branded shopping centres in Hanoi and Ho Chi Minh City and rebranded them Lotte after
converting supermarkets into Lotte Mart hypermarkets.
Vietnam online shopping rise: Vietnamese may have been slower to adopt to online
shopping than counterparts in other southeast Asian countries – but they are starting to
catch up.
Data released by the Vietnam eCommerce and Information Technology Agency (VECITA) shows
Vietnam online shopping was worth US$2.97 billion in 2014 with each consumer spending an
average of $145 during the year. Fashion and cosmetics accounted for 60 per cent of sales.
While $3 billion may seem a lot, it amounted to just 2.12 per cent of the country’s gross retail
sales. In China, online shopping now accounts for just over 10 per cent of the total retail market.
One factor hindering Vietnam’s online retailing growth is the low penetration of credit cards. Two
thirds of purchases are paid for in cash upon the delivery of the purchases. Other figures show
about four in 10 of Vietnam’s 94 million population have access to the internet, with penetration
far higher in major cities. More than 50 per cent of people using social networking also shop
online. VECITA said just 35 per cent of Vietnam’s online shoppers bought from group buying sites
in 2014, down from 51 per cent in 2013. Regionally, Vietnam ranks above only Indonesia, where
the online market was estimated at $2.6 billion last year.
Prada Fashion makes debut in Vietnam. Italian luxury brand Prada has opened its
first store in Vietnam – in Hanoi.
Prada Vietnam has debuted in Hoan Kiem, the capital city’s premier shopping strip Designed by
architect Roberto Baciocchi, the store covers a total area of 360 sqm on a single level and
houses the women’s and men’s leather goods, accessories and footwear collections.The store is
strategically located on the corner of one of Hanoi’s historic buildings overlooking the renowned
August Revolution Square.
Fast-food chain to open 330 stores. Philippines-based fast food operator Jollibee
Foods has reported a 14.3 per cent increase in income and announced a massive 330store rollout for 2015.
Jollibee is the country’s largest fast-food chain saw global sales increase 12.9 per cent to P90.7
billion (US$2.05 billion) from P80.2 billion ($1.81 billion) year on year to December 31. Its profit
was P5.3 billion ($120 million), according to a lodgement with the Philippine Stock Exchange.
Jollibee says it will open 330 stores this year – 220 of which will be in the Philippines. That’s a
significant increase on last year’s 234 stores last year, of which 169 were in the Philippines and
the remaining 65 abroad. The expansion will be funded by a 65 per cent boost in capital
expenditure this year. two thirds to be spent in the Philippines, the blance in China, the Middle
East and Southeast Asia. Jollibee operates 2301 restaurants inside the Philippines: 858 bearing
the Jollibee banner, 456 Mang Inasal, 410 Chowkings, 211 Greenwich, 323 Red Ribbon, and 43
Burger Kings. It has a further 612 stores overseas, including 310 Yonghe Kings, 50 Sang Pin
Wan stores and 42 Hong Zhuang Yuan stores in China; 125 Jollibees outside the Philippines,
including 62 in Vietnam and 32 in the US; and a chain of Chowkings in the US and Middle East. It
also has a 50 per cent stake in Vietnamese chains Highlands Coffee, which has 78 stores in
Vietnam and the Philippines, and Pho 24 which has 53 restaurants in Vietnam, Indonesia, the
Philippines, Cambodia, Macau and Korea; and in 12 Sabu, which has 19 stores in China.
US Fast Food chain in major Asian roll-out. Hooters of America has signed an
extensive development agreement to open 30 new Hooters QSR restaurant locations
throughout Southeast Asia over the next six years.
After introducing the concept to Thailand with the opening of Hooters Phuket, international
franchisee Destination Resorts has set sights on Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam, as well as Hong Kong and Macau.
Hooters, derided by many for its concept of attractive women in tight or skimpy clothing serving
ordinary, primarily deep fried food to customers, appears to have exhausted its growth potential in
its home market and has failed to capture customers in forays into other western market, such as
Australia. Now it is eyeing Asia for growth, recognising locals are currently ready to embrace
pretty much any US fast food concept or brand.
Less than a year after Hooters Girls first welcomed guests in Patong, Phuket, Destination Resorts
says it will dedicate “significant capital and resources” to an expanded Hooters venture,
continuing growth in Thailand and concentrating heavily on Hong Kong and the Philippines and
on the other new countries like Vietnam. Hooters franchises or operates more than 415 Hooters
restaurants in 42 states and 26 countries.
Currency exchanges retail group plans SE Asian money shops. LuLu Group,
the Emirates-based retail group, is looking to open a network of money exchanges in
southeast Asian countries.
According to media reports in the Gulf, Lulu Group plans money exchanges in Thailand, Vietnam
and the Philippines, where it opened a liaison office late last year. The company had already
announced plans to open hypermarkets in Malaysia and Indonesia and now, according to reports,
Hong Kong is on its radar also.
LuLu Exchange already has 75 outlets in five Gulf countries and plans another 25 branches in the
region in 2015, along with a further 20 in other nations, including in northern and eastern Africa.
LuLu’s founder and MD Yusuff Ali MA is ranked the fourth richest Indian in the Middle East with a
net worth of US$2.2 billion. His company turned over nearly $5 billion in 2014.
US-based fast food chain Vietnam roll-out. US-based fast food chain Dairy
Queen opened its first store in Vietnam.
Its Taiwan partner, Jolly Brands, has opened a Dairy Queen location in the Tianmu neighbourhood of Taipei. The company plan to open 45 stores throughout the country within the next five
years.
In Vietnam, Dairy Queen has signed a multi-unit deal with QSR Vietnam Trading One Member
Company to open its first store in Ho Chi Minh City. The store is located in Nguyen Thi Minh Khai
in a part of the downtown area popular with Asian expats and local students. The plan is to
develop a network of 60 stores within five years.
“We certainly look forward to delivering the Dairy Queen experience and innovative menu items
to our fans in those countries as we continue to expand our global presence,” said Jean
Champagne, COO, international, Dairy Queen. Dairy Queen has more than 6400 locations
worldwide.
Aeon opens second Vietnam mall
Aeon has opened its second shopping mall development in the industrial city of Binh Duong, an
hour from downtown Ho Chi Minh City. Aeon Mall Binh Duong Canary boasts some 150 stores
(including 40 Japanese retailers, 18 of them new to Vietnam. It is also home to Vietnam’s largest
food court yet with more than 60 vendors selling foods from all over the world.
This will be Aeon’s second mall in Vietnam followed by Aeon Mall Tan Phu Celadon opened this
January which has already proved to be Ho Chi Minh City’s most sucessful mall.
An estimated 800,000 people live within 20 minutes ride by motorcycle from the mall. A large
number of Koreans and Japanese are included in the resident expat mix of factory managers and
specialist tradespeople.
Aeon Canary is one of the biggest commercial facilities in Binh Duong comprising three stories,
with about 70,000sqm offloor space and parking 6000 bikes and 1000 cars. It includes a
3000sqm Kids Republic zone selling baby and child related goods together with an indoor theme
park Molly Fantasy operated by the Aeon Group. It is anchored by a 17,000sqm Aeon
supermarket and department store.
Market Entry for European SME in Vietnam Asean
In addition comes; in the face of the ASEAN Free Trade Zone Agreements
EU-Vietnam (Free Trade Agreement).
TPP (Trans-Pacific Partnership)
AEC (ASEAN Economic Community)
RCEP (Regional Economic Partnership)
European entrepreneur should be present in VIETNAM. When these trade agreements come
2015 into force, Vietnamese exports will be freely accessible to the world’s largest markets.
Whoever wants to join the fields of opportunities are:
> Procurment, Import, Export, Marketing, Sales of merchandise of all kinds
> Production. As a in-house production or contract manufacturing
> Production relocation. Outsourcing of labor-intensive manufacturing
> Investment projects by company purchase. Joint-Venture
> Or new begin. We possess viable business concepts
> Company founding mit all national permits and licences
Productionservice-Vietnam handles in Vietnam and Indochina all business activities practicecompliant and reliable. No problems with authorities, site selection, staff recruitment and training.
Our controlling also has the costs and potential returns in grip. We can offer interim manager too.
Interested investors / companies we give an free first time estimate of the requirements,
possibilities and project costs http://www.produktionsservicevietnam.com/Englisch/leistungen.php
Dipl.-Ing. Alex Narr is executive consultant of Produktionsservice-Vietnam, an GERMAN
ADVISORY FIRM that helps Western companies since 2005 do business in Vietnam, Cambodia,
Laos, Myanmar based in Ho Chi Minh City.
Economy & Business
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V - French expected to ratchet-up current investment
The Hanoitimes, 21 Apr 2015
French firms are deepening roots in Vietnam in anticipation of the EU- Vietnam free trade
agreement and growing economic ties.
Sanofi, a diversified global healthcare provider, recently affirmed their commitment to developing
its presence in Vietnam’s market after visiting as part of a French government delegation led by
Minister of State Matthias Fekl who is responsible for foreign trade, tourism, and the rights of
French nationals abroad. Fekl was in Vietnam last week to attend the third annual high-level
Vietnam-France Economic Dialogue.
Sanofi is a trailblazer in building pharmaceutical plants in Vietnam.
Last March, the firm kicked off construction of a new drug manufacturing plant and a research
and development centre in Ho Chi Minh City with US$75 million in the total investment capital,
making it Sanofi’s largest investment project in Vietnam so far, according to Sanofi CEO
Christopher A. Viehbacher. “With a 50-year plus track record operating in Vietnam, Sanofi is
enjoying its number-one position in one of most dynamic nations in the region. The new project
will continue affirming its pole position in this emerging market,” said Viehbacher.
Other members of the French delegation, such as Alstorm, Airbus D&S, Thales and IMP
Engineering all expressed interest into expanding their presence in Vietnam.
Alstom, a global leader in power generation, power transmission, and rail infrastructure is hoping
to team-up with other partners in order to spur on sustainable development city models in
Vietnam.
The group has already been involved in a string of large-scale projects in Vietnam such as the
landmark Son La hydropower plant, and Hanoi’s metro line 3.
International electrics and systems group Thales voiced its intention to develop surveillance
satellite systems in Vietnam, while IMP Engineering is keen to building hospitals. IPM has
engaged in a proposal to build a 500-bed hospital in the Mekong Delta city of Can Tho. This
project, if it gets the go-ahead, will be funded using French official development assistance.
The French investors’ proposals were all commended by Deputy Minister of Planning and
Investment Nguyen Chi Dung who chaired dialogue.
“Current French investment in Vietnam is well below its potential. We want French businesses to
realize there are plenty of opportunities in the country, especially as we’re about to wrap-up
negotiations on the European Union free trade agreement and become part of the ASEAN
Economic Community,” said Dung. “Vietnam has a number of advantages in terms of its
investment environment, reformed policies, coupled with low-cost labour and competitive
infrastructure,” Dung said.
The Ministry of Planning and Investment’s Foreign Investment Agency’s figures revealed that
France had 429 investment projects in Vietnam worth US$3.4 billion in the total committed
capital, ranking 16 out of 101 countries and territories investing in Vietnam by the end of March.
V - New rich drive Vietnam luxury boom
Joffre Castilla Breininger, April 21, 2015
The rapidly rising ranks of Vietnam’s uber-rich are fueling growing demand for luxury
goods in the fast-growing economy.
The number of ultra high net worth individuals (UHNWI) in Vietnam is predicted to double
to 300 by 2024, according to the Knight Frank Wealth Report 2015.
The increase of 159 per cent makes Vietnam the country with the fastest growing population of
persons with a net worth of more than US$30 million, followed by another ASEAN member state,
Indonesia (132 per cent). Ultra-rich individuals in Asia hold net assets of US$5.9 trillion, now even
surpassing North America’s US$5.5 trillion. Furthermore, the report predicts that cities across
Asia will see an increase of 91 per cent of UHNWIs in the next decade. But not only the uber-rich
are on the rise: according to Euromonitor International more than 100,000 Vietnamese in 2013
had a disposable income of more than US$75,000 per year. As in China, the highly affluent in
Vietnam are constantly looking for opportunities not only for investing their money, but also to
spend it.
A survey conducted by Nielsen concluded that Vietnam ranks third in the world in terms of
fondness for branded goods, only surpassed by China and India. Moreover, 56 per cent of the
participants responded that they are willing to pay more for designer products than for less known
brands despite same functionality.
Another study by the Japanese advertising agency Hakuhodo found that female consumers in Ho
Chi Minh City are the only customers in Southeast-Asia that preferred design over functionality.
All that is driving a Vietnam luxury boom, with growth especially prevalent in jewellery, fashion,
cars and wine…
Gold and Jewellery
Although demand in gold and coins in Q4 of 2014 has dropped 15 per cent to 13.3 tones
(amounting for US$514 million) compared to the same period in 2013, Vietnam remains the
world’s seventh largest gold consumer. Bullion, historically one of the most inflation-resistant
investments allowed people to save and pass these savings on to children and their family. Gold
also has a cultural significance in Vietnam: The fifth day of the first month of the lunar year, the so
called God of Wealth day traditionally pushes gold prices up in Vietnam and customers queue up
in front of stores for hours to have a chance to buy the desired metal, hoping for good fortune all
year. Recently, the government changed its policy regarding the hoarding of gold bars, issuing a
ban on interests on gold deposits when stored in financial institutes and releasing regulations to
turn the central bank into the sole importer of gold bars. Formerly, many real estate purchases
were conducted using gold as a payment method. Listing housing prices in gold was common
practice in Vietnam, until in 2011 the State Bank issued a decree imposing fines on advertising
goods, services and property in foreign currency or gold.
Being a country rich in gemstones, especially jade, sapphires and topaz, jewelry is especially
popular in Vietnam. In 2014, jewellery worth US$519 million was traded, a decline of eight per
cent from 2013, though demand was still higher than in other Asian countries with higher GDP
per capita including Thailand and South Korea (US$250 and 382 million, respectively). At this
time, licensing restrictions limit joint ventures to manufacture jewellery for export only. The
popularity and demand of jewellery, combined with the fact that it has to be imported, is a unique
opportunity for foreign investors.
Fashion
The market for apparel in Vietnam is predicted to reach US$4.2 billion by 2017, according to
Euromonitor International’s forecasts. Among the first high-end fashion brands in Vietnam was
the French company Louis Vuitton, and since 1997 many followed: Dior, Burberry, Ermenegildo
Zegna, Bulgari, and Hermes, only to name a few. It was a profitable decision: the Hermes
boutique in Hanoi, opened in 2008, increased its profits gradually by 20 to 30 per cent each year.
Salvatore Ferragamo opened up it’s fifth store in Vietnam two years ago. Other luxury brands are
operated under a franchise system, such as Loewe, Marc Jacobs, Givenchy and Balenciaga,
which monobrand stores are operated by a single partner. There are of course risks involved; the
official partner of Gucci was investigated for tax evasion in 2010.
Cars
Several luxury car brands have established themselves within Vietnam in the recent years,
including Lamborghini, Jaguar, Bentley and Rolls-Royce. Customers benefit from these
permanent establishments within the country, since previously they had no other chance than
importing them at a costly price through dealers and were forced to pay exorbitant maintenance
fees because of the lack of licensed service providers.
Other manufacturers, who are not new players to the Vietnamese market are reporting positive
figures. Mercedes Benz entered the country’s market 20 years ago, and sold 1106 units in the
first six months of 2014, marking a 70 per cent increase over the same period in 2013. Earlier this
month, Mercedes-Maybach, the relaunched luxury brand from Daimler reported 10 orders for its
S600 model, which costs VND9.6 billion (US$451,850). Notably, only 50 units of that model will
be produced worldwide in 2015.
Most affluent customers own more than one car, and due to Vietnam’s heavy traffic and shortage
of car parks a lot of them rely on a driver. Customers may care as much about the amenities in
the back seats, than technical gadgets on the dashboard. Automobile manufacturers will have to
face a challenge when inner-ASEAN import tariffs will be cut to zero per cent in 2018. Imported,
completely built units from Thailand and Indonesia, where a lot of companies already have
established factories will be cheaper than cars partly assembled in Vietnam.
Wine
While young Vietnamese obtain more purchasing power, consumption of wine is rising. As of
2012, France held the lion’s share of the Vietnamese wine market at 35 per cent, with it’s biggest
contender being Chile, accounting for 20 per cent, followed by Australia, the US and Italy.
However, Chilean market share is expected to grow over the next years due to the Chile-Vietnam
free trade agreement (FTA), that took effect in January 2014. Import tax on Chilean wine has
dropped from 56 per cent to 20 per cent and until 2030 will approach zero, similar to the abolition
of tariffs on Chilean wine imported to China, earlier this year. The Chile-Vietnam FTA marks the
first agreement of its kind for Vietnam with a Latin-American country. When importing to Vietnam
from a country or territory without an FTA in place, import duty applied to wine with alcoholic
strength not exceeding 15 per cent is 50 per cent, and is further taxed with a 10 per cent VAT.
Only licensed importers are permitted to import wines into Vietnam. Apart from a few
multinationals, most bottles are imported by small businesses, either directly, if licensed, or via
regular importing companies on a fee-based basis, usually 2-3 per cent over the total contract
value.
Vietnam leads in Southeast Asian alcohol consumption with around US$3 billion spent on alcohol
every year, and the industry still has a lot of room for growth.
O - Reform in China - The quiet revolution
Economist, 2nd Q. 2015
Fears are rising that, after three soaring decades, China is about to crash.
WITH China, the received wisdom belongs to the pessimists. Figures this week revealed that
growth has slowed sharply and deflation set in, as the economy is weighed down by a property
slump and factory production is at its weakest since the dark days of the global financial crisis. In
the first three months of 2015, GDP grew at “only” 7% year-on-year. Growth for 2015 will
probably be the weakest in 25 years.
The Asean Tiger
(not be confused with Asian/China)
Fears are rising that, after three soaring decades, China (Asia) is about to crash. That would be a
disaster. China is the world’s second-largest economy and Asia’s pre-eminent rising power.
Fortunately, the pessimists are missing something. China is not only more economically robust
than they allow, it is also putting itself through a quiet—and welcome—financial revolution.
The robustness rests on several pillars. Most of China’s debts are domestic, and the government
still has enough sway to stop debtors and creditors getting into a panic. The country is shifting the
balance away from investment and towards consumption, which will put the economy on more
stable ground (see article). Thanks to a boom in services, China generated over 13m new urban
jobs last year, a record that makes slower growth tolerable. Given China’s far bigger economy,
expected growth of 7% this year would boost the global economy by more than 14% growth did in
2007.
However, the real reason to doubt the pessimists is China’s reforms. After a decade of dithering,
the government is acting in three vital areas. First, in finance, it has started to loosen control over
interest rates and the flow of capital across China’s borders. The cost of credit has long been
artificially low, squashing the returns available to savers while, at the same time, succouring
inefficient state-owned firms and pushing up investment. Caps on deposit rates are becoming
less relevant, thanks to an explosion of bank-account substitutes that now attract nearly a third of
household savings. Zhou Xiaochuan, the governor of China’s central bank, has said there is a
“high probability” of full rate-liberalisation by the end of this year.
China is also becoming more tolerant of cross-border cash flows. The yuan is, little by little,
becoming more flexible; multinational firms are able to move revenues abroad more easily than
before. The government’s determination to get the IMF to recognise the yuan as a convertible
currency before the end of 2015 should pave the way for bolder moves.
The second area is fiscal. Reforms in the early 1990s gave local governments greater
responsibility for spending, but few sources of revenue. China’s problem of too much investment
stems in big part from that blunder. Stuck with a flimsy tax base, cities have relied on sales of
land to fund their operations and have engaged in reckless off-books borrowing.
The finance ministry now says it will sort out this mess by 2020. The central government will
transfer funds to provinces, especially for social priorities, while local governments will receive
more tax revenues. A pilot programme has been launched to clear up local-government debt. It
lays the ground for a municipal-bond market—despite the risks, that is better than today’s opaque
funding for provinces and cities.
The third area of reform is administrative. In early 2013, at the start of his term as prime minister,
Li Keqiang pledged that he would cut red tape and make life easier for private companies. It is
easy to be cynical, yet there has been a boom in the registration of private firms: 3.6m were
created last year, almost double 2012’s total.
The high road of lower growth
In time, these reforms will lead to capital being allocated more efficiently. Lenders will price risks
more accurately, with the most deserving firms finding funds and savers earning decent returns. If
so, Chinese growth will slow—how could it not?—but gradually and without breaking the system.
Yet dangers remain. Liberalisation risks breeding instability. When countries from Thailand to
South Korea dismantled capital controls in the 1990s, their asset prices and external debts
surged, ultimately leading to banking crises. China has stronger defences but nonetheless its
foreign borrowing is rising and its stockmarket is up by three-quarters in six months.
And then comes politics. Economic reforms have high-level backing. Yet the anti-corruption
campaign of President Xi Jinping means that officials live in fear of a knock on the door by
investigators. Many officials dare not engage in bold local experiments for fear of offending
someone powerful.
That matters because reform ultimately requires an end to the dire system of hukou, or household
registration, which relegates some 300m people who have migrated to cities from the countryside
to second-class status and hampers their ability to become empowered consumers. Likewise,
farmers and ex-farmers need the right to sell their houses and land, or they will not be able to
share in China’s transformation.
Ever fond of vivid similes, Mr Li says economic reforms will involve the pain a soldier feels when
cutting off his own poisoned arm in order to carry on fighting. “Real sacrifice”, he says, is needed.
China’s quiet revolution goes some of the way. But Mr Li is right: much pain lies ahead.
O – In ASIAN the world’s most dynamic region, family companies occupy
the commanding heights of capitalism
Economist, Apr 18th 2015
Asian values - The commanding heights of the world’s fastest-growing region, Asia, are
dominated by great business families.
At first glance companies such as Samsung and Hutchison Whampoa may look like regular
public companies, but closer examination quickly reveals a family dynasty and a family saga. The
partial exception to this rule is China, where state-owned enterprises (SOEs) still dominate. But
even there the country’s own brand of family capitalism flourishes wherever the state allows it to.
Family companies were at the heart of the development of capitalism in Asia. Family names
acted as a guarantee of honesty for fellow businesspeople and quality for consumers. Family ties
allowed businesspeople to operate across countries and regions. Some families such as the
Tatas added further lustre to their name by standing up to the colonial oppressors. Indians love to
tell the (probably apocryphal) story of how Jamsetji Tata built the Taj Palace, the grandest hotel in
Mumbai, because he was refused entry to a European-owned hotel.
For some observers these family companies are turning into eye-catching relics as specialised
firms move in and contracts are enforced by lawyers. The great patriarchs who once presided
over these dynasties are being replaced by professional managers who could just as easily work
in London or New York as in Hong Kong or Mumbai. Many hereditary businesspeople share
these doubts. Anand Mahindra, the boss of Mahindra Group, a conglomerate that has been run
by a member of the Mahindra family for three generations, is uncomfortable with talk of family
capitalism. Family companies are mostly stuffed with family members “99% of whom should not
be there”, he says.
But the numbers tell a different story. Asian countries are far more family-oriented than Western
ones, and well over half the largest business groups in South-East Asia and India are controlled
by families. Family companies continue to draw on time-honoured advantages such as their good
names and deep connections, and continue to reinforce their positions through judicious
marriages.
Family companies can also draw on new advantages, such as modern management techniques
and their connections with Western companies. The local princes and princesses are almost
invariably educated at famous Western business schools (to which they make generous
donations) and then polished in well-known Western companies such as McKinsey and J.P.
Morgan.
O - China growth lowest since 2009 as property and manufacturing drag
Gabriel Wildau in Shanghai and Tom Mitchell in Beijing, April 15, 2015
China’s economy grew at its slowest pace in six years in the first quarter this year,
highlighting the challenge of finding new growth drivers amid a slowdown in the key
pillars of construction and manufacturing.
Peking’s Environment
Gross domestic product grew 7.0 per cent in the first three months of 2015 compared with the
same period a year earlier, the country’s National Bureau of Statistics said on Wednesday — the
weakest quarterly expansion since the depths of the global financial crisis in the first quarter of
2009. China’s economy grew 7.3 per cent in the fourth quarter last year.
A slowdown in China is widely seen as necessary and inevitable as the country tries to retool its
growth model away from smokestack industries and towards domestic consumption and services.
Last month Premier Li Keqiang announced a growth target of “around 7 per cent” for 2014. “We
expected the fall in economic growth,” said Sheng Laiyun, NBS spokesman. “As the economy
enters the ‘new normal’, the drop in growth rate is good for structural adjustment and
transformation.” However, policy makers want to avoid an abrupt slowdown that could cause
unemployment to spike and threaten financial stability with a wave of defaults.
The People’s Bank of China has cut interest rates twice since November in an effort to stimulate
investment by lowering borrowing costs. But analysts say companies remain loath to invest even
at lower rates, given weakness in final demand and highly indebted corporate balance sheets,
especially among state-owned firms. Separate data out on Wednesday added to the picture of a
slowdown. Factory output grew at a record-low pace of 5.6 per cent in March, well below the
previous low of 6.8 per cent in January and February. “The big surprise is that industrial
production is very weak. But the service sector is holding up pretty well,” said Zhu Haibin, chief
China economist at JPMorgan in Hong Kong. “If you look on the positive side, this shows that
rebalancing is continuing. But it highlights the near-term risk coming from manufacturing and real
estate.” Fixed-asset investment — which includes spending on infrastructure, factory equipment
and property construction — grew at a 14-year low of 13.5 per cent in the year to March, down
from 13.9 per cent in the first two months.
Meanwhile, retail sales, viewed as a rough proxy for consumption, grew at a nine-year low of 10.2
per cent.
Beyond monetary easing, Chinese local governments have also announced plans to boost
infrastructure spending this year in an apparent effort to compensate for the declining investment
in construction and factory equipment.
Mr Sheng's comments on Wednesday suggest the government intends to use infrastructure
investment to buffer the investment slowdown in other sectors. “China has made great
achievements in infrastructure in recent years but infrastructure per capita still trails far behind
developed countries,” he said. “The space for further infrastructure investment is still large.”
Late last month the government rolled out fresh measures to support the ailing property market,
eliminating restrictions on mortgages and expanding a capital gains tax exemption for
homeowners.
“The weaker Q1 GDP growth and much weaker than expected March activity data suggest that
growth momentum remains weak, which calls for further policy easing,” Nomura analysts led by
Yang Zhao wrote in a note. Nomura forecasts one interest rate cut and one cut in banks' required
reserve ratio in each of the remaining three quarters of 2015. The investment share of China's
overall economy remains far higher than any other major economy, but there were signs of
moderate progress on Wednesday.
Mr Sheng said the consumption share of GDP growth probably declined in the first quarter, while
net exports rose and consumption was stable, though he said exact figures had not been
finalised. China’s trade surplus surged in the early months of 2015, as resilient export demand
from the US combined with plummeting commodity prices that reduced China’s import bill.
Consumption contributed 3.8 percentage points to China’s full-year GDP growth last year,
compared with 3.6 percentage points for investment and zero for net exports.
L - New Asian markets driven by youth
Euromonitor international, 14 April 2015
ASIA: Laos is set to be one of the fastest growing markets in Asia in over the next fifteen
years, with consumer spending predicted to triple between 2015 and 2030, driven by a
combination of youth and urbanisation.
A report from research firm Euromonitor International – Markets of the Future – pointed to five
markets in Asia to watch. As well as Laos, it named Bangladesh, Cambodia, Myanmar and Sri
Lanka as the region's next generation of consumer markets. A number of factors were
referenced in addition to the obvious requirements of economic growth and poverty reduction.
Modern retail formats, for example, are emerging and leading to a wider range of consumer
goods becoming available. But these countries also shared other characteristics, mostly having
younger populations and faster growing urban populations than others in the region.
Bangladesh, for example, is expected to add 1.6m urban inhabitants every year between 2015
and 2030, with a consequent increase in demand for packaged food. Euromonitor highlighted the
categories of dairy, baby food and confectionery, all of which are expected to more than double
between 2014 and 2018.
Laos, meanwhile, has the youngest demographic profile, with a median age of 21.7 in 2014 and
more than one third of the population aged under 14. Despite the high birth rate, relatively little is
being spent on baby food ($2.07 per capita) and baby care products ($0.27). Such low spending
levels mean, said Euromonitor, that "companies must understand the trade-off poor consumers
make between price and quality". In addition, there can be "challenges around building brand
awareness or even category awareness (with word of mouth a crucial form of communication)".
Standard business models are unlikely to work, even those imported from neighbouring emerging
markets, although Euromonitor noted that it was often possible to combine CSR policies with
commercial strategies to good effect.
It cited the example of Grameen Uniqlo in Bangladesh, with the fashion retailer sourcing raw
materials, production, logistics and sales within the country and ploughing profits back into the
business. "Uniqlo is learning a huge amount of valuable information about the market as well as
achieving CSR targets," it observed.
O - European Parliament assesses Vietnam’s readiness for FTA
VNA 8.4.2015
The European Parliament has assessed Vietnam’s level of readiness to
sign a free trade agreement (FTA) with the European Union (EU), Chairman of the
European Parliament’s International Trade Committee Bernd Lange told
a press conference in Hanoi on April 8.
As a continuous process that requires efforts of both sides, the FTA talks between Vietnam and
the European Union is now in the finalstage and will last through this June, he said, noting that
the 12th negotiation round, the latest one, concluded this March.
Vietnam and the EU started FTA talks in June 2012, with the latter being the second largest trade
partner of Vietnam. The Southeast Asian country, meanwhile, is the 32nd largest trade partner of
the bloc with garment as the most competitive export item. While in Vietnam from April 6-9, the
European Parliament delegation will hold a working session with Chairman of the Ho Chi Minh
City People’s Committee and tour two factories, including an European automobile assembly line.
V - Big international companies buying top Vietnamese brands
VietNamNet Bridge / 06/04/2015
Strong Vietnamese brands, one after another, have fallen into the hands of foreign
international groups, a number of analysts have said.
In late 2014, for example, Kinh Do Group held an extraordinary shareholders’ meeting to discuss
the sale of 80 percent of sweets manufacturing division to foreign investor Mondelez
International, while the remaining 20 percent is expected to be sold in the next 12 months. With
the VND8 trillion deal, Kinh Do has officially quit the sweets market.
In December 2012, shareholders of Prime Group unexpectedly earned big money thanks to the
Siam Cement Group (SCG), which spent $240 million, or VND5 trillion, to buy 85 percent of the
building materials manufacturer.
In 2013, Do Thi Kim Lien, the founder of AAA insurance, decided to sell the remaining 30 percent
of AAA’s shares to Australian IAG Group, though she “could see bright prospects for AAA ahead”.
In early 2015, a Thai retailer revealed that it had bought 49 percent of shares of a Vietnamese
home appliance distribution chain.
Most recently, according to Japan Times, Fivimart, owned Nhat Nam, and Citimart, owned by
Dong Hung, two well known brands in Hanoi and HCM City, have sold 30 percent and 49 percent
of shares, respectively, to Aeon, a leading Japanese retail group.
WSJ has reported that ThaiBev plans to spend $1 billion to acquire 40 percent of Sabeco, the
Vietnamese largest beverage manufacturer. Singha Corp, also from Thailand, is also eyeing
Sabeco’s shares.
Prior to that, ThaiBev had acquired 11 percent of Vinamilk, the largest Vietnamese dairy
producer.
The deals, in the eyes of many people, show the great successes made by Vietnamese
businessmen, because they brought big money to the brands’ owners.
However, in the eyes of many analysts, the deals show the lack of long-term vision of Vietnamese
business people, who have sold their best brands to foreigners after many years of building them.
That could be why many Kinh Do shareholders decided to sell shares in large quantities and say
“goodbye” to the group, thus causing Kinh Do’s share prices to fall dramatically from VND65,000
per share to VND45,000 within three months, even though Kinh Do bought treasury stocks and
offered attractive dividends at 200 percent.
Sources said that Minh Phu Seafood Company, the “shrimp King” with no rival in the international
market, may be sold to foreign investors following a decision to delist from the stock market.
A branding expert noted that Vietnamese brands are now absent in many business fields, and
that it is foreign brands which are the major players in many fields. He fears that in the future, the
rules of the game will be set by foreign players.
V - Electronics industry: Playing field for foreign businesses
By Do Ngoc, 05/04/2015
Ho Chi Minh City’s microchip industry has achieved big successes in recent years and is
regarded as the cradle of the Vietnamese semi-conducting microchip industry, helping
Vietnam rank third among Association of South East Asian Nations (ASEAN) countries in
the field of microchip design. However, by contrast the city’s electronics industry has
faced difficulties and growing competition.
Domination of foreign businesses
Currently, 30 investment projects in the field of electronics are ongoing in the Saigon Hi-tech Park
with total registered capital of US$1.7 billion. These include 16 foreign invested projects with total
registered capital of US$1.3 billion, and 14 domestic projects valued at US$392 million. In exportprocessing and industrial zones, 44 electronics projects are ongoing with total registered capital
of US$1.3 billion, including 30 foreign invested projects with total registered capital of US$1.2
billion. Most domestic electronics companies based in the city’s districts have stopped operations.
Since 2001, companies with foreign direct investment (FDI) have contributed over 90 percent to
the revenue of the city’s electronics sector (91.26 percent in 2014). The export value of hi-tech
products such as computers, electronic products and components, and digital technology
products has rapidly grown. These products have become major exports for Ho Chi Minh City and
have been exported mostly by FDI businesses such as Samsung, Hitachi, Intel, and Sanyo.
While FDI businesses dominate the city’s electronics market, domestic companies contribute a
mere 8.74 percent to the sector’s revenue. In recent years, many domestic electronics
companies have dissolved due to the costly import of foreign-made components for domestic
assembly.
Ho Chi Minh City Department of Information and Communications Deputy Director Le Quoc
Cuong said that domestic electronics businesses were mostly small to medium in size and their
skills and productivity remained low. Their brands had also failed to win customer trust. Very few
domestic businesses are capable of manufacturing products of high economic value. Domestic
businesses also have limited access to capital sources and market information as well as little
production space, hindering their efforts to expand production, promote technological innovation
and invest in product research and development.
Boosting the domestic electronics industry
Ho Chi Minh City People’s Committee Vice Chairman Le Manh Ha said that to boost the domestic
electronics industry, the committee had assigned the municipal Department of Information and
Communications to identify key products of the electronics industry so that suitable policies could
be applied to support the sector’s development. Special attention will be paid to building
microchip plants and promoting electronic software and information technology development.
Information exchange channels between FDI businesses and domestic suppliers will be
established. Domestic manufacturing of support products will be expanded to raise the local
content of domestic electronic products so that they can join global value chains.
In August 2014, Prime Ministerial Decision 1290/QD-TTg was promulgated, indicating the action
plan for developing the electronics industry to implement Vietnam’s industrialization strategy in
the framework of Vietnam-Japan cooperation towards 2020 with a vision to 2030. This action plan
aims to create breakthroughs in investment attraction and improving the effectiveness of FDI and
Japanese investment in particular into the Vietnamese electronics industry. Under this plan,
Vietnam intends to pursue the goal of becoming a large electronic equipment manufacturer using
new, smart and environmentally-friendly technologies.
Suitable policies will be applied to offer tax and credit preferences for support industry businesses
to expand production. Greater attention will be paid to developing human resources for the
electronics sector. Businesses, research institutes and training organizations as well as state
management authorities should cooperate in training highly skilled human resources meeting
business requirements.
The Vietnam Posts and Telecommunications Group (VNPT), the Vietnam Military
Telecommunications Group (Viettel), the Vietnam Electronics and Informatics Joint Stock
Corporation (VEIC), the Saigon Industry Corporation, and other businesses operating in the fields
of electronics industry and electronics support industries need to take the initiative in preparing
specific plans and projects for investment.
V - Vietnam to be Asia's new manufacturing powerhouse
Bloomberg, 03/04/2015
If you thought Asia's manufacturing giants are just China, the Republic of Korea and
Thailand, say hello to a new one: Vietnam.
Its benchmark purchasing managers' index for manufacturing has expanded -- a reading above
50 -- every month since Aug. 2013, according to HSBC and Markit Economics.
That feat is unmatched by any other Asian country that HSBC and Markit track. By contrast,
China's manufacturing PMI has contracted in eight months in that same period. Thailand's
manufacturing, as measured by the government, contracted for 22 months through January.
"Central to the latest improvement in business conditions were further rises in both output and
new orders," HSBC and Markit said in a note accompanying the release of Vietnam's March data.
Vietnamese firms were able to secure more new orders from both domestic and export clients
and "falling commodity prices in world markets continued to feed through to lower input costs,"
said Andrew Harker, senior economist at Markit. Vietnam last year became the biggest exporter
to the US among the 10 Association of Southeast Asian Nations, or Asean. And with its strategic
location, younger population and lower costs than China, it has drawn the likes of Samsung
Electronics, Intel and Siemens, besides apparel and shoe makers.
In Vietnam's favor, wages are still low, with the average monthly wage at US$197 in 2013,
compared with US$391 for Thailand and US$613 for China, according to the International
Labor Organization. Its population is younger: only about 6% is above the age of 65,
compared with about 10% in China and Thailand and almost 13% in the Republic of Korea.
Of course, much of Vietnam's work now is in low-end manufacturing in textiles, garments,
furniture and electronics. That may change, as companies invest in training and R&D.
V – New wave of M & A's for Vietnam
Vietnam Bridge, 2nd Q. 2015
With a raft of free trade agreements on the way, a checklist of equitisations, and new
legislation in place to support foreign investment, a new wave of M&As are forecast to
sweep across Vietnam
The 2005 Law on Investment and Law on Enterprises laid the foundations for a new Vietnamese
investment regime, and created a level playing field for foreign and local investors alike. Ever
since then, the legal framework for the M&A sector in Vietnam has been developing at a rapid
pace.
Currently, apart from some limitations under both Vietnamese law and Vietnam’s WTO
commitments, foreign investors can freely acquire shares in Vietnamese enterprises. At present,
a new wave of M&As is set to hit Vietnam, as the country is once again highlighted as an
attractive investment market. The primary investors have been from Japan, Korea, Taiwan, and
recently from other ASEAN member countries, particularly Singapore and Thailand.
Once the Trans-Pacific Partnership (TPP) and Free Trade Agreement between the EU and
Vietnam (EVFTA)—which are now in their final rounds of negotiation—are concluded, they may
also drive more interest in M&A activities in Vietnam. The recent development of the 2014
Investment Law and Enterprise Law has highlighted the determination of the Vietnamese
government to ease M&A procedures and set in place a regulatory framework to re-ignite M&A
activity in Vietnam.
Recent M&A deals
M&A activities in Vietnam witnessed a steady growth after Vietnam officially became a member of
the WTO in 2007. Vietnam saw its first M&A wave in the period between 2008 and 2013, with a
reported total value of $15 billion. In 2012 alone, Japanese investors made about $1.2 billion
worth of deals in Vietnam. Indeed, in terms of both quality and value, Japan is the leading nation
bringing M&A deals to Vietnam. Their efforts in this regard helped Vietnam’s M&A market reach a
peak of $5.1 billion in 2012. According to statistics from Capital IQ, there were 92 successful M&A
deals in 2008, 308 deals in 2012, and 182 deals in 2013. Fast-moving consumer goods is
considered the most attractive sector, with the total M&A transaction value up to $1 billion,
accounting for 25 per cent of the total M&A value in Vietnam. Of course, the retail and real estate
sectors have always been robust sectors in M&A with big deal value.
Vietnam’s M&A market saw a strong uptrend in 2014 with six deals reportedly made every week.
In total, 313 M&A deals were made in 2014, with a value of $2.5 billion, a 15 per cent increase
compared with the previous year.
The most notable deals in 2014 include Vingroup, one of the biggest domestic private companies
in Vietnam, acquiring 70 per cent of Ocean Retail Company’s capital; Mondelez International
acquired 80 per cent of Kinh Do Joint Stock Company’s capital in their sweets manufacturing
section at $370 million; and Standard Chartered Private Equity acquired a significant minority
stake in An Giang Plant Protection Joint Stock Company at $90 million. The business community
are hopeful that the total value of M&A deals could reach $20 billion during the second wave
between 2014 and 2018.
Good news for M&As in Vietnam
Starting from July 1, 2015, foreign investors will not need to undergo lengthy investment
certificate procedures when buying stakes in Vietnamese target companies. While this remains to
be seen, the change, introduced by the new Investment Law, will hopefully end years of
uncertainty and frustration faced by foreign investors eyeing Vietnam market entry or expansion
via M&A. We have seen a strong increase of interest from international investors, especially in
the last months of 2014, and continuing into 2015. The TPP (which includes the US and Japan),
the EVFTA as well as tariff reductions under the ASEAN Economic Community (AEC) are all
scheduled for this year. These will increase market access for foreign investors in Vietnam and
lower barriers to trade in goods and services.
Why is the investment certificate question so important?
Under current law, Vietnam has different licensing procedures for foreign and domestic investors.
The Investment Certificate (IC) serves as a business registration for foreign investors. In practice,
despite a 45 day maximum statutory time limit, the IC process can take four to six months or
longer, while domestic business can be registered within a day. Under the new Investment Law,
the IC is replaced by an “investment registration certificate” (IRC) and an enterprise registration
certificate (ERC). Obtaining ERCs should be straightforward, as they only contain basic business
info and also apply to domestic investors. The IC process is due to take just 15 days, while ERCs
are scheduled to be issued within three working days. The process may be longer in practice but
it is better than before in terms of a clear application of time frame.
Explicitly, no IRC for M&A activity!
Foreign ownership in public companies, including listed companies or companies with 100
shareholders or more, and with a contributed equity of VND10 billion or more, cannot exceed 49
per cent. Although in principle enterprises with foreign ownership of up to 49 per cent are entitled
to the same treatment as local companies, such rules appear to be disregarded in practice. For
example, the Department of Planning and Investment (DPI) of Ho Chi Minh City refused to
register the distribution of pharmaceutical products of a local company on the grounds that 4.3
per cent of its shares were then held by foreign investors. It is therefore very difficult for foreign
investors to conclude an M&A deal.
Now, the new Investment Law expressly provides that no IRCs will be required for acquisitions of
target companies. As a result, the time needed to complete purchase of stakes in Vietnamese
entities is expected to be reduced tremendously. Buying into public companies listed on the
Vietnamese stock exchanges will not require an IRC either, but foreign ownership of listed
companies is still capped at 49 per cent (and maximum 30 per cent for financial institutions).
Rumours have long abounded that the caps will soon be raised but, until that day, investors will
need to buy unlisted companies to take control. Provincial departments of planning and
investment (DPI) will still have to “register” (read: “approve”) plans to acquire a majority of a target
or stakes in a company that is active in a “conditional” sector. Conditional sectors for foreign
investors include construction, urban planning, and education (Annex 4, new Investment Law). In
practice, DPI officials have broad discretion to approve applications, but they should need much
less paperwork then for an IRC application. In addition, the business registration office will have
to update ERCs to reflect changes in an unlisted company’s ownership, statutorily, in three
working days.
New waves of M&A?
With positive changes brought about by the new Investment Law, together with a significant
equitisation target of about 368 state-owned enterprises in 2015, the conclusion of the TPP and
EVFTA as well as the formation of AEC by the end of this year, Vietnam will witness another
wave of M&A. Banking and finance will attract main foreign investment as the number of
commercial banks are required to be reduced to 13-15 in 2017, and smaller banks under the
pressure of competition and capital requirements will look for new foreign investors to achieve
expansion. In addition, consumer goods and real estate also remain attractive sectors.
V - Asia’s About to Spawn a New Tiger Economy: Good Morning, Vietnam
Bloomberg, 2nd Q. 2015
Perched along one of a world’s most crucial shipping routes, and with a immature and growing
population, Vietnam is — once again — being sloping for economic lift-off, after years of
disappointment.
New Asean Tiger Economy Vietnam
Money pouring into a Southeast Asian economy from the likes of manufacturers Samsung
Electronics Co. and Intel Corp. is giving Vietnam a second run during apropos Asia’s subsequent
tiger economy. The country’s “Doi Moi” marketplace opening in a 1980s ushered in spurts of
enlargement in additional of 7 percent that waned in recent years after a wreck of bad debt during
state-owned enterprises. According to PricewaterhouseCoopers LLP, a republic has the intensity
to turn one of a world’s fastest-growing economies over a duration to 2050. Not usually is a
Southeast Asian republic gaining belligerent as a cheaper manufacturing alternative to adjacent
China, Vietnam is also a politically palatable end for Japanese firms boosting investment in the
segment amid repeated Sino-Japan spats. “It is utterly probable that Vietnam could turn the
fastest-growing economy in Asia,” pronounced Vikram Nehru, a senior associate in a Asia
Program and Bakrie Chair in Southeast Asian Studies during a Carnegie Endowment for
International Peace in Washington. “It has all a mixture for fast enlargement if it can residence a
hurdles in a state sector.”
Growing Clout
Signs of Vietnam’s flourishing poke are gathering: In 2014 the country overtook informal
counterparts to turn a biggest exporter to a U.S. from a Association of Southeast Asian
Nations, or Asean, muscling forward of a some-more established manufacturing rivals of Thailand
and Malaysia. Disbursed unfamiliar investment in Vietnam has soared in the past 14 years to
strech $12.35 billion in 2014, adult 7.4 percent from 2013 and compared with $2.4 billion in 2000,
total from the Foreign Investment Agency show. Samsung’s operations in the country are
flourishing so large that it got supervision capitulation to operate a possess depot during Hanoi’s
Noi Bai International Airport.
And manufacturers are changeable from China. Japanese printer maker Kyocera Document
Solutions Inc., a section of Kyocera Corp., plans to quadruple a annual printer prolongation in
Vietnam to 2 million units by Mar 2018, a association pronounced this month. Part of a operation
in China will be changed to Hai Phong, making Vietnam a company’s biggest production bottom
for printers, with another plant designed by August, it said.
‘Big Winner’
“Vietnam is unequivocally a large leader from China losing its competitiveness since of rising
wages” and a clever currency, said Frederic Neumann, co-head of Asian economics investigate
in Hong Kong during HSBC Holdings Plc. “By relocating really early into the space vacated by
China, Vietnam has first-mover advantage and it is now starting to show.” Before weakening final
year, a yuan in Shanghai had a four-year allege of 13 percent that was a best performance
among 24 emerging-market currencies tracked by Bloomberg.
Vietnam’s benchmark batch index has climbed 5.5 percent this year, compared with
Indonesia’s 4.1 percent increase, Malaysia’s 2.4 percent and Thailand’s 2.2 percent.
Vietnam’s annual genuine sum domestic product enlargement could average 5.3 percent in a
2014-50 period, a gait only bettered by Nigeria, according to PwC’s “The World in 2050” report.
Growth in China might tumble next 4 percent. Demographics are a large help. Some 13 percent
of China’s population in 2012 was already 60 or older, compared with 9 percent in Vietnam,
according to a United Nations. More than 40 percent of Vietnam’s race of about 90 million in 2013
was in a labor force aged 15 to 49, supervision information show. The normal monthly salary in
Vietnam was $197 in 2013 compared with $391 for Thailand and $613 for China, according to
International Labour Organization calculations. That disparity is widening. The Economist
Intelligence Unit predicts that in 2019, production labor costs per hour in China will be 177
percent of those in Vietnam, adult from 147 percent in 2012.
There are caveats to a optimism
Lenders in Vietnam are creaking underneath bad loans, and the government has struggled to
renovate emasculate state-owned companies. Inadequate infrastructure, skills gaps and
corruption remain risks. Vietnam ranked 119 out of 175 countries and territories in a Berlin-based
Transparency International’s 2014 Corruption Perceptions Index. China came in during 100th
place. Meanwhile, other Southeast Asian countries such as a Philippines and Malaysia are also
competing to win production jobs. “It’s not guaranteed that Vietnam will do its potential,”
pronounced Hawksworth. “Part of it is that Vietnam is simply in a good geography place and
partial of it is that it does have some throwing adult to do in terms of GDP per capita.”
Labor Intensive
Much of a work being eliminated to Vietnam is in low-end manufacturing as China moves adult a
value chain: labor-intensive work in textiles, garments, seat and electronics.
Vietnam will try to sell a record volume of shares in state-owned companies this year, Dang
Quyet Tien, emissary general director of a financial ministry’s corporate financial department, said
in an talk Mar 13. The devise to sell stakes in about 280 entities this year is “credit positive” for
banks, Moody’s Investors Service said. There are other positives. Vietnam is in talks on a free
trade understanding with a European Union and is partial of U.S.-led negotiations for a vital
informal trade deal, a Trans-Pacific Partnership.
Mekong Star
“Vietnam will excommunicate Thailand as a larger Mekong star,” pronounced Tim Condon,
conduct of Asia investigate during ING Groep NV, referring to a Mekong River dish segment that
includes the nations of Cambodia, Laos, Myanmar, Thailand and Vietnam, along with China’s
Yunnan province. Exports from Thailand, one of a nations dubbed by analysts and a media as a
fast building tiger economy before a 1997-98 Asian financial crisis, have engaged in the final dual
years. By contrast, Vietnam in 2014 saw its shipments abroad burst roughly 14 percent.
Australia New Zealand Banking Group Ltd. this month upgraded Vietnam’s GDP foresee to 6.5
percent for this year and next, citing strengthening sell sales, accelerating industrial
production and improving construction.
“The economy’s structure is shifting, it is relocating from agriculture to manufacturing,”
pronounced Victoria Kwakwa, a World Bank’s republic executive for Vietnam. “You can see there
is a progression happening.”
V - Vietnam tops outsourcing location index
Viet Nam News, 2nd, Q. 2015
Vietnam has become the world's top outsourcing location for the first time in terms of
costs, risks and operating conditions
Cushman & Wakefield's annual global report "Where in the World? Business Process
Outsourcing (BPO) & Shared Service Location Index" assesses factors likely to affect the
successful operation of BPO functions around the world. In 2013 Vietnam was not even in the list,
which ranks the 36 top countries in terms of foreign direct investment in the BPO sector. It
entered in fifth place last year and now tops the list followed by the Philippines, Bulgaria and
Romania. The next stage determines the parameters to assess each country against one
another, and costs, risks and operating conditions are analysed to provide an insight into which
markets are particularly attractive in the current global environment.
With one of the highest growth rates in outsourcing, Vietnam has established its presence
in the sector as an alternative destination for low-cost offshoring services, rising from fifth
place in last year's index. The country's government has put in place policies to promote
the country as an outsourcing destination, with the services segment expected to expand
rapidly.
According to Cushman & Wakefield's head of research and valuation in Vietnam, Jonathan
Tizzard, the report demonstrates the success that the Vietnamese Government has had in
providing a stable business environment along with policies encouraged to raise the education
and professional standards of its young and ambitious population. Vietnam is witnessing an influx
of foreign direct investment currently, and when a flurry of free trade agreements are signed this
year or next, this is expected to increase. In addition, Government legislation making it easier for
foreign companies to invest and do business in Vietnam comes into effect in mid-2015,
suggesting Vietnam is a country that will continue to dominate headlines in the business press for
the foreseeable future.
While not the cheapest outsourcing destination, Vietnam is still very competitive when compared
to other global locations and wage rises in India and China largely contributed to it surging up the
ranking to take first place in 2015. But by actual market size, despite rising costs and concerns
that overheating will inevitably lead to further pressure surrounding access to skilled labour, India
remains the world's largest BPO destination. Rising one place on the 2014 index to take second
position this year is the maturing Philippines market, which has become an established pillar of
the country's economy.
The market in fact hit a record US$15 billion in revenue last year, leapfrogging India in terms of
growth and absorbing 70 per cent of India's voice and call centre operations.
The shift in power has in part been a result of spiralling Indian labour costs and climbing rates of
attrition – which stand at 26.9 per cent, the highest globally as rising wages have left companies
continuing to compete for the best talent.
Strengths
The strength and attractiveness of the Vietnamese BPO industry is a young workforce
comprising skilled and dynamic people with an inquiring mind and costs equivalent to just
a third of India's and half of China's, according to insiders.
The local BPO market sees two German firms, Digi-Texx and GHP, having provided this kind of
services for over a decade. The major local players are Lac Viet, CMC, and Tinh Van, which have
large BPO projects. FPT has opened a BPO centre in city of Da Nang to serve Japanese clients.
Int'l Cooperation
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O - Deputy PM affirms closer VN-France cooperation
VGP - | 16/04/2015
Deputy PM Hoang Trung Hai in Ha Noi on April 15 received Matthias Fekl, French Minister
of State for Foreign Trade, the Promotion of Tourism and French Nationals Abroad, who
is on a working visit to Viet Nam.
Mr. Hai appreciated the results of the third high-level annual Viet Nam-France economic dialogue
under the chairmanship of minister Fekl and the Vietnamese Deputy Minister of Planning and
Investment.
The Deputy PM suggested the two sides accelerate the implementation of joint projects such as
a project on small satellites observing natural resources, the environment and natural disasters,
a Ha Noi urban railway project and a cooperation project between France’s GDFSuez group and
the Viet Nam National Oil and Gas Group.
For his part, Fekl briefed the Deputy PM on the results from his working session with the Ministry
of Planning and Investment.
He noted that the two countries need to step up broader cooperation in aviation, satellite supply,
energy, equipment and infrastructure in the future.
O - Vietnam, Italy universities helped to seek partnerships
VNA 10/04/2015
A conference was held in Rome, Italy on April 9 for Vietnamese and Italian universities to
explore opportunities for training partnerships.
Thirty leading universities of the two countries sent representatives to the conference, which was
organised by the Italian Ministries of Foreign Affairs and Education, Universities and Research,
and the Vietnamese Embassy in Italy. Addressing the event, Vietnamese Ambassador to Italy
Nguyen Hoang Long, who once pursued tertiary study in Italy, said education cooperation is
among priorities in Vietnam-Italy strategic partnership.
According to Deputy Director of the International Cooperation Department under the Ministry of
Education and Training Nguyen Thi Thanh Minh, Italy is a potential educator partner of Vietnam,
especially in social, cultural, and technology studies. She also introduced foreign partnership
programmes to Italian universities which are interested in partnership deals with Vietnam.
Meanwhile, Italian Government representatives assured that more favourable conditions will be
rolled out for Vietnamese students. The two sides also agreed that cooperation in training highskilled human resources is essential to support Italian businesses investing or planning business
expansion in Vietnam.
Vietnam and Italy have so far cooperated in 72 education projects. About 1,000 Vietnamese
students are currently studying in universities across the European country.
O - Vietnam remains Hungary’s key market in Southeast Asia
VEN / 02/04/2015
(VEN - Secretary of State of the Hungarian Ministry of Foreign Affairs and Trade István
Mikola speaking at the sixth session of Vietnam-Hungary Joint Commission on Economic
Cooperation in Hanoi said that Vietnam remains Hungary’s key market in Southeast Asia.
He also said that the Hungarian government continued to encourage and create favorable
conditions for companies to promote trade and investment activities in the Southeast Asian
market. Trade turnover between the two countries has experienced significant growth in recent
years with an average increase of 10 percent per year. According to statistics, Hungary’s exports
to Vietnam in 2014 increased by 42 percent compared to 2013. By the end of the third quarter of
last year, Hungary had 13 investment projects in Vietnam with total capital of nearly US$51
million, ranking 53rd among the 101 countries and territories investing in Vietnam in the
manufacturing and processing industry, science and technology, transport and warehousing.
These investment projects have been implemented in five provinces and cities with the largest
being a US$40-million project in the manufacturing and processing industry in Binh Duong
Province.
However these figures have failed to meet the potential and advantages of the two countries.
István Mikola said that to increase two-way trade turnover, Hungary would deploy trade
promotion activities and seek cooperative opportunities to implement technology transfers with
Vietnamese businesses in information technology, medical equipment, beverages, environmental
protection and water treatment. At the sixth session of Vietnam-Hungary Joint Commission on
Economic Cooperation, the two sides agreed various measures to promote economic relations,
including creating favorable conditions in terms of mechanisms and policies for the two business
communities and promoting information exchanges.
Strengthened cultural and educational cooperation was also discussed. To date, Vietnam has
about 5,000 people studying in Hungary and they will act as a good bridge to promote cultural
exchanges between the two countries, paving the way for trade cooperation and development.
The signing of the Vietnam-EU Free Trade Agreement (EVFTA) in the coming time will also
provide cooperation opportunities for the two business communities. However, in addition to
benefits, Vietnam will face many challenges as the number of business rivals will also increase.
Therefore, businesses need to make greater efforts and improve competitiveness to enjoy the
benefits provided by the EVFTA.
According to the General Department of Vietnam Customs, export-import turnover between the
two countries in 2014 totaled US$175.8 million, a year-on-year increase of nearly 18.83 percent.
Vietnam’s export turnover stood at US$55.04 million through the main exports of garments and
textiles, spare parts and vehicles. Meanwhile, import turnover reached US$120.8 million with the
main imports being machinery and equipment and pharmaceutical products.
Investment
V - The play of Chinese-speaking economies
VietnamNet, 21/04/2015
Chinese investment present in all important sectors of VN economy
It is natural that Vietnam, the second largest South East Asian market, has drawn the
attention of investors from China, Hong Kong, Taiwan and Macau.
Analysts noted that Chinese capital has been poured into a wide range of business fields.
The presence of Chinese investors is mostly evident in the power sector. The Duyen Hai 1
thermopower plant which is under construction, for example, was developed with 85 percent of
total capital of $1.6 billion borrowed from China Import-Export Bank. The $1.95 billion Mong
Duong 2 thermopower plant, expected to become operational in the near future, is developed with
19 percent of the capital contributed by the Chinese investment group CIC.
According to the World Bank, China provides preferential loans to the projects in nearly all
industries and energy sectors in Vietnam, through export credit loans and ODA (official
development assistance). China is also the EPC (engineering, procurement, construction)
contractor in power projects.
A report released by the Ministry of Industry and Trade in April 2014 showed that Chinese were
the EPC contractors in 15 out of the 20 undergoing thermopower plant projects. Chinese have
also poured money into key infrastructure projects. Most recently, they have suggested building a
railway connecting Can Tho City in Vietnam with Phnom Penh City in Cambodia. Chinese money
has been present everywhere in the Vietnamese real estate market. The capital flow has become
even stronger recently when Vietnamese real estate developers met difficulties in the economic
crisis and they had to transfer projects at low prices. Troy Griffiths, deputy managing director of
Savills Vietnam, a real estate service provider, said many Chinese investors sought to buy real
estate projects in Vietnam in 2014.
In 2013, Chinese Prime Minister Li Keqiang, during a working visit to Vietnam, called for support
for the development of two Chinese-invested key industrial zones in Tien Giang Province in the
south and Hai Phong City in the north.
Meanwhile, Texhong Group is developing a large industrial zone, capitalized at $215 million in
Quang Ninh province. These areas are likely to become new Chinese production bases in
Vietnam.
In heavy industries, Chinese presence can be seen in the Formosa steel project in Ha Tinh
Province and Lao Cai Steel project capitalized at $340 million.
A series of textile and garment projects have been registered recently in anticipation of the
TPP (Trans Pacific Partnership) agreement slated for 2015.
Chinese investments have brought capital to Vietnam, but also have brought challenges. Projects
in heavy industries have caused serious environmental problems. The old machines and
technologies brought to Vietnam from China are feared to turn Vietnam into a “technology
dumping ground” for China.
O - Corporate takeovers are booming once again
The Economist, Apr 18th 2015 |
MIX processed cheese and ketchup and you get revolting gloop. Put two manufacturers
that make them (Kraft and Heinz) together and you get a much more efficient company. Or
at least that is the theory behind one of the year’s biggest mergers.
Chief executives are dusting off their chequebooks once more. Figures from Dealogic show that
global takeover activity in the first quarter reached $889 billion, up 21% from the same period in
2014. It was the strongest first quarter since the financial crisis.
Academic evidence on the benefits of takeovers to the firms doing the acquiring is distinctly
mixed, although much of it dates from the 1980s. That never stops chief executives from
believing that their proposed deal will be different: like second marriages, mergers are a triumph
of hope over experience.
Fashion plays its part. As the chart shows, takeover booms tend to be associated with periods
when stockmarkets are doing well, such as the late 1990s or 2006-07. Executives can use their
highly valued shares as currency. In the tech sector, the likes of Google and Facebook can
scatter their shares like confetti. Equity-based deals are less risky for the predator, which does
not have to saddle its balance-sheet with debts that might prove a dangerous burden in the next
recession. But today’s very low level of interest rates also makes life easy for private-equity
bidders, which rely mainly on debt.
During a merger boom, executives will be besieged by fee-hungry investment bankers eager to
suggest plausible deals; the newspapers will be full of speculation about the next bid. A boom can
thus create a “get rich or die trying” mentality. Managers reason that, if they are not a predator,
they will turn into prey.
Even more cynical explanations are available. Running a bigger company can justify bigger
salaries for executives. A study* in the Journal of Banking and Finance last year found that, in
cases where the chief executive of the target company was retained after a merger, the acquirer
paid a smaller premium to the initial share price than in other takeovers. That suggests
executives are trading away shareholder value in return for personal benefits.
There is no sign, in the current boom, of the rise of the kind of acquisition-hungry conglomerates
that marked the late 20th century: the likes of ITT, Hanson or Tyco. Indeed, GE, the longestlasting conglomerate, is shrinking by lopping off its financial arm. Nor are we seeing the kind of
cross-industry deal that usually denotes the top of the market, most famously in the case of the
AOL-Time Warner merger of 2000. When investors start hearing the word “synergies”, they
should head for the exit.
This merger boom seems to be focused more on consolidation within various industries, as with
the Heinz/Kraft deal or Nokia’s offer for a rival telecom-equipment maker, Alcatel-Lucent. Such
deals have a better chance of succeeding than most: the enlarged company can benefit from
economies of scale. But they can also be a sign of an industry that is struggling to create growth:
mergers are a way of boosting earnings per share by cutting costs. There were lots of oil mergers
in the late 1990s, when the price of crude was low. Now the price has slumped again and Royal
Dutch Shell has agreed to buy BG, another oil and gas producer, for £47 billion ($69 billion).
Indeed, companies seem rather pessimistic about their chances of achieving organic growth, as
illustrated by their willingness to return cash to shareholders rather than to invest in new factories
and equipment. According to S&P Dow Jones Indices, American companies spent $553 billion
buying back their shares last year, and $903 billion if dividends are included. The combined figure
may top $1 trillion this year. Meanwhile American domestic investment is well below pre-crisis
levels as a share of GDP and profits fell last year according to the national accounts.
This cycle can become self-perpetuating, at least for a while. Companies buy back their shares to
prop up prices and fend off takeovers. At the same time, the lack of business investment or
organic growth makes it more necessary for firms to merge in order to cut costs and boost
earnings per share. The game only stops when the stockmarket declines. But it is hard to
envisage a crash when yields on cash and government bonds remain so low, even negative in
some cases. Expect the takeover fever to continue.
V - US invests in 17 industries in Vietnam
VNA, 16/04/2015
US enterprises have invested in 17 out of 21 industries in Vietnam with the majority in the
accommodation and food service industry, according to the Foreign Investment Agency
under the Ministry of Planning and Investment.
American investors have poured 4.68 billion USD into 17 accommodation and food service
projects, accounting for 42.3 percent of the total US investment in Vietnam, Nhan Dan newspaper
quoted the source as saying.
The manufacturing and processing industry was their second choice with an investment of 2.24
billion USD in 323 projects, accounting for 20.3 percent of the total US investment in Vietnam. By
March 20, the US had 735 valid projects in Vietnam with a total registered capital of over 11
billion USD, ranking seventh among 101 countries and territories investing in the Southeast Asian
country. The average capital per project is 15 million USD, which is higher than the average
capital of a foreign direct investment (FDI) project in Vietnam at 14.3 million USD.
In the first quarter of 2015, eight new US projects were licensed and two existing projects were
approved to expand capital with a total newly registered and supplemented capital of nearly 70
million USD, ranking seventh among 33 countries and territories investing in Vietnam in the first
quarter of this year.
The statistics from the Foreign Investment Agency showed that 74.8 percent of the US
investment in Vietnam was poured into wholly US-owned projects and 23.5 percent of investment
was in joint-venture projects, while a small percentage of investment went to joint stock
companies and business cooperation contracts.
American investors are present in 42 of 63 provinces and cities nationwide with 18 projects worth
5.3 billion USD in Ba Ria-Vung Tau province, making up 50 percent of the total US investment in
Vietnam.
Hai Phong was the runner-up, attracting 13 projects valued 1.2 billion USD while Binh Duong
province came in third with 970 projects worth 780 million USD.
To date, Winvest Investment Vietnam has been the largest US project in Vietnam, located in Ba
Ria-Vung Tau with a total investment of 4.1 billion USD since 2007.
O - Nokia exit: Is China's 'golden age' of foreign investment over?
By Peter Ford, 2nd Q. 2015
Microsoft's Nokia division in China is shifting its production to Vietnam in what appears a
larger trend. Its Lumia cell phone was not selling well in China.
Beijing — In the Yizhuang hi-tech industrial park in southeast Beijing, a gleaming seven-story
glass and steel building that houses Nokia’s mobile phone factory will close by the end of the
month. Its sister plant in southern China is to suffer the same fate as Nokia’s new owner,
Microsoft, shifts jobs and investment to Vietnam.
Nokia's high-profile move is the latest sign that for international companies, China is losing some
of its luster after years of shining as the brightest star in global capital's firmament. “The ‘golden
age’ for business in China is drawing to a close,” a recent report by the European Union Chamber
of Commerce in Beijing concluded.
One big problem for these firms is simply that China’s economy isn't growing as rapidly. Seven
percent a year is high by international standards but it is well down from the double-digit rates
that astounded the world for the past 30 years. And most forecasters expect growth to slow
further, while still outpacing Europe and the US.
A survey by the American Chamber of Commerce in Beijing last September found other reasons
that made 2014 what it called “the most challenging year in recent history” for many of its
members.
High among them was a widespread sense that Chinese laws are unclear and often arbitrarily
applied. Fifty seven percent of US firms believed that foreign companies are being singled out in
recent government anti-monopoly, anti-corruption, and pricing campaigns.
At the same time, foreign firms are being kept out of some of the most lucrative investment
opportunities in China's service sector. “These are some of the most strictly controlled sectors in
terms of foreign investment,” complains James Zimmerman, Chairman of the American Chamber
of Commerce.
Nearly half of the survey respondents felt that foreign businesses are less welcome than they
once were, and for the third year in a row the survey found an increase in the number of firms
moving production out of China or planning to do so, though they still represent only 15 percent.
Foreign investment plateau
After a decade that saw annual flows of foreign investment into China double, the rate has
flattened. In its report Thursday to the annual meeting of China’s parliament, the government’s
economic planning agency said it expected foreign investment this year to be similar to the $120
billion it registered in 2014.
Microsoft’s decision to decamp to Hanoi was doubtless influenced by lower production costs
there. The Japanese trade agency JETRO found in 2012 that Vietnamese wages were around
one third of Chinese wages.
But the company also decided to close its handset factories here, with the loss of 9,000 jobs,
because Nokia’s Lumia model was not selling well in China. Microsoft decided on “an adjustment
of production capability based on current levels of demand,” says company spokeswoman Steffi
Cao, and headed for Southeast Asia where market prospects for its phones seem brighter.
That illustrates a swelling trend towards making things as close as possible to the people who will
buy them, says Rosemary Coates, founder of supply chain advisers Blue Silk Consulting based in
Los Gatos, Ca.
Once, not long ago, the southern Chinese province of Guangdong was called “the workshop of
the world.” It exported goods across the globe. Today, 80 percent of American firms in south
China are focused on the Chinese market; only 20 percent manufacture primarily for export.
General Electric, for example, which moved all its water heater production lines to China in the
1990’s, now only makes the cheaper models, aimed at Chinese customers, here. It has “reshored” to Kentucky the manufacture of its high-end heaters that sell better in America.
“I did off-shoring to China for 15 years,” says Ms. Coates. But now she is helping some three
dozen companies move production out of China. “For the past two years clients have been asking
me about re-shoring,” she says. “The momentum is clearly building on this.”
Competitive domestic market
China's consumer market continues to grow, which helps explain the shift by factory owners in
Guangdong towards domestic shipments. China's government is emphasizing domestic-led
growth over exports, while also promoting the service sector.
But at the same time China is getting more competitive and harder to sell into, says Sage
Brennan, head of China Luxury Advisors, which helps luxury goods companies break into China.
“It is no longer the untapped marketer’s paradise that it once was,” he says.
One US company making that unwelcome discovery is GoPro, makers of miniature action
cameras. The firm had barely begun to expand into China when Chinese mobile phone maker
Xiaomi last week unveiled its own Yi Action Camera, selling for half the price of GoPro’s basic
model.
Lawyer Dan Harris, who helps small and medium sized American companies operate in China,
says that most of the businesses here he has helped to wind up have closed because of
disappointing local sales, not because they are moving elsewhere.
Smaller firms cannot afford to move abroad because they have made big investments to establish
themselves in China, Mr. Harris says. Nor are they big enough to take sufficient advantage of
lower per-unit production costs to make a move from China to Vietnam worthwhile, as it has been
for Microsoft, Intel and Samsung, among other global firms.
“But if the big companies go, the feeder firms will want to go too,” says Harris. “Eventually my
clients will have to follow them.”
“A company puts its resources where it thinks its future market will be,” says Mr. Brennan. “China
is not going away, but it is becoming just one market among others” while countries like Vietnam
offer the prospect of faster revenue growth. “So far, companies have been focusing on China,”
Brennan adds. “Now they are looking at southeast Asia . We are seeing a groundswell shift in
what companies are spending their time on."
V - Vietnam, ASEAN Well Positioned as Investors Relocate from China
Helios global 2nd Q, 2015
China’s meteoric rise as an economic superpower in recent decades has transformed the
fundamental structures of international economic activity. China’s economic expansion helped to
usher in a transformational shift in a global economy once dominated by the United States,
Europe, and Japan – in essence, the developed world – to the rapidly emerging markets of Asia.
It also lifted hundreds of millions of Chinese out of poverty and contributed to historic
improvements in social and other economic development indicators across China. Propelled by
China’s incremental turn toward a centrally-planned to market-based economic system, the
world’s economic center of gravity has gradually shifted to the vast geographic space that lies
roughly between India and East Asia.
This trend is best illustrated by China’s emergence as the world’s preeminent hub for global
manufacturing. Having successfully leveraged its massive pool of low-wage labor, growing
openness to international investment, increasingly urbanized demographics, and vastly improved
infrastructure, China positioned itself as an attractive location for foreign investors. While initially
centered on low-cost, labor-intensive manufacturing, China’s manufacturing sector has since
evolved to produce high technology and other advanced goods. This has elevated China as the
world’s largest manufacturing economy. China’s comparative advantage was further bolstered by
its large consumer base and growing network of indigenous suppliers.
But a confluence of factors resulting from China’s very success, including higher wages
demanded by Chinese laborers, the increasing value of Chinese currency, and growing
competition with Chinese-owned and -operated enterprises, has caused foreign investors
to look elsewhere for their manufacturing needs. Owing to numerous factors, Association
of Southeast Asian Nations (ASEAN) members such as Vietnam have become increasingly
attractive to foreign investors looking to recapture their competitive advantage in the
manufacturing sector.
A number of high-profile multinational corporations, including Samsung, Microsoft, and Nike have
scaled back their presence in China in favor of what they have determined to be the more
competitive operating climate of Vietnam.
While lagging behind China in a number of important areas, Vietnam has implemented numerous
regulatory reforms governing foreign investment that have been designed to facilitate the influx of
foreign capital. Vietnam has also devoted greater attention toward improving transparency and
labor codes while also instituting tax-friendly frameworks for investors. Moreover, Vietnam’s
infrastructure capacity continues to expand and progress. Major concerns from around the globe,
including the United States, Europe, India, South Korea, and Japan, have taken notice. On the
surface, it is Vietnam’s comparatively lower-cost labor that has drawn the most attention. Equally
important, foreign investors are also keen to circumvent competition from China’s increasingly
capable and competitive vendors and distributors. Some investors are also finding it increasingly
difficult to operate in China due to incidences of labor unrest and China’s declining reliance on
export-driven economic activity.
In December 2014 U.S. technology giant Microsoft announced that its Nokia division plans to
relocate over 12,000 factory and professional jobs previously based in China for Vietnam in
2015. Most of these jobs will involve assembly and production operations and will be situated in
the capital Hanoi. In November 2014 South Korea’s Samsung was awarded a license to expand
its current presence in Vietnam. Samsung reportedly plans to invest about $3.4 billion toward the
construction of a second factory in Vietnam’s Thai Nguyen Province for producing and
assembling smartphones and associated products, doubling its overall investment in the country.
A recent survey of Japanese producers conducted by the Japan External Trade Organization
found that a growing number of Japanese producers have considered establishing operations in
ASEAN markets, including Vietnam, the Philippines, Indonesia, Laos, Myanmar, and Malaysia.
The same poll found that other Japanese concerns are rethinking their approach to investment in
China in the context of new regional opportunities.
V – Not only Vietnamese Industrialists pour money into agriculture
VietNamNet Bridge - 13/04/2015
Investing in agriculture projects is a choice made by industrialists who have realized that
the profits in their core business fields have dried up.
“Hoa Phat Group makes trillions of dong worth of profit every year. But our shareholders
don’t want dividends. They want to see the money to be re-invested in other projects. And
we have chosen agriculture projects,” said Tran Tuan Duong, CEO of Hoa Phat Group.
Duong said that he decided to inject money into the agriculture sector after he considered
investment opportunities in many different business fields, including BOT (build, operation,
transfer) transport and hydropower projects. “The animal feed market is estimated to have the
value of $7 billion a year. Meanwhile, the steel market is worth roughly $5.5 billion. You can see
that the animal feed market is not as small as people think,” he said.
Doan Nguyen Duc, chair of Hoang Anh Gia Lai Group, a big real estate developer, has been
praised as “being abreast of the times” when he decided to quit the real estate market five years
ago and began making money in the agriculture sector. It is sugar production, not real estate
projects, which is the “bread earner” for Hoang Anh Gia Lai now. Sugarcane, rubber and corn
were estimated to make up 53 percent of its total revenue and 69 percent of profit in 2014.
“They (investors) have realized that they can expect huge profits which are in no way inferior to
the profits they can expect from industrial projects, if they can make heavy and reasonable
investment in agriculture,” an analyst commented.
As for the big real estate “big names” like Vingroup and Hoang Anh Gia Lai, or big steel
manufacturer like Hoa Phat, it is within their reach to pour not only hundreds of billions, but
trillions of dong into agriculture.
Vingroup, for example, has contributed VND1.4 trillion, or 70 percent of the chartered capital, to
Vineco, a company specializing in making farm produce. Vineco’s products would be distributed
at Vinmart, a retail chain owned by Vingroup.
Hoa Phat, which has a large distribution network and experience in industrial production
management, has decided to build a chain of five animal feed factories, which are expected to
bring turnover of VND3 trillion in the next three years.
A branding expert commented that the “big guys” have taken a wise move by putting their money
into agricultural production. “They have taken a turn at the end of the road,” he said, explaining
that with the free trade agreements signed with other trade partners, the profits the businesses
can expect in their core business fields would no longer be attractive.
V - Footwear material production needs investment
VEN, By Thuy Duong, 13/04/2015
Although Ho Chi Minh City has issued a number of policies to promote the development of
support industries serving the leather and footwear sector, attracting investment in those
industries remains difficult.
According to a survey by the Ministry of Industry and Trade’s Institute for Industry Policy and
Strategy (IPSI), the local content of support industry products used for manufacturing leather and
imitation leather footwear for adults in Ho Chi Minh City was only 37 percent, while the rate of
products of the same kind for children was 38.5 percent, that of canvas footwear reached 41
percent, that of sports shoes was 39 percent, while other leather and imitation footwear products
reached 38 percent.
According to Shoes and Leather Association of Ho Chi Minh City General Secretary Nguyen Van
Khanh, Vietnam’s leather tanning industry needs investment because businesses in the field in
general have a humble financial capability. The lack of clear waste standards is hindering the
tanning industry from development. This is a reason why foreign investors are reluctant to invest
in this sector. Khanh said that there were several businesses operating in the city’s leather and
footwear support industry, including the Gia Dinh Shoes Co., Ltd., Viet A Chau Investment
Development Corporation, and Dong Hung Co., Ltd., among others. These manufacturers just
made simple products such as soles, eyelets, buttons, zippers, shoe insoles and carton boxes,
while most of main materials – leather and imitation leather – were imported.
While preparing to take opportunities to be provided by the future Trans-Pacific Partnership (TPP)
agreement, the Gia Dinh Shoes Co., Ltd. early invested in production of raw materials and
accessories to satisfy footwear production demands. The company is developing an industrial
zone to produce leather and footwear materials and accessories in Binh Duong Province, which
is expected to go into operation in April 2015. Gia Dinh Shoes Co., Ltd General Director Nguyen
Chi Trung said that the industrial zone is expected to not only increase the local content of
company products (the current rate is 60 percent) but also provide a large amount of materials
and accessories for other businesses in the sector.
Trung said that capital is the biggest difficulty of leather and footwear material and accessory
producers; most of enterprises in the field have to find capital themselves, while there are no
preferential policies for leather and footwear material and accessory investors; while the
government and the Ministry of Industry and Trade encourage businesses to invest in anticipation
of international integration, businesses in the sector haven’t benefited from preferential interest
rates subject to medium and long-term loans; it is important to issue preferential land and tax
policies for businesses in the field.
Ho Chi Minh City Business Association Chairman Huynh Van Minh said that consistent
preferential policies for businesses, including reductions in enterprise income tax and import tax,
and value added tax (VAT) exemptions for support industry products are important to develop
support industries on a fast and sustainable basis; it is also necessary to have policies on
stabilizing interest rates for businesses investing in this sector; the city should prepare land for
investors, free enterprises investing apartment and workspace building projects from paying land
rents, issue policies to promote skilled workforce training, and promote administrative reform to
make it easier for businesses to benefit from investment incentive policies.
O - Foreign investors scampering for a share in garment industry
By Kim Oanh | 07/04/2015
A series of foreign direct investment projects in the garment sector will be started in the
central region of Vietnam over the next months. Some of the more outstanding projects
include the Delta Galil fiber-dyeing and garment plant, the Onewoo garment plant and the
Tam Thang textile-garment and dyeing plant.
Delta Galil Industries Ltd, an Israel-based apparel manufacturer and distributor, is currently
completing procedures to start construction of the Vietnam Delta Galil fiber-dyeing and garment
plant in the second quarter. In January, the Binh Dinh Provincial People’s Commiittee approved
Delta Galil Industries Ltd to construct a plant on the total area of 18,000 square metres with the
total investment capital of $13 million. At present, the construction project has completed the site
clearance and base design phases and is ready to move forward. Upon starting operations, the
plant’s annual revenue is expected to reach $11 million over the initial years. Following further
consolidation of operational, production and business activities and potential enlargement, this
figure is expected to increase to $30 million, the equivalent of rolling out 1.3 million products a
year.
Being a leading global apparel manufacturer and distributor, Delta Galil Industries Ltd currently
sells apparel products under famous brands including Wilson, Maidenform and Tommy Hilfiger. It
is also selling its products under high-grade fashion brands such as Calvin Klein, Nike, Hugo
Boss and Victoria’s Secret.
At the end of March a number of textile and garment projects have been granted investment
certificates. Two of these are the Korean-financed Onewoo garment project, boasting the
chartered capital of $6 million, and the Tam Thang textile-garment and dyeing project worth $30
million invested by PanKo Tam Thang Company.
Poong Vina Company, another 100 per cent Korean company producing and outsourcing apparel
products for the famous brands, such as Ann Taylor, C.W.C, Talbots, has plans to pour $4 million
into the construction of their fifth plant in Binh Duong province.
According to the Vietnam Textile and Apparel Association, foreign investors are increasing
investment in the Vietnamese garment industry in order to grab opportunities from the TransPacific Partnership (TPP) Agreement as, once the TPP is inked, Vietnam’s garment industry will
enjoy large benefits from a zero tax rate when exporting to the US.
V - Domestic firms target agribusiness
06/04/2015
Vietnam’s massive agricultural potential has encouraged local private investors to make
huge investments into the sector. Thanh Dat reports.
TH Group’s $1.2 billion hi-tech dairy and fresh milk processing complex is largely helping
Vietnam reduce reliance on foreign milk imports-Photo: Le Toan
Leaders of 28 top Vietnamese agricultural businesses committed themselves to multi-billion dollar
investment projects into the agriculture sector at a meeting in late March held with the Ministry of
Agriculture and Rural Development. The enterprises include T&T, Hoa Phat, BAC A BANK,
Tonkin Investment, Otran Vietnam, Trung Thanh, Quang Minh, Nafoods, FLC, Minh Phu, Viettel,
Vingroup, Vinamit and Bui Van Ngo.
Bui Van Ngo’s investment consultant, The Ha, said this company would implement a $1 billion
project to process high-quality rice in the southern province of Long An.The project will include
four clusters of factories able to dry 4,000 tonnes of rice per day and husk 800,000 tonnes of rice
per year. It will need around $52 million for constructing the project’s infrastructure, including
roads, warehouses and drying grounds, and $48.55 million for machinery and equipment. Rice
inputs would be sourced from the province.
The project will bring in revenue of nearly $200 million in the second year of operations, nearly
$250 million in the fifth year and $331 million a decade later. The plant is predicated to deliver
profits of $2.537 billion, including the net profit of $209.88 million by the end of the first decade of
operations.
Minister of Agriculture and Rural Development Cao Duc Phat said this project was one of many
big agricultural projects expected to be implemented by local private investors in 2015. The local
agricultural sector was said to be mainly dominated by foreign giants like CP, Cargill, Japfa
Comfeed, GreenFeed, De Heus, Uni-President and New Hope. “However, things will change.
Many big local firms are planning a new wave of huge investments into this lucrative sector,
because they see the potential with the domestic rising demand for high-quality produce, that will
provide new competitiveness,” Phat said.
Great potential
Ha said Bui Van Ngo saw that “Vietnam is a big rice maker in critical need of high-quality rice
processing factories. We also want Vietnamese rice to be more competitive in the world’s market
economy.”
Agricultural attache of the Japanese Embassy to Vietnam Atsuki Tomoyose cited many reasons
behind a surge in agricultural investments in Vietnam. Vietnam has a diverse environment,
providing ideal conditions for the development of its agriculture and fishery products. Vietnam’s
geographical position means it is ideally connected to ASEAN and China and this means it would
be economically strategic for enterprises to invest in Vietnam’s agricultural sector and export
products, particularly given the relatively improved infrastructure seen in recent years.
Additionally, with economic development, Vietnam’s demand for high-quality food is increasing
among Vietnamese consumers, providing a big chance for enterprises to apply more modern
technologies and techniques to meet those demands.
A new wave of investments
Vietnam’s largest real estate developer Vingroup, opened its new VinEco unit to produce organic
agricultural products for export and domestic consumption in March.With the chartered capital of
$93.45 million, VinEco will initially concentrate on using technology from Israel, Holland and
Japan for domestic products. Later, VinEco will conduct research and development of agricultural
specialties for export.
Nguyen Nhu So, chairman and general director of animal feed maker Dabaco Vietnam, last week
said his company would invest over $9.34 million into building a project to developing high-quality
chicken breeds, in addition to its current five animal feed processing factories with the total
annual capacity of 800,000 tonnes.
Tran Tuan Duong, general director of Hoa Phat Group, one of Vietnam’s leaders in steel
production and property, also said the group would focus on producing animal feed through a
$467.28 million investment project over the next five years. Hoa Phat expects to occupy about 10
per cent of the domestic animal feed market share over the next 10 years. In February 2015, the
group established an animal feed company with the chartered capital of $14 million and the
annual capacity of 300,000 tonnes in the northern province of Hung Yen. Other four similar
factories are expected to be built over the next ten years.
According to senior agricultural expert Pham Hoang Ngan, besides Vietnam’s potential, one of
the main reasons behind these large-scale investments is that investors want to benefit from tariff
cuts under the coming free trade agreements expected to be signed this year between Vietnam
and the EU, South Korea, the Customs Union (Russia, Belarus and Kazakhstan), and especially
the Trans-Pacific Partnership Agreement. “Actually some investors like Hoang Anh Gia Lai and
BAC A BANK have been investing in the agricultural sector for years and they are doing this job
very well,” she added. Since 2009, BAC A BANK has acted as an investment consultant for TH
Group’s $1.2 billion hi-tech dairy and fresh milk processing complex in the central province of
Nghe An. Established in October 2009, the Asian record-breaking project has 45,000 dairy cows,
22,000 of which are milked, and the processing capacity of 400 tonnes of fresh milk a day. The
number of cattle will rise to 137,000 in 2017 and about 203,000 by 2020. Before the project was
implemented, 92 per cent of Vietnam’s milk was imported from abroad. Now the rate has been
reduced to 72 per cent, thanks partially to TH’s contribution.
Meanwhile, Hoang Anh Gia Lai, which previously focused on property, has invested VND18
trillion ($841.12 million) into hi-tech agriculture so far. It shifted to agricultural projects in Vietnam,
Laos and Cambodia in 2008 after recognising that the local property sector embraced potential
risks. Currently, this group has over 45,000 hectares of rubber, 8,000ha of sugarcane, 17,300ha
of palm oil and 5,000ha of maize. Revenues from rubber and sugar production hit VND1.2 billion
($56 million) last year, up 18 per cent on-year. It has also begun a plan to raise 100,000 cows in
Vietnam with milk producer Nutifood.
Last October, Vietnam’s leading sofeware group FPT began its agricultural investment by signing
a deal with Japanese-backed IT developer Fujitsu on deploying Fujitsu’s Akisai Cloud, which is
used to support agricultural management via cloud computing, during 2015-2016.
Challenges remain
Vietnam Association of Advanced Technology Enterprise in Agriculture representing over 30 hitech agricultural enterprises claimed that hi-tech agricultural enterprises were still hurt by land, tax
and capital problems.
Da Lat Flower Biotechnology Joint Stock Company’s general director Nguyen Dinh Son said the
company found it hard to access medium-term loans. Currently, only short-term loans could be
accessed but only with considerable difficulties. “While import tariffs for equipment and machines
are exempted under the law, we still face a 25 per cent tax rate for our imports in these kinds of
investments,” he said.
Dutch-backed Dalat Hasfarm Company’s vice general director Nguyen Van Bao also lamented
that his company was forced to pay duties for its modern imported greenhouses, which were
exempt from import taxes as they could not be produced locally.
Minister Phat told the 28 enterprises at the meeting that the MARD would work with other
ministries and localities to directly support their projects in terms of land, tax and administrative
procedures. “We have established an independent task group with offices nationwide exclusively
in charge of attracting agricultural investment projects. Investors will be provided with
consultancy, information on input materials, outputs and distribution channels and even merger
and acquisition activities,” he stressed.
V - A new wave of FDI inflows to Vietnam
By Khanh Linh, 04/04/2015
More foreign invested businesses have embarked on impressive expansion plans to grow
their presence in Vietnam.
“Rising order intake has prompted us to use up all remaining areas of our company’s 50 hectare
land at the Hap Linh Industrial Park in the northern province of Bac Ninh. Around $8 million will be
injected into building the new workshop,” said Chun Yu Kil, the company’s CEO. “If current
favourable conditions continue, we will assemble the new, second workshop by the end of this
year,” Chun added. The fresh $8 million investment project is double the company’s committed
capital stated at its investment certificate granted in 2006. This is also the company’s first
expansion plan in Vietnam after nearly 10 years of presence in the Vietnamese market. Focusing
on the production and trading with trailers of various kinds, Doosung Vina was bogged down in
corporate hardships and employed a meagre several dozen workers before 2013.
Following government action to curb truck overload, forcing transport companies to better their
fleet to meet requirements, business has been consistently picking up due to rising demands.
“Last year we rolled out 600 trailer units and we expect to reach about 2,000 this year. We now
have more than 100 workers and will recruit more,” Chun said. Chun has also unveiled that the
parent company in Korea- Doosung Motor- is mulling over setting up a new firm operating in the
support industry in the northern province of Hung Yen to take over tasks which Doosung Vina
now has to outsource.
At the VSIP Bac Ninh Industrial Park, Foster Bac Ninh Limited, specialising in the production of
acoustic and automotive components and products, is planning to build a new 5,000sqm
workshop within the 33,000sqm company premises, employing 3,900 labourers. According to
administrative director La Van Thanh Foster Bac Ninh’s disbursed capital has reached $55 million
at this point of time. Foster Bac Ninh is one of five Vietnamese plants under Japan’s Foster
Group. All production caters to orders made by the parent company.
Meanwhile, Korean electronics giant LG Electronics (LG) two weeks ago launched its $1.5 billion
production complex based in Haiphong city’s Trang Due Industrial Park. At the new complex’s
launching ceremony, Minister of Planning and Investment Bui Quang Vinh said the project
progress had indicated LG’s long-term commitment to doing business in Vietnam. “Such moves
are luring more investors to drop anchor in Vietnam,” Vinh commented. Investment flows from
Korea and Japan have continued to top Vietnam’s FDI ranking in this year’s first quarter.
Specifically, during January-March this year, South Korea took the lead with $491 million in total
committed and expanding investment capital, making up 26.7 per cent while Japan took third
place with $294 million, providing 16 per cent of the country’s total FDI inflows.
V - Vietnam to benefit from new wave of Japanese investment
VOV, 02 April 2015
Many Japanese companies are expected to promote foreign investment. Vietnam is
capable of receiving a new wave of investment from Japan.
Japanese Prime Minister Shinzo Abe has issued many new policies from defense to economics.
Abenomics, his bold economic policy launched nearly two years ago to rebuild the economy of
Japan, could create a war between "the money-making machines" in the world. This article
introduces this policy and its impact on Vietnam. Although Japan has regained growth
momentum, the economic policies of Prime Minister Abe continue to be challenged. Abenomics
includes three main pillars: loosening monetary policy, boosting public spending, and deep and
wide economic growth policy.
According to the Japanese government, in the second quarter of 2014, Japan’s GDP fell by 7.3%.
The real GDP decreased 1.6% in Q3. According to experts, an economy that decreases two
consecutive quarters is falling into recession. An opposite effect of Abenomics is the implications
of a cheap yen. According to the Tokyo Shoko Research Research’s research conducted late last
year, 48.4% of Japanese companies said they were negatively affected by the consequences of
the rapid devaluation of the yen. 22.7% said that they were under both positive and negative
impacts. The particularly negative effect cited is the increase in the price of imported goods.
Among the businesses affected by the depreciation of the yen, 80.8% said they were not able to
adjust the import price through product prices. When asked about measures to be taken to deal
with the depreciation of the yen, 73.2% were pessimistic, saying that they did not have feasible
measures. Another consequence is the trade deficit. It is worth noting that the trade deficit of
Japan has lasted for 29 consecutive months, while Japan is a country whose economy relies on
exports. The economist also pointed out that Abe’s policies have not succeeded in increasing
income for the people. The average income of households fell in September 2014, marking a
decline in 14 consecutive months.
The bad news about the Japanese economy has caused criticism of Abenomics, especially from
Jeff Kingston, professor of politics at Temple University in Tokyo, who said bluntly: "Abenomics is
a failure".
2015 outlook
In the bleak context of 2014, comments on the outlook of the economy in 2015 of the world`s third
largest economy were not optimistic.
According to a 2015 survey by the leading business statistic agency of Japan - Teikoku Data
Bank - conducted earlier this year, the number of companies optimistic about the prospect for the
new year declined, while concerns over the cheap yen rose abnormally. Specifically, only 13.4%
of companies in the survey said that the economy will recover in 2015, nearly half compared to
the survey in 2013. In addition, the pessimistic rate increased from 16.5% of the previous year to
26.8%. The cause of concern is still ... the depreciation of the yen while it is one of the "three
arrows" of Abenomics. According to analysts, the Government of Japan has gone too far in
easing monetary policy, causing the yen`s exchange rate to drop too much. In the context of
Japan falling into recession, international organizations such as the Organization for Economic
Cooperation and Development (OECD), the International Monetary Fund (IMF) and others
lowered growth forecasts for the economy.
OECD said the third-largest economy in the world is expected to grow by 0.8% in the 2015 fiscal
year, lower than the 1.1% previously announced. IMF also cut growth forecast for the Japanese
economy in 2015 to 0.8%, lower than initially expected figure of 1.0%.
Will Vietnam benefit?
According to economic experts, the yen weakness will cause two main disadvantages to
emerging countries in the region. There will be less need to import products from Japan, and
Japan`s exports will have better competitive advantage thanks to cheap prices. The worst
affected economies will be South Korea, Taiwan and the Philippines. However, with Vietnam, the
impact can be much less, and could even benefit the country if it know how to take advantage of
it.
In 2013, the yen depreciated by 17% against the US dollar, but Vietnam gained a trade surplus of
nearly US$2 billion from Japan, with export turnover of US$13.65 billion. Also in 2014, its exports
to Japan reached US$14.70 billion, an increase of 7.7% compared with 2013. On the other hand,
many Vietnamese companies using yen loans also significantly benefit from the rising price of the
VND against the yen. It also benefits companies importing raw materials from Japan or those
doing business with Japanese partners.
To reduce reliance on the US dollar as well as risks of exchange rate uncertainties, many
enterprises of Vietnam and Japan have used the yen for payment. The cheap yen policy has
brought about significant profits. In addition, Japanese companies doing business in Vietnam also
benefit by avoiding direct influence from Abenomics. According to a new survey published by the
Japan Trade Promotion Organization (JETRO), 60% of Japanese companies in Vietnam are
profitable, and 70% of them are planning to expand business scale. In this context, many
Japanese companies will promote foreign investment, and Vietnam can receive a new wave of
investment from Japan.
Japan is the largest provider of official development assistance (ODA) for Vietnam. If Vietnam
must pay maturing debts in this period, with the current yen exchange rate, Vietnam will save a
considerable amount of the national budget.
V - LG inaugurates largest industrial complex in ASEAN
Business times, 2nd, Q. 2015
LG Electronics on March 27 inaugurated its new facilities in the northern port city of Hai
Phong.
This LG’s largest hi-tech complex in South East Asia has a total investment capital of US$1.5
billion.
Bon-Joon Koo, Vice Chairman & CEO, LG Electronics Inc. affirmed that this important event
marked the group’s strong development in Vietnam over the last 20 years. He emphasised that
the group will do its utmost to ensure its cooperation and investment a success. He underscored
the importance of the new facilities in the LG’s global production strategy.
The new facilities were built on an area of 800 hectares in Trang Due Industrial Park at a cost of
US$1.5 billion. The project has 3 phases. In the first phase, the complex will manufacture and
assemble telematics devices, refrigerators, TV sets, washing machines, and air conditioners. In
the next five years, 70% of its products will be exported to 35 countries in the world.
Representatives from LG Electronics said the group will transfer more technology to the
Vietnamese electronics industry, expecting to raise the localization rate to 50% in the first phase.
After the complex is put into full operation, it will open up a good opportunity for the auxiliary
manufacturers in Vietnam to cooperate and meet the group’s demand for auxiliary equipment.
C - Coke to build $100M plant at PPSEZ
Charles Rollet , 1 April 2015
Coca-Cola will build a second factory in Cambodia, investing $100 million into a new plant
in the Phnom Penh Special Economic Zone that will more than triple its current output,
company officials said yesterday.
The news comes on the heels of a meeting in November during which Prime Minister Hun Sen
and one of Coca-Cola’s regional representatives announced that the American beverage
behemoth would expand its factory in the Kingdom.
Lina Lim, public affairs manager for Cambodia Beverage Company Ltd, Coca-Cola’s Cambodian
distributor, said yesterday that construction of the plant would begin in May or June, taking about
a year until it is fully operational. “We didn’t really focus on Phnom Penh Special Economic Zone
[at first], but after studying the price, area, and so on and so forth and [after] comparing, we can
answer that PPSEZ was the one that met all the criteria that [Coke] was looking for,” Lim said.
According to company statistics, Coca-Cola produced 20.52 million unit cases in Cambodia in
2014, with 24 beverages in each case. Its new factory, however, aims to produce 42 million unit
cases alone, more than tripling total capacity.
Coca-Cola’s current and only factory in the Kingdom, which dates back to 1993, has not kept up
with rising demand, having had to more than double its output from 10 million unit cases in 2012
to 21 million last year. “The current plant that we have is a little bit small, so we need a bigger
plant to conduct our operations,” Lim said, adding that Cambodia’s rapid growth and relative
stability were further spurs to investment. Revenue for Cambodia Beverage Ltd was also up 21.4
per cent from 2013 to 2014 to $78.19 million. The plant, which will add about 300 workers to
Coca-Cola’s Cambodia operations' current payroll of over 650, will also add a number of
unspecified Coke products to its existing roster in an attempt to diversify its portfolio.
Ministry of Commerce spokesman Ken Ratha said Coca-Cola’s expansion plans were “another
step in the growing American investment in Cambodia”. “Relations between the two countries are
improving,” he said. “We are trying to promote more American business to Cambodia,” Ratha
added, citing an upcoming Cambodian business delegation to the United States composed of
Commerce Minister Sun Chanthol and other business leaders.
The chief executive of PPSEZ, Hiroshi Uematsu, declined to comment at the time due to ongoing
discussions with Coca-Cola. The Phnom Penh Special Economic Zone, a 357-hectare sliver of
land located on the outskirts of the capital, currently has 77 companies, which have invested
$365 million so far. The SEZ is modeled as a “one-stop shop” service centre where companies
can sort out their legal, infrastructure, and logistical issues in one place. The PPSEZ, Cambodia’s
most developed special economic zone, is also aiming to list on the Kingdom’s fledgling stock
exchange by mid-year.
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V - Foreign banks see opportunities in Vietnam
VEN, 15/04/2015
Foreign banks have increased their presence in Vietnam in recent years, underlining the
fact that the Vietnamese financial market remains attractive in the eyes of foreign
investors.
Vietnam currently has more than 50 representative offices and 50 branches of foreign banks, five
foreign-invested banks and some joint-venture banks.
The State Bank of Vietnam (SBV) issued a document to allow Malaysia’s Public Bank Berhad
(PBB) establishing a foreign-invested bank in Vietnam on March 24. This is the sixth foreigninvested bank operating in Vietnam after the Hong Kong and Shanghai Banking Corporation
(HSBC), the Australia and New Zealand Banking Group Limited (ANZ), Standard Chartered Bank
Limited, Shinhan Vietnam and Hong Leong Bank. The Kasikorn, one of the leading banks in
Thailand has also opened two representative offices in Hanoi and Ho Chi Minh City after a long
time of cooperation with the Vietnam Joint Stock Commercial Bank for Industry and Trade
(Vietinbank) and the Vietnam Bank for Agriculture and Rural Development (Agribank). According
to Kasikorn General Director Preedee Dawchai, the official presence in Vietnam would help the
bank increase flexibility in business management.
The prospects of the Vietnamese economy will be bright thanks to great opportunities
from the AEC and the signing of free trade agreements such as the EU-Vietnam Free Trade
Agreement (EVFTA) and the Trans-Pacific Partnership (TPP) Agreement, creating an
engine for foreign banks to increase investment capital and stay for a long time in
Vietnam.
Japan, the Republic of Korea, China and Chinese-Taipei have had a large amount of investment
capital in Vietnam in previous years. Therefore, the majority of foreign banks are come from these
countries and territories. However, this trend has moved to ASEAN countries which are promoting
investment in Vietnam. It means that regional credit institutions are ready for opportunities offered
by the ASEAN Economic Community (AEC) as the AEC aims at integrating the intra banking
sector by 2020 in order to create the open system for fair operations between member countries.
The increasing presence of foreign banks in Vietnam will provide a large amount of investment
capital but will also cause increased competition.
State-owned banks have primarily focused on large-sized corporations and state-owned
enterprises, while joint stock banks have paid their attention to small and medium-sized
enterprises and individual customers. However, the market seems to have fierce competition as
foreign direct investment (FDI) businesses are holding nearly 70 percent of the country’s export
turnover and these potential customers are in the hands of foreign banks. Moreover, foreign
banks are also targeting domestic enterprises.
Under the banking system restructuring project, the SBV has set a target towards building one or
two banks at a higher level. Therefore, domestic banks must have strategic plans to diversify
services and implement merger and acquisitions (M&A) deals to expand operations.
V - WB upgrades VN’s economic growth forecasts
VGP | 13/04/2015
The World Bank (WB) has upgraded the economic growth forecasts for Viet Nam in 2015,
2016 and 2017 in its East Asia Pacific Economic Update.
Accordingly, the WB forecasts that Viet Nam’s economic growth will achieve 6% in 2015, 6.2% in
2016 and 6.5% in 2017. In comparison with the forecasts released in October last year, the
figures in 2016 and 2017 are higher than 0.5 percentage point and 0.4 percentage point,
respectively.
The positive figures are thanks to the decrease in the oil and gas prices, said WB’s Chief
Economist for the East Asia and Pacific Region Sudhir Shetty.
The other factor which helps the WB proposes constructive evaluation on Viet Nam’s economy is
that the nation not only stabilizes its economy but also attracts a lot of Foreign Direct Investment
over the past few years, which leads to achievements in the export turnover.
The East Asia and Pacific Update is the World Bank’s comprehensive review of the region’s
economies.
C - ADB Expects Cambodian Economy to Pick Up
Cambodia Daily 2nd Q. 2015
The Asian Development Bank (ADB) is predicting a steady uptick in Cambodia’s economic
growth to 7.3 percent and 7.5 percent in 2015 and 2016, respectively, on the strength of improved
performance in the country’s trade partners and a tempered political environment at home.
The forecast is part of the Asian Development Outlook 2015, which the bank launched Tuesday
and shows Cambodia continuing to outpace most of Asia and recovering from a slight dip to 7
percent growth in its gross domestic product (GDP) in 2014.
The ADB blames last year’s dip —down from an average growth rate of 7.2 percent over the
previous three years—on political and labor unrest that dented both investor confidence and
tourist arrivals, and on floods and droughts curbing agriculture. At a press conference in Phnom
Penh on Tuesday, ADB senior country economist Jan Hansen said Cambodia’s economy was set
to speed up again thanks to last year’s political detente, appeased garment workers and a
recovering global economy. “These headwinds for the economy have eased, or started to ease,”
Mr. Hansen said. “We are…expecting an increasingly positive performance by the major trading
partners, by the U.S, by Thailand, and to a lesser extent by the European Union, but also
because of the [easing of] political and labor tensions, the lower fuel costs…which are increasing
real disposable income for households.”
The ADB says Cambodia will also benefit this year and next from robust domestic demand, a
shrinking fiscal deficit, replenishing bank deposits and an improving—if still deeply negative—
trade deficit. The bank also expects agricultural output to pick up modestly.“So the Cambodian
economy is in the favored position of being able to rely both on strong external and internal
demand, rather than some other countries relying only on one of them,” Mr. Hansen said.
Unions and labor rights groups say workers in the critical garment and footwear sectors, which
contribute roughly a third of the country’s GDP, were cowed by the government’s deadly
suppression of wage protests early last year. A 28 percent hike to the sector’s minimum wage—
from $100 to $128—that took effect in January also helped.
Though garment exports continue to grow, the unrest has cut sharply into orders from abroad. Mr.
Hansen said rising garment worker wages, and the upward pressure they may put on other
sectors, could also hurt orders. “That is maybe a bit of a concern for the next years…. And there
are also other competitors in the region joining the market and producing garments,” he said.
“When it comes to rising labor costs, and also spillover effects to other sectors, rising costs
throughout the economy, that is something which has to be watched over the next years.” ADB
country director Eric Sidgwick said this year’s sharp wage raise, while “reasonable” after many
years of no raise at all, could also drive up expectations in the years ahead. “Issues of industrial
relations will therefore become more important,” he said.
“The fact that there was agreement [over this year’s raise], that there is more of a mechanism
now for dialogue, I think one would hope that this mechanism can be used more effectively and
that you have regular dialogue so that you don’t have this stop-go kind of approach where you
raise the minimum wage and then you forget about it until the next crisis or the next
demonstration,” Mr. Sidgwick said.
Mr. Hansen said the slowdown in the garment and agriculture sectors last year also made
Cambodia’s economy more reliant on construction and real estate, “which has often proved a
tendency to create economic cycles and occasionally also financial vulnerability, so this will
require an increased attention by the government supervisors and regulators over the next
years.” He also urged the government to keep a close eye on the rapid rise of private credit,
which rose from 45 percent as a share of GDP in 2013 to nearly 55 percent last year. “The level
is also comparatively high for a low or an upcoming low and middle income country, so this is
indicating the possibility of some financial vulnerabilities for the next year,” he said.
As for Cambodia’s prospects beyond 2016, the ADB said the economy would likely continue to
slowly diversify its relatively narrow economic base—perhaps most importantly into light
manufacturing—and integrate into regional and global supply chains. The ADB Outlook urges
Cambodia to do more to build up its infrastructure, improve the skills of its labor force and raise
the incentives for foreign investment. It says the country’s special economic zones have helped to
lure investors but shown little evidence that the firms they house are significantly outperforming
the firms operating outside them.
The arrival of the Asean Economic Community at the end of this year has caused jitters about
Cambodia’s ability to compete as trade barriers within the region begin to fall. Mr. Sidgwick said
Cambodia was making good progress to get ready, at least on paper, and that existing barriers
would in any case be coming down gradually. “AEC is not a big bang, and the world for
Cambodia will not be dramatically different on January 1 than it was on December 31,” he said.
Mr. Sidgwick and Mr. Hansen also stressed the importance of getting more Cambodians to
benefit from the country’s booming economy. Though inequality has been falling since 2007,
many of the Cambodians rising above the official poverty line are just barely escaping. “The
challenge for growth for Cambodia is for that growth to be more inclusive,” Mr. Sidgwick said.
“That means more people to have access to this growth and to have access to opportunities for
growth. Obviously, the higher the rate of growth the higher the chances for growth affecting more
people, but it’s not automatic.”
Markets & Prices
V - VivoCity Saigon opens doors
Inside Retail Asia , April 20, 2015
VivoCity Saigon opened its door Sunday (April 19) making it the second international shopping
mall brand to enter Vietnam, behind Japan’s Aeon. SC VivoCity is a joint venture between
Singapore-based Mapletree Investments and local supermarket operator Saigon Co-op.
Mapletree will manage the centre, its fifth internationally to carry the brand; the other three are in
China.
The centre is located on Nguyen Van Linh Boulevard in Ho Chi Minh City’s District 7, a suburb
popular with Asian expats including Koreans and Singaporeans, and a stone’s-throw from the
Royal Melbourne Institute of Technology campus. It is very close to the Crescent Mall
development which has struggle to attract customers since its opening more than three years
ago. Mapletree and Saigon Co-op say SC VivoCity Saigon embraces the popular features of the
Singapore VivoCity, which in 2011 was voted one of the Top 10 shopping destinations in the
world.
“With Mapletree’s expertise in developing large-scale projects and commercial complexes
throughout Asia, as well as Saigon Co-op’s experience in retail and real estate investment in
Vietnam, this partnership is expected to bolster commercial activities in the city, at the same time
as offering consumers new services and international retail standards,” the two companies said in
a statement. “With its modern architecture, impressive and striking design, SC VivoCity is sure to
become a momentous part of the city skyline, while housing famous trademarks, offering the
most popular food brands along with year-round festivals and events that will draw repeated visits
from both local residents and foreign visitors.”
With a total area of 41,000 sqm, the five-storey mall offers fashion, entertainment and lifestyle
tenancies, a hypermarket, an education centre, and food and beverage outlets. Tenants include
McDonald’s (the company’s third restaurant in Ho Chi Minh City), CGV cinemas (from Korea’s CJ
Group) and a Harley-Davidson Black Label store. “SC VivoCity aims to create a vibrant, multiexperience destination which will constantly surprise visitors with its mix of unique, ever-evolving
and refreshing, new-to-market retail and lifestyle brands and concepts,” the two companies said.
SC VivoCity is the first phase development of Saigon South Place, a 4.4 ha integrated mixed-use
project which will also house Grade-A office buildings and internationally operated serviced
apartments.
V - Foreign retail giants compete for big projects in Vietnam
VietNamNet Bridge - Wednesday, 15 April 2015
Major foreign retail groups are competing for a slice of the commercial retail pie in
Vietnam, despite the closure of some malls in Hanoi.
The South Korean leading retailer Lotte, for example, bought Diamond Plaza mall in District 1 in
HCM City from Korean firm Posco E&C. Sources say Lotte is moving ahead with its project on
developing a smart complex in Thu Thiem new urban area in District 2, estimated to be
capitalized at billions of dollars. The South Korean retail giant has been implementing its strategy
announced by President Shin Dong Bin in 2005, which focuses on four non-Korean markets –
Vietnam, Russia, Indonesia and China. Of the four, Vietnam is considered a promising
destination with 90 million people, 70 percent of whom are below 40 years old. Takashimaya, the
retail group from Japan with 180 years of experience, could also be a threat to the existing
retailers in the market. The giant, which has decided that China and ASEAN will be its key
markets in the future, plans to set up the first store in Vietnam early the next year.
The Japanese group, with three big centers in Singapore, Shanghai and Taipei, began eyeing
Vietnam in 2012. At that time, Takashimaya signed a long-term contract to lease 15,000 square
meters of retail premises at Saigon Center in District 1 in the central area of HCM City. And
another new shopping mall is expected to open in the second quarter of 2015 – SC VivoCity. The
72,000 square meter shopping mall, with five floors and one basement, developed by
Singaporean Mapletree and Saigon Co-op, is expected to sell major international brands. In
Singapore, VivoCity is considered one of the top 10 favorite shopping destinations in the world
and one of the top three shopping centers in Asia.
Professional rivals Analysts are surprised that big foreign retail groups are marching towards
Vietnam as they believe the current market is not sufficiently promising to investors. A number of
shopping malls have shut down or shifted to other types of business over the last two years
because of bad business performance. However, well-informed circles have said that closure of
the shopping malls occurred because of bad management, not because of low market demand.
“The other large shopping malls managed by experienced investors such as Aeon and Robinson
still have retail premises fully occupied and a high number of customers,” an analyst said.
V - More than 48% of businesses to expand operation
VGP – | 16/04/2015
As much as 48.4% of the total number of responded businesses have plans to expand
their operation, according to an annual report released by the Viet Nam Chamber of
Commerce and Industry on April 15.
According to the report, the businesses’ operation in 2014 and their expectation for 2015 are
positive.
It revealed that 47.9% of the asked enterprises maintain their scales and more than 3% reduce
their business scale.
The result showed positive signs in comparison with the previous one. In the report in 2014, only
42.5% of the responded enterprises expressed their desires to expand operation; 50.7%
maintained their operation; 6.7% reduced their operation scales and 0.1% had to stop operating.
The production performances of the business community were improved compared to the 2013 in
terms of revenues, orders, and labor productivit
V - Supermarkets tap into domestic retail sector
VNS, 14/04/2015
The considerable potential of Vietnam's domestic retail market is being actively promoted
by large retailers looking to expand their businesses at a faster pace.
The Ministry of Industry and Trade said the modern retail model in Vietnam accounted for a
quarter of the national retail value. Vietnam has 724 supermarkets, 132 shopping centres and
hundreds of convenience stores. Most of these supermarkets and shopping centres are
concentrated in large cities. Meanwhile, sale agents are mainly located in rural areas. Given their
great potential, foreign and local retailers had stepped up the development of their retail network
nationwide, reported vnexpress.net, a local online newspaper.
VinMart, a retail brand of VinGroup, entered the local market in 2014. VinGroup plans to
restructure 13 of the existing supermarkets of Ocean Mart this year after buying Ocean Mart from
the Ocean Group last year and develop under the VinMart brand. During the next three years,
VinMart also expects to add 100 supermarkets and 1,000 convenient stores nationwide to its
retail system via new investment projects or mergers and acquisitions (M&As) projects.
During the review quarter, movements were observed from both local and foreign retailers,
according to the first quarter report on the Hanoi property market of CBRE Vietnam, one of the
foreign property service providers in Vietnam.
Vincom Retail aggressively expanded the Vinmart+ chain, including mini-supermarkets and
convenient stores, while opening two new brands for the VinPro (electronics outlet) and VinDS
(department store) in 2015, the CBRE report said.
Strong expansion was also reported from the Aeon Group (Japan) and two other retailers from
Thailand (BJC and Central Group) via their partnership with local retailers, it said.
Emart, a Republic of Korean retail group, plans to open its first trading centre, with a total
investment of US$60 million in HCM City going forward.
Meanwhile, vnexpress.net quoted Hong Won Sik, general director of the Lotte Vietnam Trading
Centre Ltd Company, as saying that the company had promoted investment in its retail system in
Vietnam because the local retail market held great potential, especially in the rural areas.
This year, Lotte Vietnam was scheduled to open three more supermarkets in Can Tho, Nha
Trang and HCM City, he said. By 2020, the company would have 60 trading centres in Vietnam
and would have become one of the leading retailers in the nation. In HCM City, the retail market
is also expected to expand to the secondary and suburban areas faster than the central business
districts (CBDs) due to growing demand for goods from a large and expanding population, the
Savills Vietnam's first quarter report on the HCM City property market said. From 2015 onwards,
the total future supply in the secondary area would account for 57%, followed by the suburban
areas, with 27% and the CBDs at 16%, the report said.
A retail manager from a foreign company in Vietnam said the retail market would see more
intense competition in the future. Therefore, new businesses in the market would find it hard to
compete with existing retailers if they did not have great potential. If the existing large retailers did
not restructure themselves to boost market share, the new retailers would capture their market
share, the retail manager said. In the future, the trend of M&As in the retail sector would continue
and e-commerce in the sector would also develop further.
In a recent consumer survey conducted by CBRE, where 1,000 consumers aged 18 to 64 years
old, were interviewed in Hanoi and HCM City, a quarter of the respondents said they expected to
shop less often at a store. Around 45 to 50% of the respondents said they would shop online via
a desktop or laptop or smartphone or tablet more often than they did now. It was surprising that a
greater proportion of consumers (69%) aged from 55 to 64 years actually thought they would use
their smartphones or tablets more frequently to buy non-food items.
Although the outlook for the brick-and-mortar retailer format still remains upbeat, shopping centre
operators should be aware of the challenges posed by online retailers, CBRE said. This would be
crucial for shopping centre management and related areas, such as marketing. It was suggested
that retailers and landlords should also take advantage of this trend and do more online selling
and advertising via social media and their well customised "Business to Customer (B2C)"
websites.
In addition, CBRE recommended that landlords adapt their strategy to boost both e-commerce
and offline business activities by leveraging "big data", which can track levels of consumer
engagement, implement Online to Offline (O2O) strategies, and create simple and useful
applications for those who wanted to shop via their smartphone or tablet.
V - Tariffs to go on hundreds of Vietnam farm products by 2018
VoV News, 13/04/2015
Vietnam has signed seven free trade agreements with multi-lateral, regional and bilateral
partners, with hundreds of tariffs on farm produce to be removed by 2018.
Under the ASEAN Trade in Goods Agreement (ATIGA), 1,434 of 1,539 tariffs will be reduced to
zero this year. By 2018, most of the 149 tariffs on wood and wood products will go.
Tariffs will be removed under a range of trade agreements, including the ASEAN-China Free
Trade Area (ACFTA), the ASEAN-Australia-New Zealand Free Trade Agreement, the ASEANIndia Free Trade Area (AIFTA) and the Vietnam-Japan Economic Partnership Agreement
(VJEPA).
Tran Kim Long, director of the Ministry of Agriculture and Rural Development (MARD) department
of international cooperation, said integration helps foster exports of farm produce, push up
science and technology application and improves food safety and hygiene and product quality.
Long said the integration has resulted in several challenges, including fierce competition and
narrowed production of some industries.
Luong Hoang Thai, director of the Ministry of Industry and Trade’s multi-lateral trade policies
department, said that this year the government of Vietnam is focusing on negotiations for three
major trade agreements , including the Trans-Pacific Partnership (TPP), Vietnam-EU Free Trade
Agreement and a free-trade agreement with the Custom Union of Russia, Belarus and
Kazakhstan (VCUFTA). “After the WTO accession, we’ve realised a changing integration trend in
the world -- switching from multi-lateral integration into regional and bilateral integration,” Thai
said. “Vietnam is negotiating proactively instead of defensively in order to find export markets for
farm produce.”
V - Shinsegae Vietnam prepares for launch
Inside Retail Asia, April 13, 2015
South Korean retailer Shinsegae Group will launch in Vietnam by the end of 2015.
Shinsegae Vietnam subsidiary E-mart will roll out discount stores in the fast-growing retail
economy after five years of research and planning.
Shinsegae has secured at least two sites in Ho Chi Minh City, the first in an undisclosed part of
the city where it will build a flagship discount store on a 20,000sqm site, the second near Tan Son
Nhat international airport.
The Korean company has worked closely with Vietnamese government officials and last week in
a public ceremony announced a charity initiative to donate 10,000 motorcycle helmets annually to
children in Ho Chi Minh City after signing a Memorandum of Understanding. The Korea Herald
reports that the corporate social responsibility program is an E-mart marketing strategy “to
enhance its corporate image with government officials and Vietnamese consumers”. “E-mart has
been preparing for this project, which will become an important momentum that signals the
beginning of its business in Vietnam,” said Choi Gwang-ho, general director of E-mart Vietnam.
“We will focus on maximising the corporate brand image to stabilise our business here by
persistently carrying out campaigns in which the Vietnam government and other civil
organizations can participate,” Choi said. With a population of more than 90 million, rising
disposable incomes and a retail industry dominated by traditional markets, retailers like
Shinsegae see enormous potential if they establish a foothold in the market now, despite the near
certainty of losses while initial customer numbers grow.
The Korea Herald reported E-mart will be keen not to repeat its “bitter Chinese experience” in
Vietnam. In December the company closed four stores in Tianjin leaving it with just 10, 17 fewer
than at its peak in 1997. Since 2014, it has posted accumulated losses in China nearing US$50
million.
V - Domestic Medicine Producers Struggle To Lift Market Share
Business Times, Apr 12th, 2015
Great effort is required by the domestic pharmaceutical companies to expand their share
in the medicine market, which is currently largely dominated by imported drugs.
The Ministry of Health’s Department of Pharmaceutical Management said that even though
there were more varieties of locally-manufactured medicines in the market than imported
medicines, the consumption of the former was lower. Data showed that Vietnam has more
than 130 companies, which meet good manufacturing practices (GMP) and produce about
12,000 kinds of drugs, while there are just around 11,000 categories of imported
medicines. The annual average spending on medicine by Vietnamese reached US$31.18
per person, but a large percentage of that was for imported medicines, which are priced
higher. The consumption value of domestic medicines made up for 48% of the total value.
Last year, Vietnam imported more than US$2 billion pharmaceutical products from 30 countries,
reflecting an 8.3% growth over the year before, the Vietnam Industry and Trade Information
Centre under the Ministry of Industry and Trade said. In addition, domestic pharmaceutical
production was hugely dependent on imported materials, which accounted for up to 90%.
Technology was also a huge problem for most domestic medicine producers.
The national strategy of developing the pharmaceutical industry was targeted at the industry
producing 20% of raw materials for domestic production and 80% of the total medicine
consumption value by 2020.
According to the Director of the Department of Pharmaceutical Management, Truong Quoc
Cuong, the pharmaceutical industry should invest in producing generic drugs of a high quality,
which could replace imported drugs in treatment. Cuong said the potential of traditional medicines
should be brought into full play, adding that priority should be given to developing raw material
plantation areas.
V - Piaggio to roll out superbikes in Vietnam
Vietnam Net, 07/04/2015
Piaggio Vietnam, part of the Italian scooter giant Piaggio Group, is considering increasing
its presence in the Vietnamese market through stepping into larger-wheel scooter
segment this year.
Piaggio Vietnam market director Stefano Cartoni told the VIR that the company was poised to join
the larger-capacity superbike market in Vietnam. “There is room for superbike market growth in
the Vietnamese market. Besides scooter brands like Vespa and Piaggio which are selling well in
Vietnam, we also have well-known superbike brands like Moto Guzzi and Aprilia and these
brands should make their appearance this year,” said Cartoni.
Aprilia, an Italian motorcycle company and one of the marques owned by Piaggio, came into
being after the Second World War while Moto Guzzi is proud of having history dating back in Italy
from 1921. These two brands were incorporated into the Piaggio Group in 2004. Piaggio’s Moto
Guzzi and Aprilia are expected to heat up the local market. These first superbikes will surface in
Piaggio’s global standard Motoplex showrooms in Ho Chi Minh City within this year, according to
Piaggio Vietnam. “Vietnamese consumers have a growing appetite for more costly and stylish
bikes. Superbikes are enjoying a growth momentum despite the motorbike market in general
being on a downward trend,” said Cartoni.
The group’s Motoplex showrooms also house bike components and Piaggio’s diverse range of
vehicle models. In fact, the larger-capacity superbike market has proven appealing to quite a few
market players.
Aprilia
Moto Guzzi Sport
Early this year, Italian superbike brand Benelli looked at Vietnam as a global strategic market
and the first place worldwide for launching of its new Benelli TNT25 although sales of Benelli
superbikes in Vietnam is not as high as in some other Southeast Asian markets like Thailand and
Malaysia. Last year, Benelli sold about 1,200 bikes in Vietnam and is expected to triple sales in
Vietnam this year through the simultaneous launch of four new versions and improved distribution
preparations, according to Vo Minh Trang, Motorrock Vietnam Chairman which is the Vietnam
dealer for Benelli bikes.
Seven units of BMW Motorrad, the motorcycle brand of well-known German company BMW,
were sold in Vietnam after their launch this January. Early this year, BMW Motorrad launched
eight superbike to Vietnam with prices starting from VND538 million ($25,100) for its C600 Sport
line and from VND759 million ($35,400) for R1200GS Adventure line. The brand hopes to sell
300 units in Vietnam this year.
V - Vietnam automotive industry to grow fastest in ASEAN: Thai industry
insider
tuoi tre news, 04/06/2015
Vietnam’s automotive industry will enjoy the fastest growth in Southeast Asia in the next
20 years because of rising demand and help from the government, Vichai Jirathiyut,
president of the Thailand Automotive Institute, said at a recent meeting in Ho Chi Minh
City.
The Vietnamese automotive industry is forecast to churn out 220,000 units annually by 2020 and
1.5 million units by 2035 given strong support from the central government, Vichai at the meeting
on Thursday last week.
The aging 67-million-strong Thai market buys around 880,000 units per year, so the 90-millionplus market of Vietnam with a younger age group will have higher demand for personal vehicles
in the future, he said.
Official figures from the Vietnam Automobile Manufacturers' Association (VAMA) showed that
automotive sales in Vietnam reached 157,810 vehicles in 2014, up 43 percent compared to 2013.
Last year, sales of personal cars increased by 43 percent year on year, topping 100,000 units,
while sales of trucks grew by 42 percent in comparison with 2013 to hit nearly 57,371 vehicles,
the VAMA said in a report in January this year.
According to the Vietnamese Ministry of Industry and Trade, the local automotive industry will
produce 200,000 vehicles in 2015, an annual growth rate of 4.4 percent. In the Southeast Asian
region, Thailand and Indonesia currently have a very competitive automotive industry but this will
gradually change, Vichai said. The Thais are focusing on manufacturing pickup cars weighing
less than one metric ton and eco-friendly vehicles, for Thailand has the highest vehicle emissions
standards regionally. The country can help Vietnam when it is moving upward in the value chain
of the automotive industry because Thai manufacturers hold many technological advancements,
the president of the Thailand Automotive Institute added. Thailand’s automobile production
topped 2.8 million units last year with 18 foreign-owned assemblers including Honda, Isuzu,
Mitsubishi, BMW, GM, and Tata, he said. At this time, the Thai automotive market is plummeting.
Last month, the Thai government reported that domestic auto sales in February fell 11 percent
year on year, marking the 21st consecutive month of decline.
However, Vietnamese analysts and automotive businesses are worried that Vietnam will be
increasingly dependent on foreign vehicles as import taxes levied on automobiles will sharply
drop or even be exempted following the roadmap of tariff reduction commitments of the ASEAN
Agreement on Trade in Goods, which will take full effect by 2018. With the low localization rate of
Vietnam’s automotive industry, only at 10-30 percent depending on each type of vehicle, when
the import tariff on foreign-made vehicles, or completely built units (CBUs), is lowered to 0
percent in 2018, the importation of spare parts for assembling in Vietnam will obviously be more
expensive than CBU imports from Thailand or Indonesia. Data from the Vietnam Customs under
the Ministry of Finance showed that the total number of automobiles imported from India in the
first two months of 2015 reached 4,363 units, topping the list of the 12 countries and territories
from which Vietnam are importing automobiles.
In 2014, the Southeast Asian country imported over 13,300 automobiles of all kinds from India,
representing approximately 17.5 percent of the total number of imported vehicles of over 71,000
units. During the same period last year, the number of automobiles shipped from India was only
864 units, around 20 percent of this year’s count. However, when considering the import value,
topping the list was Chinese-made vehicles. Specifically, the value of CBU imports from China in
January-February totaled US$114 million, followed by South Korea ($66.9 million), Japan ($38.3
million), Thailand ($32.4 million), and India ($24.8 million).
O - Leading Italian machinery firms visit Vietnam for business
opportunities
Thoai Tran/Tuoi Tre News / 04/02/2015
It is a 266 percent rise in the number of Italian firms joining the PROPAK 2015 exhibition,
organized from March 31 to April 2, at the Saigon Exhibition and Convention Center in District 7,
Ho Chi Minh City, said Bruna Santarelli, a trade commissioner at the Italian Trade Commission in
Vietnam. The eleven Italian firms partaking in the PROPAK 2015 include HTBS, Brenna, P.E.
Labellers, CFT, AMUT, OCME, Melegari Manghi, Pietribiasi, Gorreri, TMCI Padovan, and FMT.
They are class-leading manufacturers of a variety of packaging machinery for extrusion lines,
thermoforming, multi-layer blown film lines, pasteurizing, filling, cleaning, labeling, and palletizing,
Santarelli said.
The Italian businesses, besides showing their products and latest developments to manufacturers
in Vietnam to seek for new partners, also look to expand their market share in the fast-growing
Asian market in general, and in the Southeast Asian nation in particular. Some, like CFT, also
signaled future investment for the establishment of a plant in Vietnam, or want to find a local firm
to act as an intermediary for distributing Italian machinery and equipment in Vietnam.
Many have already set up a representative office in Vietnam, or in Thailand, in an effort to tap the
developing regional market. The closer a firm gets to its potential customer, the better it
understands the customer’s needs and can thus offer the right machinery and timely solutions, a
representative of the Italian delegation said.
FMT, which built a complete bottling chain for the manufacturer of Red Bull energy drink in
Vietnam in the past, or Gorreri, which set up the cake manufacturing line for many leading
Vietnamese confectionery firms like Kinh Do Corp. and Bibica Co., in the 2000s, are seeking for
new potential customers.
The delegation was gathered by the Italian Trade Commission in Vietnam, the Trade Promotion
Department under the Italian Embassy in Vietnam, and the Italian Packaging Machinery
Manufacturers Association. Italy's packaging exports to Vietnam in 2014 were worth 23.4 million
euros (US$25.2 million), Santarelli said, without citing the annual growth rate.
The PROPAK 2015 exhibition, organized by Singapore Exhibition Services and its local partner
VCCI Exhibition Services for the 10th time in a row, is a leading international processing and
packaging expo. The three-day event has been attended by 267 exhibitors from 28 countries and
territories, with foreign exhibitors occupying 79 percent of the total area covering 6,000 square
meters. There are eight international pavilions representing Germany, Korea, Italy, Japan,
Taiwan,
L - Markets in Laos attract regional interest
VoV, 2nd Q. /2015
Businesses from throughout the Asian region are seeking to expand the market share for
their products and foreign direct investment (FDI) in Laos after learning about its rapid
development over recent years.
Despite being a small market, its ASEAN membership has increased the attractiveness of Laos
as an interesting market, principally because it removes many of the investment barriers that
previously existed. In the past, the length of time it took to obtain the required authorizations to
do business or invest in the country, inequalities in terms of tax benefits, the high cost of some
applied tariffs and the weakness of infrastructure were all barriers to investment.
A number of businesses in Vietnam, Thailand, Malaysia and the Republic of Korea now consider
Laos as a promising market where they would like to increase their sales base and also introduce
new technologies. Firms from these countries, especially from Vietnam, want to create a stronger
marketing base in Laos ahead of the introduction of the AEC in December 2015. The AEC
envisages a single market and production base, a highly competitive economic region, a region of
equitable economic development and a region fully integrated into the global economy. The AEC
will transform ASEAN into a region with free movement of goods, services, investment, skilled
labour and freer flow of capital.
The Vietnam Trade Information Centre in turn has reported that products experiencing the
highest growth for the January-February period included cereals (up 108.54%), iron and steel (up
57%), machinery and equipment (up 39.27%), and means of transports and spare parts (up
27.93%). The Ministry of Industry and Trade (MoIT) has set a target for domestic businesses to
achieve annual export growth of 14%-15% in the five year period from 2015-2020. However,
many domestic companies still face numerous difficulties. In comparison with other businesses
exporting to the Lao market, Vietnamese companies lag far behind. For example, Thai firms
grossed US$4 billion in revenue last year from exports to the market and Chinese firms total
revenues were US$1.9 billion while Vietnam straggled far behind at only US$448 million.
Potential investment destination
Vietnam has pumped nearly US$5 billion of FDI in 413 businesses principally focusing on
telecommunications, energy, services, infrastructure, agro-forestry and mining, according to the
Ministry of Planning and Investment.
Laos is the third largest foreign market attracting Vietnamese FDI and it accounted for 12% of all
investment in Laos. The main investing countries are Laos' large neighbours: Vietnam, China and
Thailand, followed by France. At present, Vietnamese’s agricultural businesses in Laos have
prospered, especially a sugarcane plantation business of the Hoang Anh Gia Lai Group.
In 2015, the Hoang Anh Gia Lai group invested in a cow breeding business along with
investments in rubber and oil palm plantation businesses. The group also also poured US$523
million in a kali salt mining project in Khammouan province.
C - Fast Food Chains Hungry for Cambodian Market
Khmer Times/Nou Sotheavy / 02 April 2015
The Western fast food concept has firmly taken root in Cambodia’s burgeoning capital, but
it is Asian food chains leading the charge, toughening the playing field for the American
heavyweights that are trickling in.
An emerging middle class and a youthful urban population hungry for a taste of Western culture
has ripened the Kingdom for fast food growth. Burger joints, fried chicken shacks and pizza
eateries have spread across the capital, banking on the allure of a clean atmosphere, childfriendly menus and generally unwholesome goodness.
“The Western food concept is growing in Asia,” said Chin Renyi, co-founder of the Malaysian
chain myBurgerLab, which officially opens its first Cambodian outlet on Norodom Boulevard on
Sunday. “In the world we live, information is given in an instant and people are not patient. That’s
why the fast food culture works.”
Asian Invasion
Competition is heating up in Cambodia’s fast food arena, with a flood of new regional brands
entering the market. The past year has seen the arrival of Lotteria, Pepper Lunch, Yoshinoya and
Bonchon – Asian brands drawing on Western fast food concepts but generally geared toward
Eastern palates. The new arrivals come 10 years since the first regional brand, The Pizza
Company, opened its first restaurant in Phnom Penh. The Thai chain introduced pizza to a
market populated by just two local fast food chains – Lucky Burger and BB World – and a singular
Dairy Queen at the capital’s airport. The Pizza Company has since expanded across the capital
and into the provinces, recently opening its 16th branch in Battambang.
While American ice cream franchise Dairy Queen was an early arrival in Cambodia, Western fast
food chains have been reticent about setting up in the Kingdom. Asian investors have brought in
KFC, Burger King and, most recently, Domino’s. But the notable absence of US heavyweights
McDonald’s, Pizza Hut, Subway and Taco Bell has left the fast food market open for local and
regional brands.
Barriers to Entry
Tim Fischer, a Phnom Penh-based consultant for the hotel and restaurant industry, suspects that
one reason for the conspicuous absence of major Western brand fast food chains in Cambodia is
cost. For local businessmen, acquiring the franchise of a popular Asian restaurant chain is
substantially cheaper than the cost of purchasing the rights to operate a big-name US brand. “It
can take up to $5.8 million for a McDonald’s franchise to be brought to Cambodia,” Mr. Fischer
estimated. “Franchises from Asia are much cheaper to acquire.” Asian chains also benefit from
cultural affinity, he said, noting that their menu items are more familiar to Cambodians, who are
more accustomed to rice and soups than starchy buns and cheese.
“The Asian brands are doing really well,” Mr. Fischer said. “I think [their food is more]
understandable in Cambodia compared to Western cuisine.”
Adapting to Local Tastes
Fast food chains often adjust the flavors and ingredients of Western staples to match local
preferences. In Asia, chili sauce trumps ketchup, rice often replaces french fries, and ramen and
tofu find their way into places Westerners would say they do not belong.
myBurgerLab’s Mr. Renyi explained that during the taste tests that led to his company’s creation
he discovered a fundamental difference in tastes. “We tested hamburgers nine times and noticed
that many of the people who tried our burgers wanted them to be sweeter to suit their Asian
tastes, as compared to blander Western ones.” And one truth is evident in Cambodia’s fast food
market – chicken reigns supreme. Few chains would dare venture into the market without it. Even
Lucky Burger and The Pizza Company – despite their monikers – keep chicken dishes on the
menu – and they are among the most consistent movers.
The Asian penchant for fried chicken fueled deep anticipation for Bonchon, the Korean-style fried
chicken chain that opened to much fanfare last month. The restaurant’s signature spicy doublefried chicken is extra crispy, and extra sweet.
Fast Food Evolution
Mr. Renyi said Cambodia’s rapid urban growth and the absence of the world’s biggest hamburger
chain has created a unique opportunity in the evolution of its fast food market “to skip the
McDonald’s step.” He explained that two decades since Phnom Penh saw its first fast food
outlets the city’s maturing market is more receptive to upscale offerings. “The fast food culture
works for developing countries or countries on the move,” he explained. “After a while, once
people have more stability, they want better things in life they will shun away from the fast food
and want a nicer environment.” The 34-year-old Malaysian said he analyzed the Asian market on
burgers after falling in love with the iconic Californian-based burger joint In and Out. His
experiments with friends and their research on burgers resulted in the launch of myBurgerLab, a
gourmet hamburger chain with three outlets in Malaysia and one in Phnom Penh.
Mr. Renyi said Cambodia’s growth of upscale chain restaurants and changing tastes will heighten
the barrier to entry for latecomers like McDonald’s. Taking Japan as an example, he said mature
markets are tough-sells for the kind of fast food popularized decades ago. “[US burger chain]
Shake Shack is coming to Japan, so you can see better versions of what we had as a kid,” he
said. “If Japan never had McDonald’s and it opened there now, it would not do well.”
Export-Import
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V - Smartphone imports up 57%
VOV, 19 March 2015 09:39
A total of 28.7 million mobile phones were imported to Vietnam last year, 13% more than in
2013, according to the International Data Corporation`s Asia/Pacific Quarterly Mobile
Phone Tracker.
Smartphones enjoyed the highest growth as shipments reached 11.6 million units, a year-on-year
growth of 57%, and are expected to eclipse feature phones this year. "With smartphone prices
rapidly declining, penetration rates have been increasing across the country," Vu Le Tam Thanh,
senior market analyst, mobile devices, IDC Vietnam, said. "The low-cost segment has been the
main driver, with six out of ten smart phones shipped to the country being budget models priced
below US$150."
Samsung remained king of the Vietnam smart phone market though its share has fallen
considerably over the past few years — from 54% in 2012 to 26% in 2014. Nokia/Microsoft on the
other hand continued to grow strongly, climbing to 24% in 2014 from 16% in 2013. "Microsoft
continues to defy global trends with Vietnam, where the company has really established a
stronghold within the region," Daniel Pang, senior research manager for client devices at IDC
ASEAN, said.
"However, most of their shipments are targeted towards budget consumers, as the lucrative
premium segment is still dominated by Apple and Samsung." IDC also recorded an increase in
smart phone shipment in the 5-5.5" screen size segment in the last quarter of 2014. "While the
Vietnamese have been more resistant to the phablet craze compared to other markets, we
continue to see growing interest in larger screen sizes," Thanh said. "This trend is helped by both
declining prices and higher interest in internet browsing and mobile gaming on larger screen
phones."
C - Increasing Vietnamese goods in Cambodia
VEN / 02/04/2015
Vietnamese businesses exported goods worth US$2.66 billion to Cambodia in 2014. It is
important to promote trade with Cambodia to make bilateral trade reach US$5 billion as
targeted in 2015.
According to Cambodian businesses, Vietnamese goods have attracted increasing numbers of
Cambodian consumers, with Vietnamese goods in Cambodia are mainly sugar, milk, coffee and
processed foods.
Center for Business Study and Assistance (BSA) Director Vu Kim Hanh said that survey teams
should introduce businesses to marketplaces so businesses can learn about demand and
purchasing power and make it possible for businesses to meet distributors and explore demand for
various commodities by Cambodian consumers.
Ho Chi Minh City Investment and Trade Promotion Center (ITPC) Director Pho Nam Phuong said
while businesses have focused on markets in Phnom Penh and Siem Reap, they should pay
increasing attention to Battambang in 2015 because it is the center of six Cambodian northwestern
provinces. Battambang is the third largest province in terms of population in Cambodia, after Phnom
Penh and Siem Reap. It is also a major international tourist center that attracts three million visitors
annually, making Battambang ripe for investment. It encourages investment in agriculture,
agricultural production services, farm produce processing and tourism. According to Phuong,
people in northwestern Cambodia mainly use Thai and Chinese goods. “We want to penetrate this
market to increase the market share of Vietnamese goods there. If Vietnamese businesses invest in
transportation and distribution and improve product quality and design they can carve out a major
niche in this market,” Phuong said.
To penetrate deeper into the Cambodian market, Vietnamese enterprises should establish
distribution networks. A modest number of Vietnamese businesses have set up shop in
Cambodia for direct distribution to end-consumers in Cambodia. There are small Cambodian
traders and retailers looking for partners to distribute Vietnamese goods. Cambodian distributors
don’t want to do long-term investment but to earn a profit quickly so the cost of commodity
circulation is always high and unstable. Therefore, development of distribution networks to transfer
goods to Cambodian distributors is necessary.
The Ho Chi Minh City Expo 2015 exhibition and trade fair will take place from May 1-5 in
Battambang. It is expected to have about 150 booths from 90 Vietnamese businesses operating in
the fields of food processing, household plastics, products for agricultural production, construction
and interior decoration materials, textile and garment, leather and footwear, cosmetics, tourism and
other services. Along with the exhibition and trade fair, there will be a survey of businesses in the
areas of Poipet and Doong border crossings. The survey aims to help businesses do market and
product assessments.
Particular Reports
O - More European businesses are coming under Chinese ownership
MILAN, Economist 2nd. Q. 2015
“ITALIAN industrial policy is now made in Beijing,” lamented Romano Prodi, a former Italian
prime minister, on March 23rd. His comment followed news the day before that China National
Chemical Corporation (CNCC), a state-owned conglomerate, would buy Pirelli, an Italian
tyremaker, for €7 billion ($7.7 billion). It will be the biggest Chinese investment in Italy so far, but
just the latest in a string of acquisitions driven by China’s growing appetite for Europe’s brands
and technology.
CNCC agreed with Pirelli’s controlling shareholders to buy Camfin, a holding company which
owns 26% of the tyremaker, as a first step before launching a takeover bid for the whole group.
The deal is in some ways an outlier, not just because of its size but because its shareholder
structure, which includes Rosneft, a Russian oil firm under American sanctions, ruled out many
industrial partners. Yet it is also part of a trend that has seen China’s investment in Italian
businesses grow from almost nothing in 2008 to €6 billion last year, according to KPMG, an
accounting firm.
That made China Italy’s biggest source of foreign investment in 2014, and Italy the biggest
beneficiary in Europe of Chinese investment after Britain. Chinese deals in Europe as a whole
rose from $2 billion in 2010 to $18 billion in 2014.
Chinese firms are following an edict to acquire advanced technology and high-quality brands from
abroad that the government laid down in its five-year plan of 2011. Until recently most outbound
dealmaking was by state firms buying up raw materials. Now high value-added businesses are
the main target, and private capital is flowing: in 2014 private Chinese firms accounted for 41% of
deal value. Like Japan in the 1980s, China is cash-rich and ready to pay up for prized assets.
Europe is attractive because it has lots of businesses going cheap—privatisations, cash-strapped
firms and a weak euro provide ample opportunities—and because it is open for business. In
France and Italy an obsession with national ownership has been eroded by a need for foreign
investment. Germans are proud that their firms are desired by the world’s rising economic power.
America, by contrast, is choosier about who buys its strategic assets.
In Britain, which has long been open to foreign ownership, Chinese firms have stakes in Thames
Water and Heathrow airport. In France they have invested in Toulouse airport; in PSA Peugeot
Citroën, a carmaker; and in Club Med, a resort operator. In Greece a Chinese firm runs part of
the port of Piraeus. In Sweden Volvo, another carmaker, is also Chinese-owned. InFront, a Swiss
firm that is a big owner of sports-broadcasting rights, has just been bought by a Chinese
conglomerate. And in Italy, besides Pirelli, Chinese firms’ purchases range from Ferretti, a
yachtbuilder, to Salov Group, an olive-oil producer, and stakes in Ansaldo Energia, a maker of
gas turbines, and Ferragamo, a fashion house.
China’s appetite for European assets, particularly in areas such as technology, food and property,
will keep growing. Less clear is how well Chinese firms can manage their acquisitions. They are
not as quick at learning this as they have hitherto been at copying foreign products, reckons
Alberto Forchielli of Mandarin Capital Partners, a Sino-Italian private-equity fund. Many are
“buffoons” when it comes to doing business in the West, he says. They tend to centralise
decision-making in China, while failing to give directions to local managers, leaving the company
in limbo. In cases where Chinese owners leave their foreign acquisitions’ managers largely to do
their own thing, while helping them gain access to China’s huge domestic market, things go
better.
Some deals offer hope. Many scoffed at Geely’s acquisition of Volvo in 2010. It took a while, but
Volvo’s sales last year hit a record 465,900 cars. The acquisition by Changsha Zoomlion of Cifa,
an Italian maker of concrete pumps, ultimately led to Asian construction contracts that saved the
firm. And Peugeot’s deal with Dongfeng, in partnership with the French government, helped the
firm return to profit in 2014; it is now selling more cars in China than in France.
Francesco Moccagatta of N+1 SYZ, an adviser on mergers and acquisitions, thinks Chinese
managers are rapidly wising up. Their fluency in English has improved greatly over the past five
years; they are increasingly using big Western investment banks to handle deals instead of doing
things for themselves; and Chinese admissions to American executive MBA courses are rising.
“They’re going to kick our arses,” he predicts. Maurizio Castello of KPMG agrees that Chinese
investors no longer stumble around like tourists, but says too few of them understand due
diligence and the other processes in M&A deals.
There would be more Chinese purchases of European firms but for a gap in expectations.
Chinese firms are aware that buying and turning round an ailing foreign business would be
beyond them, and yet the family owners of the best-performing European businesses—the ones
the Chinese covet—are fussy about whom they might sell to. If the Pirelli deal and others go well,
that could help shift attitudes. If so, and if Chinese firms master the art of doing business in the
West, Mr Moccagatta could be proved right.
O - Political priority, economic gamble
Economist, Apr 4th 2015
Free-trade zones are more popular than ever—with politicians, if not economists
RWANDA has developed a strategic plan for them. Myanmar is embracing them as it opens up.
Countries that have long been fans, from China to the United Arab Emirates, are doubling down.
India’s plans in the area are “revolutionary” and could add 2% to its GDP, says a minister. Special
economic zones (SEZs) are all the rage among governments hoping to pep up their trade and
investment numbers. Such havens are appearing even within havens: the Cayman Islands has a
new one. “Any country that didn’t have [an SEZ] ten years ago either does now or seems to be
planning one,” says Thomas Farole of the World Bank.
Studying history may give eager trade ministers pause. SEZs—enclaves in which exporters and
other investors receive tax, tariff and regulatory incentives—create distortions within economies.
Other costs include required infrastructure investment and forgone tax revenues. The hope is that
these are outweighed by the boost to jobs and trade. In reality, many SEZs fail. Performance data
are elusive because the effects of zones are hard to disentangle from other economic forces. But
anecdotal evidence suggests they fall into three broad categories: a few runaway successes, a
larger number that come out marginally positive in cost-benefit assessments, and a long tail of
failed zones that either never got going, were poorly run, or where investors gladly took tax
breaks without producing substantial employment or export earnings.
SEZs have a long pedigree: the first free-trade zones were in ancient Phoenicia. The first modern
one was set up at Shannon airport in Ireland in 1959, but the idea took off in the 1980s after
China embraced them. There are now more than 4,000 SEZs (see chart). A study conducted in
2008 estimated that 68m people worked in them. They come in many forms, from basic “export
processing zones” to “charter cities”, urban zones that set their own regulations in all sorts of
areas that affect business.
The biggest success story is China, whose decision in 1980 to create a zone in Shenzhen
transformed the city (pictured) into an export powerhouse. Dozens of SEZs have since popped up
across the country. In March, Xi Jinping, the president, urged a faster pace of roll-outs. Other
successes include the United Arab Emirates, South Korea and Malaysia. The Philippines has
won praise for its “PEZA” zones, which offer a streamlined permit process for foreign investors,
says Shang-Jin Wei of the Asian Development Bank. Most economists agree that SEZs catalysed
liberalisation in China, which used them to test reforms that were seen as too hard to unveil
nationwide. In the Dominican Republic they helped create a sizeable manufacturing sector in an
economy previously reliant on agriculture.
The overall impact of SEZs on trade is poorly understood. A paper published in 2014 by
economists at Paris-Dauphine University found that, for a given level of tariff protection, SEZs
increase exports for the countries they are in and for other countries that provide intermediate
goods or components. This helps explain why the World Trade Organisation generally tolerates
SEZs, even though many breach its subsidy rules. However, the paper also concluded that zones
sometimes give countries an excuse to retain protectionist barriers around the rest of the
economy. More prosaic problems pop up, too. Bureaucracy can be excessive, and the
bureaucrats underfunded—sometimes at the same time. Too little is often spent on railways,
roads and ports to link the zone to the rest of the world. Many African SEZs have struggled for
such reasons. One in Senegal flopped because of a combination of excessive bureaucracy, high
electricity costs and its distance from a good port. Developers have withdrawn from 61 of the 139
approved SEZs in the Indian state of Maharashtra because of capricious policymaking, a murky
screening process and concern over economic prospects. One survey found that firms
sometimes had to deal with 15 different agencies to do business in an Indian zone. Violent
protests by locals over land acquisition for zones have also deterred investors.
Moreover, governments sometimes embrace SEZs for the wrong reason: to win praise for reform
(and votes) without having to risk full liberalisation. Partial liberalisation can also be a way to
preserve some of the rents earned elsewhere by shielding businesses from competition. Some
officials see zones as vehicles for graft. In 2005 some 60% of firms in Indian SEZs reported
having to make “irregular” payments to zone authorities. Last month Ukraine’s prime minister said
he opposed SEZs because of corruption. SEZs in Nigeria were firmly resisted by the customs
agency, which did not want to lose its clout. Another concern is the use of zones to launder
money, by inflating export values.
The SEZ concept appears to have natural limits, too. What works in manufacturing may not work
in other sectors. The Shanghai Free Trade Zone, launched in 2013 and focused on finance, has
been disappointing. Economists fret that it is impossible to tinker within the zone with China’s
capital controls, for instance, without the effects spilling over to the rest of the economy. Perhaps
as a result, the authorities have been cautious: in a recent survey, three-quarters of American
firms in Shanghai said the zone offered them no benefits. That hasn’t stopped China approving
plans for more financial SEZs. The government is also promoting zones abroad: it is helping six
African countries to set some up. Although its are state-run, ever more SEZs are likely to be
privately owned and operated. The Philippines already has more than ten times as many private
zones as public ones. This shift may go further, if privately run charter cities and other so-called
“special governance zones” gain traction. The idea is to create enclaves that write their own rules
in all business matters, from labour regulation to anti-corruption codes—“to look at laws as
services that companies demand”, says Lotta Moberg of George Mason University. Such
ventures will provide competition more effectively than zones focused on fiscal incentives, says
Shanker Singham, founder of Enterprise Cities. Mr Singham is in talks to develop sites in the
Dominican Republic, Colombia, Morocco, Bosnia, India and Oman. But these are mostly at an
early stage. The most advanced charter-city project, backed by a group of American libertarians,
is in Honduras. But it has yet to start and is already controversial: many Hondurans worry that it
will operate as a state within a state, milked by business interests. In most countries, such
parastatal ventures are likely to encounter political difficulties.
Whether or not such freewheeling zones catch on, expect more experiments. South Korea and
Thailand are developing eco-industrial parks. Others are considering SEZs for refugee
populations. For better or worse, the number of zones could top 5,000 before long.
O - Emerging markets
Predicting the next crisis
By C.W. | WILMINGTON, DE, 2nd Q. 2015,
HOW resilient are emerging-market economies? Many are struggling, thanks to the economic
impact of a strong dollar. But what would happen if things suddenly got a lot tougher? A new
paper, from Liliana Rojas-Suarez of the Centre for Global Development, a think-tank, offers some
interesting data.
Let’s imagine that something really bad happens. The Federal Reserve tightens its monetary
policy too soon; some new global debt crisis begins; Russia launches a full-scale invasion of
Ukraine. Ms Rojas-Suarez wants to understand which emerging-market economies are most
vulnerable. To do so she creates a “resilience indicator”. The ingredients of the index are listed at
the bottom of the piece. In short, the indicator measures how indebted a given country is; how
reliant it is on foreign funding; and how much scope it has to fight the markets if things go wrong.
She first constructs her index for 2007. There is a reasonably strong correlation between a “good”
resilience indicator and better economic performance during the subprime meltdown (see bottom
chart). For instance, in 2007 Peru had a score of 0.39, thanks to a budget surplus and low
external debt. From 2008 to 2010, real per-capita GDP duly grew. The Baltics, meanwhile, had
much higher external debt and big current-account deficits. Their per-capita GDP dived during the
crisis.
Ms Rojas-Suarez’s paper then updates the indicator for 2014 (see top chart). Lots of countries
look very different. In particular, the Balts look much better. Others, though, like Poland, India and
Bulgaria, look much worse. The results suggest that if there were a big financial shock, these
countries would be worst hit.
1: current-account balance as a percentage of GDP.
2: ratio of total external debt to GDP. Both public and private debts are included.
3: ratio of short-term external debt to gross international reserves
4: ratio of general government fiscal balance to GDP.
5. ratio of government debt to GDP
6. squared value of the deviation of inflation from its announced target. (This is important, since it
gives an indication of how constrained a central bank is to respond with countercyclical
monetary policy.)
7: a measure of financial fragility, characterised by the presence of credit booms or busts.
All Fairs & Exhibitions 2015 in Indochina
O - Fairs & Exhibitions 2015 in VIETNAM - CAMBODIA - LAOS – MYANMAR
Our link http://www.produktionsservice-vietnam.com/Englisch/messen.php shows all trade fairs
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