VIETNAMICA.NETSocio-Economic Insights on Vietnam

Understanding of

The Vietnamese Economy and Business Environment

Bonjour Vietnam, 2006

Raconte-moi ce nom étrange et difficile àprononcer

Que je porte depuis que je suis néeRaconte-moi le vieil empire et le trait de mes yeux

bridésQui disent mieux que moi ce que tu n'oses direJe ne sais de toi que des images de la guerreUn film de Coppola, des hélicoptères en colère

Tell me all about this name, that is difficult to say.It was given me the day I was born.Want to know about the stories of the empire of

old.My eyes say more of me than what you dare to

say.All I know of you is all the sights of war.A film by Coppola, the helicopter's roar.

Musician: Marc Lavoine (French) Singer: Pham Quynh Anh (Belgian)

Vietnamese Tourism

2000-2005: Welcome to Vietnam

2006-2010: Vietnam: The Hidden Charm

(by Dr. Adam McCarthy, + 30% foreign visitors)

Curious? Then What Next?

The Last Frontier• First investment funds in Vietnam: early 1990s

– First half 1990s: Eight funds; US$700 Mln.– After 1997: only two (Vietnam Enterprise Investment Fund run by

Dragon Capital Vietnam, and Vietnam Frontier Fund by Finasa)• 2002-2005:

– Quite period– Mekong Capital, VinaCapital, IDG, VietFund, PXP Asset Management

• 2006-2007: – Booming period– More: 22 funds and 17 fund management companies

• 2009-2010:– Closing, exiting, leaving (Indochina Capital exited in May 2009)– Poor perfomance (May 16, 2011)

• VMFVF1: 9.8; PRUBF1: 5.3; MAFPF1: 4.1• Par value: 10

• The charm is no more hidden!

Vietnam Stock Market

GDP per capita

150

650

1,150

1,650

2,150

1969 1975 1981 1987 1993 1999 2005 2015

US$

GDP Growth

0%1%2%3%4%5%6%7%8%9%

10%

1986198819901992199419961998200020022004200620082010

The Stock of FDI in Vietnam(As of Dec. 22, 2010)

63,186193,38212,236Total

56,527174,71510,805(As of Oct. 20, 2009)

83981Investment holding

9033,59911BOT, BT, BTO contracts

1,4054,795193Joint-stock company

4,5745,053223Business cooperation contract

16,96460,5862,209Joint venture

39,258119,2529,599100% foreign-owned

StatutoryRegistrationNo. of ProjsType of Investment

Source: GSO and Vietnam Economic Times, 2010. Registration and statutory capital figures in million of USD.

Major FDI Sources, 2009

Source: Vietnam Economic Times, 2009.Data point: Country; Cumulated FDI registration; Relative contribution in percentage; Value: US$ Bln

Major FDI Sources, 2010

Source: Vietnam Economic Times, 2010.Data point: Country; Cumulated FDI registration; Relative contribution in percentage; Value: US$ Bln

Thailand, 5.8 , 3%

Others, 38.5 , 20%

Chinese Taipei, 22.8 , 12%

Korea, 22.1 , 11%

Singapore, 21.7 , 11%

Japan, 20.8 , 11%

Malaysia, 18.3 , 10%

BVI, 14.5 , 7%

USA, 13.1 , 7%

Hongkong, 7.8 , 4%

Cayman Islands, 7.4 , 4%

Vietnam: A Destination for American Companies

• Pros:– The 2001 US-Vietnam Bilingual Trade Agreement – Vietnam’s full membership of WTO in 2007. – A promising market of 87 million people. The nation

GDP per capita was about US$1,200 in 2010. – A reasonable alternative for China-based production

since the Chinese production cost is increasing • Cons:

– Business environment: Organized Chaos– Emerging and transiting economy

• Fact: No American FDI in Top15 (4-M 2011)

Trade Deficits

0

20000

40000

60000

80000

100000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Exports of Goods Imports of Goods

Exports ~ Imports

US$ Mln.

Trade Balance

Agricultural Products Exports

71,629 Total Export Value

6.9%4,944 Crude Oil

2.2%1,549 Coal

0.8%556 Casava

4.5%3,212 Rice

0.6%425 Pepper

0.3%197 Tea

2.5%1,763 Coffee

1.6%1,136 Cashew nuts

0.6%451 Vegetable

6.9%4,953 Aquacultural Products

US$ Mln

• The nation’s comparative advantage

• Renewable resource

• Green development and climate change

Agricultural Products

John Richard "Jack" Simplot, 1909-2008

King of Potato

Forbes (2007): # 273, US$3.2 billion

Dang Le Nguyen Vu, born 1971

Trung Nguyen Coffee

Financial Times Case Study Apr. 27, 2011

Tourism Industry

Socio and Cultural Aspects• Chinese-originated Confucianism

– Hierarchy

– Face-saving

– Relation business

• Social Ranking “Sĩ – Nông – Công –Thương”

– Gentry Scholar/Intellectual Official – Farmer –Craftsman – Trade/Businessman

• The Hidden Entrepreneur’s Aspiration to Become a Non-Entrepreneur

‘Seed’ Capital• Most Vietnamese business people are enthusiastic

about discussing collaboration opportunities• Perception: foreigners bring

– Future profits– AND immediate revenues

• Knowledge of the local market should be an asset for the potential partnership

• Face-saving keeps Vietnamese business people not asking for what they really want

• `Seed’ capital for long-term partnership

Cultural Interpreter

• There is a gap between what the local partner proposes what he has done or is able to do

• “Cultural Interpreter”– local professional business and

consulting firm– understanding and expertise of the

business and administrative processes

Disguised Entrepreneurs• Who are disguised entrepreneurs?

– A bunch of ideas and proposals

– NO risk-taking, NO implementing, ect.

– Trying to be on the “safe-side”

• Middle man:

– Willing to facilitate the foreigners’ smooth businesses in Vietnam

– Gains: profits, business relations, images and brands

• Keep encouraging them to do their best for business collaboration.

Strategic Planning• Many set up and start running a new company with:

– A list of wishes– No business plan

• New fashion of the Vietnamese large corporations:– Doing “big things,”– Thinking globally,– Developing strategy

• Strategic planning services: a multi-million dollars market• High prices for:

– Well-known consulting brands (experts, professors)– The business owner’s ex-ante strategy– Higher prices of equity

What is Strategy?

Reference Reading• Vuong, Q.H., Dam, V.N, Van Houtte, D. and Tran, T.D. (2011) “The Entrepreneurial Facets as Precursor to Vietnam’s Economic

Renovation in 1986,” Working Paper Series Centre Emile Bernheim, SBS-EM – ULB, No. WP-CEB 11-010, April.

• Nancy K. Napier and Vuong Quan Hoang (2011) “Getting to the Real Story: What Vietnamese business people wish foreigners understood about doing business in emerging and transition countries like Vietnam – BEFORE they start,” Int. J. Human Resources Development and Management, accepted-forthcoming.

• Quan Hoang Vuong and Tri Dung Tran (2011) “Vietnam’s Corporate Bond Market, 1990-2010: Some Reflections,” The Journal of Economic Policy and Research, Volume 6, Number 1, pp. 1-47, October 2010 – March 2011.

• Vuong Quan Hoang, Tran Tri Dung, and Nguyen Thi Chau Ha (2010) “Mergers and Acquisitions Market in Vietnam’s Transition Economy,” The Journal of Economic Policy and Research, Volume 5, No. 1, pp. 1-54 (ISSN: 0975-8577), Mar. 2010. Institute of Public Enterprises, Hyderabad 500-007.

• Vuong Quan Hoang (2010) Financial Markets in Vietnam’s Transition Economy: Facts, Insights, Implications. (ISBN: 978-3-639-23383-4) VDM-Verlag, Feb. 2010, Saarbrücken, Germany.

• Quan-Hoang Vuong and Tran Tri Dung (2009) “The Cultural Dimensions of the Vietnamese Private Entrepreneurship,” The IUP Journal of Entrepreneurship Development, Vol. VI, No. 3 & 4 (Sept. and Dec. 2009), pp. 54-78.

• Vuong Quan Hoang and Tran Tri Dung (2009) “Financial Turbulences in Vietnam’s Emerging Economy: Transformation over 1991-2008 Period,” in Jagadeesha and Deene, eds., Contemporary Issues in Finance, pp. 43-61, Excel Books, New Delhi, ISBN 978-81-7446-725-6 (Amazon link). Available at SSRN: http://ssrn.com/abstract=1486204

• André Farber, Nguyen Huu Tu ,Tran Tri Dung, and Quan-Hoang Vuong (2008) “The financial storms in Vietnam’s transition economy: A reasoning on the 1991-2008 period,” Working Papers CEB 08-023.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB), November.

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