vietnam market research
TRANSCRIPT
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Where is Vietnam
going from here ?
Damien DuhamelDamien DuhamelManaging Director Asia
www.solidiance.com
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Where is Vietnam going from here?Damien Duhamel
3 objectives
� We were keen to invest in Vietnam, nowwe will definitely move forward
� We were not so keen to invest in� We were not so keen to invest inVietnam but we may now explorefurther
� We were not very keen to invest inVietnam and now we probably won’t
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some
basic basic
Vietnam
facts
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Where is Vietnam going from here?Damien Duhamel
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80-90 90-03 2004 2005 2006 2007 2008 2009f
strong GDP growthReal GDP growth 1980 – 2006 (in %)Vietnam’s economic growth - on average –
well above 7% since 1990
� Vietnam has been consistently toppingthe economic growth performance inASEAN since 1990.
� CAGR GDP growth overt the past 15 yearsChina Thailand Vietnam
0
1000
2000
3000
4000
5000
2003 2004 2005 2006 2007 2008 2009f
China Thailand Vietnam
GDP per capita 2003 – 2006 (in US$)
� CAGR GDP growth overt the past 15 yearsis 8% - Only China has better numbers toshow in Asia (9%)
� Despite Vietnam’s impressive growthperformance over the past two decadesit is still catching up with Thailand andChina in terms of GDP per capita. Its GDPper capita is – at this moment – still roughly5 times lower than that of Thailand and 2.5times lower than that of China
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Where is Vietnam going from here?Damien Duhamel
timid and inconsistent FDISteadily growing flow of FDI intoVietnam, more to come.
� Vietnam’s regime has been graduallyliberalizing its economy since the 80s.Further liberalization was and will continueto be facilitated by WTO obligations.
� As a result, Vietnam has becomeincreasingly attractive to foreigninvestors, particularly in light of its strategic
20,000
16,000
14,000
investors, particularly in light of its strategiclocation in Southeast Asia, largepopulation, and abundance of naturalresources
� A steadily growing flow of FDI intoVietnam is testimony to this growingattraction, and underlines the success ofVietnam’s efforts to develop the countryinto a force in Asia to reckon with
Yearly FDI flow 1988 – 2009 (USD M)
2007 2008 2009f
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Where is Vietnam going from here?Damien Duhamel
asia dominates FDI – where is the EU ?Top 10 Investors in Vietnam 1988 – 2008 (USD B)
Rank Country USD Billions
1 Korea 14
2 Singapore 12
3 Taiwan 11
4 Japan 10
5 BVI 9.5
Asia
5 BVI 9.5
6 HK 6
7 Malaysia 4.2
8 USA 4.1
9 Netherlands 2.6
10 France 2.3
…12 China 1.8
…15 UK 1.5
GC
EU
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Where is Vietnam going from here?Damien Duhamel
south dominates FDI inflow
25%
FDI is focused on the South of Vietnam
� More than 55% of the total investmentcapital
between was invested into theSouth whilst the North accounted for a littleover 24%
� Besides the key cities, i.e. HCMC and
55%
� Besides the key cities, i.e. HCMC andHanoi,
investment poured mainly into provincesbordering HCMC such as Dong Nai(16.22%), Binh Duong (9.44%), and Vung Tau(5.56%)
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Where is Vietnam going from here?Damien Duhamel
industrial & manufacturing revolution
22%
8%
70%
22%
Key FDI sectors
� Roughly 70% of FDI is undertaken in theIndustry and Construction Sector, 22% in theServices Sector and the remainder in Agro-Fishery & Forestry. The investment intoservices is mostly in the area ofHotels, Offices, Transport and Telecom
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Where is Vietnam going from here?Damien Duhamel
Vietnam 2008 - growing pains…
“25%CPI!”-Overheating economy
-Over speculative mentality -Too fast banking sector
liberalization -Commodity climbing prices
impact-Natural market
readjustment“25% !” readjustment
-FDI still very impressive-Country remains most
attractive in Asean-Pains will ease after Tet 2009
-Vietnam remains insulated-Timed M&A activities
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vietnam’s little dirty dirty
secrets
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should we enter vietnam
now ?
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Where is Vietnam going from here?Damien Duhamel
should we enter VN ?� Yes, if…
� You are selling machinery with uniquetechnology and applications
� You are in the IT and e-commerce fields –80,000 IT graduates a year and growing80,000 IT graduates a year and growing
� You are looking for a safe and affordablemanufacturing hub for exports (furniture /textile / CPG / Toys / etc.)
� Your products serve the infrastructure needsof the country or the new consumerism of itspeople
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Where is Vietnam going from here?Damien Duhamel
should we enter VN ?� Not really if…
� If your shareholders hope for immediatequarterly earnings. The Vietnamese havetime, your shareholders don’t…
� If you are in industries with low barriers toentry or solely capitalizing on your IP/Brand.
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what specific specific
sectors?
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Where is Vietnam going from here?Damien Duhamel
what specific sectors?
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is vietnam still a communist
country?
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Where is Vietnam going from here?Damien Duhamel
is Vietnam a communist country?� Yes just like China…� Vietnamese are pragmatic. “Why rock the
boat when it takes us to destination?”Personal economic advancement takesover political challenge.
� Modern and dynamic youth, they also wanttheir MTV… (or youtube as matter of fact)
� Modern and dynamic youth, they also wanttheir MTV… (or youtube as matter of fact)
� Vietnam has embraced globalisationthrough its membership of AFTA (1995), APEC(1998), the US Bilateral Trade Agreement(2001) and WTO (2007).
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sustainable growth ? probably…
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Where is Vietnam going from here?Damien Duhamel
sustainable growth ? probably… � Saving rates have spiraled from 5% to 35%.
Lots of native investment. The Vietnamese arenow taking control of their nation.
� Managed costs by default : Ten yearsago, Vietnam’s manufacturing wage costrepresented 95% of that of China’s.Today, that figure is about 65%, as growth hasToday, that figure is about 65%, as growth hasforced Chinese wages up.
� Unlike neighbors: Political stability. Industriousnation. Investment in education.
� The model of growth is very “Singaporean”
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a few a few deja vu road
blocks
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Where is Vietnam going from here?Damien Duhamel
a few déjà vu road blocks� Infrastructure: The Government has
committed 10% of GDP to infrastructure butthis will not be enough
� Everything is in need of total rehaul: airports /train / road / power / telecom / evencomplete cities. Investment and upgradescan’t cope with demand. Sectors need tocan’t cope with demand. Sectors need tobe liberalized to bring more privateinvestment
� SOE. Like in China they once were thebackbone of the Nation. They still represent30% of GDP. SOE financing and NPL remaina dark cloud
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how do I sell and get my get my money (safely)?
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Where is Vietnam going from here?Damien Duhamel
how do I sell and get my money (safely)? � You don’t !� Like in most developing nations, payments
and financing are an issue. There are nomagic formula for this thorn…
� Suggestions: some home banks have co-financing schemes, use agents (but their risk-carrying has a cost!), take your time and dofinancing schemes, use agents (but their risk-carrying has a cost!), take your time and doyour homework
� Lots of suspicion with foreigners in and out forquick dirty deals (their time is now over).
� Good news, if you sell expensivemachinery, your clients are likely to beSingaporeans…
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is job hopping a national a national sport?
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Where is Vietnam going from here?Damien Duhamel
is job-hopping a national sport? � The rule of supply and demand works the
same in VN. Right now there is lots ofdemand. Expect staff attrition a la Shanghai…
� Successful companies that have been able tosustain growth without HR issues hinderingalong the way have staffed key positions with1/3 expats, 1/3 Vietkhieu, “2/3” locals and1/3 expats, 1/3 Vietkhieu, “2/3” locals andprovided all with First World opportunities asopposed to working in a Third Worldenvironment.
� Wage inflation has shoot up and will continue.Current meltdown brings reality back, butreality will fade away fast.
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do I need expats in vietnam ?in vietnam ?
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Where is Vietnam going from here?Damien Duhamel
do I still need expats in Vietnam ? � Most likely yes. Especially for two positions:
Leadership and Financial “Controller”� Very small local pool of expats� Warning: few expat families survive the
country. Families break, contracts are cutshort, expensive relocations. A previous Asianexperience does not warrant success in VN. Ashort, expensive relocations. A previous Asianexperience does not warrant success in VN. Atough emerging nation experience isprobably best.
� Vietkhieu are more welcome now than in thepast. Employing overseas Vietnamese willdeliver either the best or the worst.
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“vietnam is (still) hot, don’t get don’t get burned…”
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Where is Vietnam going from here?Damien Duhamel
VN is (still) hot, don’t get burned… � Don’t think they don’t know or won’t know…� Don’t go in for a quick buck. It will be quick-burn� Work as diligently as you would elsewhere. Once
you cross to the Dark Side, you are in quick sands� The ATM syndrome. If you start to bribe, you will
never stop� GDP growth does not equate to earnings growth
Where is Vietnam going from here ?
� GDP growth does not equate to earnings growth� Look for growth and returns in three years ++� Learn to navigate the red tape and
bureaucracy, there is no escape� Integrate CSR into your strategy. The authorities
are sensitive to it.
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Where is Vietnam going from here?Damien Duhamel
Cám òn qúi vi rhâ[email protected]
30
Suite 801Hong Kong Plaza283 Huaihai Road CentralShanghai 200021Tel: +86 21 5168 [email protected]
China
Suite 17-01High Street Center1 North Bridge RoadSingapore 179094Tel: +65 6408 [email protected]
Singapore
Solidiance is a marketing strategy consulting firm with focus on growth in Asia Pacific. We are devoted to working side-by-side with our clients to outpace the competition, close gapsin growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better understanding of intrinsic Asia and regional issues.
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VIETNAMMARKET ACCESS AND LEGAL CHALLENGES
Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in
professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference
to an “office” means an office of any such law firm.
CHALLENGESEurochamber Breakfast Club
Nov 12 2008
Shanghai
Seck Yee Chung
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CONTENT
• What is keeping us busy?
• Why?
• What are the legal challenges?• What are the legal challenges?
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WHAT IS KEEPING US BUSY?
• Market access: FDI; M&A; rep offices
• WTO; trade and distribution
• Pharma and health care
• Cosmetics• Cosmetics
• Multi-Level Sales (MLS)
• Property; casino
• ITC; online activities
• Labor
• Customs and tax
• Compliance and dispute resolution
• Banking
• Clean Development Mechanism (CDM)?
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WHY?
• Business does not sleep
• Geo-political stability; insulated
• Export; natural resources• Export; natural resources
• Growth - mid to long term
• Manufacturing; industrial products
• Consumer products
• Foreign investment; M&A
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WHAT ARE THE LEGAL CHALLENGES?
• Rep office; Chief rep; PIT
• Investment Certificate; lease; translation
• M&A: foreign/local; private/OTC; 51%; management
• WTO compliance: Import vs distribution; warehousing; retail and Economic Needs Test (ENT)
• Customs; import valuation; automatic import license
• Selling pharmaceuticals
• Court and enforcement
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Standard Chartered Bank’s Success
A case study
Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in
professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference
to an “office” means an office of any such law firm.
A case study
Simon Taylor
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The Deal
• Standard Chartered Bank (SCB) buying shares
and convertible bonds in Asia Commercial Bank
(ACB) from the International Finance (ACB) from the International Finance
Corporation (IFC)
• Took stake from just over 7% to 15%
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The Players
• SCB: Two branches and now a subsidiary in Vietnam;
long-term investment as strategic investor in ACB
• IFC: Active role in Vietnam; but keen to exit ACB• IFC: Active role in Vietnam; but keen to exit ACB
• ACB: Largest listed bank; supportive of transaction
• SBV: Banking regulator
• SSC: Stock market regulator
• HASTC: Exchange
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The Issues
• Trading outside price trading band for listed
shares
• Unclear regulatory approval requirements• Unclear regulatory approval requirements
• Sensitive industry
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The Solutions
• SSC/HASTC approval for one-off trading
mechanism
• Communication with SBV to clarify regulatory • Communication with SBV to clarify regulatory
approvals
• Involvement of ACB in process
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The Lessons
• Be patient; plan for problems
• Maintain and utilize relationship with all key
playersplayers
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THANK YOU …
BAKER & McKENZIE
12th Floor, Saigon Tower
29 Le Duan, District 129 Le Duan, District 1
Ho Chi Minh City, Vietnam
Tel: 848 3829 5585
Fax: 848 3829 5618
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