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Vietnammarket 2009

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Vietnam has experienced strong economic growth over the past decades. However, there are still challenges ahead as the country develops further. Foreign direct investment has increased steadily but is still concentrated in certain industries and regions of the country. While Vietnam remains an attractive investment destination, investors should be aware of growing pains like overheating and inflation the country experienced in 2008. Overall, Vietnam's economic growth appears sustainable due to factors like political stability, high savings rates, and investment in education. However, infrastructure development requires continued focus to support future growth.

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Where is Vietnam going from here ? Damien Duhamel Managing Director Asia www.solidiance.com
Where is Vietnam going from here? Damien Duhamel 3 objectives We were keen to invest in Vietnam, now we will definitely move forward We were not so keen to invest in Vietnam but we may now explore further We were not very keen to invest in Vietnam and now we probably wont 2
some basic Vietnam facts
Where is Vietnam going from here? Damien Duhamel strong GDP growth Vietnams economic growth - on average Real GDP growth 1980 2006 (in %) well above 7% since 1990 12 10 8 Vietnam has been consistently topping 6 the economic growth performance in ASEAN since 1990. 4 2 0 80-90 90-03 2004 2005 2006 2007 2008 2009f CAGR GDP growth overt the past 15 years is 8% - Only China has better numbers to China Thailand Vietnam show in Asia (9%) GDP per capita 2003 2006 (in US$) 5000 Despite Vietnams impressive growth 4000 performance over the past two decades 3000 it is still catching up with Thailand and 2000 China in terms of GDP per capita. Its GDP 1000 per capita is at this moment still roughly 5 times lower than that of Thailand and 2.5 0 times lower than that of China 2003 2004 2005 2006 2007 2008 2009f China Thailand Vietnam 4
Where is Vietnam going from here? Damien Duhamel 20,000 timid and inconsistent FDI Steadily growing flow of FDI into 16,000 Vietnam, more to come. 14,000 Vietnams regime has been gradually liberalizing its economy since the 80s. Further liberalization was and will continue to be facilitated by WTO obligations. As a result, Vietnam has become increasingly attractive to foreign investors, particularly in light of its strategic location in Southeast Asia, large population, and abundance of natural resources A steadily growing flow of FDI into Vietnam is testimony to this growing attraction, and underlines the success of Vietnams efforts to develop the country into a force in Asia to reckon with 2007 2008 2009f Yearly FDI flow 1988 2009 (USD M) 5
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 Asia 2 3 Singapore Taiwan 12 11 4 Japan 10 5 BVI 9.5 6 HK 6 7 Malaysia 4.2 GC 8 9 USA Netherlands 4.1 2.6 10 France 2.3 12 China 1.8 EU 15 UK 1.5 6
Where is Vietnam going from here? Damien Duhamel south dominates FDI inflow FDI is focused on the South of Vietnam 25% More than 55% of the total investment capital between was invested into the South whilst the North accounted for a little over 24% Besides the key cities, i.e. HCMC and Hanoi, investment poured mainly into provinces bordering HCMC such as Dong Nai (16.22%), Binh Duong (9.44%), and Vung Tau (5.56%) 55% 7
Where is Vietnam going from here? Damien Duhamel industrial & manufacturing revolution 8% 22% Key FDI sectors Roughly 70% of FDI is undertaken in the 70% Industry and Construction Sector, 22% in the Services Sector and the remainder in Agro- Fishery & Forestry. The investment into services is mostly in the area of Hotels, Offices, Transport and Telecom 8
Where is Vietnam going from here? Damien Duhamel Vietnam 2008 - growing pains -Overheating economy -Over speculative mentality 25% ! -Too fast banking sector liberalization -Commodity climbing prices impact -Natural market CPI readjustment -FDI still very impressive -Country remains most attractive in Asean -Pains will ease after Tet 2009 -Vietnam remains insulated -Timed M&A activities 9
厩庄艶岳稼温馨s little dirty secrets
should we enter vietnam now ?
Where is Vietnam going from here? Damien Duhamel should we enter VN ? Yes, if You are selling machinery with unique technology and applications You are in the IT and e-commerce fields 80,000 IT graduates a year and growing You are looking for a safe and affordable manufacturing hub for exports (furniture / textile / CPG / Toys / etc.) Your products serve the infrastructure needs of the country or the new consumerism of its people 12
Where is Vietnam going from here? Damien Duhamel should we enter VN ? Not really if If your shareholders hope for immediate quarterly earnings. The Vietnamese have time, your shareholders dont If you are in industries with low barriers to entry or solely capitalizing on your IP/Brand. 13
what specific sectors?
Where is Vietnam going from here? Damien Duhamel what specific sectors? 15
is vietnam still a communist country?
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 takes over political challenge. Modern and dynamic youth, they also want their MTV (or youtube as matter of fact) Vietnam has embraced globalisation through its membership of AFTA (1995), APEC (1998), the US Bilateral Trade Agreement (2001) and WTO (2007). 17
sustainable growth ? 沿姻看恢温恢鉛霞
Where is Vietnam going from here? Damien Duhamel sustainable growth ? 沿姻看恢温恢鉛霞 Saving rates have spiraled from 5% to 35%. Lots of native investment. The Vietnamese are now taking control of their nation. Managed costs by default : Ten years ago, Vietnams manufacturing wage cost represented 95% of that of Chinas. Today, that figure is about 65%, as growth has forced Chinese wages up. Unlike neighbors: Political stability. Industrious nation. Investment in education. The model of growth is very Singaporean 19
a few deja vu road blocks
Where is Vietnam going from here? Damien Duhamel a few d辿j vu road blocks Infrastructure: The Government has committed 10% of GDP to infrastructure but this will not be enough Everything is in need of total rehaul: airports / train / road / power / telecom / even complete cities. Investment and upgrades cant cope with demand. Sectors need to be liberalized to bring more private investment SOE. Like in China they once were the backbone of the Nation. They still represent 30% of GDP. SOE financing and NPL remain a dark cloud 21
how do I sell and get my money (safely)?
Where is Vietnam going from here? Damien Duhamel how do I sell and get my money (safely)? You dont ! Like in most developing nations, payments and financing are an issue. There are no magic 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 do your homework Lots of suspicion with foreigners in and out for quick dirty deals (their time is now over). Good news, if you sell expensive machinery, your clients are likely to be Singaporeans 23
is job hopping a national sport?
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 of demand. Expect staff attrition a la Shanghai Successful companies that have been able to sustain growth without HR issues hindering along the way have staffed key positions with 1/3 expats, 1/3 Vietkhieu, 2/3 locals and provided all with First World opportunities as opposed to working in a Third World environment. Wage inflation has shoot up and will continue. Current meltdown brings reality back, but reality will fade away fast. 25
do I need expats in vietnam ?
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 cut short, expensive relocations. A previous Asian experience does not warrant success in VN. A tough emerging nation experience is probably best. Vietkhieu are more welcome now than in the past. Employing overseas Vietnamese will deliver either the best or the worst. 27
vietnam is (still) hot, dont get burned
Where is Vietnam going from here? here ? Damien Duhamel VN is (still) hot, dont get burned Dont think they dont know or wont know Dont 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 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. 29
Where is Vietnam going from here? Damien Duhamel C叩m 嘆n q炭i vi rh但t damien@solidiance.com 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 gaps in growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better understanding of intrinsic Asia and regional issues. To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com China Singapore Suite 801 Suite 17-01 Hong Kong Plaza High Street Center 283 Huaihai Road Central 1 North Bridge Road Shanghai 200021 Singapore 179094 Tel: +86 21 5168 8905 Tel: +65 6408 8208 asia@solidiance.com asia@solidiance.com 30
VIETNAM MARKET ACCESS AND LEGAL CHALLENGES Eurochamber Breakfast Club Nov 12 2008 Shanghai Seck Yee Chung 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.
CONTENT What is keeping us busy? Why? What are the legal challenges? 息2008 Baker & McKenzie 32
WHAT IS KEEPING US BUSY? Market access: FDI; M&A; rep offices WTO; trade and distribution Pharma and health care Cosmetics Multi-Level Sales (MLS) Property; casino ITC; online activities Labor Customs and tax Compliance and dispute resolution Banking Clean Development Mechanism (CDM)? 息2008 Baker & McKenzie 33
WHY? Business does not sleep Geo-political stability; insulated Export; natural resources Growth - mid to long term Manufacturing; industrial products Consumer products Foreign investment; M&A 息2008 Baker & McKenzie 34
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 息2008 Baker & McKenzie 35
Standard Chartered Banks Success A case study Simon Taylor 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.
The Deal Standard Chartered Bank (SCB) buying shares and convertible bonds in Asia Commercial Bank (ACB) from the International Finance Corporation (IFC) Took stake from just over 7% to 15% 息2008 Baker & McKenzie 37
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 ACB: Largest listed bank; supportive of transaction SBV: Banking regulator SSC: Stock market regulator HASTC: Exchange 息2008 Baker & McKenzie 38
The Issues Trading outside price trading band for listed shares Unclear regulatory approval requirements Sensitive industry 息2008 Baker & McKenzie 39
The Solutions SSC/HASTC approval for one-off trading mechanism Communication with SBV to clarify regulatory approvals Involvement of ACB in process 息2008 Baker & McKenzie 40
The Lessons Be patient; plan for problems Maintain and utilize relationship with all key players 息2008 Baker & McKenzie 41
THANK YOU BAKER & McKENZIE 12th Floor, Saigon Tower 29 Le Duan, District 1 Ho Chi Minh City, Vietnam Tel: 848 3829 5585 Fax: 848 3829 5618 Yeechung.seck@bakernet.com 息2008 Baker & McKenzie 42

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Vietnammarket 2009

  • 1. Where is Vietnam going from here ? Damien Duhamel Managing Director Asia www.solidiance.com
  • 2. Where is Vietnam going from here? Damien Duhamel 3 objectives We were keen to invest in Vietnam, now we will definitely move forward We were not so keen to invest in Vietnam but we may now explore further We were not very keen to invest in Vietnam and now we probably wont 2
  • 3. some basic Vietnam facts
  • 4. Where is Vietnam going from here? Damien Duhamel strong GDP growth Vietnams economic growth - on average Real GDP growth 1980 2006 (in %) well above 7% since 1990 12 10 8 Vietnam has been consistently topping 6 the economic growth performance in ASEAN since 1990. 4 2 0 80-90 90-03 2004 2005 2006 2007 2008 2009f CAGR GDP growth overt the past 15 years is 8% - Only China has better numbers to China Thailand Vietnam show in Asia (9%) GDP per capita 2003 2006 (in US$) 5000 Despite Vietnams impressive growth 4000 performance over the past two decades 3000 it is still catching up with Thailand and 2000 China in terms of GDP per capita. Its GDP 1000 per capita is at this moment still roughly 5 times lower than that of Thailand and 2.5 0 times lower than that of China 2003 2004 2005 2006 2007 2008 2009f China Thailand Vietnam 4
  • 5. Where is Vietnam going from here? Damien Duhamel 20,000 timid and inconsistent FDI Steadily growing flow of FDI into 16,000 Vietnam, more to come. 14,000 Vietnams regime has been gradually liberalizing its economy since the 80s. Further liberalization was and will continue to be facilitated by WTO obligations. As a result, Vietnam has become increasingly attractive to foreign investors, particularly in light of its strategic location in Southeast Asia, large population, and abundance of natural resources A steadily growing flow of FDI into Vietnam is testimony to this growing attraction, and underlines the success of Vietnams efforts to develop the country into a force in Asia to reckon with 2007 2008 2009f Yearly FDI flow 1988 2009 (USD M) 5
  • 6. 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 Asia 2 3 Singapore Taiwan 12 11 4 Japan 10 5 BVI 9.5 6 HK 6 7 Malaysia 4.2 GC 8 9 USA Netherlands 4.1 2.6 10 France 2.3 12 China 1.8 EU 15 UK 1.5 6
  • 7. Where is Vietnam going from here? Damien Duhamel south dominates FDI inflow FDI is focused on the South of Vietnam 25% More than 55% of the total investment capital between was invested into the South whilst the North accounted for a little over 24% Besides the key cities, i.e. HCMC and Hanoi, investment poured mainly into provinces bordering HCMC such as Dong Nai (16.22%), Binh Duong (9.44%), and Vung Tau (5.56%) 55% 7
  • 8. Where is Vietnam going from here? Damien Duhamel industrial & manufacturing revolution 8% 22% Key FDI sectors Roughly 70% of FDI is undertaken in the 70% Industry and Construction Sector, 22% in the Services Sector and the remainder in Agro- Fishery & Forestry. The investment into services is mostly in the area of Hotels, Offices, Transport and Telecom 8
  • 9. Where is Vietnam going from here? Damien Duhamel Vietnam 2008 - growing pains -Overheating economy -Over speculative mentality 25% ! -Too fast banking sector liberalization -Commodity climbing prices impact -Natural market CPI readjustment -FDI still very impressive -Country remains most attractive in Asean -Pains will ease after Tet 2009 -Vietnam remains insulated -Timed M&A activities 9
  • 10. 厩庄艶岳稼温馨s little dirty secrets
  • 12. Where is Vietnam going from here? Damien Duhamel should we enter VN ? Yes, if You are selling machinery with unique technology and applications You are in the IT and e-commerce fields 80,000 IT graduates a year and growing You are looking for a safe and affordable manufacturing hub for exports (furniture / textile / CPG / Toys / etc.) Your products serve the infrastructure needs of the country or the new consumerism of its people 12
  • 13. Where is Vietnam going from here? Damien Duhamel should we enter VN ? Not really if If your shareholders hope for immediate quarterly earnings. The Vietnamese have time, your shareholders dont If you are in industries with low barriers to entry or solely capitalizing on your IP/Brand. 13
  • 15. Where is Vietnam going from here? Damien Duhamel what specific sectors? 15
  • 16. is vietnam still a communist country?
  • 17. 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 takes over political challenge. Modern and dynamic youth, they also want their MTV (or youtube as matter of fact) Vietnam has embraced globalisation through its membership of AFTA (1995), APEC (1998), the US Bilateral Trade Agreement (2001) and WTO (2007). 17
  • 18. sustainable growth ? 沿姻看恢温恢鉛霞
  • 19. Where is Vietnam going from here? Damien Duhamel sustainable growth ? 沿姻看恢温恢鉛霞 Saving rates have spiraled from 5% to 35%. Lots of native investment. The Vietnamese are now taking control of their nation. Managed costs by default : Ten years ago, Vietnams manufacturing wage cost represented 95% of that of Chinas. Today, that figure is about 65%, as growth has forced Chinese wages up. Unlike neighbors: Political stability. Industrious nation. Investment in education. The model of growth is very Singaporean 19
  • 20. a few deja vu road blocks
  • 21. Where is Vietnam going from here? Damien Duhamel a few d辿j vu road blocks Infrastructure: The Government has committed 10% of GDP to infrastructure but this will not be enough Everything is in need of total rehaul: airports / train / road / power / telecom / even complete cities. Investment and upgrades cant cope with demand. Sectors need to be liberalized to bring more private investment SOE. Like in China they once were the backbone of the Nation. They still represent 30% of GDP. SOE financing and NPL remain a dark cloud 21
  • 22. how do I sell and get my money (safely)?
  • 23. Where is Vietnam going from here? Damien Duhamel how do I sell and get my money (safely)? You dont ! Like in most developing nations, payments and financing are an issue. There are no magic 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 do your homework Lots of suspicion with foreigners in and out for quick dirty deals (their time is now over). Good news, if you sell expensive machinery, your clients are likely to be Singaporeans 23
  • 25. 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 of demand. Expect staff attrition a la Shanghai Successful companies that have been able to sustain growth without HR issues hindering along the way have staffed key positions with 1/3 expats, 1/3 Vietkhieu, 2/3 locals and provided all with First World opportunities as opposed to working in a Third World environment. Wage inflation has shoot up and will continue. Current meltdown brings reality back, but reality will fade away fast. 25
  • 26. do I need expats in vietnam ?
  • 27. 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 cut short, expensive relocations. A previous Asian experience does not warrant success in VN. A tough emerging nation experience is probably best. Vietkhieu are more welcome now than in the past. Employing overseas Vietnamese will deliver either the best or the worst. 27
  • 29. Where is Vietnam going from here? here ? Damien Duhamel VN is (still) hot, dont get burned Dont think they dont know or wont know Dont 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 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. 29
  • 30. Where is Vietnam going from here? Damien Duhamel C叩m 嘆n q炭i vi rh但t damien@solidiance.com 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 gaps in growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better understanding of intrinsic Asia and regional issues. To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com China Singapore Suite 801 Suite 17-01 Hong Kong Plaza High Street Center 283 Huaihai Road Central 1 North Bridge Road Shanghai 200021 Singapore 179094 Tel: +86 21 5168 8905 Tel: +65 6408 8208 asia@solidiance.com asia@solidiance.com 30
  • 31. VIETNAM MARKET ACCESS AND LEGAL CHALLENGES Eurochamber Breakfast Club Nov 12 2008 Shanghai Seck Yee Chung 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.
  • 32. CONTENT What is keeping us busy? Why? What are the legal challenges? 息2008 Baker & McKenzie 32
  • 33. WHAT IS KEEPING US BUSY? Market access: FDI; M&A; rep offices WTO; trade and distribution Pharma and health care Cosmetics Multi-Level Sales (MLS) Property; casino ITC; online activities Labor Customs and tax Compliance and dispute resolution Banking Clean Development Mechanism (CDM)? 息2008 Baker & McKenzie 33
  • 34. WHY? Business does not sleep Geo-political stability; insulated Export; natural resources Growth - mid to long term Manufacturing; industrial products Consumer products Foreign investment; M&A 息2008 Baker & McKenzie 34
  • 35. 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 息2008 Baker & McKenzie 35
  • 36. Standard Chartered Banks Success A case study Simon Taylor 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.
  • 37. The Deal Standard Chartered Bank (SCB) buying shares and convertible bonds in Asia Commercial Bank (ACB) from the International Finance Corporation (IFC) Took stake from just over 7% to 15% 息2008 Baker & McKenzie 37
  • 38. 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 ACB: Largest listed bank; supportive of transaction SBV: Banking regulator SSC: Stock market regulator HASTC: Exchange 息2008 Baker & McKenzie 38
  • 39. The Issues Trading outside price trading band for listed shares Unclear regulatory approval requirements Sensitive industry 息2008 Baker & McKenzie 39
  • 40. The Solutions SSC/HASTC approval for one-off trading mechanism Communication with SBV to clarify regulatory approvals Involvement of ACB in process 息2008 Baker & McKenzie 40
  • 41. The Lessons Be patient; plan for problems Maintain and utilize relationship with all key players 息2008 Baker & McKenzie 41
  • 42. THANK YOU BAKER & McKENZIE 12th Floor, Saigon Tower 29 Le Duan, District 1 Ho Chi Minh City, Vietnam Tel: 848 3829 5585 Fax: 848 3829 5618 Yeechung.seck@bakernet.com 息2008 Baker & McKenzie 42