Opening Remarks from IFC Vietnam
Transcript of Opening Remarks from IFC Vietnam
Opening Remarks from IFC Vietnam
Dialogue to Drive Japanese Investments in
Vietnam
January 22, 2021
Senior Regional Manager
Kyle Kelhofer
IFC: A member of the World Bank Group
2SOURCE: WORLD BANK, IFC
Own
Account
Committed
Private
Sector
Development
Sizeable
Portfolio
Consistent
Triple-A
Credit Rating
WBG
Collaboration
Global
Footprint
Largest global development
institution launched in 1956,
focusing on the private sector
in developing countries
Headquartered in Washington,
D.C.
102 offices in 95 countries
worldwide
29 offices in 24 countries in Asia
Leveraging the full range of World Bank Group
knowledge and capabilities
Increasing annual own account commitments to
US$25 bn by 2030 globally
Since 1989, IFC has been
rated AAA credit rating;
owned by 185 countries
Committed portfolio as of FY20:
US$59.8 bn worldwide
US$19.1 bn in Asia
What IFC can offer
3SOURCE: WORLD BANK, IFC
ADVISORY
Loans• Project and corporate financing
• On-lending through intermediary institutions
Equity• Direct equity investments
• Private equity funds
Trade and Commodity Finance• Guarantee of trade-related payment
obligations of approved financial institutions
Derivative and Structured Finance• Derivative products to hedge interest rate,
currency, or commodity-price exposures of
IFC clients
Blended Finance• Using donor funds to crowd in private
financing
Syndications• Capital mobilization to serve development
needs
• Over 60 co-financiers (bank, fund, DFIs)
Create proprietary projects and investment
opportunities by developing a sustainable
pipeline of bankable transactions
• Early-stage, project level intervention in return
for proprietary rights for equity and debt
arranger role
• Promoting and anchoring the design and
implementation of platforms and programmatic
approaches
• Working closely across the World Bank Group
to help develop policies, regulations and
frameworks for private sector investments
Innovative Solutions Combining IFC’s
Expertise and Tools to:
• Help create new markets
• Unlock investment opportunities
• Strengthen clients’ performance and impact
• Improve environmental, social, and corporate
governance standards
IFC Asset Management Company (AMC)
• Mobilizing and managing capital for
businesses in emerging markets
INVESTMENT UPSTREAM
AMC
Our approach to supporting project development
4SOURCE: WORLD BANK, IFC
Legal & Commercial Framework
• IFC will help with consulting government and
government-related entities to develop key project
documents in a manner that represents the
interests of both public and private sectors
• IFC actively supports the development and
negotiation of key project documents to ensure
bankability
• IFC leverages the World Bank Group’s convening
power to resolve project-development issues
Financing
• IFC will play an integral role in the financing
process, including investing for its own account
and mobilizing other sources of debt (and
equity, if necessary). IFC’s due diligence is
broadly accepted by development finance
institutions (DFIs), export credit agencies
(ECAs), and commercial banks.
• IFC’s access to a large client and equity/debt
investor base helps raise capital for projects.
• IFC’s access to all WBG instruments and
services helps further de-risk projects
Technical, Environmental & Social (E&S)
• Reviewing designs, implementation, and mitigation
plans according to IFC’s Performance Standards
• Ensuring transparent and efficient bidding processes
to secure competitive engineering, procurement and
construction (EPC) pricing
Overall Development Support
• IFC dedicates a team of experienced staff with
financial, technical, and legal backgrounds,
adding to the expertise of the development
team
• IFC’s brand, reputation, and involvement
reassure project participants and stakeholders
• IFC has a track record of “hands-on” project
development as principal and advisor in
challenging environments
• IFC and World Bank-managed trust funds and
donor grants may be sourced to fund
consultants and studies
• IFC’s global presence and knowledge of local
environments help ensure application of best
practices, leveraging the global expertise of the
World Bank Group and facilitating government
interactions
About IFC Upstream
5SOURCE: WORLD BANK, IFC
IFC Upstream Works in Early-Stage Development with Clients
▪ Providing advisory services and other capacity support to clients (governments and private sector) to
develop, enable, and seek investment for transformative projects
▪ Working closely across the World Bank Group to help develop policies, regulations, and
frameworks for private sector investments and to provide necessary political-risk and financial products
to address gaps in commercial and financial structures
▪ Investing in and helping develop projects at an early stage through a variety of means, with a focus on
high-impact projects where IFC can add significant value
▪ Create, deepen, and expand markets where they are weak or do not currently exist
…in Markets with Challenging Operating Environments
▪ Challenging regulatory environment
▪ High-risk perception
▪ Complexity to achieve bankability for large-scale, transformative projects
▪ Limited availability of early-stage risk-capital and other project-development resources
Models of upstream cooperation
6SOURCE: WORLD BANK, IFC
•
1
▪ Early-stage engagement
via a project services
advisory (PSA) mandate
on which IFC will work
with project sponsors on
developing the project
within a clearly defined
scope for a fee
▪ IFC could also support
with de-risking the project
and attracting other
strategic investors
▪ The PSA would indicate
IFC rights/intent to
negotiate a Lead
Arranger mandate for
financing the project
Upstream Project
Advisory 2
▪ Partnership on project
development via a joint
development agreement
(JDA) or collaboration
agreement (CA) in which
IFC contributes to project
development costs
▪ In return, IFC would seek
key rights as a project
development partner,
including the right to
negotiate a lead arranger
mandate
▪ Suitable for projects with
commercial rationale, strong
sponsor, and clear IFC
value-add
Co-Development
3
▪ Joint investment and
implementation (via
JDA/CA) with a private
sponsor of a pilot project to
establish “proof of concept”
of a novel business model,
followed by scale-up of the
business if proven viable
▪ Utilized for very specific
scenarios in which IFC
resources are used to
support capital expenditure
and some operational
expenditure with the aim of
proving a business model,
concept and technology
Pilot Projects
4
▪ Partnership with
experienced sponsors
on project development
via JDA or shareholder
agreement (SHA)
▪ Used to support strategic
partners with significant
track record in
delivering projects
▪ Engagement informed by
existence of a strong
pipeline of
multiple projects within
areas of strategic
importance for IFC or
with common themes
Multiple-Project
Platforms
Project Development Funding
Employing a holistic approach combining project development support and investment for clients and partners
In all cases, IFC would be seeking a Lead Arranger role in the financing and an option to invest in the projects
IFC and World Bank Group Activities in Vietnam
7SOURCE: WORLD BANK, IFC
IFC long-term commitments by fiscal year in Vietnam
US$ Million
7
94
239
507
660
600
FY19FY17FY16 FY18 FY20FY15
Investment
Since 1994, IFC has
invested over $8bn
in Vietnam, spanning
over 153 projects
Advisory
The current IFC
Advisory program
consists of 15
projects with $26m
in total funds
No. of Employees
Spanning over two
offices, IFC Vietnam
team consists of over
80 employees
As of FY20, World Bank has provided ~$24bn in grants,
credits, and concessional loans to Vietnam through 209
operations. Vietnam's existing portfolio consists of 37
active projects, with total net commitments of ~$7bn.
World Bank also manages a portfolio of 45 active advisory
projects leveraging country-level partnerships and trust funds
from development partners
Vietnam in strong shape prior to Covid-19
SOURCE: WORLD BANK, IFC
1. Association of Southeast Asian Nations 2. World Trade Organization 3. The European Union − Vietnam Free Trade Agreement 4. Comprehensive and
Progressive Agreement for Trans-Pacific Partnership
1986 2007 2020
Increasing role as manufacturing hub“Doi Moi” program stimulated market reforms Accession to global trade
Adoption of Restructuring program
1987 1988
Adoption of Foreign Investment Law and Land Law
1994
Removal of US Trade Embargo
Ratification of EVFTA3
1995
Member of ASEAN1
Member of WTO2
2018
Ratification of CPTPP4
Key development milestones
Poverty reduction without losing equity Vietnam with stable and increasing GDP growth
1990
Law on private business
1990
Law on export /import duties, exchange rate
2001
10-year plan enhancing role of private sector
2017
Private sector regarded as key economic engine
Vietnam public debt well-managed
% of GDP
5.0%
6.0%
2.0%
1.0%
3.0%
7.0%
4.0%
8.0%
Global
2011 2013 2015 2017 2019
Vietnam
ASEAN
Asia-Pacific
%, Constant 2010 prices
0%
10%
20%
30%
40%
50%
60%
70%
80%
20132011 2015
Domestic
debt
2017 2019
Foreign
debt
Public
debt cap
0
5
10
15
20
25
30
35
40
20%
10%
50%
60%
30%
40%
70%
GNI IndexPoverty rate
1992 98 04 08 12 14 2018
Poverty rate (LHS ) GNI Index (RHS )
Vietnam is effectively managing the pandemic
9SOURCE: OUR WORLD IN DATA
Vietnam controlling COVID-19 situation well…
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Vietnam
China
Thailand
Indonesia
Philippines
Singapore
Total positive cases per millions, As at 30 November 2020 No. of tests per positive
case, As at 30 November 20
5,372
1,077
698
559
40
19
15
13
7
Singapore
S. Korea
Malaysia
Japan
China
Philippines
Vietnam
Thailand
Indonesia
…with aggressive testing at large scale
By managing effectively, the second wave
in Danang, Vietnam held globally as
exemplary model for COVID containment
and management
Vietnam
aggressive
testing only
surpassed by
Singapore and
China
Mar-20 May-20 Jul-20 Sep-20 Nov-20
Vietnam economy remains resilient
10SOURCE: WORLD BANK, BLOOMBERG
The only SE Asia country with positive GDP
growth in 2020 . . .
Vietnam is also projected to embark on
strong recovery trajectory . . .
7.9%
6.7%
6.7%
5.9%
4.5%
4.4%
4.0%
3.5%
China
Vietnam
Thailand
USA
Malaysia
Philippines
Indonesia
Singapore
Real GDP growth forecast, as at January 2021Quarterly GDP growth yoy, %
-10%
0%
2%
-8%
-4%
8%
4%
-20%
-2%
-12%
6%
Indonesia
Malaysia
Thailand
Philippines
Singapore
Vietnam
Vietnam GDP
declined to +0.36%
growth at 2Q20,
but is now
accelerating
upward
Sep-16Sep-14 Sep-18 Sep-20 Dec-20
2021F 2022F
5.2%
6.5%
4.8%
6.0%
3.5%
4.8%
4.7%
3.3%
The long-term future to be driven by growing private sector
11SOURCE: GSO, FITCH
Investment disbursed by sector, $bn
Private sector consumption growing fast . . .
driving 70% of Vietnam GDP
7.2%
6.3%
6.2%
4.4%
4.5%
2.7%
2.2%
Vietnam
Indonesia
Malaysia
China
Singapore
Philippines
Thailand
72.7%
68.1%
59.4%
56.8%
52.7%
37.8%
34.2%
Thailand
China
Malaysia
Vietnam
Singapore
Indonesia
Philippines
CAGR 2010-20 % of GDP, 2020
Private consumption
Private sector investment growing fast . . .
largest share of investment in Vietnam
2011 18 202012 1613 14 15 17 19
88
Private FDI
Private
Domestic44
State
52
61
73
94
Prime population profile continues to be the springboard
12SOURCE: OECD, EUROMONITOR
Prime working-age population
25%
30%
35%
40%
45%
50%
1980 2000 2020 2040 2060
Vietnam
China
Philippines
Japan
% of working-age population
45% of Vietnam
population is prime
working-age
Robust middle-class formation
Middle class growth, 2019-2024 CAGR (%)
13.9%
7.9%
7.2%
5.0%
4.5%
2.8%
1.1%
Vietnam
Philippines
Indonesia
Thailand
Malaysia
Singapore
China
Fastest middle-
class growth in
SE Asia
Vietnam is the beneficiary of global supply chain re-alignment
13SOURCE: JAPAN RESEARCH INSTITUTE, SAVILLS, BLOOMBERG
Company
Country of
origin
Decision
year Location Industry
Hanwa Aero South Korea 2019 Hanoi Aerospace
Yokomo Japan 2019 Ha Nam Automotive
Huafu China 2019 Long An Textile
Goertex USA 2019 Bac Ninh Airpods
TCL China 2019 Binh Duong Electronics
Foxconn TW, China 2019 Bac Giang Hardware
Lenovo HK, China 2019 Bac Ninh Hardware
Nintendo Japan 2019 Not disclosed Hardware
Sharp Japan 2019 Binh Duong Electronics
Kyocera Japan 2019 Hai Phong Electronics
Asics Japan 2019 Not disclosed Garment
Luxshare ICT China 2020 Bac Giang Technology
Panasonic Japan 2020 Binh Duong Electronics
Pegatron TW, China 2020 Hai Phong Electronics
Wistron TW, China 2020 Ha Nam Software
Oppo China 2020 Bac Ninh Mobile devices
TopBand China 2020 Dong Nai Technology
Hoya Japan 2020 Not disclosed Med-tech
Matsuoka Japan 2020 Not disclosed Medicine
Meiko Japan 2020 Not disclosed Meiko
Yokoo Japan 2020 Not disclosed Mobile devices
Shin-Etsu Japan 2020 Not disclosed Metal
Nikkiso Japan 2020 Not disclosed Medicine
List of companies which have announced
intention to relocate to Vietnam since 2018
0.9%
0.6%
0.3%
0.3%
0.3%
0.2%
0.1%
0.0%
0.0%
-0.1%
-0.1%
-0.3%
-0.3%
HK - China
Thailand
Vietnam
S. Korea
Malaysia
Taiwan
Singapore
Mexico
Indonesia
Philippines
India
China
Canada
Changes of import shares by country in
Japan, US, and EU between 2018 and 2020
Vietnam infrastructure spending points to high(er) GDP growth
14SOURCE: OECD, FITCH CONNECT
Higher infrastructure spending correlates
with higher GDP growth
Vietnam infrastructure investment heading
into period of increased spending
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0% 5% 10% 15% 20% 25%
(1960-80)
(1975-90)
Average Infrastructure Investment, % of GDP
(1960-80)
Average GDP growth, % yoy
(1995-05)
(2000-17)
(2000-15)
(2000-15)
(1980-95)
Asia, higher infra
spending correlates
with higher GDP
growth
4.5%
8.0%
4.0%
7.0%
5.5%
9.0%
6.0%
7.5%
0.0%
-4.5%
5.0%
6.5%
3.5%
8.5%
201920132011 2015 2017 2021F 2023F 2025F
GDP growthInfrastructure investment growth
Prior infra
spending
correlated with
high GDP growth
Projected infra
spending points to
high(er) GDP growth
China
Singapore
Thailand
Japan
Vietnam still needs to capture more value to avoid the “middle income
trap” – Moving up and beyond basic assembly….
15
R&D Design Components Assembly Marketing Embedded Services
Pre-Production Manufacturing Post-Production
Sh
are
of
To
tal V
alu
e-a
dd
ed
3
2
1
3
2
1
SOURCE: OECD
…..and improving FDI value addition linkages
16SOURCE: OECD
Domestic value added to export in key sectors
%
Domestic value added to export
%
50%
55%
60%
65%
70%
75%
80%
85%
90%
11072005 20171309 15
China
Philippines
Vietnam
Malaysia
Indonesia
Thailand
53%
59% 58%
64%
38%
55%52%
56%
Computers
& Electronics
ManufacturingTextile &
Apparel
Overall
2005 2016
….. for more spill over effects in firm innovation capacity, management
capabilities and skills
17SOURCE: WORLD BANK
23%
53%
32%
82%
14%
83%
3%
75%
33%
62%
8%
86%
Product innovation (% firms) New to market (% innovating firms)
Vietnam CambodiaLao PDR MalaysiaPhilippines Thailand
Proportion of firms with product innovation in
Southeast Asia region
Product innovation rate by firm size and ownership
type in Vietnam
12%
40%45%
23%
70%
19%
Small Medium ForeignLarge Domestic JVs
By type of firmBy size of firm
Proportion of firms using certificate of quality in
Vietnam
Proportion of firms finding it difficult to find relevant
skills in Vietnam
50%
9%
24%
6%
Foreign-owned
Linked-firms
Domestic
Non-linked firms
56%
26%
57%
87%
17%
60%
88%
74%
20%
77%
44%
69%
31%
93%
Computer & IT
Technical skills
Foreign language
Leadership
Work ethic
Writing
Interpersonal
LinkedNon-linked