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Vol 32, August 30th 2017

BUSINESS REVIEW VIETNAM

Finance Ministry wants 1% tax on transfer price in M&A deals



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INSIDE THIS ISSUE

HIGHLIGHTS


Developing medical tourism: better late than never

Real estate market: magnet for foreign investors

ECONOMY

Vietnamese President Quang reappears after 1-month absence

Cashew sector may miss export target

BANKING & FINANCE

Techcombank to sell 500 million shares in two phases

Vietnam banks surviving on credit

INVESTMENT

FDI flow into real estate: a cause for concern?

US$678.4 million registered for solar power projects in Tay Ninh

Central Group targets pouring more money into Vietnam

ENTERPRISES

Tran Anh Digital and Mobile World on verge of merger

Large corporations compete for market share in food sector

Farmers struggle with low sales as more consumers buy imports

MARKET & PRICES

Vietnam consumer confidence at record high: Nielsen study

Online tourism market called „new gold mine‟, worth $9 billion

New entrants heat up Vietnamese beauty market

LOGISTICS

Vietjet planning direct charters to Fukushima in spring

Vietnam to lift airport charges in October



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ECONOMY

Vietnamese President Quang reappears after 1-month absence

Nikkei - Speculation rife over the health and political standing of No. 2 leader

Vietnamese President Tran Dai Quang met

Herminio Lopez Diaz, the departing Cuban

ambassador, in Hanoi on Monday, making his

first public appearance in about a month.

Quang had not been seen in public since July

25, arousing speculation about his health or a

power struggle in the Vietnamese leadership.

He suddenly canceled a scheduled meeting

with Turkish Prime Minister Binali Yildirim, who

visited the country last week.

Although a meeting with the Cuban

ambassador is not normally considered an

important event, local news media heavily covered the meeting and many photographers were present.

They reported what was discussed, without emphasizing that it was Quang's first public appearance in a

month.

In August, Quang missed a number of key events, including the anniversary of the founding of the People's

Public Security Force and the meeting with the Turkish prime minister. The Vietnamese Foreign Ministry gave

no explanation for his absence.

There has been much speculation about why Quang disappeared from the public eye. A senior official at a

Japanese company with ties to the Vietnamese government said Quang was receiving medical treatment in

Japan.

Questions have been growing over whether Quang will attend events commemorating Vietnam's

independence on Sept. 2.

The president is the second-highest government official, after the secretary-general of the Communist Party. It

is unusual for a such a high-level official to be out of public view for so long. Quang's absence drew strong

attention because he is seen as possible successor to Nguyen Phu Trong as the head of the ruling party.

Cashew sector may miss export target

VNA - Vietnam may not reach this year‟s targeted cashew export value of 3.3 billion USD, due to a shortage

of raw materials for cashew export processing.

Ta Quang Huyen, vice chairman of the Vietnam Cashew Association and general director of the Hoang Son I

Co Ltd, stated that Vietnam‟s cashew exports in the first seven months of this year have reached a total value

of 2.6 billion USD.

Vietnamese TV reported on the first public appearance of

President Tran Dai Quang in about a month, a meeting with the

outgoing Cuban ambassador.



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The domestic cashew industry must import about 300,000 tonnes of raw materials for export processing, to

reach its targeted export value of 3.3 billion USD for the entire year, Huyen added.

However, the cashew crop season in West Africa has already ended so the available supply of raw materials

from this region will not be too significant, making it difficult for the domestic cashew processing industry, he

further said.

“In the first seven months of this year, Vietnam‟s cashew processing and export enterprises have imported 1.3

million tonnes of raw cashew nuts, 200,000 tonnes higher than in the same period last year,” said Nguyen Hue

Chi Thai, a consulting expert at the association.

By the end of the year, the demand for cashew nuts in the world market will increase, especially for Christmas.

Therefore, factories will continue to import 300,000 tonnes of raw cashew for processing and export to many

countries, such as Libya, Mozambique, Tanzania and Indonesia.

However, due to unusual weather conditions, many African cashew growing countries, such as Libya, have

reduced their cashew output by 250,000 tonnes, so the two main regional suppliers of raw materials for the

industry are Tanzania and Mozambique.

Indonesia will also supply 200,000 tonnes for the world market, but at higher prices, at 2,500 USD per tonne,

compared to raw materials from African countries, so local businesses will have to calculate the cost of

importing raw materials from Indonesia.



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BANKING & FINANCE

Techcombank to sell 500 million shares in two phases

VIR - Vietnam Technological and Commercial Joint Stock

Bank (Techcombank) will put 500 million shares on sale in two

phases.

According to newswire CafeLand, in the first phase,

Techcombank will issue 70 million shares at the initial price of

VND30,000 ($1.32) apiece. The sale is expected to take

place between September and October or when the bank

receives approval from State Securities Commission of

Vietnam.

In the second phase, the bank will sell the remaining 430 million shares, aiming to add VND4.3 trillion ($189.27

million) to its chartered capital. The time for the sale will be decided after Techcombank completes the first

round.

If successful, Techcombank‟s chartered capital will increase from VND8.8 trillion ($387.69 million) to VND13.8

trillion ($607.96 million) after the two sales.

This is the largest capital increase Techcombank has made since 2008. Between 2008 and 2012, its charter

capital was increasing regularly, from VND4.7 trillion ($207.07 million) to VND8.8 trillion ($387.69 million).

All proceeds from the share sale are expected to be invested in the VND916 billion ($40.35 million) expansion

of its head office and fixed assets.

It will also spend VND1.6 trillion ($70.5 million) on technology and equipment.

The bank will also increase its capital for credit activities and investment in government bonds to some

VND2.4 trillion ($105.76 million).

Previously, during the period from July 14 to August 12, Techcombank repurchased over 172.35 million

treasury shares, equivalent to 19.14 per cent of the nearly 222 million shares in circulation. This volume equals

HSBC‟s ownership at Techcombank.

The shares were bought at an average price of VND23,445 ($1.03) per unit through public auctions. It is

estimated that Techcombank has spent about VND4.04 trillion ($177.83 million) on the deals.

In the first six months of this year, Techcombank earned VND1.3 trillion ($57.2 million) in pre-tax profit, up 130

per cent on-year, and representing 26.3 per cent of its 2017 plan.

Vietnam banks surviving on credit

VNN - The net interest margin (NIM) of Vietnamese banks is lower than that of other regional banks, while

financial reports show that the business performance of the banks depends heavily on credit.

Analysts say that NIM in Vietnam has decreased in recent years because banks have set high deposit

interest rates to compete for capital.



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In addition, they cannot raise the lending interest rate because of the monetary policy designed to stimulate

the economy.

Some commercial banks have even eased the lending interest rates in some preferential business fields to

support economic growth.

According to Phan Minh Ngoc, a renowned economist, the average NIM of Vietnamese banks was 2.4% at

the end of 2016, lower than the 2.5% in 2015 and much lower than the 5.5% of Indonesian banks, 3% of

Philippine and 2.9% of Thai banks.

However, banks still live on lending. H1 finance reports show that most banks had net interest income on total

income ratio of 75% or more.

The reports of 10 large banks (Vietcombank, VietinBank, BIDV, SHB, MBB, Sacombank, ACB, VIB, VP Bank and

Eximbank) show that the net interest income reached VND80.3 trillion in the first half of the year, up by 28.6%

over the same period last year.

Though the proportion of net interest income of total income of the banks has decreased from 81% to 79.8%,

this is still relatively high.

SHB has the highest proportion in the banking system, 92%. BIDV‟s ratio has increased from 75.4% to 83.4%. It

has the highest net interest income, over VND14 trillion, among banks which have released H1 finance reports.

Meanwhile, ACB is the bank which has witnessed the biggest changes in income structure with income from

non-credit services on rapid rise.

Its net profit from services increased by 27.5% in the first half of the year, while the net profit from forex trading

increased by 26.7%, and from other activities by four times.

The H1 reports of eight commercial banks, including Vietinbank,

Vietcombank, BIDV, Sacombank, Eximbank, NCB, ACB and VIB,

showed total pre-tax profit of VND16.4 trillion, a 25% growth over the

same period last year.

In general, the banks in the surveyed group posted relatively good

growth over the same period, except for NCB which saw profit fall by

12%. It was the only bank which reported losses in the second quarter.

In terms of business efficiency per employee, Vietcombank was the leading bank with each employee

generating VND87 million in net profit per month.

The average NIM of Vietnamese

banks was 2.4% at the end of 2016,

lower than the 2.5% in 2015 and much

lower than the 5.5% of Indonesian

banks, 3% of Philippine and 2.9% of

Thai banks.



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INVESTMENT

FDI flow into real estate: a cause for concern?

VNN - Real estate ranked fourth among the most

attractive business fields for foreign investors, with

registered FDI capital of $1.15 billion in the first half of

the year.

According to Savills Vietnam, the increase in FDI in the

manufacturing sector has prompted investors to pour

money into projects to develop industrial infrastructure.

Thai company Hemaraj Land & Development and

Vietnamese firm Cienco 4 last May confirmed

cooperation to set up a joint venture to develop an IZ

on an area of 3,200 hectares in Nghe An province,

capitalized at $1 billion.

Many deals were made in the first half of the year. Japanese firm Nishi Nippon and Hankyu joined forces with

Vietnamese firm Nam Long to develop Mizuki Park residential quarter on an area of 26 hectares in Binh

Chanh district, HCMC, capitalized at $351 million.

Meanwhile, Aeon Mall has teamed up with BIM Group to develop Aeon‟s second shopping mall in Hanoi,

covering an area of 16.7 hectares in a $200 million project. Son Kim Lan has successfully called for $100 million

worth of investment capital from a Japanese investor.

Housing projects continue attracting attention from investors. Chinese firm Fortune Land Development has

bought Lotus Dai Phuoc shares from VinaCapital, worth $65.3 million. This is a residential quarter project

covering an area of 198.5 hectares in an area of Dong Nai province adjacent to HCMC.

A 65% stake in Times Square complex worth $41 million has been transferred by VinaCapital to Elite Capital

Resources Limited.

Analysts have predicted that FDI flow into the real estate sector will continue in the time to come thanks to

open policies and the great potential in tourism development. However, they warned that the amount of

capital into the market needs to be measured by disbursed capital, not registered capital.

Many registered projects have not been implemented. Booyuong

Mo Lao project in Ha Dong district, for example, has been left

unimplemented for years.

Nguyen Tri Hieu, a respected banking expert, commented on Dau Tu

Bat Dong San that more FDI capital is good news, but that is

necessary to reconsider the situation if too much capital flows into

the real estate sector. If the capital only goes to high-end real estate and resort projects, it will only heat up

the market and lead to oversupply in the market segment, and not propel socio-economic development

The increase in FDI in the

manufacturing sector has prompted

investors to pour money into projects

to develop industrial infrastructure.



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Phan Huu Thang, former head of the Foreign Investment Agency, now chair of the Vietnam Real Estate

Association, affirmed that FDI real estate projects would still be welcomed. The problem is that Vietnam

needs to supervise project implementation to ensure sustainability in investment and development.

US$678.4 million registered for solar power projects in Tay Ninh

VNHA - The People‟s Committee of southwestern Tay Ninh province has proposed the Ministry of Industry and

Trade add 15 solar power projects to the provincial planning scheme on electricity development from 2011-

2015, with a vision through 2020.

According to the committee, since June 2017, enterprises have asked for the province‟s permissions to build

15 solar power plants, worth a total of VND15.4 trillion (US$678.4 million). The projects have a designed

combined capacity of 554 MW and will be implemented from 2017-2019.

The Mien Trung Energy Joint Stock Company wants to invest over VND1.3 trillion (US$57.2 million) in a 50 MW

solar power plant on 60 hectares around Dau Tieng lake in Tan Chau district, while the Bien Hoa-Thanh Long

One-Member Co. Ltd. plans to build a 30 MW solar power plant, worth VND736 billion (US$32.38 million) on 37

hectares in Thanh Long commune, Chau Thanh district.

The TTC Green Energy Company registered to use over 110 hectares in An Hoa commune, Trang Bang district,

to build two solar power plants, with a combined capacity of 94 MW, worth over VND2.43 trillion (US$106.92

million).

The Asia Polytechnic Company also wants to use 120 hectares in Dau Tieng lake to build two solar power

plants with a combined capacity of 60 MW, worth over VND1.5 trillion (US$66 million).

Nguyen Thanh Ngoc, Vice Chairman of the provincial People‟s Committee, said Tay Ninh has huge potentials

for solar power development, with the solar radiation reaching 5.1kWh/square metre per day, and the

average sunshine duration of 2,400 hours per year.

The projects in extremely disadvantaged areas of Suoi Ngo commune in Tan Chau district, and Thanh Long

commune in Chau Thanh district are eligible to enjoy investment incentives.

Central Group targets pouring more money into Vietnam

VNN - The Central Group from Thailand has poured money into supermarkets, home appliance distribution

chains, hotels, fashion shops, export and wholesale, and is developing 160 shops/supermarkets. And it is now

harboring a plan to build a 200-500 room hotel in HCMC.

Joining the market in July 2011, Central Group has become familiar to many Vietnamese.

The conglomerate is present in six business fields and has been continuously investing in the country.

In late 2014, Central Group opened two Robins fashion centers in Hanoi and HCMC, where the products of

famous brands are displayed, though Thai products are dominant.

In January 2015, Power Buy, a subsidiary of Central Group, bought a 49% stake of NKT, the company which

owned Nguyen Kim home appliance distribution chain, with 21 supermarkets throughout the country.



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Later, the Thai giant surprised the public when taking over Lan Chi, a retail chain with supermarkets mostly

located in rural areas, which did not catch the attention of foreign investors. The takeover showed Central

Group‟s ambition of reaching every corner of the Vietnamese market.

In April 2016, Central Group stirred up the public when

defeating TCC group (Thailand), Lotte (South Korea), Aeon

(Japan), Masan and Saigon Co-op (Vietnam) in

competition to buy Big C Vietnam from the French owner.

After taking over Big C Vietnam, the Thai giant began

restructuring the management of the chain. It has reported

an 11% increase in Big C‟s revenue in July and projected

the 20-30% annual growth rate in Vietnam.

In May 2016, Zalora Vietnam backed by Rocket Internet,

was transferred to Nguyen Kim, where Central Group holds

a 49% stake. Meanwhile, Zalora Thailand was also sold to the group. Each deal was worth $10 million.

In the field of fashion, besides Robins, it also does trade with the brands of SuperSports, Crocs and New

Balance through its subsidiaries and franchise to Vietnamese partners.

Central Group is also the conglomerate which brings Marks & Spencer (M&S) to Vietnam and manages

Komonoya. It has announced a plan to open tens of Komonoya shops and 20 M&S centers more by 2020.

In the field of hotels, Central Group owns Centara Sandy Beach

Resort, a 4-star facility in the central city of Da Nang.

As such, just after a short time, Central Group developed four

shopping centers, 27 sports shops, 30 fashion shops, 1 hotel, 21 home

appliance retail centers, 1 e-commerce channel and 13

supermarkets.

The conglomerate stated it will spend 17 billion baht, or $511.7 million, to expand its operation in Vietnam in

the next five years.

The conglomerate stated it will spend

17 billion baht, or $511.7 million, to

expand its operation in Vietnam in

the next five years.



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ENTERPRISES

Tran Anh Digital and Mobile World on verge of merger

VNS - Electronics retailer Tran Anh Digital World

Company (TAG) is seeking its shareholders‟ approval to

sell a 25 per cent stake to Mobile World Investment

Corporation (MWG), paving the way for a merger into

the latter company.

The company‟s existing shareholders are expected to

send their feedback before the end of this month.

The share sale has confirmed recent speculation around

the merger and acquisition (M&A) between Mobile World and Tran Anh Digital.

On Wednesday, shareholders of Mobile World Investment Corp gave their nod to increase the company‟s

new budget for M&A activities to VND2.5 trillion (over US$110 million), a five-fold increase over the old budget

of only VND500 billion, which had been approved in March.

At a meeting in early August, Mobile World‟s general director Nguyen Duc Tai said the company planned to

acquire a chain of electronics stores in the North. He declined to disclose the targeted company.

According to the approved plan, the M&A budget will be mobilised from loans, bonds and new share issues

and undistributed profit. In addition, the mobile devices retailer will separately issue additional 6.7 million

shares, worth VND67 billion and equivalent to 2.18 per cent of its outstanding shares, to fewer than 10

investors in a private placement.

The new share issue is speculated to be designed to sell to Tran Anh Digital‟s stakeholders.

Chairman Tran Xuan Kien is the biggest stakeholder in Tran Anh with a 22.7 per cent holding, while his relatives

own 33.2 per cent of the company‟s charter capital. Japan‟s Nomaji Group holds 30.8 per cent.

Win-Win M&A

Tran Anh Digital is one of the largest electronic chains in the North with 39 supermarkets, including 14 outlets in

Ha Noi. Meanwhile, Mobile World is currently the biggest electronics and mobile devices retailer with over

1,500 retail stores nationwide.

Mobile World runs three major brands including The Gioi Di Dong, Dien May Xanh and Bach Hoa Xanh.

The M&A between Tran Anh and Mobile World is reportedly a win-win deal for the two companies as it could

help Mobile World expand its coverage in the northern region while Tran Anh hopes to improve its profitability

through the merger.

“The value of this deal is Tran Anh‟s improvement in earnings to become comparable to the growth rate of

Mobile World. At the same time, Mobile World can take advantage of Tran Anh‟s customer service to reach

customers in the North,” a report of HCM Securities Co (HSC) said.

Shares of Tran Anh have risen 15.7 per cent this month after speculation around the deal, settling yesterday at

VND34,700 ($1.53) a share on the Ha Noi Stock Exchange. According to HSC, Tran Anh‟s shares may climb to

VND50,000 a share.



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Meanwhile, Mobile World‟s shares closed at VND105,600 apiece on the HCM Stock Exchange yesterday.

After the first six months of the year, Mobile World Group recorded total revenues of VNDD31.2 trillion, a year-

on-year increase of 59 per cent. Its net profit reached VND1.06 trillion, an annual gain of 28 per cent.

Tran Anh has yet to deliver its second-quarter business results. At the end of March, it posted VND1.05 trillion in

net revenue, a decline of 4 per cent from the same period of 2016, and VND2.6 billion in post-tax profit, down

73 per cent year on year.

Large corporations compete for market share in food sector

VNN - The long-term demand of the market has prompted large corporations to spend trillions of dong

making food, although 2017 is expected to be a tough year.

Kido Group has announced a plan to launch chili sauce, its new product, in August. The group, formerly a

sweets manufacturer, sold the sweets production facilities to Mondelēz International last August and jumped

into the food sector.

It has acquired vegetable oil, spices and frozen food production companies, moves that helped it join the

food market in the quickest way.

In 2016, PAN Group, a business operating in many fields, decided to withdraw capital from two of its

subsidiaries to gather strength in two major fields – agriculture and food.

Within one year, PAN increased its ownership ratio in Ben Tre Seafood (ABT), Long An Food Processing (LAF)

and Bibica (BBC) and established PAN Food with charter capital of VND1 trillion. All the moves are a part of a

strategy to develop business in the food sector.

Other large corporations, whose core business fields have no relation with the food sector, have also

expressed their willingness to invest in food production projects.

These include Vingroup (real estate development), FPT (information

technology), Hoa Phat (steel manufacturing) and Thaco

(automobile).

The growing tendency of investing in the food sector and fast-

moving consumer goods, plus the wave of foreign groups taking over

Vietnamese enterprises, shows the great potential of the Vietnamese

food market.

A report from Stoxplus shows that Vietnamese average spending on food increased from $28.1 a month in

2011 to $61.3 in 2015.

In 2016 and the first months of 2017, Kido obtained the controlling stakes in two large vegetable oil

companies – Tuong An and Vocarimex.

A Kido senior executive said Kido would wrap up the procedures to acquire a 50% stake in Dabco Food in

some days.

As for Masan Consumer, known for its meat, spice and fast-moving consumer goods, has set the target of $2-

3 per consumer each month in the next three years.

The long-term demand of the market

has prompted large corporations to

spend trillions of dong making food,

although 2017 is expected to be a

tough year.



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In 2009, one consumer paid $0.2 a month for Masan products. The figure rose to $0.7 in 2016 and is expected

to increase to $2-3 by 2020, which means sales of $2-3 billion.

According to EIU, the total consumption of individuals and households in Vietnam in 2015 reached $128 billion.

Of this, the spending on food, drinks and tobacco was $55.3 billion, or 43.3%.

The amount of money was equal to spending on four fields – housing & building materials; entertainment &

education; transport & telecommunication; and on healthcare services.

Farmers struggle with low sales as more consumers buy imports

VNN - Ministries have had to hold meetings to discuss ways to rescue local farm produce as competition from

imports continues to cut into sales.

At lunchtime, bank officer Dang Thu Thuy of Hanoi, for example, placed an order via phone 15 kilos of

Australian grapes and 8.5 kilos of Rose apples from a fruit shop.

Thuy said she usually buys imported fruit. “Australian grapes are big and sweet, priced at just VND50,000 per

kilo. If you get a whole box of Rose apples, you‟ll just have to pay VND43,000 per kilo only. The prices are very

reasonable,” she said, adding that imports have become as cheap as domestic products.

The owner of a fruit shop confirmed that imported fruit is getting cheaper with prices of some products falling

by 50%. American cherries, for example, which sold at VND350,000-700,000 per kilo, are now VND180,000-

200,000.

MARD has reported that Vietnam imported $216m worth of vegetables and fruits in July and $852m in the first

seven months of the year. This included $659m spent on fruit imports, a two-fold increase compared with the

same period last year.

Dao Anh Tuan, director of a fruit import company in Hanoi, said the company only imported fruits grown in

temperate zones which cannot be grown in Vietnam, such as kiwi, apple, pea and cherry. But now, it imports

mango, longan and coconut which are grown in many areas of Vietnam.

A kilo of domestically grown custard-apple is priced at VND40,000-60,000 only. However, Vietnamese pay

VND500,000 for every kilo of Taiwanese products.

Many types of fruits which were only brought to Vietnam across

border gates by travelers are now imported through official channels.

Since more and more businesses have joined the market, the

competition has become stiff and the selling prices are getting

cheaper. In many cases, imports have prices lower than Vietnamese

products. Australian grapes, for example, are priced at VND50,000

per kilo, while Ninh Thuan grapes are VND80,000.

Vietnam is a big rice exporter, but Vietnamese prefer imports to domestically grown products. Vibiz.vn, after

surveying Vietnamese habits, found that 53% of Vietnamese like rice from Thailand, Cambodia and Japan.

Vietnam grows maize and soybean on a large scale. However, it had to spend $1.3 billion to import maize

and soybeans in the first seven months of the year.

Many types of fruits which were only

brought to Vietnam across border

gates by travelers are now imported

through official channels.



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MARKET & PRICES

Vietnam consumer confidence at record high: Nielsen study

VOV - Vietnam ranks the fifth

most optimistic country

globally with an index score of

117 in the latest Consumer

Confidence Index released by

Nielsen, its highest score in the

past five years and up five

points from the last quarter of

2016.

The report also finds that

consumers in Southeast Asia continue to be among the world‟s most confident.

Despite decreasing by two points, the Philippines with 130 points has surpassed India with 121 points to

become the most confident country in the world.

Indonesia ranks fourth with a score of 122 while Thailand drops to 10th with 107.

Confidence levels bounced back in Malaysia and Singapore, which score 94 and 89.

Unlike last year, consumers in Vietnam are no longer the most avid savers globally.

The study shows that 63% of Vietnamese put their spare cash into savings (compared to 76% in the previous

quarter), following Thailand (69%), Singapore and Indonesia (66%).

Consumers in Vietnam continue to spend more on big-ticket items.

After covering essential living expenses, around one in three Vietnamese consumers are willing to spend on

things like holidays (38%), new clothes (36%), new technology products (31%), home improvement (30%), and

out of home entertainment (29%).

Twenty three percent have medical insurance.

Nguyen Huong Quynh, managing director of Nielsen Vietnam, said: “In contrast to the volatility of the fast

moving consumer goods market in the first half of the year, Vietnamese consumer sentiment is getting better.

This upsurge is due to consumers‟ optimistic perception of personal finances and immediate spending

intentions.

“Vietnamese consumers pay closer attention to what is happening, easily being influenced by word of mouth

and social media, and quickly react, which makes them continuously evolving consumers.

“Therefore, manufacturers and retailers need to have „real time‟ understanding of the emerging consumer

trends and take faster actions to meet their demands.”

The top five concerns of Vietnamese consumers remain the same as in the last quarter of 2016.

Job security continues to top the list at 48%, followed by health (38%), work/life balance (25%), the economy

(20%), and parents‟ welfare and happiness (17%).



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“While consumers continue to be upbeat about their future, financial security remains one of their top

priorities,” Quynh said.

“Both job security and economic outlook have a direct impact on consumers‟ degree of financial security,

and hence remain key concerns.

“It is not a surprise that in the current context, consumers are looking for healthier lives or even total wellness.

Thus, this trend offers both manufactures and retailers the opportunity to innovate and develop the next

generation of offerings.”

Online tourism market called ‘new gold mine’, worth $9 billion

VNN - The fourth industrial revolution is expected to be a

great opportunity for Vietnamese businesses to make a

breakthrough in the online market, estimated to be worth

$9 billion by 2025.

A Nielsen report shows that revenue from the global online

tourism market in 2016 was $565 billion, an increase of 13.8

percent over the year before.

Nielsen has predicted that Asia Pacific would surpass North

America to become the world‟s largest online tourism

market.

The South East Asian market is expected to see a 4-fold increase, according to survey by Google and

Temasek Holdings conducted in 2016. It would reach $90 billion by 2025. Ten percent of the revenue, or $9

billion, would go to Vietnam.

Lai Viet Anh, deputy director of the Ministry of Industry and Trade‟s E-commerce and Information Technology

Agency, said that up to 45 percent of Vietnamese internet users book hotel services or air tickets, with the

figure increasing by 11 percent per annum.

According to VECOM (Vietnam E-commerce Association), the online ticket booking market in Vietnam is

worth roughly $3 billion, while the online tour and hotel room booking market is worth $1 billion. The online

tourism market is now valued at $4 billion.

“Vietnam‟s online tourism market is a new gold mine,” said Do Huu Hung, CEO of Interspace.

In order to exploit the potential of the market, businesses need to make professional and methodical

investments instead of „hit-and-run‟ projects.

“The tour & hotel room booking market is being controlled by foreign invested enterprises or overseas

businesses,” he said. “Agoda, for example, controls 40-50 percent of the Vietnamese market.”

To develop online tourism, businesses need to have close links with hotel and associated service providers,

because the links promote clients‟ confidence and allow them to use services in a closed chain.

“Methodical investment and close links with service providers are the two important things businesses need to

do to join the $9 billion market,” he said.



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Hung does not believe that online tourism firms need to invest in mobile platforms immediately.

“Some businesses go directly to the mobile platform. This depends on the strategy businesses pursue. If

businesses still don‟t have good conditions to develop mobile platforms, they should try to do well on the

computer platform first and then shift to the mobile platform,” he said.

The mobile platform makes up 20-30 percent of total transactions, while the number of transactions from

computers is still higher.

Hung believes that online tourism is a field open to both small and large businesses.

New entrants heat up Vietnamese beauty market

VIR - An increasing number of new players are entering

the Vietnamese beauty market as local consumers are

becoming more conscious of beauty treatment and

products.

Nguyen Van Minh, vice chairman of the Vietnam

Essential Oils, Aromatherapy and Cosmetics Association,

is confident that the market will maintain its bullish

trajectory in the coming years.

In 2017, around 200 foreign beauty brands have entered

Vietnam, especially Thai and Korean companies.

“The Vietnamese beauty and cosmetics retail market is estimated at US$1.2 billion in 2017, which is expected

to reach US$2.2 billion by 2020. Vietnamese consumer spending is only 40% of regional markets. Thus, the

market holds ample opportunities for both local and foreign companies to tap into the rising spending on

beauty products,” he said.

To grab a piece of the lucrative market, more than 200 international beauty brands have gathered at

Vietbeauty 2017 in Ho Chi Minh City this week.

The expo, organised by UBM Asia, is set to be the most comprehensive beauty platform for industry

professionals to expand in this promising market.

In addition to excited foreign companies, local firms are also stepping up their market presence. Phan Anh

Thu, director of Beauty Queen, said that the competition in the beauty market is becoming stiff due to the

entrance of foreign brands.

In addition, some local companies are selling fake and low-quality products which also dampens the

reputation of local beauty brands.

“To tackle these challenges, we have invested in international-standard technology to produce high-quality

products in Vietnam. The firm has just launched two beauty brands, including Beauty Mall and Hot Care to

cater to local clients,” he said.

According to market research provider Euromonitor International, colour cosmetics registered a growth in

value of 13% in 2016. This growth rate was among the strongest in the beauty and personal care category.



15


LOGISTICS

Vietjet planning direct charters to Fukushima in spring

Nikkei - Vietravel responding to strong local demand for Japan

tours

Tour operator Vietravel and low-cost carrier Vietjet have

signed an agreement with Fukushima Prefecture in eastern

Japan to fly 15 direct charter flights next spring.

The deal was sealed when the governor of the prefecture

recovering from the 2011 earthquake and tsunami visited

Vietnam last week. Some 3,000 Vietnamese are expected to

visit between February and April, the cherry blossom season,

which happens to coincide with Vietnam's Tet new-year holiday, when many travel.

Vietnam to lift airport charges in October

Nikkei - Proceeds will be invested in upgrading facilities and services

Vietnam will raise airport charges across the board in October to cover maintenance expenses, improve

service quality, and pay back some of the state investments in aviation infrastructure, the Civil Aviation

Authority of Vietnam (CAAV) announced.

Airport taxes for domestic passengers will go up 30% at main airports like Tan Son Nhat, Danang, Cam Ranh,

Phu Quoc, and Noi Bai, and 21% at second tier facilities like Lien Khuong, Buon Ma Thuot, and Tuy Hoa. The

current charges are $3.08 and $2.64, respectively.

Security charges passed on by carriers for baggage screening and terminal security will rise to $2 for

passengers flying internationally, and to $0.8 for domestic routes. There will be further increases in 2018. The

rates remain low by regional standards -- Myanmar charges $6.5, Singapore $6, and Cambodia $3.

After a 5% increase, take-off and landing charges will range from $30 to $255 depending on the size of

aircraft, and further increases will be applied in 2018 and 2019. There will also be premiums of 15% added for

peak hours, and reductions of 15% for off-peak usage.

The current rates have been in place since 2011, and the CAAV said domestic carriers have benefited from

low service charges, cheaper fuel, and high growth in demand for domestic travel.

"The landing and takeoff service fees for domestic flights in Vietnam are only between 47% and 68% of

Southeast Asia's average rates," Lai Xuan Thanh, the head of CAAV, told reporters.

Vietnam has some 52 air routes connecting 22 civilian airports around the country, and these are used mostly

by local carriers. Internationally, 63 foreign airlines operate 105 international routes through six international

gateways.

In the first half of 2017, Vietnamese airports served over 46 million passengers, up 17.6% year on year, and this

figure should reach 91 million by year's end, a 13% increase on 2016. Cargo volume is meanwhile expected to

rise 5% to reach 1.2 million tons this year.



16


HIGHLIGHTS


VNN - In an effort to prevent involved parties from evading tax by

inaccurately declaring profits from M&A deals, MOF plans to tax

one percent on the transfer price, to be applied to businesses,

and one percent on income, to be applied to individuals.

The current CIT Law stipulates that the government determines

tax rates on capital transfer deals made by foreign institutions

that have no presence in Vietnam.

However, in Decree 12/2015, the government has not set a

specific percentage tax rate. Therefore, MOT has set a temporary

tax rate of 20 percent on income.

However, a problem has arisen that the majority of foreign

institutions declared transfer prices equal to cost prices so as to

avoid tax. In principle, if they don‟t make a profit, they don‟t have to pay CIT.

Meanwhile, Vietnam still finds it difficult to check transfer prices. This explains why in recent M&A deals,

Vietnam‟s taxation agencies could only collect tax on the difference of exchange rates between the time of

transfer and time of capital contribution.

To make it easier to control tax collection and avoid loss of revenue for the state budget, MOF believes that it

would be better to impose the same tax rate of one percent on revenue. The tax rate would be applied to

both foreign institutions with or without resident offices in Vietnam.

The tax duties for transfer deals in the oil & gas sector will be shown in another specific document to be

released by MOF.

Many large M&A deals have been made recently, including the transfer of Metro Cash & Carry distribution

chain in Vietnam to TCC Group and the takeover of Big C by Central Group. Most recently, Siam City

Cement acquired a stake in LafargeHolcim, a cement manufacturer.

Sources said that taxation bodies finally were able to collect trillions of dong in tax from investors in the deals,

but they could only do this after many arguments and discussions with involved parties.

The big difficulty was that the legal entities which conducted the transfer deals were outside the Vietnamese

territory.

An official of the HCMC Taxation Agency admitted that most foreign institutions declared wrong prices, but

the taxation agency still had to accept the deals because it could not prove if the declaration was wrong.

MOF is also facing the same problem with transfer deals made by individuals. Under current law, the taxable

income in capital transfer deals equals the selling price minus (buying price + related costs). However,

taxation agencies find it difficult to discover the transfer price and related costs.

The current CIT Law stipulates that the

government determines tax rates on capital

transfer deals made by foreign institutions that

have no presence in Vietnam.



17


Developing medical tourism: better late than never

VNN - Medical tourism can bring huge incomes

to countries, but it has not been properly

exploited in Vietnam.

According to Deloitte, global medical tourism

has value of no less than $60 billion. It is

estimated that 50,000 Vietnamese travel abroad

to have healthcare services with total spending

of $2 billion every year.

A report from Malaysia Healthcare Travel Council

(MHTC) showed that in 2016 about 9,800 Vietnamese patients had healthcare services in the country.

The agency in late 2015 opened a medical tourism office in Vietnam and in April 2017, launched

ytemalaysia.vn to help Vietnamese approach Malaysian healthcare system and tourism services.

The representative offices of Singaporean medical centers in Hanoi and HCMC not only provide information,

but also help customers follow necessary procedures to go to Singapore for healthcare services. Vietnamese

travelers don‟t have to book tours with Vietnamese travel firms.

Experts say Vietnam is capable of developing medical tourism as neighboring countries have. In SE Asia,

Vietnam‟s healthcare sector is highly appreciated in infertility treatment with high success rates and for

cheap cosmetic and dental aesthetics services.

HCMC has great potential for medical tourism development. The city gathers many prestigious hospitals

including the University Medical Center HCMC, Cho Ray, Tu Du and FV which can provide services at

international standards. The hospitals all have experience in treating foreigners.

Since 2008, the University Medical Center HCMC has been providing inpatient treatment to 6,000 foreign

patients. At FV, besides 20,000 patients from the neighboring countries of Cambodia, Laos and Myanmar,

there are also many patients from the US and Africa.

The other hospitals of Tu Du, Van Hanh and Cho Ray each year receive 500 foreign patients.

However, despite the high qualifications of Vietnamese medical workers and advantages in beautiful

landscapes, Vietnam‟s medical tourism potential still has not been well exploited.

Most foreign patients who come to Vietnam to have medical treatment have demand for sightseeing and

relaxing. Meanwhile, many travelers said it takes much time to arrange medical tours to Vietnam because of

the lack of information, while travel firms offer few medical tours.

Having realized the great potential, the HCMC Healthcare and Tourism Departments have decided to join

forces to develop medical tourism.

According to deputy director of the Healthcare Department, medical tourism will focus on five major types:

dentistry, traditional medicine, aesthetics, health screening and specialized services.



18


La Quoc Khanh, deputy director of the HCMC Tourism Department, said it is now the right time to promote

medical tourism, when Vietnam has the facilities and staff sufficiently qualified to compete with other

regional countries.

There will be two important events in June – a workshop on medical tourism and dental tourism exhibition.

Real estate market: magnet for foreign investors

VNN - Property investors in Vietnam have been

scaling up their business, while more and more new

investors have concluded M&A deals in the real

estate sector.

A Q2 market report released by Savills Vietnam

showed that many foreign investment funds have

spent big money to acquire land plots in

advantageous positions to develop high-end

projects. M&A activities are especially active in

HCMC, attracting 40.9 percent of total FDI to Vietnam.

Creed Group has teamed up with An Gia Group to acquire five apartment blocks of La Casa project in

district 7 in a deal worth VND910 billion. Kajima has joined forces with Indochina Capital to set up a joint

venture with investment capital of $1 billion which will develop four high-end projects in HCMC, Hanoi and Da

Nang.

Foreign investment funds are also pouring money into “golden land” plots in HCMC. Frasers Centrepoint Ltd

has acquired a 70 percent stake in G Homes project from An Duong Thao Dien Group.

CapitaLand has acquired a land plot in the center of district 1 on which it plans to build a 240 meter tower,

expected to become the tallest shopping center in HCMC.

The fund has also announced the purchase of a 90 percent stake of a 0.8 hectare project in Thao Dien to

develop 300 high-end apartments. The investment is part of the Singaporean group‟s plan to inject $500

million into commercial real estate projects in Vietnam.

The foreign capital flow into real estate is described by experts as „more substantial and feasible‟ than in

2011-2013. Investors are ready to disburse funds for M&A deals and start developing projects in order to

launch products on the market as soon as possible.

From 2018, Vietnam will no longer receive preferential ODA loans from WB, ADB and other financial institutions

at preferential interest rate of 2-3 percent. The interest rates will be 5-6 percent, not including the service fee.

Mid-end products top the list of property products with the highest liquidity, attracting the most foreign

investors.

The demand for mid-end products is expected to continue to rise as Vietnam is now experiencing the

„golden population index‟, with the number of people of working age expected to reach 5.5 million by 2019.



19


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