Vietnammarket 2009
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Transcript of Vietnammarket 2009
Where is Vietnam
going from here ?
Damien DuhamelDamien DuhamelManaging Director Asia
www.solidiance.com
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
2
some
basic basic
Vietnam
facts
Where is Vietnam going from here?Damien Duhamel
0
2
4
6
8
10
12
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
4
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
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
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
6
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%)
7
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
8
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
9
vietnam’s little dirty 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 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
12
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.
13
what specific 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 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).
17
sustainable growth ? probably…
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”
19
a few a few deja vu road
blocks
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
21
how do I sell and get my get my money (safely)?
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…
23
is job hopping a national 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 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.
25
do I need expats in vietnam ?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 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.
27
“vietnam is (still) hot, don’t get don’t get burned…”
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.
29
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.
To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com
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
CONTENT
• What is keeping us busy?
• Why?
• What are the legal challenges?• What are the legal challenges?
©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• Cosmetics
• Multi-Level Sales (MLS)
• Property; casino
• ITC; online activities
• Labor
• Customs and tax
• Compliance and dispute resolution
• Banking
• Clean Development Mechanism (CDM)?
©2008 Baker & McKenzie 33
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
©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
©2008 Baker & McKenzie 35
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
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%
©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• 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
©2008 Baker & McKenzie 38
The Issues
• Trading outside price trading band for listed
shares
• Unclear regulatory approval requirements• Unclear regulatory approval requirements
• Sensitive industry
©2008 Baker & McKenzie 39
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
©2008 Baker & McKenzie 40
The Lessons
• Be patient; plan for problems
• Maintain and utilize relationship with all key
playersplayers
©2008 Baker & McKenzie 41
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
©2008 Baker & McKenzie 42