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SEIKO IDEAS CORPORATION
Vietnam Business Review
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Vol 40, October 12th 2016
BUSINESS REVIEW VIETNAM
Foodex Vietnam 2016 to be in this November
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Vietnam Business Review
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INSIDE THIS ISSUE
HIGHLIGHTS
Hanoi to host Vietfood, Beverage - ProPack next month
HCMC and its ambition to build a Silicon Valley
Automobile and auto parts industries need overhaul
VIETNAM – JAPAN COOPERATION
Japan - Vietnam to join forces on river redevelopment
Vietnam calls for Japanese investment in prioritised sectors
Panasonic opens solution, innovation centre in Vietnam
ECONOMY
Growth target leans on FDI in last quarter
Seafood products face more EU safety warnings
FINANCIALS
Vietnam's stocks are no longer cheap
Big caps move to HOSE from Hanoi in bid to boost share prices and liquidity
INVESTMENT
Vietnamese investors nurture ‘super urban area’ dream
Solar sector waits on FiT power-up
ENTERPRISES
Vietnam businessman Pham Nhat Vu buys Vermelha Station in Top End
Morgan Stanley picked as adviser for Vinamilk stake sale
Samsung turns farmers into bigger earners than bankers
MARKET & PRICES
Local companies flee urban areas to escape competition
Extra taxes keeps Vietnamese buyers from cheaper cars?
LEGAL UPDATES
Amendments to 05 Circulars pertaining to tax
Unclear laws contribute to environmental crisis
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ECONOMY
Growth target leans on FDI in
last quarter
VIR - While the country’s growth
target of 6.7% for 2016 may be out
of reach, its economic outlook
remains positive thanks to strong FDI.
PM Nguyen Xuan Phuc last week
requested greater efforts from
ministries, localities, and enterprises
to reach a modest economic
growth of 6.3-6.5% this year, which is
smaller than last year’s 6.68%.
The economy rose quarter-on-
quarter since early this year, from
5.48% in the first quarter to 5.78% in
the second quarter, and to 6.4% in
the third quarter.
The Ministry of Planning and
Investment (MPI) last week
submitted a scenario for 2016
growth to the government for
discussion, based on different
growth expectations in Q4.
MPI Minister Nguyen Chi Dung told
the government that in the
remaining three months there is still
some room to boost the economy-
including foreign direct investment
(FDI), disbursement of state budget
investment capital, and
government bonds, as well as
improvement of the local demand
and consumption.
The World Bank last week forecast
that Vietnam’s economy is
expected to grow only 6% next
year, and also 6.3% in 2018.
In its update on Vietnam’s
economy released in late
September, the Asian Development
Bank (ADB) also predicted that the
economy may grow only 6% this
year, and rise to 6.3% next year.
However, both banks are optimistic
about the country’s outlook thanks
to strong FDI.
FDI commitments in the first nine
months of 2016 rose to $16.43b and
the disbursed sum hit $11.02b, up
12.4% year-on-year.
It is expected that the figures for
the whole year will be about $24b
& $15b, respectively, which are
higher than last year’s respective
figures of $22.76 & $14.5b.
Much of this investment is directed
to manufacturing to generate a
steep rise in production, and
exports of mobile phones,
electronics, and other products.
FDI contributes about 18% of
Vietnam’s GDP, nearly a quarter of
total investment, two thirds of total
exports and millions of direct and
indirect jobs, according to the
World Bank.
Seafood products face more
EU safety warnings
DTI - Since early this year, many
Vietnamese seafood products
have been warned by the
European Union for containing
banned substance.
According to the National Agro,
Forestry and Fisheries Quality
Assurance Department (Nafiqad),
the EU issued alerts on 11 shipments
of Vietnam's seafood products
found to have surpassed the
permitted content of metals such
as mercury and cadmium between
January and September this year.
The number of EU warnings for
Vietnamese seafood products
during the January-September
period increased by 2.2 times
against the same period of 2015,
said Nafiqad.
By late April this year, the EU issued
warnings to four Vietnamese
seafood exporters, that had
shipments to several European
countries for failing to pass food
safety checks. The companies,
Mekong Delta Food Factory, South
Vina, Foodtech JSC and Khang
Thong JSC Seafood Processing
Factory, failed to pass food safety
checks to enter the EU, according
to the Rapid Alert System for Food
and Feed.
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FINANCIALS
Vietnam's stocks are no longer
cheap
VNN - The P/E (price-earnings) ratio
of the Vietnamese stock market is
14.3, while the figures are 16.5 in
Thailand, 22 in Indonesia, 15.8 in
Malaysia and 14.7 in China.
The VN Index on September 23 rose
to 674.09 points, or by 30 percent in
comparison with earlier this year
with the improved liquidity. Analysts
put emphasis on the P/E ratio of
16.49, a record high in the last five
years.
Doanh Nhan Sai Gon commented
that the strong recovery of the
national economy backed the VN
Index escalation. Some listed
companies have reported
considerable improvement in
business results.
The shares of retail companies
witnessed the sharpest increase of
81.17 percent, while healthcare
companies had 74 percent,
household-use goods 64 percent
and construction & building
materials 60 percent.
Meanwhile, considerable
decreases have been reported by
oil & gas shares (-19.7 percent),
financial services (-13.24 percent)
and banking (-9.8 percent).
With the average P/E ratio at over
14.3, the gap between Vietnam’s
P/E and other regional countries,
and between Vietnam’s and the US
(16.5) and Europe (20.7) has been
narrowed.
As such, the cheap-stock period of
the Vietnamese stock market is
over, and its status has shifted from
frontier to emerging.
Vietnam’s P/E ratio index is
influenced by the performance of
Large Caps such as VNM, MSN, FPT,
VIC, VCB and BVH. The group of
shares pushed the last VN Index
upward movement and account
for a large proportion of VN Index’s
capitalization value.
Dau Tu Chung Khoan also quoted
experts as commenting that with
the new price levels, Vietnam’s
stocks are no longer ‘too cheap’
compared with Thailand, the
Philippines and China.
While 90 listed reported loss in the
first quarter of the year, only 69 out
of 687 businesses which have
released Q2 financial reports so far
reported loss. In the first quarter,
listed companies reported modest
profit growth rate of 1 percent,
while the figure was 1.6 percent in
the first half of the year.
The statistics showed that listed
companies have made
considerable improvement in their
business performance.
Official reports showed that profits
made by the 20 most profitable
businesses were between VND500
billion (SSI) and VND6 trillion (VNM).
The losses were between VND30
billion (PVV) and VND1.1 trillion (TTF).
The strategic report by Ban Viet
Securities Company (VCSC)
showed that the upward trend in
the first half of the year was not a
‘bubble’, and that the P/E increase
is in line with the trend in the region.
The increased P/E will reduce the
attractiveness of Vietnam’s stocks
in foreign investors’ eyes. Therefore,
Vietnam needs to develop many
other tools to attract foreign capital.
Big caps move to HOSE from
Hanoi in bid to boost share
prices and liquidity
VNA - Several big companies are
planning to follow their peers in
moving their shares from Hanoi to
the HCM Stock Exchange (HOSE) in
an attempt to boost stock prices
and improve liquidity.
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FINANCIALS
Since late September, the HOSE has
approved the listing of around 300
million shares from the Hanoi Stock
All the companies moving their
listings are large-cap companies on
the HSE.
Almost 126 million shares of Central
Hydropower JSC (CHP) made their
HOSE debut on September 29. It
used to be among the 15 largest
companies listed on the Hanoi
bourse.
Last week, Saigon Thuong Tin Real
Estate (Sacomreal) JSC (SCR) and
An Phat Plastic and Green
Environment JSC (AAA) also got the
nod to move their shares to HOSE.
Sacomreal and An Phat Plastic are
two of 30 highest valued stocks in
the Hanoi market with charter
capitals of nearly 2.2 trillion VND (99
million USD) and 520 billion VND,
respectively.
Sacomreal officials said the shift
was aimed at boosting the liquidity
of its shares.
An Phat Securities Co said the
southern bourse has higher
standards and listing there would
enhance its business reputation.
In addition, HOSE allows a minimum
trading volume of 10 units,
facilitating trading by shareholders
with holdings of less than 100 shares,
the company said.
Established in July 2000 with just two
listed companies, HOSE now has
317 companies with a market
capitalisation of 459 trillion VND
(20.6 billion USD). This accounts for
over 75 percent of the total
capitalisation value of the
Vietnamese securities market.
Liquidity in HOSE is typically three to
four times higher than in Hanoi. The
average trading value at HOSE had
reached 2.3 trillion VND by the end
of September.
Earlier in March this year, the HCM
City bourse welcomed nearly 13
million shares of the Tay Ninh Cable
Car Tour Company from the Hanoi
bourse.
Last year, it also received switches
from real estate developer FLC
Group (FLC) and F.I.T JSC (FIT).
Other companies including Vicem
Materials Transport Cement JSC
(VTV) and insurance company PVI
Holdings (PVI) are reportedly
preparing for a similar shift.
On the other hand, shifting from
HOSE to Hanoi happens very rarely.
A rare exception was that of
Mineral Ferrous Metallergy JSC (KSK)
in 2014.
Workers of Vicem Materials Transport Cement JSC at Ha Noi Port move sacks of cement.
The company is preparing to move their shares from Ha Noi to the HCM Stock Exchange.
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INVESTMENT
Vietnamese investors nurture
‘super urban area’ dream
VNN - Many big real estate
developers have taken bold steps
to develop large urban area
projects, which in the past were
implemented only by foreign
investors.
Novaland and its partner – Bac
Nam 79 – have won the right to
develop the Da Phuoc – Da Nang
urban area after Daewon, the old
investor, withdrew the investment,
ending one decade of
hibernation.
The land reclamation project,
expected to cover an area of 180
hectares, was initially announced
as having investment capital of
$250 million. The investment capital
of the project has not been
announced by the new investor,
but it will be renamed The Sunrise
Bay.
The construction of the urban area,
comprising avhotel, shopping mall,
conference center, school, golf
course and houses, would be
completed in 2019.
This is the first project Novaland has
developed in the central region’s
real estate market, which marks a
milestone in its strategy on
developing non-HCMC markets.
Named Saigon Peninsula, located
in Phu Nhuan Ward of district 7 in
HCMC, the project would comprise
a multi-functional park,
international marina, houses and
other items. Saigon Peninsula Group
has received the nod from HCMC
authorities to become the investor
of the super project, capitalized at
$6 billion.
The investors wish to turn the project
into one with unique architectural
features and a ‘green lung’ at the
T-junction of the Sai Gon and Nha
Be Rivers.
Once it becomes operational, this
would be the largest passenger
ship port in Vietnam which serves
domestic travelers and foreign
travelers to HCMC.
The project is hoped to bring a new
look to Vietnam’s tourism and help
create 30,000 jobs.
A new urban area is taking shape in
Thu Thiem area. Sala is located on
junction of the two Thu Thiem’s
most important roads – Mai Chi Tho
and Bac Nam (North-South). The
project will be the focus of the
functional areas No 5 and No 6 in
Thu Thiem, capitalized at $2.2 billion.
Most of the investment capital
poured into the urban area,
infrastructure and other items will
be from Dai Quang Minh Company.
In April 2014, the first items of the
area – a residential quarter and the
technical system - were built.
Another project that has caught
the special attention from the
public is Vinhomes Central Park with
investment capital of $1.4 billion.
Covering an area of 43.91 hectares
on Nguyen Huu Canh Road of Binh
Thanh district, the urban area will
be developed with huge
investment capital of $1.4 billion.
Vinhomes Central Park promises to
provide 10,000 more villas,
apartments and officetels to HCMC.
Solar sector waits on FiT
power-up
VIR - As Vietnam looks to raise the
nation’s renewable energy sources,
foreign investors are sensing an
opportunity for solar energy
projects. But low feed-in-tariffs are
slowing this movement, to the
dismay of both local and
international organisations.
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INVESTMENT
Representatives of six German firms
recently came to Vietnam to
explore the potential of the
country’s solar photovoltaic (PV)
market.
The firms include IBC Solar AG, M+W
Group GmbH, Droege Energy
GmbH, CARERA Solar/Hydro UG, ILF
Consulting Engineers GmbH, and
Syntegra Solar International AG.
They introduced their products and
services to 150 Vietnamese
companies during bilateral co-
operation meetings.
Peter Cattelaens, deputy
programme director of German-
backed GIZ Energy Support
Programme in Vietnam, said that
“German firms in the solar PV sector
can now seize a number of
attractive business opportunities in
Vietnam.”
Not only German firms, companies
from the UK, South Korea, the US,
and Canada are also eyeing solar
power projects in the Southeast
Asian country.
The UK’s Kimin Power Company is
working with the south-central
province of Quang Ngai’s
authorities on a $227.3 million, 150
megawatt (MW) solar power
project, on a 250 hectare plot in
the province’s Pho An commune.
In the south-central province of
Ninh Thuan, local company Thien
Tan Group is co-operating with the
US’ Black & Veatch Group to make
a feasibility study for implementing
a $2 billion, 1,000MW solar power
project.
Also in this province, Canadian
company CMX Renewable Energy
planned to construct a 150MW
solar power plant worth $150
million over an area of 250ha.
In another case, in the nearby
province of Binh Thuan, US-based
ACO Investment Group also
expressed an interest in building a
50MW solar power farm.
Meanwhile, Vietnam’s private-
owned firm Kinh Bac City
Development Holding Corporation
recently signed a land leasing
agreement with China’s JA Solar,
which will invest $450 million into a
40ha solar cell plant in the northern
province of Bac Giang. The capital
is expected to be raised to $1 billion
in the future.
Besides, the Central Highlands
province of Dak Lak’s authorities
are waiting for the Ministry of
Industry and Trade (MoIT) to offer
higher feed-in-tariffs (FiTs) for two
major solar projects floating on
water, the first of their type in
Vietnam.
The investors include South Korea’s
SolarPark Korea Co. Ltd., who
wishes to build a 620MW solar PV
plant in Ea Sup district. The project’s
investment capital is estimated to
be in the range of €600 million
($673.1 million) and €900 million ($1
billion).
Dak Lak authorities are also
negotiating a 120MW solar power
project with another South Korean
firm and Vietnamese private firm
Long Thanh Infrastructure
Development and Investment
Company. This $200 million project
is expected to be built in the
district’s Cu M’Lan commune.
“We want to receive the decision
from the MoIT soon, because the
investors are urging us. [Until the
MoIT’s decision,] we can’t decide
on the FiTs for them,” said Huynh
Van Tien, deputy director of the
Dak Lak Department of Planning
and Investment.
Great potential
At the recent Global Green Growth
Week 2016 organised by Global
Green Growth Institute (GGGI) on
South Korea’s Jeju island, Gavin
Smith, director of Dragon Capital’s
Clean Development Fund and vice
chair of Eurocham Vietnam, said
Vietnam is becoming a magnet for
foreign investors interested in solar
PV power projects. The fund has
invested in solar, small hydro, waste,
and clean water projects.
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INVESTMENT
According to a GIZ draft report on
solar PV investment opportunities in
Vietnam released last month, the
potential for development of solar
energy in Vietnam is massive.
Solar resources are expansive, with
an average solar irradiation of 4-5
kilowatt hours (kWh) per square
metre per day in most regions of
southern and central Vietnam, and
a total of 1,400-3,000 sunshine hours
every year. This makes the country
comparable to developed solar
markets in the region, including
China, Thailand, and the Philippines,
as well as to mature international
solar markets, such as Spain and
Italy.
While calling upon international
investors to invest into Vietnam’s
solar PV market, Deputy Minister of
Industry and Trade Hoang Quoc
Vuong told the Global Green
Growth Week 2016 event that “The
potential of solar energy in Vietnam
can be utilised for water heaters,
generators, and other types of
applications such as drying and
cooking.”
However, the MoIT admitted that
despite such potential, over the
past few years, only 7MW of PV
capacity has been installed in
Vietnam, with around 2MW drawn
from rooftop solar arrays. In August
2015, Thien Tan Group co-operated
with Indian and Thai partners to
begin construction of the first solar
project in Vietnam, in the central
province of Quang Ngai. This $37.54
million, 24ha project has a
designed capacity of 19.2MW.
Several investors have come to
Vietnam in search of solar power
investment opportunities, but have
run into a wall.
“Currently, policies for renewable
energy projects, including solar
power ones, are too unattractive to
lure investors,” Vuong said.
Awaiting incentives
The Vietnamese government has
recognised this potential, and aims
to significantly increase its
renewable energy production,
including that from solar power.
Solar PV power generation
capacities are set to rise from the
current 7MW to 850MW in 2020,
4,000MW in 2025, and 12,000MW by
2030.
To reach these targets, the
government is currently preparing
solar PV support legislation. First
drafts released in 2015 and
developed further in the first half of
2016 include a FiT of $0.112/kWh for
large-scale grid-connected free-
field PV power plants, and a net
metering credit for excess solar
power fed into the grid set at
$0.15/kWh for rooftop systems.
In addition, there are
supplementary instruments in
preparation, such as import tax
exemptions, land incentives, and
corporate income tax reductions
incentivising the development of
the sector.
According to the UNDP, one of the
biggest hurdles for Vietnam to
attract investors into its solar PV
market is the low FiTs. The average
retail price of electricity in Vietnam
was $0.076/kWh in 2015.
“The retail price of power in
Vietnam remains artificially low by
international comparison. This is
thanks to pricing policies that lead
to indirect subsidies to the power
sector,” said the UNDP’s report on
policies for expanding solar PV
power in Vietnam.
“Meanwhile, power generators
depend on adequate financial
returns on their investments. They
need predictable and assured
revenue, which means that
perceived risks for getting a good
return on their capital investment
must be low,” said the report.
A FiT of $0.15/kWh is proposed by
the UNDP for mainland solar power
plants, which should be paid over
the 20-year lifetime of the
investment project. A lower initial FiT
may not attract any investors.
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ENTERPRISES
Vietnam businessman Pham
Nhat Vu buys Vermelha Station
in Top End
ABC - A prominent businessman
from Vietnam has purchased a
Northern Territory cattle station.
In what is believed to be the first
major Vietnamese investment into
the north Australian beef sector,
Vermelha Station has been sold to
An Avien Pastoral Holding and
Agriculture for $18 million.
The Australian Securities and
Investments Commission lists the
major shareholder of the company
as Pham Nhat Vu, the chairman of
media company An Vien Group.
Mr Pham is the brother of Vietnam's
only billionaire and head of
conglomerate Vingroup, Pham
Nhat Vuong.
In February, the Australian
newspaper reported Vingroup had
purchased a Sydney CBD
redevelopment site for $22.5 million.
The northern cattle industry
continues to be well-supported by
both domestic and foreign
companies, as it has been for
decades, with many properties
recently changing ownership.
Vermelha is 2,039 square-kilometres
in size, located about 200
kilometres south of Katherine,
alongside the Stuart Highway.
While not commenting specifically
on the new owner, selling agent
Sue Brosnan from Tanami Rural
Property told ABC Rural the
property would continue to be run
as a pastoral enterprise, which may
look to diversify.
"They will be looking at the new
diversification provision of the
Pastoral Land Act, just to ensure
they're making best use of the
property," she said.
"I think it will be fantastic for the
pastoral industry, as I'm sure they'll
be committed to the industry as
investors here."
Ms Brosnan said there were 10,000
Brahman-cross cattle included in
the sale.
"The cows - even at this time of year
in the dry season - are in really
good condition," she said.
"It's also been well-developed in
terms of fencing, laneways, yards
and waters."
The Top End already has a large
population of very successful
Vietnamese farmers in Darwin's rural
area, however few have ventured
far beyond fruit and vegetables.
Vermelha Station, formerly owned
by Lyn and Bobbie Brazil, may be
well suited to a diversification
model, with a recent Northern
Territory Government study finding
the local soils to be very suitable to
irrigation projects.
The property has a reasonable
water licence and was the first in
the region to introduce a centre
pivot irrigator to grow hay for cattle.
Another Vietnamese company,
which was looking for land
to develop a large dragon fruit
farm, came close to buying
Vermelha earlier this year.
The CT Group inspected the
property but failed to follow
through with the purchase.
Lindsey and Veronica Elliott will
continue to manage the property
on behalf of An Avien Pastoral
Holding and Agriculture.
ABC Rural has requested an
interview with the company.
Morgan Stanley picked as
adviser for Vinamilk stake sale
Reuters - Vietnam’s State Capital
Investment Corp. has picked
Morgan Stanley Asia (Singapore)
Ltd. to be its lead consultant in the
sale of a 9 percent stake in
Vietnam Dairy Products JSC.
SCIC, as the government’s
investment arm is commonly known,
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ENTERPRISES
also signed a contract Oct. 5 to hire
Saigon Securities JSC and
VinaCapital Corporate Finance
Vietnam Ltd. to assist in the sale of
shares in the dairy company,
according to an SCIC e-mail
statement.
Investors have long awaited SCIC’s
divestment of Vinamilk, the nation’s
largest company by market value
that is viewed as one of the most
desired public enterprises in
Vietnam by foreign investors. The
dairy company in July received
approval from the securities
commission to remove the 49
percent foreign ownership limit on
its stocks, paving the way for
investors to buy more.
Hiring these “reputable” financial
organizations will ensure the
transparency and effectiveness of
the stake sale in Vinamilk, Hanoi-
based SCIC said in the statement.
SCIC chairman Nguyen Duc Chi
said it plans to complete the stake
sale this year, according to state-
controlled VnEconomy on its
website on Sept. 24. The minimum
price for the first installment of the
sale will be determined in
November, the report said. SCIC
currently holds a 45 percent stake
in Vinamilk.
Shares of Vinamilk have climbed 32
percent this year, compared with
an 18 percent advance for the
benchmark. The stock was added
to MSCI Inc.’s frontier-markets
indexes in August. Vinamilk fell 0.6
percent at the midday break on
Friday.
Samsung turns farmers into
bigger earners than bankers
Bloomberg - A few years ago,
Nguyen Thi Dung was feeding
chickens and planting rice to make
ends meet in one of the poorest
areas in Vietnam. This year, she
expects to earn more than a
typical stockbroker in the country.
The difference? Samsung.
The South Korean electronics giant
moved into the rice paddies of Bac
Ninh province in Northern Vietnam
and began rolling out smartphones
seven years ago. The latest exports
include the company’s new Galaxy
Note 7 phones and their batteries,
which have embroiled the global
brand in a massive product recall.
Those gadgets have transformed
Dung’s sleepy village into the
country’s second-biggest exporting
center after Ho Chi Minh City.
“Our lives have improved
dramatically since Samsung came,”
says the 57-year-old ex-farmer, who
now rents rooms and sells groceries
to assembly line workers, and
expects to earn the equivalent of
$68,000 this year. “I want to buy a
car and have my children drive me
around.”
Samsung Electronics Co. and its
affiliates have built a factory town
with 45,000 young workers and
hundreds of foreign component
suppliers -- a miniature version of
the family-
run chaebolconglomerates that
dominate business back in
Korea. The investment has been a
windfall for businesses in Bac Ninh --
almost 2,000 new hotels and
restaurants opened between 2011
and 2015 according to the
provincial statistics office -- helping
raise the province’s per capita GDP
to three times the national average.
“Samsung’s investment has created
a breakthrough that spurred the
economic growth of not only Bac
Ninh but the nation,” said Nguyen
Phuong Bac, head of a Bac Ninh
socioeconomic institute. “It has
quickened the country’s
industrialization.”
The Korean company represents
the first stage in Vietnam’s plan to
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ENTERPRISES
inherit a slice of the manufacturing
mantle of China, which is losing
makers of apparel, electronics and
consumer goods because of
soaring wages and costs. China’s
ability to attract factory investment
in the 1980s and 1990s from abroad
helped it build home-grown
suppliers and eventually its own
global companies. Samsung
Electronics opened its first plant in
China in 1992.
Shares of Samsung Electronics rose
4.5 percent at close in Seoul trading
today, a record high.
Airport Terminal
Now the company has bet large on
Vietnam. White buses emblazoned
with the blue Samsung logo rumble
past water-buffalo grazing across
the street from the Samsung SDI Co.
battery plant. Trucks ferry Galaxy
smartphones on the Bac Ninh-Noi
Bai Highway -- opened
simultaneously with Samsung’s
operations -- to Noi Bai International
Airport, where the company has
asked for its own cargo terminal.
This week, local news websites
reported that Samsung has applied
to the customs department for tax
exemptions to re-import flawed
Galaxy Note 7 smartphones and
export replacements to Samsung’s
headquarters in South Korea. The
company declined to comment on
the production of the phone or
details of the product recall.
More than half of 856 foreign
companies that had invested a
combined $11.9 billion in Bac Ninh
province by June were related to
Samsung. Foreign investment now
accounts for 60 percent of the
province’s economy, said Nguyen
Duc Cao, vice director of Bac Ninh
Industrial Zones Management
Board, who owns a gold-colored
Samsung S6 phone.
Samsung’s $15 billion investment in
Vietnam has made it the country’s
largest single exporter, shipping
about $33 billion of electronics last
year. The year before the South
Korean company came, Vietnam’s
total exports of mobile phones and
other telecommunications products
was $593 million.
In addition to the two Bac Ninh
plants, Samsung has opened
factories in nearby Thai Nguyen
province and in Ho Chi Minh City --
employing about 130,000 workers
nationwide.
“We will continue to strengthen our
business in Vietnam and our
expansion plan is dependent on
consumer, market trends,” the
company said in an e-mail.
Vietnam’s long-term economic
growth requires it become “a
haven of investment,” said Scott
Rozelle, a Stanford University
development economist. “There
are all these spillover effects -- you
get everybody working.”
“Samsung provides very good
working conditions,” Le Thi Hoa, a
22-year-old Samsung SDI assembly
line worker in Bac Ninh, said as she
shopped at an open-air vegetable
and fruit market near the factory.
“We get good benefits here,
including health insurance, and
free holiday trips with the company.”
Samsung has put Vietnam in the
vanguard of countries trying to
inherit China’s factory jobs,
competing with the likes of
Bangladesh, Thailand and
Indonesia. Yet none has the
confluence of cheap labor, cheap
capital, a vast domestic market,
infrastructure, education and
political will that fostered China’s
industrial boom.
If Vietnam is to follow China’s
model, it will need to develop
home-grown suppliers that can
provide more advanced
components than basic products
like packaging, said Bac at the
socioeconomic institute.
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MARKET & PRICES
Local companies flee urban
areas to escape competition
The growth rate of the fast-moving
consumer goods (FMCG) segment
of the Vietnam economy is slowing
down, with a few areas showing
strong prospects for potential
growth.
The rate of expansion of FMCG
sales in the country’s six main
population centres jumped 3.6%
on-year for the first quarter of 2016,
according to a recently released
survey conducted by market
research firm Nielsen.
This compared to 5.7% on-year
growth for the fourth quarter of
2015.
Beverages, milk products and food
were the three biggest sellers for
the quarter accounting for 39%,
16% and 15% of total sales for the
segment, respectively.
They were trailed by tobacco
products (13%), personal care items
(8%), household products (6%) and
baby products (4%).
Market challenges
The easing of FMCG sales is
consistent with the general
deceleration of the Vietnam
economy whose GDP has slowed
to 5.52% on-year growth in the first
half of 2016, down from 6.32% for
the corresponding six-month period
a year earlier.
Consumers in the six major
metropolitan areas of Vietnam are
increasingly demanding and
expecting better choices,
according to Nguyen Anh Dung,
director of retail measurement
services at Nielsen Vietnam.
They are specifically looking for
innovative new products, which
represents an advantage for
newcomers to the market.
According to one recent product
innovation study, Vietnamese
consumers try more new products
than other Southeast Asian
consumers, with 88% of Vietnamese
buyers reporting they bought a
new item during their last shopping
trip, compared to a 69% regional
average.
However, as trade barriers are
lowered as a result of the ASEAN
Economic Community, Vietnamese
FMCG manufacturers are preparing
and drawing up strategies to face
greater regional competition.
Potential remains strong
Medium-term potential in the
market appears strong, according
to a report issued by the Ministry of
Industry and Trade early this year.
Fuelled by growing incomes and a
young consumer base, FMCG
spending is expected to climb
modestly to US$173 billion by 2020.
Consumer confidence remains
relatively strong (though slightly
down) heading into the second
half of 2016, according to an
August Nielsen survey, with the
index at 107 points, two below the
first quarter’s peak.
The vast majority of manufacturing
companies in Vietnam also have a
positive outlook for the second half,
a General Statistics Office survey
reported, with more than 90% of
respondents expecting production
to either increase (55%) or remain
stable (35.4%) in the second half of
the year.
Market prospects
The potential consumer market is
significant, and the penetration
rate for many FMCGs has yet to be
maximized, according to Mai Kieu
Lien, CEO of dairy industry leader
Vinamilk.
However, purchasing power in
Vietnam is also one of the lowest in
the Southeast Asian region, she told
the Oxford business Group recently,
so a localized strategy sensitive to
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MARKET & PRICES
pricing has to carefully be put in
place.
A number of leading Vietnamese
FMCG producers are looking at the
country’s neighbours for growth.
Kajiwara Junichi, CEO of food
manufacturer Acecook Vietnam,
recently told reporters his company
is focusing on Laos, Myanmar and
Cambodia as good markets to
enter.
Another area of potential growth is
the rural regions of Vietnam, home
to roughly two-thirds of the
population and almost entirely
ignored by foreign companies
entering the Vietnam market.
According to a report by market
survey company Kantar WorldPanel,
household income in rural areas in
Vietnam is rising faster than in the
urban centres in terms of
percentage rate of growth.
Though, obviously this survey could
be misleading.
The rate of increase is simply
magnified because the starting
wage base is extremely low.
The wage base in absolute dollars
in the rural areas of Vietnam is small,
which accounts for the lack of
interest of foreign companies in
pursuing these markets.
However, local Vietnamese brands
are aggressively seeking market
share in the rural areas outside of
the six major metropolitan areas of
the country as they search for
refuge from the onslaught of
foreign competition.
Extra taxes keeps Vietnamese
buyers from cheaper cars?
VNS - Buying cars for cheap
remains an elusive dream for many
Vietnamese who have been saving
up to buy their first ever automobile
after expecting steep price cuts on
vehicles imported from ASEAN
member countries.
While tariffs fell following the birth of
the ASEAN Economic Community
this year, the Government added a
duty of US$1,000-$2,000 on
imported cars in early September.
Buyers and car traders were waiting
for amendments to the Law on
Special Consumption Tax in July
that reduced the tax on cars with
engines of less than 1,500cc from 45
per cent to 40 per cent.
But the tax on cars with 1,500-
2,000cc engines remains at 40-45
per cent, while the rate for 2,500cc-
3,000cc vehicles rose from 50 to 55
per cent.
Popular small cars such as the
Hyundai i10 and i20, Kia Morning,
Toyota Vios, Toyota Yaris, Ford
Fiesta, and Mazda 2 cost around
VND358-670million ($15,900-29,910).
But their prices have all risen.
Unfortunately, beginning in early
September 2016, import tariffs on
imported cars with engines below
1,500cc increased $1,000 against
July 1, 2016. For instance, an import
tariff levied on a Kia Morning with a
1,000cc engine has risen from
$4,700 to $5,600. The Kia Rio
Hatback with a 1,400cc engine is
now levied at $7,500, instead of
$6,500. The Hyundai Accent with a
1,400cc engine has been lifted to
$6,700 from $5,700. For vehicles with
engines ranging from 2,000cc, such
as the Kia Optima with a 2,400cc
engine, they are being taxed at
$15,600, instead of $13,000, and the
Kia Sportage LX with a 2,000cc
engine is levied at $13,000, instead
of $11,000.
The duty is also levied on second-
hand cars, at the rate of $5,000 on
those with engines below 1,000cc
and $10,000 on those with 1,000-
1,500cc.
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MARKET & PRICES
The retail prices of luxury cars and
those with high cylinder capacity
have gone up dramatically due to
the new tariffs and duty.
Stimulating car sales
Quang Tuan, a Ha Noi resident, said
he was saving to buy a cheaper
small car after July 1, but with the
extra duty he has had to
temporarily shelve his plan.
Van Nam, an automobile trader in
Ha Noi's outlying Gia Lam District,
said sales of small cars has been
slowing down.
Ford, Suzuki, Mazda, and other
dealers also confirmed that there
was no sudden change in prices
after the law came into effect.
A car dealer of Chevrolet in Ha Noi
said that sale volumes over the
months were not influenced by the
special consumption tax. Because
of this General Motors Vietnam has
launched its monthly promotional
campain by asking its sale agents
to strongly cut prices.
Manh Tu, a sale representative of a
Toyota car dealership in Ha Noi,
said to stimulate purchasing power,
his car dealership has offered many
promotions by reducing prices
between VND20 to VND30 million
for small vehicles such as Vios or
Yaris.
"The price of a locally assembled
Ford Fiesta with a 1,500cc engine is
being offered at a promotional
discount ranging from VND40
million to VND44 million per unit.
While, cars with bigger engines like
the Ford Ranger from 2,200cc to
3,200cc are being offered at a
promotional discount of VND10 to
VND30 million, with an average
sales of 10 to 15 units per month per
sales agent," Hong Minh, a sales
representative of Ford Thang Long
told Viet Nam News.
An auto expert said that in May
and June, many car dealers have
stimulated purchasing power by
slashing selling prices to be
equivalent to the tax reduction of
the special consumption tax on July
1, 2016.
Reffering to the policy for special
consumption rates and car prices in
Viet Nam in the future, President of
the Vietnam Automobile
Manufacturers Association (VAMA)
Yoshihisa Maruta told a press
conference recently held to
celebrate the association's
15thanniversary of its establishment
in Ha Noi that each car in Viet Nam
has been bearing various taxes and
fees including import tax, luxury tax
rates, value-added tax and
registration fees, so it's difficult to
foretell the time when car prices
would be truly reduced.
However, he said VAMA and other
auto businesses will make their best
efforts to give clients a suitable
price.
VAMA will continue to propose to
the Government to ensure the
rights and interests of auto makers,
both locally-assembled products
and imported, as well as of buyers
nationwide.
Arrears on luxury cars
Nguyen Van Phung, a
representative of the General
Department of Taxation said that
domestic auto importers raced
against time to import cars before
June 30 to avoid higher special
consumption taxes. However, if the
imported cars were sold after July 1,
they will automatically collect
arrears.
Tax rates on luxury cars with engines
ranging between 2,500cc-3,000cc
will see a rise from 50 to 55 per cent.
For those with engine
displacements between 3,000cc-
4,000cc, the rise will be an even
sharper 60 to 90 per cent, and cars
with engines between 5,000cc –
6,000cc will see a rise from 130 to
150 per cent.
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LEGAL UPDATES
Amendments to 05 Circulars
pertaining to tax
VLO - Circular No. 130/2016/TT-
BTC dated August 12th, 2016 of the
Ministry of Finance on guidelines for
the Government Decree
No. 100/2016/ND-CP dated 01 July
2016 on the implementation of the
Law on amendments to certain
articles of the Law on value added
tax, the Law on special excise tax
and the Law on tax administration
and to certain articles of tax-
related Circulars.
This Circular is to amend,
supplement to 5 Circulars on tax,
including:
1. Circular No. 219/2013/TT-BTC on
value added tax (VAT) (which has
been amended at Circular
No.119/2014/TT-BTC , Circular
No. 151/2014/TT-BTC and Circular
No. 26/2015/TT-BTC )
2. Circular No. 195/2015/TT-BTC on
excise tax
3. Circular No. 156/2013/TT-BTC on
tax administration (which has been
amended at Circular
No.119/2014/TT-BTC , Circular
No. 151/2014/TT-BTC and Circular
No. 26/2015/TT-BTC )
4. Circular No. 153/2011/TT-BTC on
tax levied on non-agricultural land
use
5. Circular No. 78/2014/TT-BTC on
enterprise income tax (EIT) (which
has been amended at Circular
No.96/2015/TT-BTC )
Accordingly, one of the most
important amendments in this
Circular is the removal of the
regulation on refund of VAT on
goods sold and purchased
domestically for the purpose of
being appropriate to the new
provisions of Law
No. 106/2016/QH13
In addition, according to this
Circular, with regard to investment
projects on construction of houses
for sale or lease without forming
fixed assets, input VAT on such
projects is not considered the
refund in the form of “investment
projects”
With regard to EIT, according to the
addition of point a1 Clause 6 Article
18 of Circular No. 78/2014/TT-BTC , if
during business and production
activities from 2009 – 2013
enterprises invested finances from
their fixed asset depreciation fund,
net profit for reinvestment, or
investment capital which has
registered with competent state
management authorities into the
addition of machines and
equipment on the regular basis
without increasing capacity of
production and business according
to the registered or approved
business plan, these cases are not
regarded as expansion investment.
In other words, revenue generated
from such additional investment is
still entitled to tax incentives for the
period of 2009-2013
This Circular takes effect from the
date on which Law
No. 106/2016/QH13 and Decree
No 100/2016/ND-CPdated July 1st,
2016 takes effect (July 1st, 2016).
Article 4 of this Circular takes effect
from the tax period of 2016.
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VIETNAM - JAPAN COOPERATION
Japan - Vietnam to join forces
on river redevelopment
Nikkei - Japan and Vietnam are
joining hands in a public-private
partnership to redevelop
Vietnamese rivers. The 22 billion yen
($212 million) project, to be
launched in Ho Chi Minh City as
early as next year, could become a
model for river redevelopment in
flood-prone Southeast Asia.
The project will mainly be carried
out by a special-purpose company
to be jointly established by
Japanese and Vietnamese
businesses. The Japan International
Cooperation Agency will provide
low-interest loans, while private
Japanese companies will also
make investments or extend loans.
At the moment, trading
house Mitsubishi Corp., Mitsubishi
UFJ Financial Group and
construction
companies Shimizu. and Maeda. ar
e expected to participate.
The aim of the project is to
redevelop flood-prone areas along
a branch of the Saigon River about
10km away from Ho Chi Minh
City. An 8.1km sewage canal will
be concreted, and a land area of
61 hectares along the river will be
mainly used for housing, with some
roads and green space. The
project is to be completed by 2020.
Private Japanese companies will
then take over land areas,
depending on investment amounts,
and build condominiums. Some
24,000 condominium units will be
ready by 2022.
Financial aid from Japan will
enable the municipal government
to promote river redevelopment
without worrying about the costs of
infrastructure development, such as
the cost to transfer residents and
the costs for bank, sewage and
road development. Japanese
companies can also invest with
ease if the transfer of residents is
handled by the authorities.
Flooding is a chronic problem for
Ho Chi Minh City. Heavy rain
caused one of the worst-ever floods
in late September. Dredging of the
river is insufficient, and sweeping
measures need to be taken.
Vietnam calls for Japanese
investment in prioritised
sectors
VNA - Vietnam hopes for Japanese
investment in prioritised sectors in
the country’s industrialisation
strategy, along with infrastructure,
energy, climate change response,
and support industry, President Tran
Dai Quang has told Vice President
of the International Friendship
Exchange Council (FEC) Yoshihiko
Nakagaki.
At a reception in Hanoi on October
10 for Yoshihiko Nakagaki, who is
also Chairman of the FEC’s
Committee for Japan-Vietnam
Cultural and Economic Exchange,
the State leader proposed that
Japan speed up technology
transfer to Vietnam and help the
country in human resources
training.
He expressed his hope that
Japanese firms invest more to
Vietnam’s promising agriculture
sector, while proposing that the FEC
encourage more Japanese
localities and businesses to seek
partnership with Vietnam in the
field.
The President said that he believes
the FEC, with a large number of
members and strong influence, will
continue making effective
contributions to the expansion of
cultural & economic cooperation
between the two countries.
Vietnam highly values the role of
the private sector of Japan in
boosting economic ties between
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VIETNAM - JAPAN COOPERATION
the two countries, he stressed,
affirming that together with large
firms, Vietnam welcomes small and
medium-sized enterprises from
Japan to invest to the supporting
industry.
Vietnam will strengthen its efforts to
complete legal and policy
frameworks to create a stable and
favourable investment and business
environment for foreign investors,
including those from Japan.
The President also noted that
Vietnam is working with the
Japanese side to implement the
sixth phase of the Vietnam-Japan
joint initiative on improving
investment environment in Vietnam.
Vietnam considers the success of
foreign investors as its own, he said.
Expressing his delight at the growing
extensive strategic partnership
between the two countries over the
past years in all fields, he noted that
Japan is the leading economic
partner and the largest ODA
provider of Vietnam, as well as the
second biggest investor and fourth
largest trade partner of VN.
He held that progress in the
regional connection process,
including the establishment of the
ASEAN Community, the signing of
the Trans-Pacific Partnership (TPP),
and the negotiation for the
Regional Comprehensive Economic
Partnership (RCEP), will bring new
prospects for both sides in
economic cooperation.
On his part, Nakagaki briefed the
host on cooperation activities
between the FEC and Vietnam in
recent years. He expressed
pleasure that Japanese ODA and
investment are contributing to socio
-economic development of VN.
He underscored that the FEC will
work hard to connect potential
Japanese investors with Vietnam in
the coming time. In the future,
Vietnam will be the close partner of
Japan in Asia, he held, adding that
Japan is aware of supporting VN in
maintaining growth speed.
Panasonic opens solution,
innovation centre in Vietnam
VIR - Leading Japanese electronics
corporation Panasonic held an
opening ceremony for its display
centre titled "Panasonic Solution &
Innovation Centre Vietnam" at the
Thang Long industrial zone in Ha Noi
on October 7.
The centre has four main areas
consisting of electronics assembly
equipment for surface mount
technology, robotic welding
systems, smart factory solutions and
air conditioning systems.
Panasonic expects the centre will
be the first place in Viet Nam to
introduce technology, smart
production equipment and
comprehensive solutions, which
help optimise the factory's
performance.
The centre will also be a place
showcasing experiences of surface
mount machines, machine
components glued surface,
software management system
PanaCIM and adaptive process
control.
This innovation centre features not
only Panasonic's latest chip
mounter and welding machine, but
also equipment from other partners,
which include component towers
and inspection machines.
This cooperation highlights
Panasonic's message about its
overall solution development
strategy based on technological
interconnectedness and their
contribution to the success of
Industry 4.0 and IoT-supported
manufacturing line.
In addition, customers can
experience the actual
manufacturing process of a printed
circuit board and welding
machines by bringing their own
materials and electronic
components for trial production.
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HIGHLIGHTS
Hanoi to host Vietfood,
Beverage - ProPack next
month
VOV - The Vietfood and Beverage-
ProPack international exhibition is
set to take place at the Ha Noi
International Exhibition Centre on
November 9 -12.
The event held by Vinexad is
expected to attract 180 enterprises
with more than 200 pavilions from
11 countries and territories,
including the Republic of Korea,
Thailand, Russia, Malaysia, Italia,
Denmark, Spain, Lithuania and
China.
Vegetables (fresh, dried, canned,
processed), seafood (cooked,
frozen), agricultural products
(coffee, tea, cashew, pepper),
food ingredients, beverage,
confectionery, and packaging and
food preservation equipment will
go on display at the event.
It is predicted that as many as
15,000 visitors, especially e-
commerce partners from
agricultural areas of some northern
provinces will participate in the
four-day event.
This is the first time for Hanoi to host
such an event after it has been
held in HCM City for 20 years.
HCMC and its ambition to
build a Silicon Valley
VNN - HCM City leaders are making
aggressive moves to turn Saigon
into the Silicon Valley of Vietnam.
In an 11-page document issued by
the city authorities in August about
the program to support small and
medium-sized enterprises’
innovation to 2020, there are five
projects on start-ups. This is
considered one of the first concrete
steps in terms of policy to realize the
ambition to turn the city into a
Silicon Valley of Vietnam.
HCM City aims to directly and
indirectly support 2,000 start-ups
project from now to 2020 through
consultancy, training, connections,
incubation activities ...
To do this, 40,000m2 of floor and
two international-standard
incubators will be created for the
startup community. In the next four
years; 50% of secondary schools in
the city will have clubs on
innovation; andv20 universities and
colleges will have courses on
startups.
The city has made many moves to
support start-ups.
The Saigon Hi-Tech Park Incubation
Centre (SHTP-IC) put into operation
an Innovation Lab on April 8 in
order to promote research,
creativity and start-ups in business
incubation projects.
The Innovation Lab is an open
space equipped with the necessary
infrastructure for the development
of products in information
technology and electrical-
electronic-telecom sectors.
It is open to both individuals and
organisations.
Deputy head of SHTP-IC
management board Duong Minh
Tam said the Innovation Lab will
help to increase competitiveness in
creativity and innovation among
individuals and organizations
working in advanced technology.
In June the city announced the
introduction of a credit support
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HIGHLIGHTS
package for startups worth VND1
trillion ($45 million).
City Chairman Nguyen Thanh
Phong said that the funds will come
from its budget and provide
support to startups in management,
technology, and access to bank
credit.
Businesspeople under 35 years of
age will be prioritized. The city will
hold exchange meetings between
youth, undergraduate students,
and successful businesspeople and
will also organize startup clubs.
He also promised to reform
administrative procedures, revoke
illegal permits, and tackle
counterfeiting and trade fraud.
Nguyen Trong Hoai, Vice Principal
of HCM City’s University of
Economics, said that his university
will soon begin introducing training
courses titled ‘Start-up
Administration’.
In July the HCM City Young
Businesspeople Association (YBA)
said it would support 1,000 creative
start-up projects during the 2016-
2020 period. The association will
also accompany 300 start-ups and
calls for VND500 billion ($22.5
million) investments in more than
100 others.
In August, the Saigon Innovation
Hub (SIHUB) was launched by the
HCM City Energy Conservation
Centre (ECC) under the municipal
Department of Science and
Technology.
Director of the Department of
Science and Technology Nguyen
Viet Dung said SIHUB will be a
channel linking the department
and the startup community; hence
they will make use of the city’s
supporting policies, and public
resources.
SIHUB will prioritize projects in four
key industrial sectors of the city:
food processing, electronic-
information technology,
mechanical manufacturing, and
chemistry (rubber, plastic,
pharmaceuticals).
HCM City, one of the country’s
largest economic hubs, is targeting
to expand the number of
enterprises in the city to 500,000 by
2020, according to its draft plan
announced earlier this month.
Currently, the city has 270,000
registered firms, or 31.7 percent of
country’s total including 170,000 in
operation. It also has 250,000
private family businesses with high
potential to develop into
companies.
In 2015 non-State enterprises
contributed 24.5 percent of the
city’s GDP and 15.7 percent of its
budget revenue.
Automobile and auto parts
industries need overhaul
VNS - Back in the 1940s, the
Japanese government was facing
a question it found hard to answer:
should it develop the automobile
industry?
There was stark division on the issue,
with some arguing that if the
country could import vehicles from
other countries, it did not seem
essential to develop the products
oneself.
However, thanks to the
implementation of several policies
supporting the production of auto
parts and components, the country
is now among the world's giant
auto manufacturers with many well-
known brands.
The story could be a very good
lesson for Viet Nam, which is also
seeking answers to a similar
question, Nguyen Thi Xuan Thuy,
director of the Integration Policy
and Strategy Division under the
Institute of Industrial Policies and
Strategies (IIPS), said.
There are justifiable reasons to pose
this question.
In two years, the tariff on complete-
built-in (CBU) units on automobiles
imported from ASEAN nations will
be zero per cent under the ASEAN
Free Trade Agreement. So
consumers will be able to purchase
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HIGHLIGHTS
new cars without paying as much
money as they currently do.
In particular, the local part supply
industry is still underdeveloped, not
to mention concerns over
environmental problems potentially
caused by the industry.
Thuy said "Domestic manufacturing
and assembling enterprises in the
country still have to import
automobile spare parts from various
sources such as ASEAN, Japan,
China, South Korea and Europe."
"The import raises the production
costs directly due to import tax and
indirectly through additional costs
such as transportation."
Vu Quang Tam, deputy general
director of Honda Viet Nam, once
told a Vietnam News Agency
correspondent that unlike the
production of motorbikes, for which
the localisation rate (the
percentage of locally-made
components used to assemble a
bike) reached nearly 97 per cent,
the rate of the automobile industry
was still very low.
In a recent conference on industry
development, the average
localisation rate was reported to be
much lower than the target of an
average 40 per cent set for 2020
and 60 per cent for 2025.
Tam explained that the size of the
Vietnamese automobile market is
not large enough to attract
investors to manufacture auto parts
and components.
Thuy agreed, saying "The scale of
the market is now much smaller
than other countries' in the region
(only equivalent to one-fifth of
Thailand or one-sixth of Indonesia)."
"With such a small scale, we don't
have any advantage of scale.
That's why the local production cost
of a vehicle is 20 per cent higher
than that of other ASEAN countries."
Pham Van Tai, Permanent Deputy
Director of Truong Hai Auto
Corporation (THACO) admitted
"With deeper international
integration, especially after 2018,
local auto manufacturing and
assembling firms like THACO will
face severe competition from auto
firms in ASEAN member countries."
Despite having high localisation
rate (15-20 per cent for passenger
cars, 35-45 per cent for trucks and
50-65 per cent for buses), the
company still have to find ways to
overcome the common difficulties
caused by modest market size, Hai
said.
Honda Viet Nam leader Tam
added that the part supply industry
was facing hardship, partly due to
the Government's support policies
which had not fully worked.
For instance, some part suppliers of
the company had to import steel
and iron from abroad because
most steel and iron products
produced domestically were
serving the construction industry.
Tran Thanh Van, general director of
Dry Cell and Storage Battery Joint
Stock Company (PINACO) which
supplies batteries to many leading
automotive and motorbike makers,
said 60-70 per cent of the materials
needed for production are
imported.
"Therefore, policies related to
monetary and exchange rates and
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HIGHLIGHTS
fluctuations on the international
market affect us."
Besides this, there is unfair
competition between locally made
batteries and imported ones since
importers usually declare lower
prices to evade tax.
He said "While local battery
producers are bound by regulations
on environment and responsible for
used batteries, importers are not
bound by such regulations."
Van suggested that the
Government create a sound
competitive environment in which
all businesses have the same
responsibilities in terms of tax,
environment and other issues.
Market potential
According to Thuy, if Viet Nam is
not going to continue producing or
assembling vehicles, it will not only
have a negative effect on auto
makers, but also result in lost
opportunities to develop other
potential related sectors, such as
mechanical engineering, rubber,
plastics, electronics and magnet
wire.
In fact, the automobile market in
Viet Nam is considered very
prospective.
According to experts, the potential
of a country's automotive market is
assessed based on factors such as
the size and structure of the
population, the per capita income,
the number of vehicles per 1,000
inhabitants and the development
of infrastructure.
"It can be seen that the elements of
population, income and
infrastructure conditions are
favourable for the development of
the Vietnamese automotive market
in the next 10 years," Thuy said.
Regarding the population, Viet
Nam has over 90 million inhabitants
and the population of the middle
class is growing with per capita
income estimated to reach the
threshold of US$$3,000 in 2020.
Viet Nam's automobile market is
expected to enter the stage of
motorisation in the 2020-2025 period
when automotive consumption
rate (motorisation) will reach 50
vehicles per 1,000 inhabitants, Thuy
said.
Road traffic systems are growing
strongly with intercity connection
through a network of highways,
which will also create more
favourable conditions for traveling
by private cars, she added.
How to develop
According to Thuy, with the
presence of the world's large
manufacturers and automobile
assemblers, such as Toyota, Honda,
Ford, GM and Mecedes-Benz, it will
be unfortunate if Viet Nam cannot
take advantage of this opportunity
to build an automotive industry and
foster the growth of the auto parts
sector.
Viet Nam now has a vast network
of part suppliers for motorbike
production, which is the basic
foundation for the development of
the auto parts industry, Thuy said.
"Without the domestic automotive
industry, in the future, when the
needs of the Vietnamese people
increase, Viet Nam will have to
import a large amount of new CBU
and even used ones from abroad,
which will put pressure on trade
balance and raise environmental
issues."
Besides this, when the motorbike
industry is saturated, if the
automotive industry does not grow,
suppliers of motorbike parts will not
have a chance to continue their
operation.
Honda Viet Nam Deputy General
Director Tam said auto
consumption is an obvious trend.
However, to develop the industry, it
is necessary to develop co-
operation among ministries and
agencies to define "which market
segment should we focus on."
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