News Collection 2016 Vol 005

SEIKO IDEAS CORPORATION

Vietnam Business Review

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Vol 05, February 03rd 2016

BUSINESS REVIEW VIETNAM

Vietnam - an attractive retail market: research

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INSIDE THIS ISSUE

Highlights

Are foreigners cornering VN's clothing and textile market?

Vietnam's e-commerce sales reach $4b in 2015

Vietnam retailer Tiki to raise $18m: report

Economy

Rice exports increase sharply in January

VASEP: Shrimp export to earn $3.3b in 2016

Banks & Finance

Domestic lending drops off in January

Dollar keeps sliding in Vietnam as foreign investment boosts supplies

Investment

Belgian multinationals heading to Vietnam

Investors in a race for the food market

Enterprises

Thai giants want to acquire entire Prime Group

PVGas to buy 56% of CNG

Market & Prices

January retail sales surge 11%, biggest increase in 05 years

Car rental prices in Vietnam rise by up to 50% around Tet

Legal Updates

Government issues resolution on TPP signing

New policies take effect in February



1

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ECONOMY

Rice exports increase sharply

in January

VNS - Viet Nam exported nearly

315,000 tonnes of rice as of January

28, an increase of 46 per cent

compared with the same period

last year, according to the Viet

Nam Food Association.

The rice exports were shipped at

US$127 million in free on board

(FOB) value and $135 million in cost,

insurance and freight (CIF) value,

up 39 and 42.5 per cent,

respectively.

According to the association, the

increase in rice exports last month

was due to the fact that Viet Nam's

rice exporters had to complete

government-to-government deals

with the Philippines and Indonesia.

Last year, Viet Nam exported 6.5

million tonnes for $2.68 billion, a

decrease of 3.9 percent in value.

Asian countries were the main

buyers, accounting for 74.5 per

cent of exports, followed by Africa

(13.7 percent), and the US (6.7 per

cent).

The association forecast that rice

export volume this year excluding

border trade is expected to remain

the same as last year's.

VASEP: Shrimp export to earn

$3.3b in 2016

VNA - The Vietnam Association of

Seafood Exporters and Producers

(VASEP) forecasts that shrimp

exports will reach US$3.3 billion in

2016, up 12% from 2015.

The sector saw a surge in the first

month of this year, up 8% from the

same period last year, according to

VASEP.

Shrimp prices also saw a slight

increase of 5-20% in the Mekong

Delta region due to low supplies.

Statistics from the General

Department of Vietnam Customs

showed that shrimp exports to the

US generated US$657 million in 2015,

up 38.3% from 2014, making the US

the largest import market of

Vietnam.

Vietnam’s shrimp exports to the US

in 2016 will rise thanks to positive

results from the ninth administrative

review (POR9) for anti-dumping

duties on Vietnamese frozen shrimp

and the signing of the Trans-Pacific

Partnership (TPP).

The average anti-dumping tariff

rate levied on most Vietnamese

frozen shrimp sold in the US market

plummeted from 6.37% in the POR8

to 0.91%, as regulated in POR9. This

has eased the tax burden on

Vietnamese shrimp exporters.

In addition, the US’s growing

demand for Vietnamese shrimp,

spurred by the rising dollar, will

increase shipments. Rising demand

has also resulted in vibrant shrimp

retail promotions in the US, creating

opportunities for Vietnamese shrimp

suppliers to boost exports to the

country.

In 2015, Vietnamese shrimp was

sold in 92 markets, down from 150

markets the previous year.

Key markets included the US, Japan,

the EU, China, the Republic of

Korea, Canada, Australia, ASEAN

and Switzerland.




2


BANKS & FINANCE

Domestic lending drops off in

January

VNS - Lending by January 20, 2016

declined 0.21% against the end of

last year, according to a report

released by State Bank of Viet Nam

(SBV) yesterday.

Despite the decline, SBV said that

lending in the first month this year

was still more optimistic than the

same period last year when the

lending down 0.5%.

According to experts, higher

economic growth this year could

push up the demands for capital.

Credit institutions have also been

optimistic about the ability of

businesses to take loans this year,

according to a recent SBV survey.

Under the survey, the institutions

expected outstanding loans to

surge to 21.4% on average, much

higher than the 14.57% forecast in

the same survey in late 2014.

SBV this year also targeted a credit

growth of 18% to 20%, however,

adding that the rate might be

adjusted flexibly based on the

actual situation, the same as in

2015.

In 2015, SBV first targeted a credit

growth rate of 13%, but then

adjusted it between 15% and 18%

to meet the rising capital demands

of the economy.

Dollar keeps sliding in Vietnam

as foreign investment boosts

supplies

TNN - The US dollar has fallen quite

sharply in Vietnam this month as

ample supplies, boosted by strong

foreign investment flows, come at a

time when dong savings have

become more attractive.

Following the central bank's fourth

cut this week, the mid-point rate for

the dollar dropped to a five-month

low of VND21,881 on Friday,

compared to VND21,910 on

Monday.

Since banks are allowed to trade

the greenback within 3% above or

below the daily-issued reference

ate, the country's biggest lender

Vietcombank reduced its rate by

0.6% to VND22,255 on Friday. That

was down 1.2% from early this

month.

As foreign investors have pumped

more money into Vietnam, the

forex market has been seeing a

surplus on the supply side, which in

return has caused the dollar to fall

continuously, a representative of

HSBC Vietnam told Thanh Nien.

Foreign investors disbursed $800

million in the January 1-20 period,

up 23.1% YOY, according to figures

released by the Foreign Investment

Agency.

Industry insiders said major M&A

deals, particularly the $1.1b[]

transaction between Thailand's

Singha Group and local consumer

goods group Masan, also

increased supplies of foreign

currencies. In the record deal

signed the end of last month, the

Thai group bought stakes of 25%

and 33% in two of Masan's

subsidiaries.

Overseas remittances, which often

come in most strongly in January,

the month before the Tet Lunar

New Year, are also expected to rise

sharply this year, said Nguyen

Hoang Minh, vice director of the

central bank's Ho Chi Minh City

office.

The central bank has recently taken

measures to curb dollar hoarding.

It cut interest rates to zero on dollar

deposits by businesses in

September and then by individuals

in December.

Reports from banks showed that

their dollar deposits have declined

since the last quarter, as many

customers have switched to dong

savings accounts to enjoy higher

interest rates of 5-6.5%.




3


INVESTMENT

Belgian multinationals heading

to Vietnam

VOV - Over the past decade,

Vietnam’s resilient economy has

grown in importance to

international trade and foreign

direct investment (FDI) relative to

western developed post-industrial

economies, says Belgian

Ambassador to Vietnam Jehanne

Roccas.

Most notably, the vigorous

development of global value

chains (GVCs) that extend over

several countries and even

continents has induced a changed

perspective towards outward FDI

by Belgian companies.

Whereas their executives once

simply thought of investing abroad

as a substitute (or replacement) for

manufacturing facilities at home,

today Belgian business leaders are

beginning to view FDI in countries

like Vietnam as an extension of

those activities.

Belgium is one of the European

countries with the highest%age of

export coming from trade

movements within GVCs and it is

fair to describe the economy as

that of a ‘middleman’ in

international trade, said

Ambassador Roccas.

She said each year, Belgium’s

economy is processing an ever

increasing share of intermediate

goods for export and its strengths lie

in chemicals, manufacturing,

logistics and the beverage and

tobacco industries.

As such, it is imperative for the

nation’s businesses to develop

complimentary GVCs in Vietnam if

they are to remain competitive and

relevant to international trade in

general, and to the ASEAN region in

particular.

A large share of Belgian export of

goods consists of products with high

skill and technology intensity,

mainly thanks to the particularly

strong position of chemicals and

pharmaceuticals in Belgian export.

Citing statistics from the Ministry of

Planning and Investment, the

Ambassador said through the end

of 2015, Belgium companies

registered a strong FDI of US$421.66

million in 59 companies throughout

the nation.

Last year, Belgium companies

received investment certificates for

four new business ventures and

increased their investment in two

projects that began operations in

2014 and prior.

With ASEAN and Vietnam’s rising

promise as the manufacturing hub

of the globe, the Ambassador said

she expects to see exponential

increases in Belgian companies’ FDI

in the future.

Meanwhile, Brussels, Belgium-

headquartered chemicals giant

Solvay SA has announced plans to

open an office in Ho Chi Minh City

and said it is actively pursuing a

number of deals in the chemicals,

automotive, agriculture and

electronic industries.

Speaking at a recent trade event in

HCM City, Vincent Decuyper, a

company representative, said the

company is bullish on the Vietnam

market, particularly in light of the

birth of the ASEAN Economic

Community (AEC).

Currently, Solvay employs an

estimated 30,000 workers in 53

countries around the globe. It

specializes in numerous fields

including chemicals, energy, the

environment, automotive,

aeronautics, electrical and

electronics.

On January 19-20, the company

organized ‘Solvay Vietnam Day’ in

HCM City at which 40 Solvay

managers sat down with

representatives from local




4


INVESTMENT

companies to seriously discuss

trade and investment deals.

They gave indications they were

closely scrutinizing investments in

the oil, gas, fertilizer, chemical and

dairy industries

Investors in a race for the food

market

VNA - Vietnam’s food market is at

its busiest ever, as investors are

pouring into the industry on the

back of local people’s increasing

demands for food and beverages.

According to Theodore Knipfing,

Director of Retail Tenant

Representation in the Asia Pacific

Region for Cushman & Wakefield –

a global leader in commercial real

estate services, food demand in

foreign countries is saturated. So

they have to look to new markets,

and Vietnam is very attractive

thanks to its young population,

people’s increased income and

rapid urbanisation, he said.

Whilst studying the consumption

trends of young Vietnamese, fast

food suppliers have found that the

domestic food industry still thrives,

despite the ups and downs of the

economy. Therefore, major brands

have set food retail as a priority

business in the Southeast Asian

nation. QSR Vietnam of the Dairy

Queen group – part of Warrant

Buffet’s Berkshire Hathaway Inc, for

example, last month announced

that it will open a second DQ Grill &

Chill fast food outlet in Ho Chi Minh

City.

John Gainor, President and CEO of

International Diary Queen, Inc.

(IDQ) – a subsidiary of Berkshire,

said IDQ now has 21 DQ-branded

restaurants as joint-ventures with

QSR Vietnam in a little over a year.

The figure is expected to climb to

60 by 2019.

The presence of the world’s top fast

food brands has turned the

Vietnamese market into a fierce

competition which is currently

being driven by KFC and Lotteria.

QSR said that apart from its typical

dishes, the company have also

developed a new range to suit

local tastes and ingredients, thus

raising the competitive edge of

their products.

Also, the US’s Starbucks Coffee

entered the Vietnamese market at

the end of 2013, putting it in

competition with brands such as

The Coffee Bean and Tea Leaf,

Gloria Jeans Coffee, Highlands

Coffee and Trung Nguyen Coffee.

McDonalds have five restaurants in

Ho Chi Minh City, but within the

next decade it hopes to have 100

more spots to sell its Big Macs and

compete against KFC, Jollibee and

Lotteria for a share of the market

there.

Joining the trend, domestic

businesses have also

professionalised their production

with attention paid to product

appearance and service quality in

order to increase the value of

traditional local dishes.

These diverse products and services

have enabled Vietnamese

consumers to experience various

new cuisines. Young people, which

make up 70% of the population,

have created a promising market

for service investors.


http://static.english.vov.vn/uploaded/ngoctu/2016_02_03/food_DRMT.jpg?width=490&encoder=wic&subsampling=444



5


ENTERPRISES

Thai giants want to acquire

entire Prime Group

VNN - The plan to purchase the

remaining 15% capital of Prime

Group has been approved by SCG

leaders, with capital of more than

$60 million.

Mr. Kan Trakulhoon, President and CEO of

SCG previously confirmed that the group's

priorities in Vietnam is the acquisition of

other companies, in order to quickly

capture the market.

According to the announcement

of the business plan of the Siam

Cement Group (SCG), Thailand's

largest cement producer,said in

The Nation it has approved the

decision to buy 15% remaining

stake of Prime Group JSC in

Vietnam. This plan is expected to

cost Siam more than $60m.

If the plan is completed, the

percentage of ownership of the

SCG at Prime Group will reach 100%.

Earlier, in 12/2012, SCG signed an

agreement to buy 85% stake in

Prime Group for about $240m.

Acquiring Prime Group will help

SCG become the world's largest

floor tiles manufacturer, because

Prime Group is the fifth

manufacturer of floor tiles in the

world and the biggest

manufacturer of building materials

in Vietnam (accounting for 20%

market share). SCG has up to 200

subsidiaries, and earns annual

revenues up to $13.7b.

In addition to owning shares in the

Pime Group, SCG also invests in

many plastic and packaging

companies in Vietnam. Through its

subsidiary Nawaplastic Industries

(Saraburi), SCG holds more than

20% stake in two listed plastic

manufacturing enterprises of

Vietnam - Tien Phong and Binh

Minh Plastics. Currently, the total

share of Tien Phong and Binh Minh

Plastics in the construction plastic

pipe market of Vietnam is over 50%.

In the packaging industry, SCG

owns two factories in Vietnam, by

acquiring 80% stake in Tin Thanh

Plastic Packaging JSC (Batico). This

group is also a shareholder of

Alcamax Packaging Company

(Vietnam) Co Ltd Packamex

Packaging (Vietnam), Vina Kraft

Paper Co. and Tan A Industrial

Company.

PVGas to buy 56% of CNG

VNS - PetroVietnam Gas

Corporation (PVGas) will buy more

than 15 million shares in natural gas

dealer CNG Vietnam JSC (CNG),

equal to 56% of the company's

capital.

PVGas is now not a shareholder of

CNG. The offered price has not

been released.

Yesterday, CNG rose 1.9% to trade

at VND32,400 ($1.44) per share. If

PVGas offers this price, the value of

this deal could reach VND490 billion

($21.8m).

PVGas will use a part of its

investment and development fund

to buy CNG's stakes. This fund was

worth VND11.27 trillion ($500.7m),

according to PVGas's revised

financial report for last year.

This deal could make PVGas the

biggest shareholder in CNG. After

completing the deal, PVGas will

restructure CNG's business

segments based on the market

region, customer and stage.




6


MARKET & PRICE

January retail sales surge 11%,

biggest increase in 05 years

VNS - The domestic market would

continue to thrive in 2016, said

Director of the Ministry of Industry

and Trade's Domestic Market

Department, Vo Van Quyen.

This prediction has been confirmed

by the initial positive retail sales at

the beginning of this year.

Quyen told that the purchasing

power in January, prior to the Tet

(Lunar New Year) holiday which

falls on February 8, increased 3.5%

from the previous month and

posted an 11% YOY rise.

The purchasing power in the year-

end month saw a record high as

compared to the past five years

while the consumer price index

stayed flat compared in December,

helping stabilise the domestic

market. He said his agency has

ordered the departments of

industry and trade in 53 of the 63

provinces and centrally-run cities to

ensure that the supply of goods

meets demand and at stable prices

during Tet, while surveillance should

be stepped up to prevent

counterfeit and low-quality goods.

In addition, price stabilisation and

promotional programmes at 50

supermarkets nationwide have

facilitated people in their

purchasing.

However, he asked the department

to have specific plans to ensure

supply of necessary goods.

Le Ngoc Dao, deputy director of

HCM City's Department of Industry

and Trade, said businesses in the

city have sufficient supply of

necessary products such as

vegetables, fruits & rice for Tet.

The city has also co-operated with

neighbouring provinces to provide

clean goods to people with 300

booths meeting VietGap standards.

Hien said export turnover was

estimated at $13.8b, increasing

2.2% from the same period last year,

while that of imports was $14b,

making the trade deficit $200m.

Car rental prices in Vietnam

rise by up to 50% around Tet

VOV - The cost of rental cars has

surged by up to 50% as the Lunar

New Year nears, local travel

agencies have said.

The price of renting four-wheel

transport vehicles during the Tet

holiday has risen by between 30

and 50% for journeys from February

8 to Feb-22, which falls between

the first and 15th day of the first

month in the lunar calendar.

A common rental car for general

travel, including Innova, Vios, Laceti,

Matiz, and the like currently cost

between VND800,000 (US$35.88)

and VND1 million (US$44.86) per

day, which is about 30% higher

than usual. On ordinary days, these

cars cost about VND650,000

($29.15) per day, according to a

manager of a car hire company in

Cau Giay District, Hanoi.

For more luxurious models, prices

will increase to VND2 million

($89.72) instead of VND1 million

($44.86) for one day’s rental, which

is a 50% rise, the manager said.

According to car rental agencies in

VN, rental prices on days before Tet

are much cheaper than those of

the days near or right on the

occasion.




7


LEGAL UPDATES

Government issues resolution

on TPP signing

VIR - The Vietnamese Government

agreed to sign the “Trans-Pacific

Partnership” agreement with

Resolution 09/NQ-CP issued on

February 2. It authorized the Minister

of Industry and Trade to ink the

agreement.

Procedures required will be

undertaken by the Ministry of

Foreign Affairs, according to the

Resolution. The TPP signing is slated

for February 4 in New Zealand.

The TPP negotiations started in 2005

and concluded in late October last

year. The 12 members of the

agreement are Australia, Brunei,

Canada, Chile, Japan, Malaysia,

Mexico, New Zealand, Peru,

Singapore, the US and Vietnam.

Once it takes effect, the

agreement will establish a free

trade zone that represents nearly 40

percent of global GDP.

In theory, Vietnam is expected to

gain the most benefits from the

pact, especially in trade of goods,

investment, and services, said

Minister of Industry and Trade Vu

Huy Hoang in an insightful interview

with the Vietnam News Agency.

He, however, pointed out that this

depends on how the country works

to take advantage of the TPP and

deal with any possible challenges.

New policies take effect in

February

A string of fresh policies on

compulsory insurance for

construction investment activities;

assistance in vocationaiontal

training and job search for workers

whose land is withdrawn comes

into effect since February, 2016.

Compulsory insurance for

construction investment activities

Decree 119/2015/ND-CP (Decree

119), dated November 13, 2015, on



shall be valid since February 10,

2016.

Accordingly, Decree 119 regulates

liabilities for participation in

complulsory insurance for


(entities required to buy compulsory

insurance for construction

investment activities; insurance

validity period; scope of insurance

coverage and denial of coverage);

conditions for sale or purchase of



(conditions with respect to

reinsurance assuming enterprises or

foreign reinsurance assuming

organizations; retained liability; sum

assured, rules of determination of

insurance premium; and

Government authority to manage

compulsory insurance on the field.

Guidance on national important

projects

Decree No. 131/2015/ND-CP,

dated December 25, 2015 provides

guidance on national important

projects based on regulations of

the Public Investment Law and the

Investment Law, including the

organization and activities of the

state evaluation council for

investment projects, procedures

and contents and expenditures for

evaluation of the national

important projects.

Indirect overseas investment

Decree No. 135/2015/NĐ-CP,

dated December 31,

2015, stipulates indirect overseas

investment.

Six organizations are allowed to

pour indirect overseas investment

including 1- stock market and fund

management companies, 2 - stock

investment fund via fund

management company (stock

management fund) and stock

investment company, 3- insurance

businesses, 4 – commercial banks, 5

– general financial companies, 6 –

State capital and investment

corporation.




8


HIGHLIGHTS

Are foreigners cornering VN's

clothing and textile market?

VOV - Vietnam’s clothing and

textiles industry has recorded

average annual growth of 15% over

the past five years and experts

anticipate this trend to continue in

the near term with gross export

revenue reaching a record high

$30b by 2020.

Substantially, all of the past growth

has been thanks to foreign

manufacturers relocating existing

facilities to the Southeast Asian

nation to take advantage of lower

labour costs and capitalize on the

benefits of FTAs.

More specifically, the EU, the

second largest export market,

accounts for a 20% share of the

Vietnam clothing and textile export

market. A recently signed free

Vietnam- EU trade deal is projected

to result in billions of dollars of

increased exports through 2020.

A second free trade deal between

the Republic of Korea (RoK) and

Vietnam is also projected to

positively boost the industry’s

exports by billions of US dollars as

well as a third trade pact with the

Eurasian Customs Union (ECU).

Of course the earnings on these

increased sales will inure primarily to

foreign invested businesses and

their shareholders— and to Vietnam

in terms of increased numbers of

good middle-income paying jobs.

According to official statistics, the

industry currently employs 7.7 million

workers in roughly 4,000 companies

and the continued projected

growth over the next few years

readily translates into thousands

more good paying jobs for

Vietnamese workers.

FTAs generally benefit foreign

invested companies in Vietnam

through reduced preferential tariffs,

less expensive raw materials and

supplies, and loosening of other

restrictive trade barriers.

As a result of these free trade

agreements and the potentiality of

the much talked about Trans

Pacific Partnership (TPP), it is widely

reported in the global media that

foreign investors, especially Chinese,

are now attempting to corner the

Vietnam clothing and textile market.

The media reports say, they are

purchasing domestic companies

mostly small factories comprised of

production workshops, a security

room, a canteen and break room

located in cities and industrial zones

with advantageous transport

conditions.

The trend has gathered momentum

to such an extent that the view is

emerging that foreign invested

companies, and not Vietnam’s

domestic clothing and textile

industry, would benefit more from

the TPP than the domestic

economy, should it ever materialize.

With their powerful financial

capability and experience, foreign

clothing and textile manufacturers

are taking over Vietnam’s domestic

businesses precisely to position

themselves to benefit from the TPP.

About 70% of Vietnam’s clothing

and textile exports are currently

produced by foreign invested

companies, which demonstrates

their large operating scale and the

big role they play in the industry.

Vietnam's e-commerce sales

reach $4b in 2015

TNN - Vietnam will likely see a strong

rise in e-commerce this year after

the relatively nascent industry

posted an impressive revenue

of US$4 billion, local media have

reported, citing the Ministry of

Industry and Trade.




9


HIGHLIGHTS

Big players such as Lazada, Tiki and

Zalora, with funding from foreign

ventures, are expected to expand

their business even more through

mobile apps, news website Saigon

Times Online reported on Tuesday.

Since last year they have diversified

their portfolios through

collaboration. Lazada, for instance,

is working with group buying site

Nhommua and mobile retailer FPT

Shop to boost sales, it said.

More e-commerce businesses are

also set to launch supplementary

services such as delivery and

payment to complete their

ecosystems, it quoted Nguyen

Thanh Hung, vice chairman of the

Vietnam E-commerce Association,

as saying.

VC Corporation, which owns

Muachung and Rongbay, and Hoa

Binh-Peacesoft, which owns

Chodientu and Nganluong, are

among a few businesses on track to

have ecosystems of their own, the

website reported.

The participation of new businesses,

including Adayroi and SILdeal, is

also expected to fuel the

competition.

Nguyen Thi Hanh, a senior official

with the trade ministry's e-

commerce department, was

quoted as saying that businesses

must achieve a minimum growth of

25-30 percent a year, or they will fall

behind in a sector that grows 25

percent every year.

However, in order to be stay in

business for a long term, companies

must target an annual growth of at

least 50 percent, she said.

Three popular e-commerce

businesses, namely food ordering

Food Panda, baby foods and

accessories seller Beyeu, and

clothes and cosmetics seller Deca,

have reportedly shut down in

Vietnam last year.

Vietnam retailer Tiki to raise

$18m: report

Tiki, an e-commerce startup, has

been in talks with Internet content

giant VNG Corporation to secure

US$18 million in funding, information

technology news website ICTnews

reported on Tuesday, citing industry

insiders.

If the deal goes through it will set a

new record start-up funding record

in Vietnam, it said.


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Documents

News Collection 2016 Vol 005