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SEIKO IDEAS CORPORATION
Vietnam Business Review
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Vol 51, December 28th 2016
BUSINESS REVIEW VIETNAM
Vietnam sets economic targets for 2017
www.seiko-ideas.com
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Vietnam Business Review
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INSIDE THIS ISSUE
HIGHLIGHTS
Top 10 domestic event in Vietnam 2016
Low localization could sound death knell for auto industry
Vietnam shoe and garment exports see drastic slowdown in 2016
Safe, high-quality agricultural production programme launched
ECONOMY
Vietnam defies Asia slowdown as GDP growth holds above 6%
FINANCIALS
Vietnam’s 2016 credit growth quickens to 18% YoY: Gov’t
Investors bet on Vietnam even as valuations top Southeast Asia
Will “zero dong” banks turn into 100% foreign owned banks?
INVESTMENT
Vietnam pharmacy industry attractive to foreign investors
Vietnam should decide how open it is to investors
ENTERPRISES
Vinamilk surpasses 2016 financial targets thanks to soaring demand
Vingroup rejects rumors of selling Vinmart chain to 7-Eleven
Telco giant FPT to float shares soon
MARKET & PRICES
Asia’s beer war is a battle of acquisitions
Hot cash flow in the real estate market in 2017
LEGAL UPDATES
Vietnam’s new rules lead to record high of business formations
Vietnam likely to approve casino decree by Christmas of early 2017
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ECONOMY
Vietnam defies Asia slowdown
as GDP growth holds above
6%
Reuters - Vietnam’s economy
expanded more than 6% for a
second year, defying a regional
slowdown to remain one of the
world’s best performers as
manufacturing rose.
Key Points
Gross domestic product
increased 6.68% in the fourth
quarter from a year earlier, up from
6.56% in the previous three months,
the General Statistics Office said in
Hanoi Wednesday.
The economy grew 6.21% in
2016, compared with the median
estimate of 6.3% in a Bloomberg
survey
Big Picture
Vietnam ranks among the world’s
fastest-growing economies as its
exports remained resilient to a
global trade slowdown that’s
hurting Singapore and China.
Companies setting up plants in the
country, such as Samsung
Electronics Co., are transforming
the nation into a manufacturing
hub for electronics goods, including
smartphones. The Asian
Development Bank forecast
Vietnam’s economic growth at
6.3% in 2017.
Economist Takeaway
"Vietnam is in a sweet spot right
now," said Frederic Neumann, co-
head of Asian economic research
at HSBC Holdings Plc in Hong Kong.
"Strong growth will persist in the next
several years. It is continuing to gain
market share in exports and even
giving China a run for
competitiveness. Foreign
companies continue to invest in
Vietnam to take advantage of its
highly competitive labor and low
cost. The outlook is bright and it is
one of the standout economies in
Asia."
Other Details
Manufacturing gained 13.61%
in the fourth quarter from a year
earlier, fastest pace this year, Ha
Quang Tuyen, head of GDP
department at the GSO, said at a
briefing on Wednesday
Exports rose 8.6% in 2016,
imports gained 4.6%, according to
GSO
Vietnam posted a trade deficit
of $300 million in December. It had
a trade surplus of $2.68 billion for
2016
Retail sales rose 10.2% in 2016
Disbursed foreign direct
investment climbed 9% to a record
$15.8b this year. Pledged FDI
increased 7.1%
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FINANCIALS
Vietnam’s 2016 credit growth
quickens to 18% YoY: Gov’t
Reuters - Dec 28 Vietnam's banking
sector has expanded loans this year
by an estimated 18%, slightly faster
than an annual growth of 17.26% in
2015 and in line with the central
bank's target, a senior government
official said on Wednesday.
Nguyen Bich Lam, head of the
government's General Statistics
Office, gave the credit growth
estimate at a news conference,
where he also announced
Vietnam's economic growth this
year at 6.21%, behind the 6.68%
expansion in 2015.
Investors bet on Vietnam even
as valuations top Southeast
Asia
Bloomberg - Vietnam stocks are
pricier than their Southeast Asian
peers for the first time in two years --
and they are about to become
more expensive.
“There is room to grow,” said
Dominic Scriven, Ho Chi Minh City-
based Chairman at Dragon Capital.
“We are looking for 19% net growth
for earnings next year,” as the
economy expands and inflation
remains stable, he said.
The benchmark VN Index is trading
15.9 times earnings, compared with
the MSCI South East Asia Index
which is at 14.7. A 15% gain in the
VN Index has led to its
outperformance versus the MSCI
Frontier Markets Index and the
South East Asia benchmark gauge.
The gauge rose 0.2% at close on
Tuesday.
The market’s “valuation is expected
to continue rising in 2017,” because
of upcoming listings of attractive
companies, said Le Nguyet Anh,
head of research at ACB Securities
JSC. “Meanwhile, for the currently
listed stocks, decent earnings
growth will be the major price
growth momentum.”
The strong premium this year is “due
to its good macroeconomic
performance and political stability,
while the rest of the region went
through political transformations
and tougher economic times,” said
Attila Vajda, managing director at
Project Asia Research and
Consulting Pte in Ho Chi Minh City.
Philippine President Rodrigo Duterte,
elected earlier this year, has
unnerved investors with his frequent
outbursts against the U.S. and
violent war on drugs. Thailand
experienced deadly street clashes
before an army coup in 2014.
Economists predict Vietnam will be
among the world’s fastest-growing
economies in 2016 as it benefits
from a manufacturing industry that
has grown in importance over the
years. Increased foreign-direct
investment helped push the VN
Index to an eight-year high of
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FINANCIALS
688.89 on Oct. 19. The government
aims for GDP growth of 6.7% next
year, which will be the fastest pace
since 2007. Profit at companies on
the benchmark gauge are
projected to grow 23% in the next
12 months, according to data
compiled by Bloomberg.
Liquidity Issues
The market still faces the “hurdle of
liquidity,” said Andy Ho,
VinaCapital’s Chief Investment
Officer. He recommends the
government lift the foreign
ownership limit in the banking
sector as one way to boost the
market liquidity. Last year, Vietnam
allowed some industries to raise the
foreign ownership limit to 100% from
49%, however, the cap for the
banking sector still remains at 30%.
Vietnam, which would have been
the biggest beneficiary of the Trans-
Pacific Partnership, may stand to
lose the most as President-elect
Trump prepares to quit the pact.
“Since Vietnam’s economy is
export driven and the U.S. is a
significant export market, it is likely
that we need to see how the
incoming Trump administration will
finally deal with trade barriers,” said
Vajda.
The average daily turnover on the
Ho Chi Minh City Stock Exchange -
the main bourse - is just $109 million
this year, compared with $768
million in Singapore, according to
data compiled by Bloomberg.
Government Plans
It’s a “great time” to invest in
Vietnam now as the government
has accelerated the divestment
process in major companies,
VinaCapital’s Ho said.
The Vietnam government’s
planned stake sales of major
companies like Saigon Beer Alcohol
Beverage Corp. and Hanoi Beer
Alcohol Beverage Corp. next year is
seen as “encouraging” for investors,
according to Ho. “There are really
good companies that the
government is now allowing foreign
companies, like institutional
investors like ourselves, to put
money into them,” he said.
State Capital Investment Corp., the
government’s investment arm,
raised about $500 million selling
5.4% of its stake in Vietnam Dairy
Products JSC during the long-
awaited Dec. 12 sale.
Besides divestments, the
government has also pushed
companies to list shares on the
exchange, which has made the
stock market “more interesting,”
according to Vajda. The market will
welcome the future listings of some
major companies, including
Vietnam Airlines Corp. and Vietnam
National Textile and Garment
Group.
Vietnam Airlines said in November
that it would start trading in Unlisted
Public Company Market, or UpCom,
before Dec. 31 and Vinatex, as the
textile group is commonly known,
plans to list 500 million shares on
UpCom on the first week of January.
“Some new listings will attract
enough excitement that the index
can grow moderately, if there are
no external trade shocks due to
protectionist policies from the U.S.,”
said Vajda.
Will “zero dong” banks turn
into 100% foreign owned
banks?
VNN – The Capital Marketing
Working Group has suggested lifting
the foreign ownership ratio limit in
banks in which the state is a big
shareholder, and in privately run
joint stock banks to 35%. As for “zero
dong” banks, the ceiling should be
up to 100%.
Vietnamese Prime Minister Nguyen
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FINANCIALS
Xuan Phuc at the 2016 Vietnam
Development Forum (VDF) said that
ADB and a private Vietnamese
partner are considering buying a
‘zero dong’ bank, and they will
introduce other partners to help
Vietnam deal with weak banks.
‘Zero dong’ banks are weak banks
which have been taken over by the
State Bank at zero dong and
forced to undergo compulsory
restructuring.
Nguyen Duc Kien, deputy chair of
NA’s Economics Committee, said
on Dan Viet that the PM’s message
is clear that Vietnam may sell zero-
dong banks to foreign partners to
turn them into wholly foreign
owned banks.
Vietnam, instead of seeking foreign
strategic investors to buy a 30%
maximum stake under the law,
would sell the entire banks to turn
them into 100% foreign owned
banks.
This is considered a good solution
and will not violate the laws on
credit institutions, because the law
allows 100% foreign owned banks
to operate in Vietnam.
In 2015, the State Bank bought 3
weak banks at zero dong, namely
Ocean Bank, VNCB and GP Bank.
After the transfer, the business
performance of the three banks
has been improved. The solution
has been praised as a perfect
move which allows to avoid the
adverse influences to other banks in
the system, while depositors’ rights
can be protected.
Kien said that Phuc’s message to
international investors shows the
government’s strong determination
to settle bad debts and make
credit institutions healthier.
VNCB, which was named a Trust
Bank in the past, in 2012 was listed
among nine weak banks put under
the State Bank’s special control.
The bank’s accumulative loss by
that time had reached VND8.765
trillion and the stockholder equity
minus VND5.711 trillion.
The figures had reached VND11.348
trillion and minus VND8.293 trillion,
respectively, by the end of 2013.
As for Ocean Bank, the bad debt of
the bank had reached VND15
trillion by March 31, 2014, or 49.84%
of its outstanding loans, while it had
incurred a loss of VND10.2 trillion, or
249.63% of stockholder equity.
GP Bank had reported
accumulative loss of VND12.28
trillion by April 2, 2015, while its bad
debt ratio had reached a record
high of 45.37%.
It is still unclear which bank ADB is
eyeing.
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INVESTMENT
Vietnam pharmacy industry
attractive to foreign investors
VNN - Pharmacy firms are making
good profits, with the market
expecting a stable growth rate of
10-15%.
A report shows that about 30
pharmacy firms had listed their
shares on the Hanoi and HCMC
bourses and on UpCom by April
2016 with total capitalization value
of VND14.8 trillion.
Thirteen firms list on two main
bourses, of which 11 have relatively
high state ownership ratios,
between 35% and 51% of charter
capital, such as Hau Giang
Pharmacy, Traphaco, Imexpharm
and Domesco.
Most of the businesses have
reported satisfactory business results,
which explains why many investors
want to bank on the pharmacy
industry.
The average spending on medicine
is around $35-37 per head per
annum in Vietnam, which is much
lower than that in Thailand ($60)
and China ($100).
The Q3 report on pharmacy
released by Virac Research showed
that there are 178 medicine
manufacturers in Vietnam, but they
only make generic medicine with
low value.
Vietnam’s pharmacy industry uses
60,000 tons of medicinal materials
of different kinds, of which 80-90%
are imports. China and India are
the biggest exporters of medicines
to Vietnam.
Vietnamese companies spend 5%
of their revenue to R&D (research
and development), while foreign
companies spend 15%.
Vietnamese pharmacy firms mostly
make food supplement and
generics, while foreign enterprises
make more specialized products.
In order to improve competitiveness,
analysts say that Vietnamese
companies need to invest more in
R&D or cooperate with foreign
pharmacy firms.
With a high economic growth rate
and increasingly high demand for
healthcare services, the market
value is expected to expand in
upcoming years.
In 2013, the total medicine
consumption was worth $3.3 billion.
The figure, as estimated by VIRAC,
reached $4.2 billion in 2015 and is
expected to rise to $8-10 billion by
2020.
VIRAC has also predicted that the
prescription medicine market’s
growth rate would surpass the OTC
(over the counter) market because
of higher demand for specific
medicine.
Commenting about the potential of
the pharmacy industry, Chris Freund,
CEO of Mekong Capital, which
invests in Traphaco, said the market
would see profit of 10-15% per
annum.
Foreign investors, both
manufacturers and financial
investors, have shown serious
interest in Vietnamese pharmacy
firms.
Andy Ho, CEO of VOF, a fund
managed by VinaCapital, praised
the fund’s investment in Hau Giang
Pharmacy, saying that he hopes he
can find other good investment
opportunities in the future.
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INVESTMENT
Drug distribution is also attractive to
foreign investors. SAM (Saigon Asset
Management) earlier this year
announced the purchase of 15% of
My Chau JSC stake, a company
which owns the My Chau drug store
chain.
Vietnam should decide how
open it is to investors
Bloomberg - Hanoi Beer Alcohol &
Beverage JSC, or Habeco, filed last
week for a listing on the Ho Chi
Minh Stock Exchange as Vietnam
tries to get more companies out of
government hands.
Four days later, state-controlled
Vietnam Dairy Products JSC, known
as Vinamilk, made a secondary
offer to increase foreign ownership.
The deal missed its target and
Singapore's Fraser & Neave Ltd.,
another beverage company,
bought two-thirds of the shares.
Habeco, and many other planned
privatizations in Vietnam, could
easily share Vinamilk's fate. While
the nation is trying to lure
international institutional investors,
restrictions on foreign ownership
that curb liquidity for most stocks is
keeping them at bay. Or worse:
After almost 10 years of pouring
money into Vietnamese shares,
foreigners are leaving.
The irony is that this comes a year
after Hanoi passed Decree 60,
which allows companies to
increase foreign ownership beyond
the 49% cap enshrined in securities
law. The follow-on offering by
Vinamilk was possible because it
was one of a handful of companies
that applied to have the ceiling
lifted. Instead of attracting a throng
of fund managers, however, the
biggest component of the Ho Chi
Minh index got itself a strategic
partner in F&N -- which will
probably keep the shares locked in
a drawer, doing nothing for liquidity.
Behind the reluctance of
companies to lift the cap, and of
foreigners to buy into them, is a
legal dispute on where exactly the
line is drawn. The new rule isn't
applicable to companies in 14
"conditional sectors," and there are
more than 250 activities that fall
within the restricted areas.
Depending on the interpretation,
even Vinamilk's increased
ownership could be challenged.
Wasted Potential
Vietnam saw about $1 billion in
share offerings in each of the past
two years even as the Ho Chi Minh
index rose almost 20% in the period
Aside from limiting foreign interest in
the market, the ceiling is probably
part of the reason Vietnam hasn't
been upgraded to emerging-
market status, from frontier,
by MSCI.
With the likes of Fidelity Investments
limiting their participation in Ho Chi
Minh, companies vying to sell
shares are hostage to retail
investors and multinationals eyeing
a port of entry into Vietnam. In
Habeco's case, giants such as
Heineken NV or Carlsberg A/S
could end up playing an important
part in the listing, keeping the
company's free float small.
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ENTERPRISES
Vinamilk surpasses 2016
financial targets thanks to
soaring demand
Nikkei - Vietnam Dairy Products,
known as Vinamilk, on Wednesday
announced it has surpassed all
financial goals this year thanks to
increasing consumption of milk in
the country.
According to a document filed at
the Ho Chi Minh City Stock
Exchange, Vinamilk forecasts its
consolidated revenue to have
grown 14.86% on the year to 46.2
trillion dong ($2b), 3.68% higher
than its target. Its pretax profit rose
19.57% to 11.2 trillion, while net profit
expanded 19.77% to 9.31 trillion
dong, exceeding by 11.78% and
12.63%, respectively, its full-year
targets.
"The initial analysis of the company's
market sector reports that
Vietnamese people buy more dairy
products compared to past years,"
a Vinamilk representative told the
Nikkei Asian Review. Details on
each market are expected to be
released later.
Vinamilk has shifted its product line
to meet changing consumer
demand, and this is one of the
main elements that helped the
company achieve the impressive
results.
The Vietnamese government
intends to develop the country's
dairy industry to meet consumer
demand. Per capita consumption
of milk is estimated to rise to 27 liters
by 2020 and 34 liters by 2025 from
around 20 liters currently. The figure
was about 15 liters in 2010.
Spending on dairy accounts for 10%
of total food expenditures in
Vietnam, which has helped the
market grow 15% per year in the
last five years. This is largely thanks
to income growth, estimated at
14.2% per year in the same period,
according to Vietnam Industry
Research and Consultant. The
population growth of 1.2% a year
also offers huge potential for the
dairy industry.
High-end product lines
Marking its 40th anniversary this
year, Vinamilk launched the
country's first-ever premium fresh
organic milk product line which
meets U.S. and European standards.
The organic milk is produced by
cows raised on the open grasslands
of the Central Highland outside
Dalat city. The cows are strictly
guarded to avoid exposure to
genetically modified fodder,
growth hormones, antibiotics,
pesticides and chemical fertilizers.
Fresh organic milk is Vinamilk's first
step on the journey to produce
more high-end product lines that
are nutritious, organic, natural and
healthy, according to Vinamilk
Managing Director Phan Minh Tien.
Earlier this month, Vietnam's State
Capital Investment Corporation
(SCIC) held its first public bidding to
sell 9% of its Vinamilk stake, in
keeping with the divestment of the
biggest state-owned companies.
Singapore-based Fraser & Neave
(F&N) is the only investor registered
to buy a 5.4% stake via its two
subsidiaries, to bringing F&N's stake
in the dairy producer to 16.35%, up
from 10.95%.
The first auction result was far below
market expectations, which
underscored Vietnam's relative
inexperience in the divestment
methods.
SCIC has not confirmed the next
divestment of Vinamilk or other
potential candidates. SCIC
Chairman Nguyen Duc Chi said the
company needs more time to
summarize the feedback from the
market and consultants. The
government, based on these
reports, is expected to prepare
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ENTERPRISES
legal documents in line with
international practices allowing
more flexible mechanisms in selling
the majority stake held by the state.
Vinamilk shares closed at 126,000
dong on Wednesday, 6.3% lower
than the day SCIC held the first
public auction on Dec. 12.
Vingroup rejects rumors of
selling Vinmart chain to 7-
Eleven
BizLIVE - An executive of Vietnam’s
top real estate developer and
retailer Vingroup has refuted rumors
of selling its Vinmart+ chain to
Japanese retail giant 7-Eleven.
Rumors saying that Vingroup would
dispose of its retail chain Vinmart+
to Japan’s 7-Eleven are totally
groundless, a high-ranking
executive of the largest property
developer and retailer in Vietnam
has said.
Vingroup will never sell a
Vietnamese brand name to foreign
investors, Vingroup’s Vice Chairman
Le Khac Hiep confirmed to the Tri
Thuc Tre news site, adding the
group will not unload such a fast-
growing retail chain to any firms
and at any prices.
Inside Retail last week cited
marketplace sources as saying that
convenience-store giant 7-Eleven
planned to enter Vietnam by taking
over the Vinmart+ chain.
Commenting about this information,
Hiep said that 7-Eleven had not
made any contact with Vingroup.
The real estate developer is seeking
to turn retail into its second business
pillar.
Currently, Vingroup is operating
1,000 supermarkets and
convenience-stores under the
Vinmart and Vinmart brand
names.
The group plans to open 70 to 80
Vinmart supermarkets and around
1,500 Vinmart+ convenience stores
next year.
Telco giant FPT to float shares
soon
BizLIVE - FPT Telecom will list its
shares on the UPCoM market soon,
giving another option to investors
seeking profits in the local stock
market.
TV pay service of FPT Telecom.
Photo: fpttelecom.net.vn
FPT Telecom JSC will float its 137.08
million shares coded FOX on the
Unlisted Public Company Market
(UPCoM) soon, giving another
option to investors seeking profits in
the local stock market, which has
been among the best performers in
Asia this year.
The date of debut is not specified,
according to a statement of the
Vietnam Securities Depository.
The telecommunications firm had a
registered capital of 1.25 trillion
dong (nearly $55 million) as of end-
2015. Government-run State
Capital Investment Corporation
(SCIC) was the largest shareholder
with a 50.16% stake and FPT Corp
held 45.64%.
Established in 1997, FPT Telecom
focuses on providing
telecommunications
and Internet services. Its operations
have reached out to Myanmar and
Cambodia.
FPT Telecom earned a net profit of
662 billion dong ($29.16 million) in
the three quarters ending
September 2016 on revenue of 4.92
trillion dong ($216.78 million).
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MARKET & PRICES
Asia’s beer war is a battle of
acquisitions
Nikkei - Major Japanese drinks
manufacturer Asahi Group Holdings
and Anheuser-Busch InBev, the
world's largest brewery, have
agreed for Asahi to acquire InBev's
beer businesses in five European
countries in a deal worth 7.3 billion
euros ($7.6 billion). This marks the
largest purchase ever by a
Japanese company of an overseas
beer business. With the market
across Asia levelling off,
competition is becoming
increasingly fierce and, for many
Asian breweries, future growth is at
stake.
The Dec. 13 deal covers the units of
what was SABMiller, a U.K. brewery
acquired by InBev, in the Czech
Republic, Poland, Hungary,
Slovakia and Romania.
Total annual sales of the five units
came to about 200 billion yen ($1.7
billion) and operating profit $367
million in the fiscal year ended
March 2016. Each enjoys a
domestic market share of more
than 30% and, excluding Slovakia
which ranked second, are the
leading players in local markets.
The high market shares guarantee
stable profits.
In October, Asahi also acquired
Italian brewery Peroni and three
other European beer companies,
which had all been under SAB's
wing, for $2.9 billion at that time.
InBev had put all up for sale in order
to acquire SAB in compliance with
antitrust laws.
According to Kirin Holdings, another
Japanese brewery, 189 million
kiloliters of beer were produced by
the main global players in 2015,
down 1.1% from a year earlier. As
the size of the market shrinks, many
analysts expect InBev's takeover of
SAB to be the last shift in a global
realignment and predict that the
chances are slim of a promising
acquisition target emerging any
time soon.
This is one of the reasons Asahi was
prepared to go up to $7.6 billion to
secure the five countries, having
originally envisaged a figure closer
to $4.3 billion. Asahi stocks plunged
when the acquisition was
announced on Dec. 13 on
concerns that it may erode the
brewery's financial health. Yet, an
Asahi executive was confident, "We
will never have such a chance
again."
In China, the biggest beer market in
the world, production declined
4.3% in 2015, while output in the
whole of Asia, which makes up 34%
of global production, was down
1.3%.
Asahi's archrival Kirin has set its
sights on Asia and Australia. A
senior company official described
the region as "the pillars of our
overseas strategy." Kirin bought a
stake in San Miguel Brewery, an
affiliate of leading Philippine
conglomerate San Miguel, in 2009.
This was followed by the 2015
purchase of Myanmar Brewery for
$560 million.
The company is also considering
transforming Brasil Kirin, a wholly
owned subsidiary it acquired for
$2.56 billion in 2011, potentially into
a joint venture. It is negotiating with
three other breweries, including
Heineken, over partnerships in an
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MARKET & PRICES
effort to get its Brazilian business
back into shape.
San Miguel Brewery, which
commands 90% of the Philippine
market, already has operations in
Hong Kong and Indonesia. San
Miguel had also expressed an
interest in Peroni before Asahi
sealed the deal.
China Resources Beer, the country's
top brewery, is looking both at
home and abroad for growth.
Outside the country, the company
also bid in the auction for the
European businesses won by Asahi
in December. There is speculation it
will move to acquire Beijing Yanjing
Brewery, which has been
performing poorly outside the core
battlefield of Beijing. Having raised
9.5 billion Hong Kong dollars ($1.2
billion) through selling new shares to
existing shareholders in July, China
Resources Beer has a sufficient war
chest. The company plans to use
the funds to terminate a joint
venture contract with SAB and
carry out mergers and acquisitions.
In the meantime, Tsingtao Brewery,
China's second-ranked producer, is
suffering in the face of competition
from foreign brands in the mid-
range and high-end segments,
once an area of strength for the
company. Under the circumstances,
there are rumors that Tsingtao will
move to acquire Chongqing Beer --
currently affiliated with Carlsberg.
In Thailand, Southeast Asia's
second-largest beer market, Boon
Rawd Brewery and Thai
Beverage dominate. Heineken and
other foreign breweries are active
in the high-end segment, but the
two local beer companies control
90% of the market. Thai Beverage is
keen on the idea of a merger
abroad, aiming at becoming a
global player.
The market receiving the greatest
attention today is Vietnam, the
largest beer market in Southeast
Asia and the last great beer frontier.
On Dec. 6, Saigon Beer Alcohol
Beverage, or Sabeco, went public
on the Hochiminh Stock Exchange,
closing the day at 132,000 dong,
20% above the price projected by
the Vietnamese government. The
stock comes in near the top of the
market capitalization ranking at the
exchange.
The Vietnamese government,
which owns about 90% of Sabeco
shares, announced in August it
would sell all of its holdings in the
company, with an auction
scheduled for sometime next spring.
Sabeco has 40% of the domestic
market share. The world's major
breweries have already shown an
interest in bidding. Some expect
the sale of the shares to produce in
the region of $2.56 billion in total.
Asahi and Kirin, as well as InBev and
Heineken, are said to be mulling a
de facto acquisition of Sabeco.
Thai Beverage CEO Thapana
Sirivadhanabhakdi declared
Vietnam is a "priority overseas
market." Boon Rawd is also
interested, and the race for the
Vietnamese brewery is likely to heat
up.
The Vietnamese government also
intends to sell its 82% stake in Hanoi
Beer Alcohol and Beverage, or
Habeco. Minority shareholder
Carlsberg could possibly increase its
stake. Although the shakeup of the
global beer industry sparked by
InBev's takeover of SAB will calm
down soon, the realignment of the
Asian market looks set to last for
some time.
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MARKET & PRICES
Hot cash flow in the real estate
market in 2017
VNN - A report of the State Bank’s
HCMC Branch showed that 22% of
overseas remittances goes to the
real estate sector, 72% to
production and business and the
remaining to other fields.
Meanwhile, a large proportion of
FDI capital in 2016 went to real
estate projects, while the same
thing is believed to continue in 2017.
Tran Kim Chung, deputy head of
CIEM, commented that there were
not major hallmarks in the financial
market this year.
The VN Index of the Vietnam’s stock
market at the end of 2016
exceeded the 650 threshold set
since 2009. The total capitalization
value of the stock market has
increased from 32.4% of GDP in
2015 to 40% in 2016. The total
market value of the investment
portfolios held by foreign investors
has increased by 20.7% by the end
of 2016 compared to the end of
2015, reaching $19.55 billion.
The interest rate has decreased
and nearly bottomed out. The
lending is estimated to increase by
18% in the year.
The State Bank released Circular 06
which tightened control over the
credit flow to the real estate
sector.
The state’s revenue from land and
houses has increased by 32.6% over
estimates, of which receipts from
land use increased by 28% and the
tax on agricultural land use rose by
38.7%.
The number of real estate
businesses has increased by 99.1%,
while registered capital has
increased by 242.5%.
According to Chung, the real
estate price in the primary market
has increased by 5-7% compared
to earlier this year, while the price in
the secondary market has
increased by 10-15%.
Transactions in the real estate
market became busy in the second
half of the year. He cited a report
as saying that in the apartment
market segment, the absorption
rate is up to 80%, the highest rate in
four years.
As the market has warmed up, the
scale and value of projects has
increased. The number of medium-
and high-end real estate products
is far higher than low-cost
properties.
Regarding market prospects in 2017,
Chung said the market fervor would
be less intense because of a
decrease in speculation. Banks’
lending to the real estate sector will
also be decreasing.
Su Ngoc Khuong from Savills
Vietnam said the housing market
segment may encounter difficulties,
but other segments such as office
and retail premises will still see
strong rises.
Some real estate developers have
jumped into the low-cost market
segment as they realize that more
the young want to be independent
from their parents.
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LEGAL UPDATES
Vietnam’s new rules lead to
record high of business
formations
BizLIVE - The application of new
laws has helped boost the number
of business formations in Vietnam to
the all-time high of 110,100 this year.
As many as 110,100 businesses
have entered the market in
Vietnam in the year to December
20, rising 16.2% from a year earlier
and marking a record high,
according to the Ministry of
Planning and Investment.
Their registered capital has
reached a combined 891 trillion
dong ($39.2 billion), soaring 48.1%
year-on-year. However, the newly-
established firms created 1.27
million jobs, down 13.9% year-on-
year.
In addition, nearly 26,700
enterprises have resumed
operations, up 43.1% year-on-year.
These figures indicate not only the
growth of the Vietnamese
corporate sector in recent years,
but also improvements in the local
business environment and thriving
opportunities, said Deputy Minister
of Planning and Investment.
The real estate sector has seen the
sharpest increase in new business
formations, at 83.9% to reach 3,126,
indicating the property market has
been back to the growth track
since 2015.
Ho Chi Minh City and Hanoi remain
the largest homes to new market
entries, with 36,442 and 22,663,
respectively. The new firms in the
two metropolis account for 53.7% of
the total in the country.
The implementation of the Law on
Enterprises has helped cut the
approval time for business
registration to just 2.9 days while the
average time for registration
adjustments has been reduced to
2.05 days.
Vietnam likely to approve
casino decree by Christmas of
early 2017
BizLIVE - The Vietnamese
government may pass the new
gaming decree this Christmas of
early next year.
The Vietnamese government is
expected to approve the new
decree on casino during Christmas
2016 or early 2017, Asian Gaming
Brief cited an expert in the industry
as saying.
The final draft of the casino decree
has been passed by the Ministry of
Justice and Government’s Office. It
is now on the table of the Politburo
and Prime Minister Nguyen Xuan
Phuc for their comments, which are
as always, the most important,
according to law firm Duane Morris
LLP.
International investors are waiting
to see whether Vietnamese
residents are permitted to enter
casinos in Vietnam. This is a big
question that may wait for decision
of the highest level of Vietnam’s
political system.
The law firm said that more likely
that Vietnamese may enter casinos
and gamble but with specific
conditions in 2017.
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HIGHLIGHTS
Top 10 domestic event in
Vietnam 2016
VNA - The Vietnam News Agency
(VNA) has selected the 10 most
outstanding events of Vietnam in
2016 as follows:
1. The 12th National Party Congress
With the spirit of “Solidarity –
Democracy – Discipline –
Renovation”, the 12th National
Party Congress was successfully
held from January 20-28, 2016. The
congress reviewed 30 years of
reform (Doi Moi) and set out
development orientations of the
nation in the new period. The
congress defined six key tasks in a
bid to enhance the Party building
and rectifying wok and continue
stepping up reform
comprehensively and
synchronously to build Vietnam into
a strong country with prosperous
people, and democratic, fair and
civilised society.
2. The election of deputies to
the 14th National Assembly
and People's Councils at all
levels for the 2016-2021 tenure
The election of deputies to the 14th
National Assembly and People’s
Councils at all levels was organised
publicly, democratically, legally,
safely and economically,
becoming a festival of the entire
people. The success of the election
laid a foundation for strengthening
the organisational and personnel
structure of the State apparatus
and continuing to build a socialist
law-governed State of the people,
by the people and for the people,
with the resolve to build an upright,
tectonic, active and serviceable
government.
3. Overcoming difficulties, the
economy continues to record fairly
high growth
Under the leadership and drastic
direction of the Government, the
determination of the entire political
system and the active participation
of the business community,
Vietnam’s economy has continued
to record fairly high growth despite
difficulties caused by drought,
saline intrusion, maritime
environmental incident in the
central region and negative
impacts from the global economy.
The country has successfully
maintained
macroeconomic stability, curbed
inflation, ensured the economy’s
major balances and accumulated
the highest-ever foreign currency
reserves. Vietnam’s business climate
has seen remarkable improvements
and the private sector has
flourished, while the number of
newly-established enterprises has
increased rapidly.
4. Fight against corruption and
negative phenomena stepped up
In the past year, many serious
economic and corruption cases
went on trial and a series of
violations in personnel work were
brought to light, with a number of
senior officials being disciplined.
The 4th plenary meeting of the 12th
Party Central Committee issued a
Resolution on enhancing the Party
building and rectifying work; and
preventing and pushing back the
degradation in political ideology,
morality and lifestyle as well as the
signs of “self-evolution” and “self-
transformation” within the Party. A
range of specific and drastic
measures were deployed, receiving
the positive response from officials,
party members and the people.
5. Bustling and effective foreign
affairs
Vietnam’s foreign affairs have been
promoted in 2016 with the
successful hosting of the 7th
Ayeyawady – Chao Phraya –
Mekong Economic Cooperation
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HIGHLIGHTS
Strategy (ACMECS) Summit
(AMECS-7), the 8th Cambodia –
Laos – Myanmar – Vietnam
Cooperation Summit (CLMV-8), and
the World Economic Forum (WEF)
on the Mekong region (WEF
Mekong). The country actively
attended regional and
international forums and arranged
many important bilateral visits.
These activities affirmed Vietnam’s
consistent foreign policy and
determination to promote intensive
and comprehensive international
integration, helping to maintain a
peaceful and stable environment
for national construction and
defence.
6. Maritime environmental incident
in the central region
Wastewater discharged illegally
from Taiwan’s Hung Nghiep
Formosa Ha Tinh Steel
Corporation seriously polluted the
maritime environment of the
central provinces of Thua Thien-Hue,
Ha Tinh, Quang Binh and Quang Tri,
causing severe impacts on
production and daily life of local
people. The Government, relevant
ministries, sectors and localities
worked hard to strictly handle
violations and support affected
residents. Formosa accepted full
responsibility for the incident and
agreed to compensate for the
losses.
7. Heavy consequences caused by
natural disasters
A large-scale cold spell in northern
mountainous provinces, continuous
floods in the central region, drought
in the Central Highlands and saline
intrusion in the Mekong Delta
caused severe impacts on
production and daily life of local
people in 2016. Administrations at
all levels, sectors and the entire
community join hands in supporting
affected people to stable their
production and lives, change
production models and respond to
climate change.
8. Vietnam’s athletes achieve
exploits at Olympics and
Paralympics
In the Rio Olympics 2016 in Brazil,
shooter Hoang Xuan Vinh won the
first-ever Olympics gold medal for
Vietnam after claiming the men’s
10m air pistol title and a silver
medal in the men's 50m air pistol.
At the Paralympics 2016,
weightlifter Le Van Cong won the
first Paralympics gold medal for
Vietnam, breaking the Paralympics
and world records in the men's up-
to-49kg category.
9. Three more Vietnamese heritage
honoured by UNESCO
“The royal literature on Hue royal
architecture” and “Phuc Giang
School Woodblocks” were
recognised as documentary
heritage at the Memory of the
World Committee for Asia and the
Pacific (MOWCAP)’s 7th General
meeting in May 2016.
Meanwhile, the practice related to
the Vietnamese belief in worshiping
Mother Goddesses of the Three
Realms was officially recognised by
UNESCO as intangible cultural
heritage of humanity in December.
10. Vietnam welcomes 10 million
foreign visitors
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HIGHLIGHTS
In 2016, Vietnam’s tourism sector
welcomed a record number of 10
million foreign tourists, up 25
percent year-on-year, and served
62 million domestic visitors. The
tourism sector’s total revenue
reached 400 trillion VND (17.6 billion
USD) in the year. This marked an
important milestone in Vietnam’s
tourism development process,
towards the target of becoming a
leading tourist destination in the
region and a spearhead economic
industry of the country.
Low localization could sound
death knell for auto industry
VOV – Transnational investor
pledges with the Foreign
Investment Agency have tapered
off in the wake of the demise of the
Trans Pacific Partnership (TPP), said
speakers at the Vietnam Business
Forum.
Most importantly, they said, it
signals that big challenges lie
ahead for the automotive parts
industry and its prospects for growth
and becoming a major-league
player in the supply chain.
Simply put, in-country auto
manufacturers are too heavily
dependent on imports to support
their production and are forced to
purchase intermediary and raw
materials in overseas markets and
ship them to Vietnam.
This adds cost to production and
cuts into the added value and
profits of the manufacturers who
would much prefer a robust local
supply chain produce the needed
items, the speakers noted.
The lack of a well-developed auto
parts segment is the biggest
obstacle holding back growth of
the auto industry, which includes all
those companies and activities
involved in the design,
development, manufacturing,
marketing, and selling of motor
vehicles.
The global auto industry’s principal
products are passenger
automobiles and light trucks as well
as pickups, vans, sport utility
vehicles as well as commercial
vehicles (i.e., delivery trucks and
large transport trucks, often called
semis).
Currently there are roughly 400
small businesses in the auto parts
supply chain, they said, with about
a 50-50 split with half of them
foreign sector businesses and the
other half domestic sector.
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HIGHLIGHTS
A very limited few of them utilize
advanced technologies and most
produce unsophisticated easy to
mass produce basic parts such as
mirrors, electric components and a
few plastic parts.
In addition, there are a few
manufacturers that produce
batteries for motor vehicles (which
technically aren’t part of the auto
industry), the speakers said.
In 2015 the country’s auto industry,
working at less than full capacity,
assembled about one-half million
autos, most of which were nine-
passenger vehicles. The local
supply chain met 7-10% of the
demand for parts with the balance
having been imported from
overseas.
The bottom line, the speakers
underscored, is that without
significant investment (tens of
billions of dollars) in the auto parts
segment to develop the supply
chain, the auto industry cannot
compete with manufacturers in
neighbouring countries Thailand
and Indonesia.
Previously, the government had
protected the country’s auto
industry by imposing high tariffs on
imported vehicles. However, with
the coming into force of the ASEAN
Economic Community (AEC) in
2015 and the elimination of those
tariffs— the industry is struggling to
survive.
In 2018 the protective import tariffs
on vehicles into Vietnam will be
completely rolled back.
It is estimated that at that time the
costs of production in Vietnam will
be 20% more than in Thailand and
Indonesia due to the lack of a
supply chain and the added cost
of importing versus manufacturing
intermediary parts in-country.
This situation, if it were to occur, said
the speakers, could sound the
death knell for the country’s auto
industry.
Vietnam shoe and garment
exports see drastic slowdown
in 2016
VIR - Vietnam’s export of garment
and shoes seems poised to record
significantly lower growth this year.
The numbers for the whole year of
2016 are not available yet, but
according to the General
Department of Vietnam Customs,
the total export of garment and
textile products was $22.58 billion in
the year to December 15, up 4.8
per cent on-year. This is the lowest
growth in 10 years.
Vu Duc Giang, chairman of the
Vietnam Textile and Garment
Association, said at a recent
conference reviewing the annual
performance of the sector that the
year saw the biggest ever shifting of
orders from Vietnam to other
countries.
He attributed the slow growth to
fluctuating material prices. Also,
foreign direct investment in the field
saw remarkably slower growth this
year than in recent years.
Shoe export showed a similarly grim
picture. Vietnam exported $12.3
billion worth of shoes in the period.
The growth rate was 8.1 per cent,
lower than the 16.3 per cent of 2015
and the 22.9 per cent of 2014.
Talking to local media, Phan Thi
Thanh Xuan, general secretary of
the Vietnam Leather, Footwear and
Handbag Association attributed
the less-than-desirable results to
political instabilities, especially
Britain’s exit from the European
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HIGHLIGHTS
Union, which caused demand in
Europe to decrease, resulting in
falling orders from importers.
The US is among the biggest
importers of Vietnamese garment
and shoe products. Even before
Vietnam, together with 11 countries,
signed the Trans-Pacific Partnership
Agreement (TPP) in February, many
garment and shoe manufacturers
as well as material producers have
come to set up shop or expanded
investment in Vietnam, citing the
deal as one of the biggest reasons.
Now that President-elect Trump has
said that the US would withdraw
from the TPP, which he called “a
potential disaster,” and Japan,
another member country, has said
the TPP would be meaningless
without the involvement of the US,
the prospects of the deal are
grimmer than ever.
Xuan said that the country’s shoe
sector still has a lot going for them
with or without the TPP.
According to Xuan, as the EU-
Vietnam Free Trade Agreement will
become effective in 2018, 2017 will
be the year where importers,
customers, and investors prepare
for better growth in the next period.
“Moreover, there are other free
trade agreements, such as the one
with the Eurasian Economic Union
(EAEU). Vietnamese shoe exports to
this market are still very modest,”
she said.
Representatives of VITAS also said
that the garment sector, which
exported 40 per cent of its products
to the US, is banking on EU and the
EAEU market in the coming period.
Besides the association highlighted
Myanmar as a potential market in
the ASEAN for Vietnamese garment
and textile companies, as the US
lifted the embargo on Myanmar in
October and allowed the country
to enjoy preferential tariffs.
Safe, high-quality agricultural
production programme
launched
VNA - A programme designed to
encourage stronger cooperation
between farmers, cooperatives,
and enterprises to develop safe
and transparent agricultural supply
chains was launched in Ho Chi
Minh City on December 27.
Through the programme, the
Ministry of Agriculture and Rural
Development (MARD) hopes to
bring together producers and
consumers to jointly develop a
clean agriculture with safe, high-
quality and highly competitive
products.
Deputy Minister of Agriculture and
Rural Development Tran Thanh
Nam said boosting the linkage
between production and
consumption will help businesses
get easier access to farming
households, thereby forming safe
agricultural product supply chains.
On this occasion, MARD also
coordinated with relevant agencies
to organise a workshop on the
situation and solutions to develop
production and consumption
models for safe and high-quality
farm produce.
A fair introducing safe products of
agricultural cooperatives was also
held at Co.opmart Foodcosa.
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