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On July 31st I was invited to attend the 2nd Vietnam Private Sector Forum, which facilitates dialogue between the Vietnamese Private Sector and Government and encourages a bottom up approach from grassroots business. The Forum sponsored by the Australian Government and the Asian Development Bank was chaired by the Prime Minister Mr. Nguyen Xuan Phuc.
For the past several years the issue of non-performing loans and the resolution of this issue has long weighed heavily on the banking sector. According to the Vietnam Asset Management Company (VAMC) if all non-perming loans and those loans that have been restructured are taken into account then total non-performing loans would be in excess of 10%, including over 5% which have been sold by commercial banks to VAMC.
Starting August 2017 Vietnam will have a derivatives market with four kinds of products: Futures; Options; Swaps; and Forwards and they can be traded both on the OTC or the main exchange. However according to the State Securities Commission there is a move to merge the two exchanges . Originally, it was anticipated that this new market would commence trading in May or June 2017.
2016 is considered to have been a “fantastic year with history-making results”. The Vietnamese Tourism Industry saw an increase in both to an all-time high, with 26% increase in total foreign visitor arrivals and an18.4% increase in total revenue. In 2016, Vietnam welcomed 72 million domestic and International visitors, higher than the target of 68.5 million visitors as set out by Vietnam National Administration of Tourism (VNAT). This is a remarkable achievement considering the ecological disaster in the Central coast, which haunted the industry in mid-year 2016, and where the number of visitor dropped significantly. The Vietnam Tourism Industry recorded a record 10 million international visitors and the highest yearly increase of 2 million international visitors
This was the title of the Vietnam Business Forum, which I attended last Friday, in Hanoi. Participants included HE Deputy PM Vuong Dinh Hue, Deputy Minister of Planning and Investment (“MPI”) Dang Huy Dong, World Bank Country Director Mr Ousmane Dione, IFC and other Government departments, Embassies, Business Groups and others.
The first 7-Eleven store is about to open in Vietnam, in the coming days, with a store in Ho Chi Minh City, interestingly in the lobby of a commercial office building on the edge of the CBD.
One of the common complaints from foreign investors is about the lack of transparency in business and in the licensing and approvals processes
As mentioned in previous Insights there has been much talk of startups and financial backing and also the encouragement of innovation and innovative technologies.
The major topic of the week of course is the One Belt One Road summit, which started in Beijing on Monday this week. The project aims at connecting all countries along the old Silk Road by sea routes, road and train, connecting Asia, Middle East, Europe and Africa.
For sure there has been a lot of talk of late about alternative energy and in particular Solar and Wind generated energy but the big impasse has often been the negotiations on feed in tariffs (“FIT’s”). The Ministry of Industry and Trade of Vietnam (“MOIT”) has just released a draft circular following Decision 11 on mechanisms for encouraging the development of solar power in Vietnam (“Decision 11”) which was issued by the Prime Minister last month.
In Grant Thornton’s recent Private Equity Survey the low level of Corporate Governance retained it’s ranking as the second issue of most concern to PE investors ranking just behind transparency. These two have ranked as the 2 most common concerns in most of the Grant Thornton PE surveys over the last few years, with little improvement.
In the 16th survey on the Private Equity sector, carried out by Grant Thornton Vietnam, in March 2017, the majority of respondents (78%) were positive about Vietnam’s economy and the economic outlook.
At last the Vietnamese authorities are waking up to the importance of Travel and Tourism as an economic sector and its growing contribution to GDP. In 2016 international visitor arrivals reached 10 million for the first time a growth of 26% over 2015. Domestic tourism also continued its rapid growth with over 63 million domestic travelers. The top 5 inbound countries are China ( 2.7 mn +51%); Korea (1.5 mn + 38%); Japan (0.74 mn + 10%); USA (0.550 mn +12.5%) Taiwan ( 0.507 mn + 15.8%). As can be seen China, Korea and Japan account for 50% of inbound foreign arrivals.
Much has been written and discussed about the impact of the demise of the Trans Pacific Partnership on foreign direct in Vietnam. With the first quarter statistics on FDI now available we can confidently say that there has been no significant impact on FDI.
The region accounts for 90% of the nation’s coffee growing area and over 90% of the country’s beans, however most of the production is Robusta with very little Arabica and although Vietnam is the world’s second largest coffee producer it is not well known internationally because Robusta is generally blended with a loss of identity. The central highlands has really failed to attract foreign investment of any real magnitude benefiting from only US$ 3.5 billion of foreign direct investment just about 1% of the total for the country since Doi Moi in 1988 and of that US$ 2 billion has been invested into wind power projects.
At last, after years of waiting, it seems that the Communist Party is willing to “flirt” with sports betting and Casinos for local gamers, for a 3 year pilot period. The Government is not only catering to foreign investor and local demand it will also open a door to collection of taxes much of which are currently lost to casino’s in Cambodia and also illegal betting syndicates in Vietnam.