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.
In a recent survey, conducted by Vietnam Works a leading on line job search and recruitment website, it was noted that the demand for employees in the Information Technology (IT) sector has doubled in the last 3 years.
The number of new SME’s continues to grow at a healthy rate with approximately 14,500 new enterprises established in the first 2 months of 2017, a year on year growth of 3.9%. In this period the registered capital of these newly established firms was US$ 6.7 billion an increase of 35% against the same period as last year. With over 600,000 registered SME’s and growing at over 100,000 per annum SME’s are an important sector of the economy. However the number of firms ceasing operations or closing has not been insignificant but over the last 12-18 months the number resuming operations has been increasing.
On Friday, last week, I attended a meeting between Dr Liam Fox the UK Secretary of State for International Trade and the Chairman of Ho Chi Minh City People’s Committee Mr. Nguyen Thanh Phong. The Secretary of State was also accompanied by HMA Giles Lever and The Consul General Ian Gibbons.
ASEAN was in itself a US$ 2.4 trillion economy in 2015 making it the 5th largest in the world. The Asian Economic Community (“AEC”) came into being at the end of 2015/start of 2016 but seems to have been overshadowed by all the talk of TPP and EU Vietnam Free Trade Agreement.
Deputy Prime Minister Pham Binh Minh recently commented Vietnam is currently trying to direct foreign investor interest to innovative, environmentally projects. The focus is now shifting away from labour intensive industries that use a lot of natural resources to more high tech sectors and looking to foreign firms working more closely with local firms to build higher value chains