Vietnam sees record new business in 2016

A man welds a steel bed at a furniture factory outside Hanoi. Photo by Reuters/Kham

The new 110,000 businesses could create nearly 1.3 million jobs.

Vietnam saw a record number of business openings in 2016, shedding hopes for robust growth and strong investment in the near future.

A new report from the Ministry of Investment and Planning said the past year saw 110,000 new businesses open, up 16.2 percent from 2015. Registered capital increased 48 percent to more than VND891 trillion ($39 billion).

These new companies are expected to create nearly 1.3 million jobs, independent of the nearly 26,700 firms who suspended operations during tough times only to resume operations in the past 12 months.

Vice Minister Dang Duy Dong described the numbers as “lively.”

“With such energy and investmentopportunities, the market will surely be more competitive and the economy will leap strongly,” the government report quoted Dong as saying.

More than 36,000 new businessescame online in Ho Chi Minh City and nearly 23,000 in Hanoi.

New openings in the real estate sector increased almost 84 percent from last year, while education and healthcare openings increased 43 and 52 percent, respectively.

Arts, entertainment and agriculture businesses all dropped from last year.

But the ministry’s report also revealed a dark side of the boom.

Bankruptcies surged 32 percent to nearly 12,578, including in both agriculture and real estate.

Vietnam hopes to see over one million businesses in operation by 2020, which means an average of 100,000 openings every year.

Source: Bao Vnexpress

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Vietnam’s logistics sector: low competitiveness despite rapid growth

The sector's progress could be derailed unless staff and infrastructure are upgraded.

Vietnam’s logistics industry has seen strong growth over the past few years but problems arising from the lack of infrastructure and the limited capacity of local businesses have put the brakes on its development.

Data from the Vietnam Logistics Business Association said that the sector is expected to record average growth of 20 to 24 percent over the next five to 10 years. In 2014 and 2015, 80 percent of logistics enterprises reached or exceeded their annual targets.

Despite recording significant progress, Vietnam’s logistics industry still lags behind other Southeast Asian countries. The country ranks 64th on the Work Bank’s Logistics Performance Index in 2016, much lower than Singapore (5th), Malaysia (32nd) and Thailand (45th).

Annual logistics expenses in Vietnam account for approximately 21-25 percent of the country's gross domestic product (GDP) per year, as opposed to 10 percent in developed countries and 18 percent in other developing nations.

Do Xuan Quang, vice chairman of the Vietnam Logistics Business Association, said that the country spends $37-40 billion on logistics each year, of which $30-35 billion flow into the pockets of foreign firms.

Domestic companies, mostly small and medium-sized, account for 80 percent of the country'slogistics firms but make up only 25 percent of the market share.

Companies are also struggling to find qualified workers, with 54.7 percent saying they lack staff with management and language skills.

Aside from these problems, infrastructure for logistics services in Vietnam is underdeveloped, said Tran Bao Ngoc, head of the Logistics Department under the Transport Ministry.

Being a long, narrow country with key economic zones located evenly from north to south, the country’s railway sector should act as the major means of freight transportation. However, in reality, the railway sector only accounts for one percent of the market share. Only 6.7 percent of Vietnam's 2,653 kilometers of railways meets international standards.

There is also a lack of connectivity between road, sea and railway transport due to the lack of dry ports and storage facilities, which play an important role in transiting and distributing commodities, Ngoc said.

To increase the competitiveness of Vietnam’s logistics sector, economic experts said the government should form a national logistics committee to boost cooperation between different means of transportation. Small and medium enterprises should be granted preferential policies to access investment capital and support to train logistics staff.

Vietnam is aiming to climb to 4th on the Logistics Performance Index in Southeast Asia and 50th in the world by 2020.

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Japanese investors ready to pour $2 bln into Vietnam’s real estate market

Property firms are confident of the growth fundamentals in Vietnam.

Japanese real estate companies are looking outside the domestic market for a potential investment destination, and Vietnam is looking like an ideal candidate with annual returns of up to 20-25 percent.

Vietnam's Real estate

Japanese companies are planning combined investment of up to $2 billion in the Southeast Asian country, said Than Thanh Vu, president of a merger and acquisition consulting company.

A large number of Japanese groups, including Sumitomo, Sanyo Homes, Daiwa House, Aeon and Toshin, are searching for large scale mixed-use developments comprising apartments, serviced apartments, retail and office space in major cities like Hanoi and Ho Chi Minh City, Vu said, citing the $100 million office building project funded by Sumitomo as an example.

Investor interest is being fueled by Vietnam’s economic growth, which has on average been above 5 percent since 1999, Vu continued.

There are other factors driving the inflow of Japanese investment into Vietnam’s property sector. Japanese investors want to tap into the potential of Vietnam’s growing population which will lead to a rapidly expanding demand for real estate. With their domestic market shrinking as population is aging rapidly, Japanese companies are increasingly looking at Vietnam as a promising market.

Japanese investors are entering the local market through mergers and acquisitions, Vu said, explaining that as long-term investors, Japanese companies prefer acquiring stakes in local property developers gradually over time so that they can gain a better understanding of the local market. Mergers and acquisitions also allow foreign investors to quickly gain a foothold without going through the massive amount of complicated paperwork involved in the real estate sector.

Industry experts forecast a surge in mergers and acquisitions (M&As) in the real estate inHanoi and Ho Chi Minh City.

“Japanese companies are financially strong and vastly experienced in property developments, so it will be easy for them to take the projects at some of the most sought-after locations from local developers,” said Vu, adding that given extremely low interest rates and limited economic growth in Japan, these investors are sitting on huge cash piles and have little option but to invest overseas.

Japanese investors have just laid their eyes on Vietnam’s real estate market, said Masataka Sam Yoshida, chief executive of Tokyo-based Recof, which is mainly involved in M&A consulting.

In the past, Japanese companies were very cautious about making real estate deals in Vietnam due to the high risk of speculation, lack of transparency and information, Masataka explained.

But things have changed, he said.

One of Japan's largest builders, Kajima Corporation, has formed a joint venture with Indochina Capital to channel funds worth $1 billion into property developments in Vietnam over the next 10 years. The 50:50 partnership has plans to acquire several local projects in the pipeline.

Vietnam is currently viewed among the top markets in Asia for foreign direct investment, said Keisuke Koshijima, market development executive at Kajima, adding that the company has identified the Southeast Asian country as the next key driver for its growing business in the region.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation.  Our services are as following:

• Advisory
• Market Entry
• Tax Advice
• Legal Advice

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Korean Investors Interested in Vietnam Stock Market

Came to Vietnam this time, the Korea Financial Investment Association included CEOs of many securities companies, fund management companies with managed capital flows of about 350 billion USD.

At the workshop named “Capital market and prospects for investment cooperation between Vietnam – Korea”, organized by Ho Chi Minh Stock Exchange (HOSE) and the Korea Financial Investment Association, many investors expressed their interest in Vietnam’s exchange traded funds (ETF), the obstacles that these funds may be encountered when listed on the Korean stock market, or the opportunities to invest in state owned enterprises (SOE) that are about to be equitized and divested.

According to the Chairman of HOSE, as of the beginning of December 2015, Vietnam financial market has 34 legal entities which are branches and offices of Korean companies that are operating, supplying a variety of services, create excitement and enhance the value added to the market.

In recent years, the authorities have taken many ways to attract foreign investors such as loosening room, promoting the equitization of SOE, launched new products, efforts to improve the market… thereby creating attractiveness and long-term potential for Vietnam stock market, which opens up attractive investment opportunities for these investors.

The workshop is expected to provide more information, introduce potential areas with different views for Korean investors.

According to the President of the Korea Financial Investment Association, annually, the Association often organizes visits to financial agencies in many different countries to learn about investment demand. This year, the delegation come to Vietnam are all the CEOs of the securities companies, fund management companies with managed capital flows of about 350 billion VND.

The reasons for choosing Vietnam of the Association to be the destination to explore investment opportunities because Vietnam is getting more attention from international investors, especially when TPP was signed and Vietnam is also member of Asean Economic Community.

In addition, the Government of Vietnam is making efforts to improve the investment environment, this is the foundation for Vietnam’s economy to develop and become an attractive destination.

Korean investors at the workshop expressed their interest in Vietnam stock market, especially investor structure, the number of listed companies, the number of fund management companies, establishing pension fund, listing the ETF Vietnam on the Korea stock market and investment opportunities to invest in SOE that are about to equitized and divested.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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16 Billion USD of FDI Capital into Vietnam

According to the data from the Foreign Investment Department, total foreign direct investment (FDI) in the first 9 months of 2016 reached 16.43 billion USD, equivalent to 95.8% compared to the same period of 2015.

As of September 20^th 2016, there were 1,820 new projects were granted the investment registration certificates with total registered capital of 11.165 billion USD, increased by 1.1% from the same period in 2015.

Along with that, there are 851 projects registered to adjust capital, with total additional capital reached 5.265 billion USD, equivalent to 86.1% over the same period in 2015.

Meanwhile, till September 20^th 2016, it is estimated that the FDI projects have disbursed 11.02 billion USD, increased by 12.4% over the same period in 2015.

Also according to the report of the Foreign Investment Department, in the first 9 months of 2016, foreign investors have invested in 19 sectors, in which the processing and manufacturing sectors are the sectors that attracting more attention of foreign investors with 767 new investment projects and 608 projects register to adjust capital, the total new and additional capital reached 12.15 billion USD, accounting for 73.9% of total registered investment capital within 9 months.

The real estate business sector ranks the 2^nd with 34 new projects with the total new and additional capital reached 1 billion USD, accounting for 6.1% of total registered capital. Fields of professional activities, science and technology rank the 3^rd with 649 million USD, accounting for 3.9% of total investment capital.

In the first 9 months of 2016, there are 65 countries and territories have investment projects in Vietnam. In particular, Korean investors led with a total investment capital reached 5.58 billion USD, accounting for 34% of total investment capital in Vietnam.

Singapore ranked 2^nd with total investment capital reached 1.84 billion USD, accounting for 11.2% of total registered capital. Japan ranked 3^rd with total investment capital reached 1.7 billion USD, accounting for 10.3% of total investment capital.

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