VIETNAM BUSINESS NEWS HEADLINES DECEMBER 6
Mekong Delta sees signs of tourism revival
The Cửu Long (Mekong Delta) province of Kiên Giang has seen a rebound in domestic tourism and tourist numbers are expected to surge during the New Year and Tết (Lunar New Year) holidays.
It received nearly 400,000 domestic visitors last month, a 26 per cent increase from October, according to its Department of Tourism.
Nguyễn Chí Thanh, deputy director of the department, said the province has pushed ahead with a tourism stimulus programme and COVID-19 preventive measures to restore travel confidence and demand.
Travel firms are now focusing on quality of travel products and services, and offering a wide range of promotions and discounts to boost domestic travel, he said.
Phú Quốc Island was chosen as the first destination to kick-start the national tourism stimulus programme launched by the Việt Nam National Administration of Tourism on November 22.
In the first 10 months of the year the island received 2.9 million visitors, and it expects the number to top three million for the full year.
The delta city of Cần Thơ has launched its own tourism stimulus programme between November and January with a number of discounts on lodging, food, entertainment, and transportation.
Tourism authorities encourage travel firms to offer discounts on tour packages to attract customers.
Around 60 businesses have registered to join the stimulus programme with tour packages and services discounted by 10-60 per cent.
In the first 10 months the city received more than 3.5 million visitors, a 53 per cent drop year-on-year.
It is expected that promotions and stimulus efforts would push the total number of tourists to more than 5.6 million this year.
Bến Tre and Trà Vinh provinces have promoted travel linkages and introduced new tour routes between themselves.
The linkages are aimed at developing travel products that offer unique cultural, food and natural experiences.
Other provinces in the delta like An Giang and Bạc Liêu recently launched stimulus programmes to attract tourists during the upcoming year-end holidays.
Eighth Mekong-RoK Business Forum gets underway
The Mekong-RoK cooperation has significantly contributed to promoting all-round relations among the six member countries with trade turnover between the Mekong countries and the RoK increasing 250% in the past nine years, said Deputy Foreign Minister Le Hoai Trung.
Deputy Minister Trung made the statement during his opening speech at the eighth version of the Mekong-RoK Business Forum held on December 4 in Hanoi, noting that bilateral FDI reached approximately US$60 billion last year.
Despite the economic downturn caused by the impact of the novel coronavirus (COVID-19), the Mekong countries and the RoK have managed to maintain trade activities at a similar level to last year, whilst continuing to be major trading partners for each other.
Deputy Minister Trung affirmed that during the course of developing mutual ties, the economic sector has consistently played a key role in promoting regional economic integration, while boosting innovation, and enhancing the competitiveness of the various economies.
He therefore called for drastic actions to be taken by respective governments in an effort to support small and medium-sized enterprises to mitigate the damaging consequences caused by the pandemic.
During the recent 37th ASEAN summit, leaders moved to affirm their determination bolster co-operation across multiple fields in order to overcome challenges and agree to upgrade Mekong-RoK co-operation to the status of a strategic partnership.
In line with this, concerned parties will beef up co-operation across seven priority areas in order to improve the resilience of regional supply chains and facilitate operations of enterprises throughout the six member countries of the Mekong.
In response to this, the RoK’s Vice Minister of Foreign Affairs Lee Tae-ho confirmed that the RoK Government will help to intensify co-operation with Mekong countries, with the RoK contributing US$10 billion to the initiative through COVID-19 prevention and co-operation funds, thereby promoting regional connectivity and sustainable development.
With regard to future ties, Deputy Minister Lee Tae-ho underlined the need to enhance co-operation in water resource management, respond to climate change and natural disasters throughout the region, and encourage the participation of localities and businesses.
AgroViet 2020 underway in Hanoi
The 2020 Vietnam International Agriculture Fair (AgroViet 2020) opened in Hanoi on December 3, featuring 220 booths exhibiting agricultural products, handicrafts, and farming machinery from more than 30 cities and provinces around the country.
Themed “Connecting values of Vietnam’s agricultural products”, AgroViet 2020 aims to honour the achievements of the agricultural industry in terms of global integration and the two decades of the fair being held.
The event also serves as a platform for agribusinesses and localities to boost trade and gain access to new domestic markets while helping cities and provinces introduce their advantages and potential and call for investment in local agriculture.
On display are a wide variety of high-quality agro-forestry-fishery products, and handicraft products many of which have been registered for geographic indicator or “One Commune, One Product” (OCOP) status, such as Bac Son tangerine, Ha Giang oranges, Ba Vi fresh milk, Bac Ha honey, Moc Chau vegetables, and Dak Lak avocado, among others.
The fair will run through December 6.
Foreign firm proposes stopping new coal-fired thermal power projects
The engineering consultancy firm headquartered in the Netherlands, Royal HaskoningDHV, and German development agency GIZ proposed stopping new coal-fired thermal power projects in the Mekong Delta region to focus on clean energy there at a conference to discuss a power plan for the region in the 2021-2030 period with a vision toward 2050 held last week in Can Tho City.
Speaking at the conference, a representative of Royal HaskoningDHV said that the region has nine coal-fueled thermal power plants with a total installed capacity of some 5,500 megawatts (MW), 10 waste-to-energy plants, one wind power plant and eight solar power ones.
Meanwhile, in line with its power development plan, in 2025, the Mekong Delta region will have three more thermal power plants in need of imported coal with a total capacity of 3,600 MW and three solar power plants and three wind power facilities with a combined capacity of over 546 MW.
By 2030, some coal and gas-fired power plants will be developed in the region to add 22,370 MW to the power grid.
However, the representative proposed the power plan in the 2021-2030 period with a vision toward 2050 should focus on renewable energy and liquefied natural gas-fired thermal power.
Accordingly, coal- and oil-fueled thermal power plants, which are under construction, are set to generate 3,600 MW, while gas-fired power plants will generate 9,400 MW. Of the total 22,400 MW for the power plan for the new period, wind, solar and biomass power plants will account for 9,400 MW. As such, the proposal excluded new coal-fired thermal power projects.
To fulfill the target, Royal HaskoningDHV proposed developing power transmission systems to support renewable energy sources.
Apart from continuing to develop the gas industry until 2025, it is necessary to build the O Mon gas pipeline system and some facilities to store LNG for the Mekong Delta region after 2025.
COVID-19 crisis could set back generation of businesswomen
Women across the world have been disproportionally impacted by the COVID-19 pandemic. A staggering 87 per cent of women business owners said they had been adversely affected, according to the Mastercard Index of Women Entrepreneurs (MIWE).
Overrepresentation in sectors hardest hit by the economic downturn (such as tourism, retail and F&B), the pronounced digital gender gap in an increasingly virtual world, and the mounting pressures of childcare responsibilities are only a few factors that have left women particularly vulnerable, particularly in economies such as Viet Nam, South Korea and Thailand.
The MIWE 2020’s top performing economies is a prime example of gender-specific support mechanisms having swift and significant results. For the first time, Israel tops the MIWE as the best economy for women entrepreneurs worldwide, advancing from fourth place in 2019.
Last year’s strong performers, the United States and New Zealand – although dropping from 1st to 2nd, and 2nd to 4th places, respectively – demonstrated that economies with mature gender-focused initiatives still out-performed on the global stage through continued focus on advancing conditions for women in business.
The majority of economies (34 out of a total of 58 in this report) had healthy MIWE scores, such as Australia, Indonesia, Mainland China, Singapore, Viet Nam (63.87) and Malaysia, while 13 economies had lower scores such as Japan and India.
Of the 58 markets included in the Index, 12 moved up by five or more ranks year-on-year, while 10 fell by five or more. Asia Pacific’s fast-rising markets included China (+6) and Indonesia (+5), while the largest drops were seen in Singapore (-12), the Philippines (-10), Hong Kong SAR (-8) and Viet Nam (-7).
Women in Asia Pacific continued to make admirable progress in the business world. The Philippines, Thailand, Viet Nam and New Zealand ranked second, sixth, ninth and tenth respectively for “Women’s Advancement Outcomes”, which measured progress and degree of marginalisation economically and professionally as businesses leaders, professionals, entrepreneurs and labour force participants.
“What the findings make clear is that regardless of an economy’s wealth, level of development, size, and geographic location, gender inequalities continue to persist – even pre-pandemic. What COVID-19 did is that it exacerbated an already problematic situation. It disproportionately disrupted women’s lives and livelihoods to a greater extent than men due to a few pre-existing factors: the jobs and sectors women tend to work in, childcare and domestic responsibilities and the pre-existing gender disparity in business,” said Julienne Loh, Executive Vice President, Enterprise Partnerships, Asia Pacific, Mastercard.
“Yet, through the pandemic we’ve seen women’s strength and endurance in the face of adversity. But this moment in time is fragile unless governments, financial services and business organisations come together to do three things: offer systemic support and programs to enable women to survive and thrive in this new normal, equip them with skills to navigate the digital world, and nurture an equitable, accessible financial services system that supports women’s work and entrepreneurship,” said Loh.
“The pandemic has adversely impacted every individual, business and economy. Yet women entrepreneurs have shown their resilience by promptly adapting to new and digital ways of working, reimagining existing models, and tapping into new business opportunities. Mastercard is committed to supporting governments and financial institutions to create initiatives and programs that will empower women entrepreneurs to help drive Viet Nam’s economic recovery,” said Winnie Wong, Country Manager, Vietnam, Cambodia & Laos, Mastercard.
In its fourth year, MIWE highlights the vast socio-economic contributions of women entrepreneurs across the world, as well as providing insight on the factors driving and inhibiting their advancement. The MIWE 2020 provides a global ranking on the advancement of women in business in pre-pandemic conditions across 58 economies (including 15 in the Asia Pacific region), representing almost 80 per cent of the female labour force.
Vietnam in driving seat for M&A wins
With the mergers and acquisitions market contracting due to pandemic-induced impacts and deal value and volume declining, experts descended on the Vietnam M&A Forum 2020 last week to share their insight on how companies could overcome the harsh environment the year has offered up.
In so far successfully containing the coronavirus pandemic, investors are turning their attention in greater numbers to Vietnam and the prospects it holds in terms of conducting mergers and acquisitions (M&A) deals, with the experts believing that companies making M&A moves typically outperform those that do not.
“There are three clouds hanging in the sky that make it more difficult to close a deal when things are not over – the US presidential handover, the COVID-19 pandemic, and the general uncertainties in the global and domestic economy,” said Warrick Cleine, chairman and CEO of KPMG in Vietnam and Cambodia. “I have been working for a long time in this country, but this is the first time I’ve ever witnessed such strong market volatility sweeping across all sectors, especially in tourism-related companies.”
Unarguably, Cleine said, an M&A approach could leave a profound effect on businesses’ growth and development. “However, the price tag for the deal might sometimes be steep and acquisition premiums might be larger than expected. Currently, many Vietnamese sellers offer quite high prices,” he added.
Meanwhile Lim Hua Tiong, CEO of Frasers Property Vietnam, also expressed that pricing is among the most sensitive part of the M&A journey, so acquirers should carry out thorough legal and financial due diligence before closing any deal.
“As one of the most active property providers in Vietnam, we have conducted a variety of deals over the past decade. Vietnam, Malaysia, and Singapore present very appealing investment opportunities. Although the progress of adapting and changing the legal requirements to open up more opportunities for M&A investors seems slow, many of our partners are still keen on acquiring local enterprises in Vietnam,” Tiong told VIR.
Other experts also warned that many foreign investors prefer to acquire stakes of Vietnamese companies, especially some state-owned enterprises, but a large proportion of their outstanding stocks are already taken. Therefore, they have to purchase from other investors, which leads to market-to-market loss on investment due to significant higher prices.
Market reaction to news of an M&A transaction may be favourable or unfavourable, meanwhile, depending on the perception of market participants and the resulting merits of the deal.
Paul DiGiacomo, senior executive director of BDA Partners, stated that since the beginning of the year there have been many areas with good growth in Vietnam, especially in the personal consumption segment as homebuyers are increasing in numbers. “Thanks to a young and tech-savvy population, Vietnam is now emerging as a bright star in the region, luring many high-profile investors from Thailand, Japan, and South Korea. Institutional investors and private equities are showing their keen interest in prominent industries,” DiGiacomo said at the forum.
He expects dealmaking activities to become more robust in education, healthcare, infrastructure, supply chain, and payments. “For instance, South Korean and Japanese behemoths now pay much more attention to the Vietnamese market and will expand their production here. This will prompt local suppliers and vendors to raise the bar to meet higher requirements,” DiGiacomo shared.
He also expressed his optimism on Vietnamese businesses making further inroads in overseas markets.
On the flip side, M&A transactions can sometimes fail due to corporate culture, or lack of cultural fit. Denis Brunetti, president at Ericsson in Vietnam, Myanmar, Cambodia, and Laos, shared how diversification in labour force is an impetus for the whole economy.
“When I first set foot in Vietnam in 1996, the working environment was basically full of working men, which is in stark contrast with the current labour force now. At the moment, Vietnam is very diverse in its workforce, and the gap between men and women is significantly narrowing,” Brunetti said. “I believe Vietnam’s prosperity will considerably depend on how people, regardless of their age, gender, or social background, can bring differences as well as their dedication to the whole of society.”
On the other hand, dealmaking is the utmost crucial factor of property developers in a bid to expand its operation, illustrated in the case of Novaland.
Nguyen Thai Phien, senior director of Corporate Finance at Novaland Group said, “We have acquired land sites from other investors to develop projects. Just a few days ago, we bought a 286-hectare project in Dong Nai worth $1 billion. Novaland has a plan to transform this project into a tourism ecosystem.”
Phan Duc Hieu, deputy director of the Central Institute for Economic Management, reaffirmed his belief that M&A activities will speed up from the beginning of next year, when three amended laws on Investment, Enterprises and Securities will come into effect at the same time. On top of that, reformed corporate governance principles in the Law on Enterprises will promote tie-up deals.
Ho Chi Minh City Brand Awards launched, to become annual feature
The HCM City Department of Industry and Trade and Saigon Times magazine launched the Ho Chi Minh City Brand Awards on December 1 to honour enterprises who have succeeded in building brands for their products and services.
The awards also seek to raise businesses’ awareness of the role and importance of building brands, encourage firms to enhance innovation, develop sustainably, and improve the competitive advantage of HCM City-based brands in the domestic and international markets, Ba Ta Hoang Vu, the department’s director, said.
The award is open to product and service brands built by HCM City-based firms at least for two years.
The awards will focus on brands in four key industrial (food processing, chemical rubber, mechanics. and information technology) and nine main service sectors (finance - banking - insurance; commerce; travel; transportation, port and warehouse; post and telecommunications, ICT; real estate; advisory; science and technology, health; education and training).
The criteria for scoring brands are based on compliance, evolution, creativity, brand investment and management, product/service quality and safety, and responsibility towards the community.
Tran Minh Hung, Saigon Times’ editor-in-chief, said the award would be given annually.
The awards ceremony is expected to be held in January next year.
TTC Sugar to issue $30 million of unsecured bonds
TTC Sugar has announced it will offer VND700 billion (US$30 million) worth of unsecured bonds up for public auction.
The firm said the interest rate of the bonds in the first year would be 10 per cent in the first four quarters then a floating interest rate after that.
The firm expects to release the bonds in the first quarter next year with the minimum order for individual investors VND20 billion and institutional investors VND250 billion.
It said the non-convertible bonds were not guaranteed by assets in the maximum term of three years and were issued to pay for sugar purchase contracts in the first quarter of 2021
Sugar purchase contracts included those with Thanh Thanh Cong Gia Lai company worth VND288.4 billion, Bien Hoa - Ninh Hoa Sugar Company worth VND205.8 billion and Bien Hoa Dong Nai TTC Sugar Company worth VND205.8 billion.
As of September 30, TTC Sugar had total capital of more than VND18.4 trillion, total financial debt of VND8.6 trillion, in which bond loans reached nearly VND1.3 trillion. In addition, the firm has nearly VND153 billion of convertible bonds.
Phu Yen grants investment decision for Xuan Dai Bay project
Phu Yen People’s Committee has issued the investment decision for the Xuan Dai Bay commercial service and tourist resort complex in Song Cau town of the central province of Phu Yen.
The project is invested by Xuan Dai Bay Investment JSC. According to the planning, the complex integrates hotels, a commercial service area, resort area, amusement area for kids, and other supporting facilities. The project covers an area of 7.32 hectares with the total investment capital of VND780 billion ($33.9 million).
The investor forecast that after receiving the approval for its investment plan, it would take 36 months from preparing to apply for an investment certificate to take the project into operation.
Once completed, the complex will contribute to meeting the accommodation demand of both foreign and domestic tourists and promoting the tourism image of the province. Besides, it will generate jobs and contribute to promoting socioeconomic development in the province.
Xuan Dai Bay is also near Cu Mong Lagoon, O Loan Lagoon, and the Da Dia Rocks. These and other lagoons are some of the best places to sample Phu Yen's famous local seafood.
In January 2011, Xuan Dai Bay was recognised as a National Relic, and plans have been made to promote tourist service development.
Phu Yen and the neighbouring provinces will build roads to Xuan Dai and promote the locale as one of the central region's prime tourism attractions.
VinSmart to export 5G-enabled smartphone to US
VinSmart, a subsidiary of Vietnamese conglomerate Vingroup, has initiated plans to sell locally produced 5G smartphones to the United States, according to Nguyen Thi Hong, CEO of VinSmart.
Hong outlined that the firm is currently ranked in third place in terms of the local market share for smartphones, making up 15.2% of the country’s smartphone market.
In addition, the local enterprise expects to sell its Aris and Aris pro 5G phones to consumers in the US market during 2021.
After conducting a number of surveys, the CEO stated that US consumers appear to be keen on the Vietnamese-made product. July saw VinSmart announce plans to develop advanced technologies, therefore successfully creating a smart phone that could make use of 5G technology.
The business also plans to expand its sales domestically once the country deploys its own 5G network.
Hong explained that the firm will co-operate alongside military-run telecommunication giant Viettel in an effort to help users switch from feature phones to smartphones.
According to Nguyen Minh Viet, head of the Mobile Device Research Institute, the proportion of Vietnamese engineers who are developing smartphones for VinSmart’s is 90%, with the remainder consisting of foreign experts.
VinSmart’s technology has been developed through close co-operation with some of the world's largest technology firms, including Qualcomm and Google, with this partnership making use of the most advanced technologies in the smart device field.
Vietnam hit by sharp decline in oil and petrol exports
Vietnam exported 1.85 million tonnes of oil and petrol during the inital 10 months of the year at a value of US$787.53 million, with the average price being US$462.7 per tonne, marking an annual fall of 33.9% in volume and 30.6% in value, according to the General Department of Vietnam Customs.
October witnessed the export turnover of oil and petrol suffer a decline, although exports to China recorded an increase of 235.5% in volume. In addition, exports to Malaysia increased by 31% in volume and 45.2% in turnover.
The opening ten months of the year saw Cambodia rank first in terms of the leading consumption markets for Vietnamese petroleum, with 519.104 tonnes, equivalent to over US$204.79 million with an average price of US$394.5 per tonne.
Furthermore, China came in second with 218.206 tonnes valued at US$111.14 million.
During the reviewed period, exports of oil and petrol to foreign markets, such as the Philippines, Indonesia, and Russia, all witnessed declines, with the exception of Malaysia which saw an increase in volume.
Catfish exporters suffer due to China’s Covid-19 inspection control
China has tightened control over imported frozen products, including Vietnamese catfish, in an effort to minimise Covid-19 infection risks.
Since November 10, Chinese authorities have applied surveillance, disinfection and origin traceability measures for all batches of frozen seafood products taken to major ports like Shanghai, Wuhan and Qingdao.
China has tightened control over imported frozen products, including Vietnamese catfish, in an effort to minimise Covid-19 infection risks.
However, since then, exporters have not yet received the Covid-19 test results as well as other instructions for their products including Vietnamese catfish from the Chinese side. As a result, a large amount of imported goods are stuck at Chinese ports.
The Vietnam Association of Seafood Exporters and Producers (VASEP) has called local exporters to keep calm and not try to lower catfish export prices.
Vietnamese catfish exporters are advised to closely co-operate with their Chinese importers to be fully aware of the export process and adjust export schedules to ensure their products are not stranded again.
According to the VASEP, the problem has been reported to the ministries of Agriculture and Rural Development, Industry and Trade and Foreign Affairs and the agencies will work with the Chinese side to remove difficulties for local exporters as Vietnam has brought the Covid-19 pandemic under control.
Glass half full for beer sector recovery
The Vietnamese beer sector is witnessing a recovery and could even grow by 20 per cent next year compared to 2020’s low base – although beer consumption is unlikely to reach figures recorded before the pandemic anytime soon.
Sabeco’s sales and distribution models are being revamped in the face of new market complexities
The leading beverage giant SABECO began to regain some of its lost momentum in the second quarter, after being set behind by COVID-19 and tough local drink-driving laws earlier this year. It is expected to maintain the recovery trend at the end of this year as the market gradually recovers from the pandemic.
According to a recent report from brokerage SSI Securities Corporation, SABECO’s gross margins would fluctuate between 28.2-28.5 per cent over the next 2-3 years thanks to its digitalisation project, named Sabeco 4.0.
According to company general director Bennett Neo, Sabeco 4.0 is a strategic initiative to transform its business using digital technologies, organisation structures, harnessing data, and improving information flow in order to make better decisions, improve governance structures, and automate the business with digital technologies where possible.
“The end goal we want to achieve is to optimise, standardise, and automate the way of working across all entities nationwide in order to strengthen our market leadership in the Vietnamese beer market,” said Neo.
In the current phase of Sabeco 4.0, the company will focus on transforming the company’s sales and distribution model.
This includes developing comprehensive business management solutions to help Sabeco achieve its business targets; standardising sales processes in line with domestic and international standards; and applying a synchronised, centralised, and standardised sales solutions system, aside with strengthening its ability to monitor and control operations based on data and building up an experienced internal workforce capable of operating the new systems.
This month Sabeco announced that it would pay its first cash dividend for the 2020 financial year on December 18, in which the dividend rate is set at 20 per cent, meaning shareholders will receive VND2,000 (0.086 US cents) per share.
The total dividend rate Sabeco set for 2020 was 35 per cent. The two biggest shareholders – State Capital Investment Corporation and Vietnam Beverage Co., Ltd. – will receive VND461 billion ($20 million) and VND687 billion ($29.9 million), respectively.
In the third quarter, Sabeco reported that revenues were down 17 per cent and post-tax profit up 1 per cent on-year, reaching VND 8 trillion ($347.8 million) and VND 1.47 trillion VND ($63.9 million) respectively. The gross profit margin increased from 24.6 per cent to 30.7 per cent.
Although revenues declined compared to 2019, it was up from the previous quarter thanks to recovery of the market after the COVID-19 pandemic. It attributed the growth in profits to better cost management.
Storms disrupt manufacturing in November
The recovery in the Vietnamese manufacturing sector paused in November as a succession of storms and floods hit the country. Output dipped, while new order growth slowed to a marginal pace, with the COVID-19 pandemic remaining a hindrance to operating conditions.
Purchasing activity and employment were also scaled back but business sentiment improved to a 16-month high. The Vietnam Manufacturing Purchasing Managers’ Index (PMI) dipped fractionally below the 50.0 no-change mark to 49.9 in November, signalling broadly unchanged business conditions during the month. This followed a reading of 51.8 in October and was the first sub-50 figure in three months.
Output decreased slightly in November, thereby ending a two-month sequence of growth. That said, anecdotal evidence suggested that the reduction could be temporary as a number of firms indicated that recent stormy weather and subsequent flooding had disrupted their production during the month. The COVID-19 pandemic was also a factor weighing on output.
New orders continued to rise but only fractionally as business was impacted by the stormy weather conditions and flooding, as well as the pandemic. The latter had a particular effect on new export orders, which decreased solidly. On the other hand, a number of respondents indicated that new orders had increased amid improving underlying demand. With new order growth slowing, firms worked through outstanding business, leading to a 10th successive reduction in backlogs of work. The latest fall was solid but softer than in October.
Falling workloads led firms to scale back their employment and purchasing activity during November. The modest reduction in staffing levels followed a slight rise in the previous month.
Purchasing activity decreased for the first time in three months. The fall in input buying fed through to a reduction in stocks of purchases. In both cases, however, consumer goods producers bucked the wider trend by posting expansions. Meanwhile, a reduction in output during the month resulted in a decrease in stocks of finished goods.
As well as hampering production, the stormy weather and COVID-19 pandemic combined to disrupt the delivery of purchased items to manufacturers. Suppliers’ lead times lengthened for the 12th successive month and to the greatest extent since August. Raw materials shortages were also a factor behind delivery delays.
Shortages of raw materials contributed to rises in input costs during November, with difficulties importing items and higher prices in international markets also cited. Input prices increased sharply, and at the fastest pace since August 2018. The rate of output price inflation also quickened but remained modest. The rise in charges was the greatest for two years.
Despite the setback in November, firms expect production to expand over the coming year. Confidence was centred on expectations that the COVID-19 pandemic would remain under control in Vietnam and cause less disruption globally.
New demand dictates retail surge for M&A
After the lull period due to the pandemic, mergers and acquisitions in Vietnam’s consumer goods and retail market are expected to thrive again as both local and foreign investors are targeting the country’s huge consumer demand.
Speaking at the Vietnam M&A Forum 2020 organised by VIR, Paul DiGiacomo, senior managing director of BDA Capital, said that Vietnam’s mergers and acquisitions (M&A) market is becoming more mature as buyers have more long-term visions. The country’s growing consumption power and expanding middle class have attracted international brands from Japan, Thailand, and many more, with some million-dollar deals concluded.
Earlier this year, Masan HPC Co., Ltd., a wholly-owned subsidiary of Masan Consumer Corporation (MCH), successfully acquired 52 per cent of Net Detergent JSC. The move marks Masan’s entrance into the $3.1 billion local personal and home care market.
More recently, Masan MEATLife announced it would enter the poultry market by buying a 51-per-cent stake in 3F VIET JSC, a leading player in the industry, for VND613 billion ($26.65 million).
Danny Le, general director of Masan Group, said that the company is stepping up its M&A efforts to capitalise on the lucrative domestic market and has extended its product lines ranging from seasoning to instant noodles and beverages.
Le added that Masan has developed a 5-year strategy to broaden its product portfolio, which serves nearly the entire country. The company aims to acquire local firms that have state-of-the-art technology to manufacture high-quality products at reasonable prices. Its acquisitions are hoped to expand its distribution network and build a strong local brand in the domestic market.
Similarly, Vinamilk officially became the parent company of GTNFoods after finalising the purchase of 79.5 million GTN shares to raise its holding to 75 per cent. After the transaction, Vinamilk also owns 51 per cent in Moc Chau Milk, which is a subsidiary of GTNFoods.
Elsewhere, Thai-backed Central Group of announced spending VND2.66 trillion ($115.7 million) to complete the acquisition of Nguyen Kim, after five years of holding a 49 per cent in the electronics retailer.
The official entry into force of the EU-Vietnam Free Trade Agreement (EVFTA) is expected to further drive the interest of investors in Vietnam’s retail market. Phong Quach, head of Strategy3 at Ipsos Vietnam, said that with the impact of the pandemic to the global economy, the abolishment of Economic Needs Test – a requirement once viewed as a considerable barrier for foreign investment in retail – may not result in a large stream of direct retail investment from EU corporations into Vietnam.
However, since EU investors need to acquire knowledge and a supplier network here, M&A may be a more viable method for market entry. “We have not seen any sign for a significant upward trend regarding M&A in Vietnam’s retail market from EU investors. Even though M&As transactions are becoming an attractive method of market entry for EU investors, the local retail market remains a challenge to be solved,” Quach said.
Nevertheless, he added, with Vietnam’s GDP growth set to be among the world’s highest in 2020 and expected growth in 2021 to be closer to 2019’s rate, the Vietnamese retail landscape could see a good recovery in 2021, which will draw many investors’ attention amidst the upcoming lockdown in the EU.
A survey from Ipsos Vietnam in September showed that Vietnamese consumers generally crave for a better economy that is stronger than regional ones. “However, both the expected market growth and regulatory potential from the EVFTA will not be enough to eclipse the changing retail dynamic in Vietnam. Our survey results also show that the growth in takeaway orders and e-commerce could suggest an omnichannel landscape with changed shopping behaviour to come in Vietnam,” Quach said. EU investors will likely try to foresee how this landscape will be changing so that they can accurately select the most appropriate players to invest in.
Matthieu Francois, associate partner of McKinsey & Company said, “We have not yet seen large deals between foreign investors and local retailers, but a lot of elements seem to converge in this direction. Local players are typically taking the lion’s share of the market in most retail categories and might, at some point, face increased need for funding.”
However, foreign retail concepts do not easily resonate with Vietnamese buyers who are generally loyal to local brands, except for convenience stores.
“This might urge foreign players to consider investments in local ventures that could be more attractive to some than a greenfield venture, while also holds appeal for local players that are looking to lift their profitability,” Francois added.
Jackpot within reach for keen Japanese investors
Vietnam is expected to welcome a growing wave of dealmaking involving Japanese companies and investors as the pandemic subsides.
Speaking at the Vietnam M&A Forum 2020 last week, Masataka “Sam” Yoshida, head of the Cross-border Division of RECOF Corporation and CEO of RECOF Vietnam Co., Ltd. – said that investment via mergers and acquisitions (M&A) into Vietnam will be a trendy activity for Japanese companies which have the potential to last for years to come.
“The first trigger for such an opinion is the destiny for Japanese companies to find new markets to expand outside their own country,” Yoshida explained.
Most sectors in Japan are already well matured – for instance, almost one-third of the Japanese population is over 65 years old, making the Japanese average age almost 20 years older than the Vietnamese equivalent.
“The second trigger is using M&A as a growth strategy, which is backed up by the abundant accumulated cash during the last 20 years – reaching $2.34 trillion as bank deposits with almost zero interest rate,” he said. “Pushed by shareholders’ requirements to make use of money, it has started to flow into the M&A market which made its highest record in 2019 by over 4,000 deals in all types of M&A. This means there were more than 4,000 active and successful Japanese investors,” he said.
Indeed, Yoshida noted that there are a growing number of M&A transactions between Japanese investors and companies in most of countries in Southeast Asia. Among them, Vietnam recorded the highest number ever with 33 transactions last year.
In the past, due to the size of businesses, Vietnam was often outside the top three countries in this regard, but in 2019 it reached an amount of $389 million – 2.8 times higher than in 2017 and, for the first time, ranked just behind Indonesia in second.
During the first 10 months in 2020, there were 21 transactions publicly announced between Japan and Vietnam, ranking second in number after Singapore. Although there was an on-year 25-per-cent decline, given that the total of outbound Japanese deals dropped by 33 per cent during this period, the Vietnamese decline was both smaller than the average and also less than most other countries. In terms of transaction value, Vietnam was ranked second at a value of $282 million.
“We can say that the interest from Japanese investors towards Vietnam continues to be strong even in the pandemic situation, and the background of a slowdown of investment is purely a timing issue,” Yoshida insisted.
In fact, there has been a surge in Japanese-driven M&A deals across the world over the last five years. In 2019, all categories recorded a historical high. In 2020, the domestic M&A market was hit by COVID-19 with a 4-per-cent on-year dip up to October. However, the Japanese market already bottomed out in May, and now the monthly number has almost recovered to the previous year’s level.
Outbound M&A was particularly hard hit and has been slow in recovering, with on-year decline of around 33 per cent up to last month mainly due to worldwide border restrictions.
“From a Japanese point of view, their companies already have very little to do in a market like Thailand. There are already about 5,500 Japanese companies in the country and it is too late to enter. As for somewhere like Myanmar, there are fewer than 400 Japanese companies and so conservative investors still have to wait and see carefully regarding appropriate timing,” Yoshida said.
On the other hand, Vietnam, with more than 2,000 Japanese companies in the country, will continue to attract them. New Japanese Prime Minister Suga Yoshihide is following the policy of his predecessor and demonstrated his commitment to Vietnam by choosing the country as his first destination to visit while in the role. “This endorsement to Vietnam will create an enormous impact to the Japanese companies’ future strategies,” Yoshida explained.
“Once the hurdle of anti-pandemic restrictions on business activities are removed, a big wave of Japanese companies waiting to make progress on investment procedures will rise,” he said.
EVN proposes Quang Tri to set up steering committee for renewable energy development
The general director of Electricity of Vietnam (EVN) proposed Quang Tri People’s Committee to establish the Steering Committee for Electricity Development in order to call for investors who plan to develop wind farms to cooperate with the committee to promote land clearance and power transmission projects.
On November 27, EVN general director Tran Dinh Nhan and the delegation had a working session with Quang Tri People’s Committee to discuss the situation of power and construction of projects in the province.
According to Nhan, to date, 100 per cent of communes, 99.79 per cent of households, and 99.68 per cent of the province use electricity from the national grid. Besides, EVN contributed to ensuring stable power supply to promote socioeconomic growth of the province.
A member company of EVN has rushed to implement power transmission projects in the west of Quang Tri, including the 220kV Lao Bao substation and the 220kV Dong Ha-Lao Bao transmission line.
Nhan also reported that the total power generated from renewable energy in the western part of the province reached 1,300MW, exceeding the transmission capacity of the existing grid. This large demand for renewable energy development in the province has prompted EVN to propose the Ministry of Industry and Trade to propose the prime minister to extend the power grid.
Thus, Nhan proposed Quang Tri People’s Committee to establish the Steering Committee to cooperate with investors in land clearance and develop power transmission projects to be able to handle electricity generated from renewable energy sources.
The leader of EVN also required provincial leaders to complete land clearance and the corridor area of the 500kV Quang Trach-Doc Soi transmission line and deal with the problems holding up the 500kV Dong Ha-Lao Bao transmission line in December this year.
“If the land clearance of the above two transmission lines is completed next year, EVN commits to completing the power transmission projects to accommodate renewable energy generation,” Nhan said.
Vietnam fintech startup go from 44 in 2017 to 121
Vietnam’s fintech startup landscape almost tripled in size between 2017 and 2020, growing from 44 startups in 2017 to now 121 startups, according to a new report released by Fintech News Singapore.
Accordingly, the number of fintech startups in Vietnam grew more than 179 per cent between 2017 and 2020. Payment remains the biggest segment, representing 31 per cent of all fintech startups.
As of October 2020, Vietnam was home to 39 licensed non-bank payment services providers, with the five biggest e-wallets being MoMo, Payoo, Moca, ZaloPay, and ViettelPay.
Statistics from the State of Bank of Vietnam (SBV) revealed that as of 2019, there were 4.2 million e-wallet users out of the country’s population of 100 million people, implying that despite a rather crowded and highly competitive local payment sector, there are still plenty of growth opportunities, stated the report.
While Vietnam’s payment startups continue to grow and attract investors’ interest, the strongest growth was actually recorded in peer-to-peer (P2P) lending and the crypto/blockchain space. These two segments saw the number of startups rise from less than five in 2017 to more than 15 startups in 2020.
The past three years also saw the emergence of insurtech, digital banking, and small- and medium-sized enterprises (SMEs) financing, three segments that were non-existent in 2017.
Fintech News Singapore emphasised that despite notable traction and strides, Vietnam’s fintech sector remains nascent when compared to neighbouring Singapore for example, and segments including data/credit/scoring management and crowdfunding are still unrepresented.
The domestics fintech sector is largely comprised of players operating under a business-to-consumer model, making the underdeveloped business-to-business (B2B) market poised for growth.
At the same time, Vietnamese banks are accelerating their digital transformation, with a growing number of them adopting a partnership approach to enable rapid innovation. This provides B2B startups with plenty of opportunities to support incumbents in their digital efforts.
In the fintech sector, these so-called “super apps” are rapidly gaining ground, leveraging their advanced tech platforms and expertise to deliver cheap and convenient digital financial services to the masses.
More developments are expected in the near future on the back of favourable regulations. These include the forthcoming fintech regulatory sandbox as well as a legal framework for digital assets and cryptocurrency, the report said.
Vietnam’s markets likely touched by US presidency
The outcome of the US presidential race is unarguably one of the most important factors influencing global markets across all sectors. Y Nguyen - head of Macro Economics, Hieu Tran - investment strategist, and Toan Dao - industry analyst at KIS Securities, dive into the nuts and bolts of Joe Biden’s impacts to Vietnam’s financial landscape.
Joe Biden’s ambitious plan may boost long-term economic growth, followed by an expansion in trade activities.
As an essential trading partner, we expect the Unỉted States’ stimulus to also benefit Vietnam in the long-run. Besides this, to modernise the crumbling transportation system, Biden proposes concentrating on infrastructure investment as a vital source for long-term economic growth in the US. This promising strategy will surge demand for construction metals such as steel, iron, aluminium, and copper and consequently favour domestic and external suppliers, including Vietnam.
As an essential policy in Biden’s plan for revitalising domestic manufacturing, the “Made in America” predicate will provide more investment in federal procurement to enhance domestic producers’ competitiveness relative to China and other countries with similar product lines, which probably lifts domestic firms’ share and position and hinders exporters from approaching the US.
Furthermore, as a part of the Green New Deal, the president-elect commits to fully integrate climate change into the US foreign policy, as well as its trade approach. As the US takes steps to make domestic polluters bear the full cost of their carbon pollution, the Biden administration will impose carbon adjustment fees or quotas on carbon-intensive goods from countries that are failing to meet their climate and environmental obligations.
Biden will also introduce new conditions related to climate change commitments into future trade agreements – a policy which may change Vietnam’s export value and structure to the US.
Vietnamese exports to the US will likely be affected by Biden’s approach to the trade tensions with China. Described as the winner of the US-China trade war, the shift in approach and attitude of the Biden administration will reverse the competitiveness of Vietnamese goods relative to China and discourage a manufacturing shift into Vietnam.
The double tax rate on global intangible low-taxed income likely reduces American companies’ tendency to offshore their production overseas. It also might discourage the capital flows into countries with cheap labour, including Vietnam.
As Vietnam’s stock markets officially began trading in 2000, we can only observe the market dynamics for the last five presidential terms. Based on these, the Vietnamese stock market tended sideways or slightly downwards during the US election years, except in 2008, when the market fell sharply due to the global financial crisis. In all other years, market sentiment had been cautious as people waited for the election results and the following policies.
After election years, the Vietnamese stock market showed a one-year upwards pattern, regardless of who won the election. From 2000 onwards, the VN-Index has been rising in each first year of a new US presidency. In 2017, the index jumped 47.8 per cent after President Donald Trump won. At that time, Trump introduced a series of tough policies to exporting countries to reduce trade deficits and protect domestic production, especially because of China, which contributed to international companies moving their operations to other countries such as Vietnam.
When Biden is president, the supply chain shifts from China to Vietnam will be maintained in the medium term as the Democratic Party supports protection- and trade-centred policy. Therefore, the Vietnamese stock market’s performance during the first presidential year of Biden in the US also promises to continue in 2021.
With Biden, the US Federal Reserve will continue to implement easing monetary policy, such as keeping interest rates low. In addition, Biden’s tax plans also put great pressure on the American financial markets.
As a result, capital flows from the US may seek other markets with higher returns to investors, and Vietnam could be one of those. The country also remains a potential market that could attract capital flows from exchange traded funds. Up to mid-November, foreign sells have overwhelmed the market, with net sell value recorded at VND16 trillion ($695 million), while the market ended up being net bought from 2017 to 2019. Foreigners’ selling activities have been increasing by 6 per cent compared to 2019 while buying activities have recorded a drop of 6 per cent.
Joe Biden’s main policies, which are about controlling the COVID-19 pandemic and raising the minimum wage, will turn on the green light for the recovery of the United States’ economy.
Pharmaceutical firms Pfizer and BioNTech have announced 95 per cent efficacy for their vaccine candidate, drawing on the final analysis of a 43,000-person study. This positive news will bring an optimistic sentiment back to the market, both in the US and Vietnam.
To address the impact of the pandemic, Biden has vowed to extend loans to small businesses, increase direct money payments to families, and raise the minimum wage to support young and blue-collar workers – policies which will contribute to the economic growth of the US and may spill over to Vietnam.
According to KIS research, the main beneficiaries will be seafood, aviation, and oil and gas, while banking and property sectors are expected to remain neutral.