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Vol 32, August 17th 2016
BUSINESS REVIEW VIETNAM
Vietnam's biggest M&A forum to be on 18th August 2016
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INSIDE THIS ISSUE
HIGHLIGHTS
Vietnam joining 4th industrial revolution
BOT no longer favored investment mode
ECONOMY
Cap of 5% inflation in new economic plan
"Coffee money" still prevalent in VN's public sector: UNDP
BANKS & FINANCE
$23,000 account hack: Vietcombank tightens OTP service security
Bad debts drop to 2.58%
Government approves plan to reduce cash use
INVESTMENT
$303m shopping mall to be built under HCMC metro station by Japan
consortium
$4b project in Thu Thiem new urban area may face rejection
ENTERPRISES
Vinamilk in focus of Thai Billionaire's F&N in race with Coke, Pepsi
Vietnam phone retailer fined over "model in glass box" PR stunt
Hi-tech agriculture project developed in Thue Thien Hue
MARKET & PRICES
Vietnam drug stocks surging as foreigners covet booming industry
The clean-energy game in Vietnam
LEGAL UPDATES
Representative offices in Vietnam
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ECONOMY
Cap of 5% inflation in new
economic plan
VNN - The Ministry of Planning and
Investment is developing a plan on
restructuring the economy by 2020
aiming to renovate the growth
model towards improving efficiency
and competitiveness of the
economy.
The ministry said that intensive
economic restructuring has
become critical for the next five-
year period due to rapid int'l
integration & technology advances
which demanded the Southeast
Asian economy to search for new
competitive advantages.
The economic restructuring
between 2010 and 2015, the
ministry said, revived macro-
economic stability and reduced
damages caused by inefficient
resource allocation, but still
generally failed to renovate the
growth model and the economic
structure.
Under the draft project, three pillars
of the economic restructuring by
2020 would be ensuring reasonable
economic growth and macro-
economic stability, boosting the
high-added-value economic sector
and developing an independent
and dynamic economy to ensure
the national security and social
order and safety.
Accordingly, inflation would be
controlled at 5% per year, the State
budget deficit would be cut to
between 3.5% and 4% of GDP,
public debts down to below 62% of
GDP and foreign currency reserve
equivalent to five months of imports.
In addition, business environment
would be lifted to be equivalent to
the ASEAN+3 level (Singapore,
Malaysia and Thailand).
Vietnam would focus on boosting
the development of key economic
sectors, including agro-forestry-
fishery sector, six prioritised service
lines such as logistics, business
development, tourism, and banking
and financial services, in addition to
university education and
vocational training, and 13
prioritised industries (including
electronics, agricultural machinery,
shipbuilding, and environment and
energy saving, in addition to
automobile, chemicals and oil).
Private firms would play a key role
in the restructuring of economic
sectors, the draft said.
Existing problems included
investment-based growth, slow
improvements in productivity as
well as disappointing results of the
restructuring of the public
investment, State-owned
enterprises, the financial system
and the agricultural sector, the
ministry pointed out.
The next restructuring phase must
focus on building a firm ground for
long-term and sustainable growth,
which could only be achieved
through improving efficiency,
productivity and quality to form a
more dynamic economic structure
with higher competitiveness and
larger growth potential, the ministry
said in the draft project on the
economic restructuring between
2016 and 2020 which is now being
raised for comments.
Policies would encourage
investments from the private sector
and FDI, the draft said, targeting at
least 150 out of 500 the leading
global multinational corporations,
together with policies to promote
the development of the private
sector, esp start-ups.
Regarding the financial market, the
draft said efforts to reduce bad
debts would continue together with
restructuring credit institutions to
limit system risk and boost operation
efficiency. The lending interest rate
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ECONOMY
would be cut to the average level
of developing countries, or around
5% while 70% of commercial banks
fully implement Basel 2 by 2020.
The draft also set goals of boosting
agricultural production towards
high quality and high added value,
promoting the co-ordination and
supply chains among regions and
sectors, improving land use
efficiency, building skilled labour
force and restructuring public
services towards efficiency.
"Coffee money" still prevalent
in VN's public sector: UNDP
TTN - A survey by the United Nations
Development Programme (UNDP)
found that petty corruption in
Vietnam’s public sector seems to
be thriving.
The survey interviewed nearly
75,000 people from 63 cities and
provinces between 2009 and 2015,
revealing that bribery is still
widespread in the Southeast Asian
country.
28% of those surveyed in HCMC
said they had been coerced into
bribing officials in order to obtain
certificates for land use rights at an
average of VND14.5 million ($650)
per instance, significantly higher
than the average VND1.2 million
($54) in Hanoi.
Over 30% of those polled in the
southern city said they had bribed
hospital staff and doctors in order
to get better treatment, a
whopping decrease from 60% in
2011.
The average amount of each
hospital and doctor bribe was
VND730,000 ($33) in HCMC, five
times lower than Hanoi’s average
of VND3.5 million ($157).
The average amount of under-the-
table money paid by parents to
primary school teachers in HCMC
public schools in 2015 was
VND853,000 ($32) per term, a rise
from VND510,000 ($23) in 2011. In
Hanoi, that amount was lower:
VND630,000 ($28) per term, a drop
from VND824,000 ($37).
According to interviewees,
personal relationships are given
considerably more weight in the
recruitment of public officials than
actual ability and over 50% of those
surveyed revealed that bribery is a
requirement to obtain public sector
employment.
More surprisingly, the threshold of
tolerance for petty corruption has
surged.
In 2011, the threshold for the
amount of under-the-table money
leading to an accusation of bribery
in HCMC was VND5.8 million ($260).
In 2015, that rose to VND34.8 million
($1,560).
Last year, only 2.3% of those in
HCMC who were asked for bribes
reported the incident, a fall from
12.5% in 2011.
The level of "coffee money" that leads to denouncing
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BANKS & FINANCE
$23,000 account hack:
Vietcombank tightens OTP
service security
VNN - The Joint Stock Commercial
Bank for Foreign Trade of Viet Nam
(Vietcombank) on August 16
announced on its official website
changes to activation methods of
smart OTP services.
The changes to smart OTP services
are aimed at improving security
after hundreds of Vietnamese dong
were reportedly stolen from a
customer's Vietcombank account.
Hoang Thi Na Huong, a
Vietcombank customer in Ha Noi,
said she received notifications of
transfer of VND500 million ($23,000)
from her Vietcombank account
between 11pm on August 3 till 5am
the next day, while she was at
home.
The bank said on August 15 that it
had managed to cancel the last
three orders to keep VND300 million
in the bank and return the amount
to Huong.
Accordingly, customers who have
already used smart OTP and wish to
continue using the services on their
existing devices must re-activate
the service via Vietcombank's
Internet banking service.
Those who have not registered for
smart OTP services or those wanting
to change their devices, will have
to go to Vietcombank branches to
register and get the service
activated.
OTP subscribers are encouraged to
download the latest smart OTP
application from Google Play Store
and Apple Store.
Further investigations are ongoing.
Banks also urged customers to be
alert against cyber-attacks.
Bad debts drop to 2.58%
TNN - The bad debts ratio of the
Vietnamese banking sector
declined to 2.58% as of the end of
June, according to new official
figures.
It represented a decrease of
two%age points from a month
earlier, the central bank's website
reported Thursday, quoting Doan
Van Thang, deputy director of the
Vietnam Asset Management
Company.
It was also nearly equal to the five-
year low of 2.55% banks reported at
the end of last year.
Meanwhile, loans outstanding rose
by 8.54% year-on-year at the end of
July, Nguyen Tien Dong, chief of the
State Bank of Vietnam’s credit
department, was quoted as saying.
The central bank projected the
sector's credit growth at 18-20% this
year, compared to 18% last year.
Government approves plan to
reduce cash use
VNS - Gov’t has approved an e-
commerce development plan for
2016-20 that targets 50% of
consumers switching from cash to
other forms of payment.
The target has been set after
factoring in the rapid increase in
SMS OTP sent by server
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BANKS & FINANCE
online shopping and electronic
banking.
However, the plan acknowledges
the need to significantly improve
network security to convince
residents to switch from cash.
E-commerce turnover $10b by 2020
Gov’t has set targets of 30% of the
population shopping online and
spending $350 a year each and
business-to-customer (B2C) e-
commerce turnover increasing 20%
to $10b, or 5% of the country’s total
retail and services turnover.
Besides, all supermarkets, shopping
malls and convenience stores will
accept credit cards.
Around 70% of telecom, electricity
and water service providers will
accept online payments from
customers.
Importantly, 50% of consumers in
big cities will use non-cash payment
services.
Gov’t also expects 100% of public
services and all bidding to be
online, with the contract
implementation process published
in the national bidding website.
Chiefs of several banks said the
target of getting 50% of residents in
large cities to use non-cash
payment methods would be
achieved soon since online
banking services like mobile
banking are booming.
According to the E-Commerce and
IT Department, as of last year 48
million people were using the
internet and 35 million had smart
phones.
The E-commerce Index report
showed that last year 27% of smart
phone users shopped using their
phones and mostly paid through
bank accounts, while 45% of smart
phone users searched for shopping
information more than once a day.
Vietnam is now among the top five
fastest growing smart phone
markets and one in which mobile
payment technologies are
developing rapidly.
A significant growth in the card
market also represents a growing
non-cash payment trend.
So far 45 banks have launched SMS
banking and internet banking and
25 others have launched mobile
banking.
According to statistics from the
Vietnam Banking Card Association,
82 million cards had been issued by
the end of 2015, 90% of them ATM
cards.
Along with the number of cards,
the value of payments made using
them has also increased sharply.
Huynh Trung Minh, a banking expert,
disagreed with the bank executives,
saying: “The target of 50% of
people switching from cash is very
hard to achieve because of poor
infrastructure, limited legal
framework, cash habit, and [the
fact that] some shops even charge
a fee if customers pay by card.
“If Gov’t would like to boost non-
cash payments, besides investing in
infrastructure, it has to be the
biggest non-cash customer and
provide public services with non-
cash payments.”
Convenience but safety first
Economists said the potential of e-
commerce using e-banking is huge
if users can feel secure about
making payments.
“E-commerce enterprises have not
paid enough attention to mobile
commerce,” Nguyen Dinh Thang,
deputy chairman of the VN
Computer Association.
At least 11.3 million customers have
ordered on their phones so far, but
only 15% of websites have a mobile
version. Meanwhile, consumers
remain worried about the quality of
goods they buy online and security.
The 2015 E-commerce Index
pointed out that the infrastructure
and services have not met the
demands of online payment.
Besides, while banks have issued
dozens of millions of cards, most
merchants are in big cities.
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INVESTMENT
$303m shopping mall to be
built under HCMC metro
station by Japan consortium
A graphic image of a 45,000-square-
meter shopping mall under the Ben
Thanh station of HCMC's first metro line.
HCMC has reportedly sought
Gov't's permission to partner with a
consortium of Japanese investors to
build a shopping mall beneath a
metro station at a projected cost of
VND6.86 trillion ($303.2m).
In its proposal, the city People's
Committee said it wants to use
ODAs from Japan to build walking
streets, a square and other
infrastructure works for the mall.
Toshin Development, a known
developer of shopping centers in
Japan, will join hands with other
Japanese companies Nikken Sekkei
Civil Engineering Ltd and Osaka
Chikagai Co., Ltd. and the
country’s fund for overseas
infrastructure investment JOIN, to
build the shopping precinct.
The whole project will cover around
45,000 m2, of which the shopping
zone will take up around 40%.
It will be built under the first station
in the city's first metro line from Ben
Thanh Market to District 9's Suoi Tien
theme park. Work on the 20km
route began in 2012 and is
expected to be completed in 2020.
$4b project in Thu Thiem new
urban area may face rejection
Cafebiz - The Thu Thiem Urban Area
Management Board recently sent a
document to the People’s
Committee on the Thu Thiem
program, repeating its view that it
won’t accept investment projects
which require an adjustment of the
initial development plan.
Regarding the $4b project
suggested by a group of US
investors, the board said it needed
more research on the programming
and infrastructure functions.
In late May 2016, Johnathan Hanh
Nguyen, president of IPP Group,
and 3 investors from the US
suggested an investment project
with capital of $4b in Thu Thiem
new urban area in district 2.
The project, if implemented, would
comprise a 70-storey tower and
lower towers, an office building,
shopping mall and entertainment
area. The investors want to set up
the project in Zone 1 of the urban
area, in the northern part of the
core, designed to be a high-density
multi-functional trade & service
center. There would be several key
construction works, including a
convention center, museum, opera
theatre and programming
information center.
The construction works there are
supposed to be no more than 50
stories. The number of permanent
residents would be 14,900, while the
number of people at work 81,700.
According to the management
board, the detailed design of the
project submitted by the investors
show that only the 70-storey
building has a financial service
function, which fits the design, while
other items have functions different
from the original plan.
Nguyen The Minh, deputy head of
the Thu Thiem Urban Area Board of
Management, said Zone 1
comprises 11 land plots, but the
investors plan to use only one plot
to build towers, and another 10
plots for resorts and restaurants.
“This will spoil the initial plan which
called for the land to be an area
for finance & banking,” Minh said.
HCMC Mayor Nguyen Thanh Phong
said city authorities had also
received US investors who wanted
to build a resort in Thu Thiem, but he
turned down the project.
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ENTERPRISES
Vinamilk in focus of Thai
Billionaire's F&N in race with
Coke, Pepsi
Bloomberg - Fraser & Neave Ltd.,
the drinks-maker controlled by
Thailand’s richest man Charoen
Sirivadhanabhakdi, is searching for
acquisitions to bolster its market
share in Southeast Asia after its war
chest grew to nearly S$1b ($745m)
with sales of beer assets.
A potential target is Vietnam Dairy
Products JSC, also known as
Vinamilk, according to Lee Meng
Tat, F&N’s chief executive officer for
non-alcoholicbeverages. Vietnam’s
largest milk producer is an example
of what F&N wants in an
acquisition: a company with market
presence, well-known brands, and
a strong distribution network.
“The ideal situation is of course to
acquire,” said Lee, referring to
F&N’s efforts to expand in Southeast
Asia, where he said the company is
a “distant third” to U.S. soft drinks
giants PepsiCo Inc. and Coca-Cola
Co. “That would give us a much
faster way into the market.”
Singapore-based F&N has S$971.8m
of cash and cash equivalents as of
end-June, after selling its stakein
Myanmar Brewery Ltd. last August,
three years after it divested its share
of Asia Pacific Breweries. In
Southeast Asia, home to nearly 600
million people and among Asia’s
fastest growing economies, the
company also plans to build its
presence from scratch in some
markets if acquisition opportunities
do not work out.
Vinamilk, VN’s biggest company by
market value, gained as much as
1.2% in HCMC on Tuesday, heading
for a fresh record high. F&N fell as
much as 1% in Singapore trading.
Vinamilk had surged to a record
last week after index compiler MSCI
Inc. said it would add the stock to
its gauge of frontier markets,
extending gains after Gov’t
scrapped the foreign ownership
limits for the company. The shares
have jumped 32% so far this year,
compared with the local
benchmark index’s 14% gain.
If more shares in Vinamilk become
“available and it makes financial
sense, we will always look at it,” said
Lee. “That has always been our
position.”
Vinamilk is not on a list of 120
companies that Gov't investment
arm State Capital Investment Corp.
plans to divest this year.
F&N is Vinamilk’s second-biggest
shareholder with a 11% stake, after
VN Gov't’s 45%.
Bottled Water
F&N's main brands include the
100Plus isotonic drink and Ice
Mountain bottled water, and it also
distributes beverages produced by
companies under its Thai owner,
such as Oishi Group Pcl's green tea
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ENTERPRISES
drink and Thai Beverage Pcl’s
Chang beer.
F&N is among the top three soft
drinks players in Singapore, Thailand
and Malaysia, according to
Euromonitor International, but isn’t
ranked among the top five
in Vietnam, Indonesia and the
Philippines, where the company is
examining ways to grow.
Charoen has laid out a strategy of
expanding across Southeast Asia
after his companies completed the
S$10.5b acquisition of F&N in Feb-
2013. The Thai billionaire has set a
target of making the food and
beverage businesses of F&N and his
other companies including Thai
Beverage, Sermsuk Pcl and Oishi
among the top three brandsin
Southeast Asia by 2020.
Vietnam phone retailer fined
over "model in glass box" PR
stunt
A major Vietnamese mobile phone
store chain operator has been
fined for an ad campaign in which
a model was put into a glass box
and carried around Hanoi on a
pickup truck.
The Hanoi culture department
found the PR stunt by The Gioi Di
Dong “inappropriate to the
capital’s cultural value,” and
decided to fine the firm VND6
million ($268).
“[The Gioi Di Dong] did not inform
local authorized organizations of
the event, which violated the
regulations of advertising acts
involving human,” To Van Dong,
director of Hanoi culture
department.
The “girl in glass box” publicity was
launched on Thursday to promote
a new phablet at The Gioi Di Dong.
Photos and videos capturing the PR
girl have gone viral on the Internet,
igniting debates whether it is a
proper ad campaign.
Hi-tech agriculture project
developed in Thue Thien Hue
VNS - The central province of Thua
Thien-Hue has licenced a hi-tech
agriculture production project in
Huong Tra town and coastal areas
in Hue city with an investment of
$23.5m.
The project, invested in by the
Vineco Company, uses Israeli
technology with a production
process that meets VietGAP and
GlobalGAP standards.
Covering about 213ha, it comprises
a greenhouse and a massive field
of vegetables for domestic sale
and export, a vegetable varieties
production area, centres for
management, training and
technology transfer, a storage area
and an irrigation system.
According to provincial People’s
Committee Chairman Nguyen Van
Cao, the project aims to produce
safe vegetables for both domestic
and foreign markets through the
development of large-scale
agriculture production with the
application of advanced
technology, an area that the
province is focusing on.
It also helps attract domestic and
foreign investment and human
resources in high technology,
contributing to creating jobs and
increasing incomes for labourers,
thus boosting local economic
growth, he said.
As committed to by the investor,
the main components of the
project, including the greenhouse,
infrastructure system and irrigation
system, will be completed in
December this year.
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MARKET & PRICES
Vietnam drug stocks surging
as foreigners covet booming
industry
Bloomberg - As Vietnam opens up
to more foreign money, the
country’s fast-growing
pharmaceutical industry is
emerging as one of the most
attractive prizes for overseas
investors.
Domesco Medical Import-Export
JSC, the third-biggest listed
drugmaker, has shot up 151% this
year as it got shareholder approval
to scrap the 49% foreign ownership
limit on its stock. DHG
Pharmaceutical JSC, the largest,
has risen 44%, with Japan’s Taisho
Pharmaceuticals Holdings Co.
buying a 24.5% stake last month.
Vietnamese health-care
companies have returned 46% in
2016, the best performance among
10 industry groups on the VN Index.
Gov't cleared Vietnam Dairy
Product JSC, the biggest listed
company, to scrap its foreign
investment cap in July, driving the
VN Index to an eight-year high
amid optimism further approvals
would follow. Overseas ownership
of many local drugmakers is
already at or near the limit,
creating pent-up demand from
money managers seeking to
benefit as the nation’s burgeoning
middle class spends more on
health-care.
“If Domesco gets approval to
remove the foreign cap, it will be a
good catalyst for the market in
general and for the stock in
particular,” said Tran Hoang Son,
the Hanoi-based head of market
strategy at MB Securities JSC. “The
pharmaceutical industry is already
an attractive sector for overseas
investors.”
Vietnam’s pharmaceutical market
is forecast to increase from $4.2b in
2015 to $7.2b by 2020 and then
maintain double-digit annual
growth through 2025, according to
a report by BMI Research. The
industry will keep growing at
around 10% to 15% a year, said
Chris Freund, the founder of
Mekong Capital Ltd., a private
equity firm.
“Vietnam’s pharmaceutical sector
is still very fragmented and the
management standards are
typically quite poor,” he said from
HCMC. “There’s an opportunity for
strategic investors to invest in
pharma companies, help them to
build their management teams, to
form international partnerships and
apply more best practices.”
Traphaco JSC, the second-biggest
local listed pharmaceutical
company, has risen 76% this year.
Imexpharm Pharmaceutical JSC
and Cuu Long Pharmaceutical JSC,
which round out the five biggest
drug companies on the HCMC
gauge, are up 41% and 151%,
respectively. The benchmark VN
Index has added 14% so far in 2016.
Domesco closed up 3.9% on
Thursday, while DHG increased 3.8%
and Cuu Long surged 6.7%.
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MARKET & PRICES
Cheap Valuations
Even with their surging share prices,
valuations are still relatively low.
Domesco has a 12-month price-to-
earnings ratio of 7.2, DHG
Pharmaceutical is 12.3 and
Traphaco is 18.1. That compares
with a ratio of 13.4 for the Stock
Exchange of Thailand Personal
Products & Pharmaceuticals Index
and 38.3 for South Korea’s KOSDAQ
Pharmaceutical Index.
The clean-energy game in
Vietnam
VOV - Many merger and
acquisition (M&A) deals in the
energy sector have been made in
recent years, but the number of
foreign players in the field remains
modest.
The Int'l Finance Corporation (IFC)
and Armstrong South East Asia
Clean Energy Fund from Singapore
have decided to contribute a 16%
to 20% more stake, respectively, to
the Gia Lai Electricity JSC (GEC).
These are the first steps taken by
institutions in Vietnam, though they
have invested in many power
projects around the world before.
IFC invested $1.75b in 75
hydropower projects in 25 countries
in the last 10 years. Armstrong has
50 recycling energy projects
throughout the world.
The main target of the fund is South
East Asia with projects with
investment scale larger than
Vietnam’s GEC.
When int'l players like IFC and
Armstrong cooperate with
Vietnam’s GEC, they bring high
hope to Vietnam’s electricity
industry, especially clean energy.
The predecessor of GEC was the
Gia Lai Hydropower Company,
which was equitized in 2010 and
has made many M&A deals to
acquire companies in the same
field since 2013.
GEC now has six hydropower
companies with 15 plants and five
thermopower companies with eight
plants. It is focusing on three major
fields – small hydropower,
thermopower and recycling energy
- in the preparation period.
GEC, on one hand, has been
making a series of M&A deals to
acquire small hydropower plants in
the central region, and continues
developing new projects. It plans to
put 8-10 new plants into operation
with the total capacity of 271 MW
by 2020.
However, in the long-term, GEC
plans to focus on recycling energy.
It now runs a solar power system
which provides electricity and
companies of the same system. It is
following necessary procedures to
develop the 6 MW wind power
project in Ben Tre province.
In the future, the company’s solar
energy project with capacity of 10
MW would be operational.
By 2015, according to Bloomberg,
the total capital funding clean
energy projects in Vietnam had
increased to US$248 million.
The projects which had licenses
recently include the 30 MW Tuy
Phong solar energy project by
DooSung Vina which has
investment capital of $66m in Binh
Thuan province, the 96 MW wind
power project in Tra Vinh province
with the capital of $130m.
The nationalities of the investors are
more diversified. AirCraft Company
from Germany is considering a solar
energy project in central Quang Tri
province, while EGAT International
from Thailand is targeting Binh Dinh
province.
GE has signed an MOU on the
development of 1000 MW wind
power by 2025.
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LEGAL UPDATES
Representative offices in
Vietnam
VNS - Establishing a representative
office in VN is considered a safe
initial step before traders conduct a
series of complex high-cost legal
procedures to establish a wholly
foreign-owned enterprise.
Market research
For any new foreign trader entering
VN’s market for the first time, their
initial primary purpose might be
promoting the brand, getting
acquainted with and examining
the market while preparing for
official business. Therefore, many
people establish a representative
office as an initial step.
Simple procedures
As far as establishing a commercial
presence in VN, a representative
office is considered much less
complex than a business co-
operation contract, establishing a
foreign-invested enterprise or
establishing a branch.
To establish a representative office,
the foreign trader only needs to
meet the following conditions:
• It is established and registered in
accordance with the laws of
territories and nations being
members to international treaties to
which VN is also a member, or
having been recognised by such
territories and national laws;
• Having operated for at
least one year from the
date of establishment or
registration, the
remaining operation term
must be at least one year
from the date of
submission of the
application for a
Certificate of
Establishment of a
Representative Office.
Licensing
The time to be granted a
Certificate of Establishment of a
Representative Office is quite fast.
A representative office can be
licensed to operate within about
seven working days of a sufficient
and valid dossier being submitted
to the licensing agency.
Cost savings
The establishment of a wholly
foreign-owned enterprise in
Vietnam requires many stages with
numerous procedures and
documentation. The process can
cost up to several thousand US
dollars. Spending such a large initial
investment without a clear
comprehension of VN’s market is an
insecure and risky move.
Another benefit of establishing a
representative office is that it will
not be subject to taxes due from
business activities, but will only have
to pay personal income tax for
office staff.
Pre-step to establishing a foreign
invested enterprise
Although a representative office for
a foreign company is not allowed
to perform business operations or
other profitable activities as
prescribed by the law, it can still
perform the functions of liaison
office, market research and
promotion of business investment
opportunities, etc. for foreign
traders in VN.
Once the image and brand of a
foreign trader has become familiar
and popular with clients in the
Vietnamese market, they can be
more assured to establish a wholly
foreign-owned enterprise and
officially perform commercial
activities in VN.
SEIKO IDEAS CORPORATION
Vietnam Business Review
11
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HIGHLIGHTS
Vietnam joining 4th industrial
revolution
VNS - VN must build a creative and
sustainable eco-system for the
Internet of Things (IoT) in order to
take part in the international IoT
supply chain and achieve a
turnover of $10b by 2020, a
technology insider has said.
“The IoT will require an eco-system
that will decide its success in VN,”
Nguyen The Trung, director of the
DDT Technology company said.
The IoT is a system of inter-related
computing devices, mechanical
and digital machines, objects,
animals or people that are
provided with unique identifiers and
the ability to transfer data over a
network without requiring human-
to-human or human-to-computer
interactions.
IoT allows objects to be sensed and
controlled remotely across existing
network infrastructure, creating
opportunities for more direct
integration of the physical world
into computer-based systems, and
resulting in improved efficiency,
accuracy and economic benefit.
“The fourth industrial revolution is
starting with IoT, Big Data and
Robot,” Trung said. “This is a golden
chance to boost the Vietnamese IT
industry."
But he stressed that a proper
working mechanism focusing on
important and long-term goals must
be set up.
The end-to-end working system,
meaning that all parts of a
circulation, from ideas to R&D,
commercialisation, marketing and
investment must be worked
together.
To become a regional centre for IoT
start-ups, the Government should
create a creative eco-system to
support small and medium-sized
enterprises and start-ups through
co-operation with multinational
corporations, he said.
“The system should provide
incentives to attract international
and regional start-ups to join and
exploit Vietnamese strengths like
human resources and low
production costs.”
Other IT experts said: “Along with
rolling out incentives and
development policies, IoT joint
ventures between domestic and
multinational enterprises are very
important to keep Vietnamese
enterprises on track.”
IoT start-up funds and infrastructure
for services like 4G and 5G for IoT
should be encouraged to be set up.
Huge potential
By 2025 the IoT will contribute US$11
trillion to the world economy,
according to a report by
management consultant McKinsey,
with factories generating $3.7 trillion,
cities, $1.7 trillion, and healthcare,
$1.6 trillion.
The report said the number of IoT
devices would grow very fast – five
times in the next five years from the
current 11.8 billion.
By 2019 the world economy will
spend $1.3 trillion on IoT, it said.
IoT would be present in all aspects
of life and even create more new
ideas in life and business.
In VN, IoT would be used by in smart
agriculture, transport, healthcare,
education, city, and digital
authority, it said.
“VN should pay attention to
network security, digital sovereignty,
privacy, integration, investment
and maintenance expenditure,”
Trung added.
SEIKO IDEAS CORPORATION
Vietnam Business Review
12
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HIGHLIGHTS
BOT no longer favored
investment mode
VOV - In 2011-2015, the Ministry of
Transport (MOT) raised huge funds
of VND186.66 trillion for road
transport projects, accounting for
92.15% of the total capital
mobilized.
But it is no longer easy to mobilize
capital for BOT (build, operation,
transfer) projects.
In the first quarter of the year, the
ministry could only raise VND3.35
trillion in funds for the BOT project
on upgrading Highway No 60,
which connects Rach Mieu and Co
Chien Bridges and the BOO (build,
own, operate) project on non-stop
fee collection on Highway No 1A
and Ho Chi Minh Road.
The figure was just 9% of the total
capital raised in the first quarter of
the year.
MOT’s H1 report did not mention
the non-state budget capital
mobilized for implementing projects.
In the first half of the last year,
VND27 trillion was mobilized for 11
BOT road projects.
The declared total capital to be
disbursed for transport projects in
2016 is VND67.294 trillion, which is
VND20 trillion lower than that in
2015 (VND89.907 trillion).
In the first half of 2016, MOT only
disbursed VND27.883 trillion, or
41.7% of the yearly plan.
Analysts commented that while in
2012-2013, investors had to queue
up to apply for investments in the
BOT projects on expanding
Highway 1A and Ho Chi Minh Road,
they are now hesitant about BOT
projects.
An investor implementing a BOT
project in Ho Chi Minh City, who
asked to be anonymous, said that
MOT could easily mobilize hundreds
of trillions of dong for BOT projects,
because Highway 1A is considered
a ‘delicious piece of cake’.
Since this is a north-south highway
with high traffic, investors are sure
they can take back the investment
capital from collecting tolls.
Investors have lined up to register
and some investors have even
accepted to spend their money to
implement projects first and then
apply for licenses later.
However, investors have shrunk
back recently because there is no
more ‘delicious piece of cake’.
People and businesses all have
complained that the fee is
unaffordable, pointing out that it is
unreasonable to ask them to pay
both the BOT fee and road
maintenance fee.
Meanwhile, commercial banks
have tightened lending to fund BOT
projects.
Minister of MOT Truong Quang
Nghia said at a conference in July
that the investment under BOT
mode will only be applied to new
routes and people can choose
which way to go – old roads with
no fees or new ones with BOT fees.
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