FDI from Asia Will Flow into Hai Phong

Set-up representative office in Vietnam

Hai Phong has made a splash in attracting foreign direct investment (FDI) and there are indications that foreign investors will continue to set up company in Vietnam in general and particularly this port city in the near future.

In fact, there are few places in the Northern of Vietnam having complete infrastructure system with five modes (railway, road, air, river, sea) such as Hai Phong.

The new Hanoi – Hai Phong highway is one of the most modern in Vietnam. In 2016, Cat Bi International Airport has been expanded to create a large capacity air transportation system in the North (after Noi Bai International Airport, Hanoi), capable of transporting goods on all international routes. The new Lach Huyen port will be operated next year, allowing ships with draft of 14 meters or tonnage of 100,000 DWT to berth in Hai Phong, minimizing the transit time of ports such as Singapore or Hong Kong. These advantages of Hai Phong bring direct benefits to investors by shortening the time to bring products to market. Therefore, many foreign investors have seized the opportunity to invest and deploy the projects in Hai Phong.

By 2016, Hai Phong has licensed 490 FDI projects, with total registered capital of nearly 14 billion USD. Particularly in 2016, with 2.9 billion USD of FDI capital, Hai Phong has risen to the second position in FDI attraction, after Ho Chi Minh City.

Hai Phong still has a large land fund, in the “gold” positions. For example, Dinh Vu – Cat Hai Economic Zone has a total area of 22,540 ha and can be expanded to 600 ha; 19 industrial parks with an area of 9,112 ha and 33 industrial clusters with area of 2,284 ha.

According to representatives of the Deep C Industrial Complex, one of the reasons why investors chose to deploy the project is that industrial parks are located in strategic locations near the newly invested infrastructure, combined with a reliable utility system (including electricity, water, sewage) and the best incentive policy. This is why many investors have implemented large capital projects in Deep C’s industrial parks such as Bridgestone (Japan), Flat Glass (Hong Kong), Knauf (Germany)…

Apart from the advantages of location, infrastructure and good human resources, Hai Phong now has many models of quality industrial parks. That is the basis to believe that in the coming time, industrial zones in Hai Phong will welcome large capital flows from Asia.

ANT Consulting assists clients with Market Entry, Legal Advice, Tax Advice and Outsourcing Services in Vietnam.

We are located in Hanoi, Da Nang and Ho Chi Minh City.

Talk to our consultants at +84 28 3520 2779 or email us ant@antconsult.vn

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Fast-moving Consumer Goods Market in Vietnam

FMCG regulatory in Vietnam

1.Overview

With increasing disposable income, rising living standard, stable GDP and economic growth, young population and low inflation, Vietnam is one of the most dynamic emerging market in Southeast Asia region. Fast moving consumer goods industry has promised a robust development.

2. FMCG in Vietnam

FMCG growth

The MoIT forecast that total revenue of the consumer goods-related sectors in Vietnam will hit 140 billion USD in 2016, thus creating great opportunities for FMCG businesses at home to boost production and expand the market. There is a significant volume growth from -1,6% in 2014 to 2,7% in 2015 in terms of demand for FMCG and the figure is expected to continue increasing in 2016 and 2017 (Nielsen, 2015). Vietnam’s volume growth in 2015 in only behind Thailand and the Philippines in South East Asian religion. In short term, urban citizens remain positive value growth of 3,6% whereas value of growth in rural areas grow at weak pace. The latest statistics released by the Ministry of Industry and Trade show that after China, Thailand is Vietnam’s second biggest suppliers of consumer goods with its garments and household utensils present in nearly 8,600 markets across the country. Besides, Japan and the Republic of Korea are also penetrating into the Vietnamese market through chains of convenience stores.

Value contribution in FMCG

It can be seen from the chart beverage contribute the largest value to FMCG industry while baby care products remain the lowest value contribution. Interestingly, urban prefers liquid tonic food drink with the rise of 4,4 PTS when the most popular beverage in rural is soya milk with the increase of 8,7 PTS.

Distribution channel

The data of Kantar research shows that traditional trade outlet such as wet markets and grocery stores is still one of the most popular channel for FMCG. Convenient stores/mini market is a new rising star in distribution channel which experience 60% growth from 2014 to 2015. For example, VinMart + have appeared from 100 to 200 store in 2015, Circle K from 97 to 129 stores, and Shop & Go from 103 to 130 stores. E-commerce also will be a big trend which reaches steady growth of 13%.

Consumer behaviour patterns

Consumer confidence index also experiences positive trend since Vietnam is the 6th most optimistic country globally. Despite of the increase of 6,3% CPI in 2015 compared to 2014, Vietnamese consumer is prudent, still prefer saving than spending. Pricing has also been one of the most important decision making factor during purchase. Additionally, dropping shopping frequency proves that Vietnamese consumer has been lessen spending

The demand for high end FMCG is still week regard to relatively low income of majority of Vietnamese consumers in rural areas. Compared to other South East Asian countries, Vietnam’s per-capital expenditure on food and non-alcoholic beverages was US$200 in 2011 while this figure is US$900 in Thai Land and US$1000 in Malaysia.

3. Future trend and potential investment

Booming of foreign investment in FMCG

Vietnam has emerged as a popular destination for multinational and regional retailers. It is allegedly agreed that Vietnamese consumers are more likely to prefer foreign brands. In addition, 57% of Vietnam’s population below 35 years old, 44% monthly increasing income, 30% urbanisation rate with 3,4% growth rate per year; and 1.6 times more college and university graduate (Nielsen) result in the shift toward modern trade outlets such as shopping mall and supermarket. Some of well-known foreign retailers are AEON (Japan), Lotte (Korea), Central Group (Thailand), Mark and Spencer (UK). In additional to strong foreign competitors, Vinmart and Citimart are the most popular domestic rising stars in FMCG/retail market in Vietnam.

Shopper get smarter and more purchasing power

In 2015, 48% of Vietnamese consumers stated that “staying fit and healthy” is the top concern (Nielsen). Therefore, Vietnamese consumers have become more concerned about the quality, hygiene and safety of the products. Due to high competition in FMCG industry in terms of manufactures and retail outlets, Vietnamese consumer have more purchase power decision. This implies that manufactures as well as retailers also need to be more selective with the products that provide to customers.

The emergence of new online channel

According to Nielson report in 2 big cities: Hanoi and HCMC, 92% of internet users are online shopper and 93% of shopper are middle class and millennial. Additionally, in such a busy world, on-the-go lifestyle will become a big trend in Vietnam. Thus, it indicates the high demand for online platform that conveniently host information and acquire interaction between online and offline store choices. Also lack of innovative approach and strategy to attract online shoppers is a huge issue in Vietnam market at the moment. Also there has been a huge lack of accessibility to online channel in rural areas and other smaller cities. E-commerce in FMCG promises high potential for investment

ANT Consulting assists clients with Market Entry, Legal Advice, Tax Advice and Outsourcing Services in Vietnam.

We are located in Hanoi, Da Nang and Ho Chi Minh City.

Talk to our consultants at +84 28 3520 2779 or email us ant@antconsult.vn

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Situation on M&A Transactions in Vietnam

M&AOpportunities in Vietnam

In 2017, if nothing breaks through, M&A value will not easily surpass the value in 2015 and 2016. This will require a boost from businesses and the Government to take advantage of opportunity from foreign capital flows.

In 2016, the value of worldwide M&A transaction reached 3.5 trillion USD, decreased by 27% compared with the previous year but still at a high level. This could be a sign of ending a period of global M&A growth. With such event as Brexit or the policies of US President Donald Trump, global M&A activities becomes unpredictable and there may be a shift in capital flows.

According to IMAA statistics, in Vietnam, after reaching its peak in 2015, which was a record level in the past 10 years, with an estimated M&A value of 5.2 billion USD by 2015, ending the year 2016 with a value of 5.1 billion USD. However, there are also many obstacles and there was a slowdown in the second half of 2016 when large and quality deals are announced.

The most exciting sector in 2016 is retail, consumer goods and real estate. Banking and finance seems to be quiet in the past year. Other sectors that also attracted attention are education and technology.

Foreign investors still play a significant role in M&A activities in Vietnam with huge deals. Japan is persistent in its strategic partnership with state-owned companies such as Vietnam Airlines, Petrolimex… Korea has entered the market with some industrial sectors, while Singapore is focusing on real estate projects.

In addition, the market continues to witness M&A moves and strategic investments by some private corporation when the State divests. The most typical in the past year was a divestment deal involving Vinamilk. Along with Vinamilk, a number of Vietnamese companies are still in the sights of investors such as Sabeco, Habeco and Mobifone.

The challenges for M&A growth in Vietnam are: The change in US policy, in particular the United States decided to withdraw from the TPP, obstacles from equitization in Vietnam, business quality and size of the economy. In order to achieve high M&A value like 2016, it requires the assertiveness of the State in the divestment of large corporations. At the same time, the market needs a new push & breakthrough factors.

ANT Consulting assists clients with Market Entry, Legal Advice, Tax Advice and Outsourcing Services in Vietnam.

We are located in Hanoi, Da Nang and Ho Chi Minh City.

Talk to our consultants at +84 28 3520 2779 or email us ant@antconsult.vn

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Indonesian Producer Wants to Invest in Vietnam

Invest in real estate in Vietnam

Vietnam has become a destination for Indonesian investors to set up business in Vietnam thanks to the ever-improving investment environment and the establishment of the ASEAN Economic Community (AEC).

At the Conference named “Vietnam – Indonesia: Strengthening trade cooperation in palm oil and paper industries” that was recently held in Hanoi, the Indonesian Ambassador in Vietnam said that many Indonesian businesses are exploring business and investment opportunities in Ha Noi, Ho Chi Minh City, Da Nang and many other places in Vietnam.

Accordingly, more Indonesian investors will come to Vietnam in the coming time because Vietnam is a promising place for Indonesian investors to open their production bases thanks to AEC tariff reductions.

According to the Indonesian embassy, the Indonesian 12 largest palm oil exporters and 14 largest paper exporters are planning to expand their export markets to Vietnam and expecting to enter into joint ventures with local businesses to directly produce products in Vietnam.

In addition to calling for investment and cooperation in the palm oil and paper sectors, Vietnam has recently welcomed many Indonesian investors coming to Vietnam seeking investment opportunities and doing business successfully in the areas of animal feed, building materials, real estate…

Meanwhile, Indonesia’s capital flowing into Vietnam through mergers and acquisitions has been rising steadily, such as PT Semen Gresik – Indonesia’s largest cement company, has spent 230 million USD buying 70% of the shares in Thang Long Cement Company from Geleximco.

Indonesia’s second largest M&A deal in Vietnam is Salim Group spent 37 million USD to purchase 49% shares in Hiep Thanh Group – a trading, processing, aquaculture and export group of two agriculture strategic products that are rice and seafood.

ANT Consulting assists clients with Market Entry, Legal Advice, Tax Advice and Outsourcing Services in Vietnam.

We are located in Hanoi, Da Nang and Ho Chi Minh City.

Talk to our consultants at +84 28 3520 2779 or email us ant@antconsult.vn

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