Why Metro Makes Losses and Divests its Vietnam Operation

Metro Group (Germany) has announced that it has come into an agreement with Berli Jucker Corporation (BJC) of Thailand on the transfer of the wholesale stores system in Vietnam. Particularly, BJC shall wholly take over the commercial operation of the Vietnam Metro Cash & Carry (MCC Vietnam), including 19 distribution centers and the portfolio of relevant real estate with the total value of EUR 655 million (USD 879 million). The representative of Metro review that the deal shall be completed in the first half of 2015.

Metro Group set its foot in Vietnam market back in 2002 with the focus on the wholesale sector. Currently, the MCC Vietnam is having 19 centers all over the nation, with the labor force of 3,600. In the 2012-2013 financial year, the revenue gained in operation in Vietnam of MCC Vietnam reached EUR 516 million (USD 692 million in equivalent). In 12 years of operation, MCC Vietnam has invested strongly and continuously in the commercial infrastructure. Meanwhile, Berli Jucker is a Trading Investment Promotion and Production Group of Thailand, with the total value of capital on the stock market of Baht 88 billion (USD 2.8 billion). The commercial sectors of BJC is divided into 5 major service chains including packaging, commodities, health care, technical, retail and other type of service chains. The corporation has 6 offices in the South East Asian with the total revenue of around USD 1.3 billion in 2013.

In Vietnam, Metro has continuously been expanding its market, with the retailing supermarket system stretched from Northern to Southern areas. However, despite the increasing revenue over the years, pursuant to the statistics of Tax Agency of Ho Chi Minh City, company is one of the FDI company having largest loss in Vietnam and as such has not been subject to any Corporate Income Tax.

Answering why Metro always make losses in Vietnam the representative of Metro responded that the company had had to concentrate on investment in the expansion of its market, on the equipment, infrastructures, land lease, land compensation, management cost to establish a wholesale center.

A result of the survey and analysis on the price transferring of FDI businesses in Vietnam in 2013 by the cooperation of researchers of Vietnam Chamber of Commercial and Industry (VCCI) and the USAID has shown that 20% of the FDI businesses have been conducting price transferring in order to avoid tax obligations in Vietnam. Despite statistically being loss, many FDI businesses still invest in widening its commercial operation.

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UK Company Interested in Vietnam Aviation Market

The Vietnamese aviation market is concerned by UK companies

NATS (National Air Traffic Solutions), a UK-based aviation solutions provider, has showed its ambition to set up company in Vietnam and enter the Vietnam aviation market. In addition, NATS is interested in Long Thanh Airport.

NATS is headquartered in the UK but the company is also present in Asia and is currently implementing a globalization strategy. NATS is planning to expand its market in addition to offices currently based in Singapore, Hong Kong and Bangkok. In which, Vietnam is an important market for NATS because Vietnam aviation market is growing at a very fast speed. The number of passengers is expected to double by 2020.

Vietnamese airlines are bringing in a lot of new aircrafts. Therefore, Vietnam aviation industry is facing many challenges in terms of infrastructure and air traffic control… Therefore, NATS with experiences working and managing airports with one, two, three runways as well as the busiest airports in the world are ready to assist the Vietnam aviation authorities to operate more effectively.

Long Thanh Airport is a concern of NATS because it will be a large airport. NATS always wants to be able to deliver efficient, optimal management solutions to airports with high capacity. Currently, NATS is supporting the management of 2.4 million flights and 250 million passengers a year in the UK. Moreover, they are also involved in managing and providing solutions to many major airports in Europe. NATS has been presented in Asia for 40 – 50 years and has cooperated with gateway airports in Thailand, Hong Kong, Singapore…

NATS has met and worked with Vietnam Air Traffic Management Corporation (VATM), a member of CANSO (Civil Air Navigation Services Organization) to discuss the potential and opportunities for cooperation in the coming time.

In the short term, NATS will cooperate with VATM to open training courses, for example air traffic controllers. At the same time, NATS will learn more about the Vietnam market. If you have the opportunity and opportunity, NATS will set up a representative office in Vietnam.

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Samsung Invests Aggressively in Bac Ninh Province

With the favorable and open business environment, Vietnam has committed to be the attractive investment destination for multinational enterprises to come and set up business in Vietnam.

Samsung wants to raise the total investment in Bac Ninh to 6.5 billion USD and transferred the model from high-tech project to large-scale project…

Bac Ninh Provincial People’s Committee has just sent an official letter to the Prime Minister on supporting Samsung Display Co., Ltd Vietnam (SDV) in the process of project expansion in Bac Ninh province.

According to the Provincial People’s Committee of Bac Ninh, so far SDV has raised investment capital to 4 billion USD. Reportedly, SDV’s total revenue in 2015 was 2.7 billion USD, in which exports reached 2.5 billion USD. Accumulated to October 2016, SDV has revenue of 5.9 billion USD.

Project disbursement schedule of Samsung by the end of 2016 is estimated at 2.5 billion USD. Expected in 2017, Samsung will disburse the registered capital of 4 billion USD in Bac Ninh.

Bac Ninh confirmed that SDV has done on schedule and as planned when the entire Module 3 project when come into operation will be a prerequisite to attract more companies to serve SDV.

Notably, SDV has expressed their desire to invest an additional of 2.5 billion USD, disbursed in 5 years since 2018. Thereby, raising the total investment in Bac Ninh to 6.5 billion USD.

Recently, according to Mr. Hyun Woo Bang – Deputy General Director of Samsung Vietnam, in 2016, although the Company has to face with the problem of Samsung Galaxy Note 7, thanks to the support of the Government and Ministries in Vietnam, Samsung has overcome difficult period. In 2016, revenue of Samsung Vietnam reached 46.3 billion USD; exports reached 39.9 billion USD, increased by 9.9% compared to 2015.

Samsung accounted for 22.7% of export turnover nationwide, a slight increase compared to the rate of 20% of the previous year.

Reportedly, Bac Ninh is the province that attracting a lot of foreign investment projects in Vietnam. Moreover, Bac Ninh is the investment destination of 30 countries and territories around the world. Accumulated up to the present time, in the Industrial Zones in Bac Ninh province, 1,050 projects are licensed with a total investment of 13.1 billion USD. FDI sector has created 231,000 jobs.

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

• Advisory
• Market Entry
• Tax Advice
• Legal Advice

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

We could be reached at email: ant@antconsult.vn or tel: +8428 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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The Attractiveness of Vietnam Retail Market

With the attractiveness that has been affirmed in the international retail market, nowadays more and more foreign investors decided to set up company in Vietnam.

With the scale of 110 billion USD by 2016 and forecasted to increase to 180 billion USD by 2020, Vietnam is considered one of the 30 most attractive retail markets in the world. Therefore, in recent years, large foreign corporations such as Lotte, Central, Aeon, Auchan… have stepped up the penetration and expansion of retail market in Vietnam, showing the potential as well as the race to win market share of the Vietnam retail market.

As predicted by the Trade Research Institute (Ministry of Industry and Trade), in the period 2016 – 2020, Vietnam’s retail growth rate will reach 11.9% per year, the market size of about 179 billion USD by 2020, from 102 billion USD in 2015, in which modern retail will account for more than 45% compared with the rate of 25% of 2015. By 2020, as planned, the country will have about 1,200 – 1,500 supermarkets, 180 trade centers, 157 shopping centers.

With commitments when joining the WTO, nowadays, Vietnam has fully opened the retail market. The attractiveness of Vietnam market is shown in a market with population of over 93 million people, in which nearly 40% are urban residents with rising per capita income and have reached over 2,000 USD per person.

Market research by Nielsen also shows that the middle class in Vietnam will double by 2020, from 12 million people in 2014 to 33 million people in 2020. The increased spending, coupled with consumers are willing to pay for high quality service and product. The structure of population and family, changing shopping habits are also facilitating the development of the retail market.

With such attractive market, foreign retailers have constantly landed in Vietnam. From Metro Cash & Carry, to Big C, Lotte and now Aeon, Auchan, Robinsons, Emart… also do not miss the opportunity to massively invest in Vietnam. In addition to direct investment, foreign retailers also strengthen joint ventures such as Saigon Co.op with FairPrice (Singapore), CitiMart and Fivimart with Aeon (Japan), or through M&A deals such as Alibaba ( buy Lazada), Central Group (buy Big C, Nguyen Kim), BJC (buy MetroVietNam), Lotte (buy Diamond Plaza), Nojima Corporation (buy Tran Anh)…

With the increasing participation of large retailers in the world in Vietnam, the competitive pressure in the retail sector is increasing for Vietnamese businesses. When both Big C and Metro are belonging to the Thai people, it is clear that Vietnam retail businesses are experiencing both financial and management weaknesses. However, proficiency in local culture and proximity to Vietnamese consumers is advantageous for local retailers. Therefore, the competition of one side is the retail businesses coming from Thailand, Korea, Japan and the other is mainly Saigon Co.op with Co.opMart supermarket chains, Vingroup with Vinmart chain is predicted to be stressful and prolonged.

In addition, the organic food supply chains like Bac Tom, Sagrifood… are also effectively exploiting the demand for food of urban people. The typical characteristics of domestic retailers are high proportion of Vietnamese high-quality goods, which have many characteristics in line with Vietnamese shopping culture.

However, the choice of consumers is the decisive factor for the success or failure of retailers. The issue of quality and price of goods is the number one priority of consumers when shopping. Therefore, besides improving management and raising capital, Vietnamese businesses need to maintain good quality products and competitive selling prices in order to survive and compete with foreign retailers right in the domestic market.

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

• Advisory
• Market Entry
• Tax Advice
• Legal Advice

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

We could be reached at email: ant@antconsult.vn or tel: +84 28 3520 2779.  To learn more about us, please visit www.antconsult.vn

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