Preferential import tariffs for RoK goods announced

Agro-products are one of Vietnam's key exports to the Republic of Korea.

The Ministry of Finance on December 21 issued a list of preferential tariffs for goods from the Republic of Korea (RoK), a step in implementing the Vietnam–RoK Free Trade Agreement (VKFTA) in 2015-2018.

Circular 201/2015/TT-BTC lists 9,502 tariff lines.

To be eligible for the preferential import tax, the goods must meet four basic conditions: being included in the VKFTA duty structure, being imported from the RoK, being directly transported from the RoK to Vietnam under the regulations of the Ministry of Industry and Trade (MoIT); meeting the VKFTA regulations on origin of goods and having certificates of origin according to regulations by the MoIT.

Goods from free-duty zones imported into Vietnam must belong to the VKFTA duty structure and have certificates of origin according to regulations from the MoIT to enjoy the VKFTA special import duty.

Goods produced in the Kaesong Industrial Zone in the People’s Democratic Republic of Korea then imported into the RoK to be exported to Vietnam will enjoy the preferential duty if they are among those marked as GIC in the VKFTA duty structure; are directly imported from the RoK into Vietnam according to regulations of the MoIT; meet regulations on the origin of special goods as stipulated in the VKFTA; have C/O KV issued by the RoK Customs Agency containing the words “Article 3.5” in box No 8.

The preferential tariffs will be applied as from December 20, the same day when the VKFTA became effective.

Under the VKFTA, Vietnam commits to eliminate 8521 tariff lines, 201 more than the commitments under the ASEAN-RoK FTA.

Meanwhile, the RoK is to remove and allocate quotas for 11,679 tariff lines, including Vietnam’s key exports like shrimps, crabs, frozen and canned fish; agro-products, fresh flower and several so-called sensitive products such as garlic, ginger, honey, sweet potato and red bean.

According to the Ministry of Finance, fulfilling tariff-reducing commitments will help Vietnamese and RoK foreign-direct-investment enterprises to import materials with lower cost that would boost exports of main commodities and competitiveness.

The RoK was Vietnam’s third largest trade partner in 2014 with two-way trade reaching 28.8 billion USD, after China and the United States.

According to the General Department of Customs, in the first 11 months of this year, bilateral trade hit 33.6 billion USD, a year-on-year rise of 27.6 percent. The figure is estimated at 33.6 billion USD this year, up 27.2 percent from last year.

Yen Bai ready to support foreign business operations

The northern mountainous province of Yen Bai stands ready to provide all possible support for businesses, including electricity, water, banking, telecommunications and information technology services.

Chairwoman of the provincial People’s Committee Pham Thi Thanh Tra was speaking at a conference in Hanoi on December 21 to promote investment in Yen Bai, which lies on the Kunming (China) – Lao Cai – Hanoi – Hai Phong key economic corridor.

Yen Bai is developing vocational training establishments to improve the quantity and quality of workforce, she said.

With favourable geographical and natural conditions, plentiful natural resources and modern socio-economic infrastructure, Yen Bai also offers incentives in terms of land, workforce training and trade promotion, according to the official.

Chairman of the Vietnam Chamber of Commerce and Industry Vu Tien Loc hailed Yen Bai as well-positioned to draw investment in industry, trade and services since it connects transportation among northern mountainous provinces.

In his viewpoint, there remain untapped potential in hi-tech and mining.

Deputy Minister of Industry and Trade Tran Quoc Khanh, for his part, said Yen Bai is one of the localities benefiting most from trade agreements, adding that foreign investors are mostly concerned about land and environment as well as the realisation of commitments by the State and local authorities.

The event was co-hosted by the Vietnam Chamber of Commerce and Industry (VCCI), the provincial People’s Committee and the Japan External Trade Organisation (JETRO).

Local exports to face stiff competition

Vietnam's exports, especially agro-forestry and fisheries, will face difficulties in 2016 if the country does not drastically restructure the industry, said Tran Tuan Anh, Deputy Minister of Industry and Trade.

Even key staple export products such as textiles and garments would also face fierce competition.

Tuan Anh told media in Hanoi on December 22 that in 2015, the sector has striven to maintain its productivity and exports. However, the export markets have seen difficulties, affecting the export turnover of products.

In addition, there was an abundant supply of the agro-forestry and fishery products in other countries. Vietnamese goods, therefore, had to face fierce competition from similar products from Thailand and India.

Moreover, several countries devalued their local currencies to promote their exports together with strengthening protection for the products, affecting Vietnamese goods.

"It can be seen that these factors require a strict restructure for the domestic sector to improve its competitiveness," he said.

He added that Vietnamese businesses should invest more in processing technologies than quantity to produce high value goods.

He said 2016 could see further difficulties and challenges due to the slow recovery of the world economy and fierce competition. In addition, the monetary and oil markets could also have a negative effect on the country's economic growth.

However, there could be favourable conditions for Vietnam thanks to the establishment of the ASEAN Economic Community (AEC) and signings of several free trade agreements which were expected to bring new opportunities for local exports.

The National Assembly approved the socio-economic development plan for 2016 with an increase in the total export turnover by 10 percent in comparison with 2015 and trade deficit lower than 5 percent.

The ministry would continue to co-operate with other ministries and localities to unravel the difficulties faced by businesses.

In addition, it would increase information on FTAs and market forecasts to help enterprises to take advantage and expand their exports.

"I believe that the export target of 300 billion USD by the year of 2020 would be reached if we implement the mentioned issues," he said.

The country's trade deficit in the first 11 months of the year was reduced to 2.87 billion USD thanks to the trade surplus of 236 million USD in November.

Statistics from the General Department of Customs showed that total import turnover last month was lower by 1.3 percent to 13.6 billion USD while the export turnover was 13.9 billion USD, reducing 2.9 percent over the previous month.

November was the second consecutive month in which Vietnam saw a trade surplus.

The department said that in the January to November period, Vietnam earned 148.2 billion USD from exports, posting 7.9 percent year-on-year rise. It imported 151.1 billion USD in the 11-month period.

"This was a low figure in comparison to the set target of five percent by the National Assembly," he said, adding that Vietnam has implemented the market forecast and tightening control.

However, another report from the General Statistics Office in November showed that the country's total import-export turnover for the whole year of 2015 could not reach the growth rate target of 10 percent increase over the previous year. The office said the main reason was due to decreasing prices of crude oil and agricultural products.

The deputy minister added that the signing of several FTAs and TPP as well as AEC has been a vital trend for Vietnam as the economy has been towards exports, and increasing competitiveness in big markets.

One of the most effective measures to curb trade deficit sustainably was to promote exports.

In 2015, the ministry completed and submitted the import management project by 2020 to Prime Minister Nguyen Tan Dung. The project is suited to the World Trade Organisation's commitments and pays attention to building and using effective technical measures, food hygiene to limit imports and protecting consumers.

Power switched on at hydropower plant

The Dong Nai 5 Hydropower Plant, owned by a subsidiary of the Viet Nam National Coal and Mineral Industries Group, went on stream on Sunday in the Central Highlands province of Lam Dong.

Vinacomin-Power Holding Corporation's VND6.11 trillion (US$271.6 million) facility includes two turbines of 150MW each.

It is one of the key projects in the Government's Power Development Master Plan VII, which focuses on meeting the electricity needs of the Central Highlands' coal and mineral sectors, especially the Lam Dong Aluminium Bauxite Project and Nhan Co-Dak Nong Aluminium Project.

The turbines were connected to the national grid on September 30 and November 13, both months ahead of schedule.

Doan Van Viet, chairman of the province People's Committee, told the inauguration ceremony that when its operations stabilise, the plant will contribute an average of over 600 million kWh a year to the grid.

Dong Nai 5 is considered an engineering achievement since it is situated in an area with a complex geology and erratic weather.

The plant is also expected to help regulate the Dong Nai River's water flow to prevent flooding.

VN firms need to up their game

Locally-produced fast moving consumer goods were urged to improve their competitiveness to occupy the home market as the challenge from imported products was anticipated to become stronger.

Deputy Minister of Industry and Trade Ho Thi Kim Thoa said that intense pressure of competition required firms to take action to avoid losing out even in the home market.

Thoa said the country's economic growth and rising income per capita was creating conditions to boost purchasing power on fast moving consumer goods.

She cited statistics which showed that the GDP was expected to grow at 6.5 per cent this year – the highest since 2011 while income per capita reached US$2,200, up 15 per cent against 2013.

The industry, however, would face rising competition from imported products as Viet Nam was integrating deeply into the global economy with the joining of many free trade agreements, Thoa said.

Thoa stressed that the ministry would continue to improve the legal and technical barriers while simplifying administrative procedures and improve the business climate.

The ministry urged firms to boost product quality and competitiveness to build the Made-in-Viet Nam brand in order to occupy the domestic market and expand exports, Thoa said.

Nguyen Viet Duc, general director of the Viet Nam Paper Corporation, said that the joint efforts between the government management agencies and businesses were important to promote local production of fast moving consumer goods.

Duc said that the battle against counterfeit and smuggled products must be enhanced while the distribution system must be consolidated to ensure that Vietnamese products reach the consumers.

To promote fast moving consumer products for the local market, the ministry would hasten the implementation of the campaign of prioritising Vietnamese products, and the project of developing the domestic market from 2014 to 2020.

Vietnamese economy on the rise according to S&P report

Viet Nam's economy has started to thrive, while most Asian economies are slowing down and moving towards consumer-led growth, announced Standard&Poor's (S&P).

According to S&P, four years ago, the Vietnamese economy was struggling with non-performing loans as the Government focused on feeding credit to its State-owned enterprises.

However, since then, the country has attracted sufficient foreign direct investment (FDI) to drive strong export growth despite sluggish demand and falling global prices.

Electronics exports have been growing at almost 33 per cent per year for three years, making up 18-29 per cent of the total exports. Meanwhile, garments and textiles have stayed at some 20 per cent of all exports.

Overall, the FDI doubled from 2012 to 2014, compared with the previous three years. Japan and the Republic of Korea each contributed some 22 per cent; Singapore, 16 per cent; mainland China and Hong Kong, 13 per cent.

Australia's own trade with Viet Nam soared 35 per cent in 2014 to A$8 billion (US$5.7 billion).

The size of the workforce in Viet Nam, which has a population of 91 million, is an important element, S&P said, attributing the productivity to the provision of new cutting-edge equipment.

The World Bank estimated that Viet Nam's working-age population will keep growing into 2030, whereas China's is starting to decline.

According to the Singapore-based business analysis agency IMA Asia, Viet Nam is set to gain more from the Trans-Pacific Partnership (TPP) agreement than any of the other 11 members through lower import tariffs on its branded exports.

Viet Nam is likely to grow 6.2 per cent and 6.4 per cent in 2015 and 2016, respectively, IMA Asia said.

Amata to build industrial zones

Thai-owned Amata Viet Nam Company Ltd has announced plans to invest over US$2.2 billion to build new zones in Viet Nam.

The announcement came late last week at the company's celebration of its 20th anniversary in the country held in the southern province of Dong Nai.

The Southeast Asia's leading industrial zone developer said Amata City Ha Long in the northern province of Quang Ninh would be developed at an estimated $1.6 billion. The nearly 5,800ha facility will be a high-tech industrial park housing companies in the automation, bio-technology, IT, and other technology sectors, especially electronics.

Somhatai Panichewa, the company's CEO, said the park would solicit investment in research and development facilities, logistics and exhibition centres and scientific laboratories.

It is planned for completion in the next two years, she said, adding it is expected to generate revenues of $5 billion a year and create 300,000 jobs.

Amata City Long Thanh in the Dong Nai will be built at a cost of $634 million with three components.

The first is a 410ha high-tech industrial park to cost $282 million. Work on its infrastructure will start by the end of next year, and in 2017 it will house high-tech, automated and environment-friendly companies.

The other two components are a 753ha township and 123ha service city. Amata City Long Thanh will transform the Long Thanh area into a modern industrial city and contribute to the region's socio-economic development.

Amata was established in December 1994 as a joint venture between Amata Corporation Public Company Ltd of Thailand and Sonadezi Bien Hoa, a State-owned developer of industrial estates in Dong Nai.

Amata Bien Hoa Industrial Park in Dong Nai is rated among the most dynamic economic zones in Viet Nam, with 145 investors from 21 countries and territories investing $2.34 billion and creating 43,000 jobs.

Agarwood sector told to improve production

The Viet Nam Agarwood Association should work with agencies to seek the most effective method to produce agarwood, delegates said at the association's second congress held in HCM City last Saturday.

The main product of the aquilaria crassna tree is agarwood, a resinous product traditionally used as incense and medicine. Its distilled pure resin is used in perfume.

Hoang Canh, chairman of Vina Hoang Gia Co Ltd, said the biggest challenge facing the industry was finding the most effective method to produce agarwood.

According to delegates, cultivating aquilaria crassna trees can generate good profits for farmers but can also leave them empty-handed if they apply improper technology or low quality chemicals to produce the wood.

Many methods and chemicals are used to make agarwood from the aquilaria crassna tree, but many of them are ineffective as the yield can be low and they can even kill the tree.

Monk Thich Chieu Phap, head of Thanh Tam Temple and chief secretary of the executive board in Binh Phuoc Province, said he had been researching methods for making agarwood from the aquilaria crassna tree for seven years.

He suffered losses as many trees died due to water shortage and disease. Many of the trees died after chemicals were injected into them.

In addition, the consumption market for agarwood is unstable, causing insecurities among farmers, he said.

He said he expected the association in the next term (2015-20) to focus more on finding markets for Vietnamese agarwood.

Tran Hop, chairman of the VAA, said in its plan for the next term that the association would strengthen co-operation with foreign partners as well as local scientists to choose the best seedlings and methods to make the fragrant wood.

It plans to petition the Government to offer support policies for agarwood producers and traders, such as preferential loans, land rental and tariff reductions.

The association will also set up an e-commerce portal to promote the Viet Nam agarwood industry, he said.

Like other countries, Vietnamese natural agarwood sources are nearly exhausted, so famers have planted agar trees to create artificial agarwood.

About 20,000ha of aquilaria crassna trees were planted in the past 10 years in 24 provinces and cities, the association said.

VINECO to launch rice brand in time for 2016

VINECO will launch its brand of rice on December 26 in co-operation with Trung An Company.

VINECO, which is Vingroup's agriculture company, said the rice will be distributed exclusively on the group's Vinmart super markets and Vinmart+ convenience stores in the southern region from December 26, and in the rest of the country four days later.

VINECO said the rice is grown on 8,000 ha of land belonging to the Trung An company, one of the leading rice producers with a most advanced and modern processing system in the Cuu Long (Mekong) Delta. The entire cultivation process is under VINECO's production, which is tightly controlled under ISO 22000, HACCP and Global GAP, ensuring the maximum food safety and nutritional content.

During the launch, VINECO will supply the market with six types of rice meeting the demand of the global GAP. It expects to serve the local customers with organic rice products in 2016.

Footwear exports hit US$11 billion in 11 months

Footwear exports are estimated at US$1.05 billion in November, up 10.2% against last year’s figure. This brings the total export revenue in 11 months to nearly US$11 billion, an increase of 16.3% against the corresponding period last year.

If it can maintain the export growth rate, the footwear sector will fulfil this year’s set target of over US$12 billion and even reach US$15 billion, taking into account the export of bags, suitcases, and umbrellas, reported the Ministry of Industry and Trade (MoIT).

This year the footwear sector has constantly received good news from free trade agreements (FTAs).

By the end of last year, Vietnam had been the second largest footwear supplier to the US, trailed by China

According to the US Textiles and Apparel under the Department of Commerce, the country’s footwear import value reached US$127 billion last year. More than 12% of this amount went to imports of footwear from Vietnam.

These figures demonstrated a huge opportunity for Vietnam footwear exports to the US market, especially after the Trans-Pacific Partnership (TPP) comes into effect when import duties will be cut down to zero.

Yen Bai ready to support foreign business operations

The northern mountainous province of Yen Bai stands ready to provide all possible support for businesses, including electricity, water, banking, telecommunications and information technology services.

Chairwoman of the provincial People’s Committee Pham Thi Thanh Tra was speaking at a conference in Hanoi on December 21 to promote investment in Yen Bai, which lies on the Kunming (China) – Lao Cai – Hanoi – Hai Phong key economic corridor.

Yen Bai is developing vocational training establishments to improve the quantity and quality of workforce, she said.

With favourable geographical and natural conditions, plentiful natural resources and modern socio-economic infrastructure, Yen Bai also offers incentives in terms of land, workforce training and trade promotion, according to the official.

Chairman of the Vietnam Chamber of Commerce and Industry Vu Tien Loc hailed Yen Bai as well-positioned to draw investment in industry, trade and services since it connects transportation among northern mountainous provinces.

In his viewpoint, there remain untapped potential in hi-tech and mining.

Deputy Minister of Industry and Trade Tran Quoc Khanh, for his part, said Yen Bai is one of the localities benefiting most from trade agreements, adding that foreign investors are mostly concerned about land and environment as well as the realisation of commitments by the State and local authorities.

The event was co-hosted by the Vietnam Chamber of Commerce and Industry (VCCI), the provincial People’s Committee and the Japan External Trade Organisation (JETRO).

Locals link to Samsung’s chain

Local businesses are enjoying bigger opportunities to join the global production and supply chain via collaboration with South Korea’s electronic giant Samsung Group.

Nguyen Van Hung, director of Ho Chi Minh City-based An Phu Viet Trading & Production Plastics Limited, was confident about the prospect of becoming a supplier for Samsung.

“We aim to become a first-tier supplier to Samsung in the near future through the delivery of assorted battery chargers for Samsung smartphones,” Hung said.

Three months ago, An Phu Viet and other local firms joined a seminar on the development of Vietnam’s supporting industries which  Samsung organised to seek local suppliers.

An Phu Viet and three other local firms - Thang Long Packaging Production Export-Import, Viet Hung Packaging, and Chien Thang Industrial were selected by Samsung as beneficiaries of this group’s supporting systems.

Samsung sent four experts from South Korea to Vietnam to support the firms in their production and supply upgrading process. Three months later, Samsung Vietnam industrial complex’s chief executive officer Han Myong-sup  visited the firms to check the final results.

Prior to his visit, Myong-sup said that “this is the first time that Samsung has sent experts to a foreign market to support the perfection of  businesses’ production process. This shows how important the Vietnamese market is to Samsung.”

Following the completed support plan for these businesses, Samsung will reach out to more local firms in the near future.

“Despite some initial teething problems, I hope Vietnamese firms will sustain their effort and commitment to join the global production chain together with Samsung,” Myong-sup stressed.

In fact, of the four companies receiving Samsung’s support, Viet Hung and Thang Long are now already acting as first-tier suppliers for Samsung.

After becoming Samsung’s supplier, Thang Long has reported exceptional growth with a nearly four-fold increase in the firm’s revenue; from $3.41 million in 2009, to $12 million last year, and an expected figure of $13 million for this year.

Meanwhile, Viet Hung, which has been supplying cardboard boxes, plastics, and paper packaging to Samsung since April 2009, saw its revenue increase exponentially from $13 million in 2010, to $42 million last year, and a projected level of $65 million this year. In addition to expanding its existing

workshops in the northern province of Hung Yen, this April, Viet Hung built another packaging production plant in Ho Chi Minh City. The company’s chairman Hoang Gia Hung was quoted as saying that “this is a step forward to take advantage of the opportunity brought about by Samsung’s third manufacturing complex in Ho Chi Minh City.”

Meanwhile, following its promotion as a supplier to Samsung, An Phu Viet hopes to swell the firm’s revenue several-fold from its current level of $2 million.

Central city calls for investment in PPP projects

The central city has called for investment in 19 Public-Private-Partnership (PPP) projects, with total capital of VND16.5 trillion (US$768 million).

The city's secretariat said these projects were classified under Build-Operate-Transfer, Build-Transfer, Build-Lease-Transfer and Operation and Management models.

These projects are key for building up the city as a "green city," following the introduction of an adjusted master urban plan for 2030 and 2050, which includes ring roads, bridges, wholesale markets for livestock and farming products and a solid waste management project, as well as tourism initiatives, automatic parking tolls, a theatre and medical projects.

Among the 19 key projects are Hoa Lien Water Station, Lien Chieu port, Software Park No. 2 and a new waste treatment plant and trash-powered generator, as well as Ngu Hanh Son Cultural and Historical Park. These are the largest projects, each requiring funds of VND2.2 trillion ($105 million) to VND4 trillion ($190 million).

The city said the feasibility Studies for PPP projects would soon commence and approval for construction was expected shortly.

The city also plans to build the first Botanical Park project on 200ha of land in Hoa Vang District in 2016.

In 2013, the World Bank agreed to provide $202.4 million in funding for the City Sustainable Development Project, which had a total cost of $272.1 million.

JICA has helped Da Nang complete the pre-feasibility studies for two projects, the Hoa Lien water supply plant and the Khanh Son waste treatment plant, since 2012 and supports private companies in the city, helping improve their skills and management of PPP projects.

Back in favor

The residential market across Vietnam has performed well this year. “We have witnessed strong growth in both demand and supply in the apartment sector,” said Mr. Neil MacGregor, Managing Director of Savills Vietnam. Many projects entering the market in 2015 have achieved high absorption rates, especially when they are developed in strategic locations by credible developers, such as Riviera Point in District 7, Ho Chi Minh City, Watermark in Cau Giay district, Hanoi, and most recently The Nassim in District 2 and City Garden Phase 2 in Binh Thanh district, Ho Chi Minh City. The villa and townhouse segment has also seen strong growth and sales performance, according to Savills. Dai Phuoc Lotus in southern Dong Nai province, Villa Park in District 9, Ho Chi Minh City, and The Point in Da Nang are outstanding examples.

For the first nine months of this year the condominium sales volume was close to the whole-year peak seen in 2009 in Hanoi while in Ho Chi Minh City it reached a new record, with nearly 25,000 units sold in the period, according to a CBRE report.

Interestingly, the high-end segment has taken over from the affordable segment in terms of successful transaction numbers.

“Even though it is still early to talk about capital gains in Vietnam again, investors can enjoy a gross rental yield of 6-8 per cent at some high-end projects in District 2 and District 7 in Ho Chi Minh City,” Mr. Marc Townsend, Managing Director of CBRE said. The availability of a ready pool of tenants in these districts, especially for projects near international schools, also helps investors quickly sell their apartments.

The key drivers in Vietnam’s property market in 2015 have been the economic recovery, controlled inflation and interest rates, rapidly improving infrastructure, the stimulus package to fund affordable housing, and a more supportive legal framework, according to industry insiders.

In particular, the new Law on Housing and Law on Real Estate Business, which came into effect on July 1, were significant and important steps towards opening up Vietnam’s real estate market to overseas investment. The Amended Law on Housing has created favorable conditions for foreigners to own properties in Vietnam. “More developers are now considering sales and marketing plans to attract this group of target buyers,” said Mr. MacGregor. The new Law represents a significant step in foreigners securing properties Vietnam and further guidance has recently been issued by authorities. The new Land Law has also clarified a number of issues, providing real estate investors with much-needed confidence.

While there has been notable interest from foreigners who live and work in Vietnam, there have been very limited sales to offshore foreigners to date, Mr. Townsend said. In contrast to local buyers, who are familiar with the market, when foreigners buy homes they have many questions about the administrative process, potential capital gains, and rental yields. They look far into the future, he said, and are concerned about any potential implications or problems related to selling their assets when the time comes.

Many potential buyers are still waiting for more guidance and progress in implementation. As an agent targeting this group of buyers, CBRE has observed that professionalism, language proficiency, and ease of credit card payments are some of the key concerns. Last but not least, offshore buyers are still looking at how to get money in and out of Vietnam, which can be difficult. “Until all of these issues are addressed we believe it may take several years to see a number of foreign buyers actually buying into the market,” Mr. Townsend confirmed.

Foreign direct investment (FDI) in real estate has increased strongly since the early months of this year. This appears to show that foreign investors long believed the TPP would conclude this year, Mr. Nguyen Manh Ha, Chairman of Phu Quy Land Company, was quoted as saying. Vietnam’s property market attracted $1.81 billion in FDI to 19 new projects in the first nine months and seven existing projects increased their registered capital, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI).

Bright prospects

Among others, real estate investors and insiders have high expectations over the potential of Vietnam’s real estate market in all segments given the imminent TPP and ASEAN Economic Community (AEC). “The partnerships will have a significant and positive impact on Vietnam’s real estate market,” according to Mr. David Blackhall, Managing Director of VinaCapital Real Estate. “While the TPP’s impact is likely to be seen over the medium to long term, the AEC should impact the industrial sectors of member countries almost immediately, with some positive impacts expected to be seen in the local office and retail markets.”

The two agreements may well trigger a healthy rise in the industrial market, which in turn will bolster the growth in office demand as more multinational corporations (MNCs) enter the market and more small and medium-sized enterprises (SMEs) expand in the country. Personal wealth and living standards should increase markedly, which will have massive implications for the real estate market in general, as people save more and look to invest. One of the main outlets for this investment would be the real estate market, especially condominiums for sale, according to one insider.

While there is still a long process before the full benefits of the trade agreements are seen, it is a great time for real estate investors to prepare for the anticipated increase in demand, according to Mr. MacGregor. Vietnam is emerging from the bottom of the real estate market cycle and the time is right to secure development projects and begin construction. “It is important that projects are built to international standards to appeal to this renewed influx of foreign demand, while the government needs to continue the focus on investment in infrastructure to maximize the opportunities,” he added.

“We hold a very positive view for 2016, with a hope that inflation and interest rates will continue to be under control and new legislation will start showing initial results after being in place for one year. More and more foreign investors will come to Vietnam at both the entity and individual level. Foreign investors love the size of the population, rising affordability, and rapid urbanization in the two major cities of Ho Chi Minh City and Hanoi.”

Mr. Marc Townsend, Managing Director of CBRE Vietnam

“We remain very positive about the residential market across Vietnam over the next 6-12 months. We’re also seeing more demand from real buyers and less speculation in the residential market, particularly in Ho Chi Minh City. We expect price increases to remain moderate given the large volumes of supply. With the effect of the amended housing law we anticipate an increased level of inquiries from foreigners looking to buy properties in Vietnam in the months to come.”

Mr. Neil MacGregor, Managing Director of Savills Vietnam

“The performance of office for lease in 2016 will be more driven by supply. There is a shortage in Ho Chi Minh City and too much in Hanoi, so different trajectories in rents will continue. Building-by-building, quality will be the key factor in 2016, not only in construction but also management and operation. The bigger multinationals become the more demanding they are in terms of building performance, service and quality, as are their best staff.”

Mr. Alex Crane, General Manager of C&W Vietnam

On the right terms

On November 5 Beyeu, an e-commerce website for baby and family products backed by Project Lana, put the following notice on its site before closing forever: “E-commerce requires lots of money. Many companies will decide to stop. Good luck to the rest who are still trying.” As painful as it sounds, such sentiments are all too true. Beyeu’s closure surprised many in Vietnam’s startup community, partly because it was so unexpected but mostly because there has been much discussion in the startup community recently about people rushing into business without giving serious thought to finances.

According to figures from the Vietnam Association of Small and Medium Enterprises (VINASME), only 30 per cent of small and medium-sized enterprises (SMEs) are able to approach capital from banks while the remaining 70 per cent have difficulties approaching capital. For startups, therefore, a relationship with investors is critical and the key determinant of survival.

Seeking assistance

Vietnam’s startup community is now going meta and becoming more united and organized in the way investors (angel investors and venture capitalists) and startup founders work together. At the end of the day, all of this results in the question: “How can investors value startups?”.

Valuations of startups are, in fact, more art than science: Everything regarding startups must be judged on a case-by-case basis, but there are some common factors when it comes to how much an investor is willing to part with.

According to Mr. David Beatty, Managing Director of Golden Seeds, the founding team has a crucial influence on any early-stage business, as the idea cannot work by itself. The managing team, with all its technical knowledge, will make products following the startup’s core values and sell them to potential customers in their network. Obviously, at this point, the founders’ reputation in the community is what really matters, not only as engineers but as salespeople as well.

Mr. Csaba Bundik, Management Consultant with the Hatch! Program, said that researching the market in order to create a functioning product is a decisive stage for investors from international venture capital funds or foreign entrepreneurs. For example, Ebay actually failed in Vietnam a few years ago as the country’s e-commerce facilities and customer behavior were not fully developed. This is something it should have been aware of. GrabTaxi and Uber, meanwhile, arrived on the scene at the right time.

“Nothing creates value like customers telling the investor you have value,” said Mr. Hung Dinh, Managing Director of Joomlart. Once capital has been poured into the business, the number of customers who keep coming back for its products and are likely to become paying users is clearly related to the growth of a startup. User engagement is a life-and-death matter in this fierce competitive landscape.

How a startup manages to build a well-organized team, gain traction in the market, and target their products more effectively to pilot customers is just the same as how the investment is used. Mr. Hung said that it would take a long time for any new business to reach its break-even point, let alone generate profit, especially in the current environment of stringent regulations. As an angel investor in Vietnam, Mr. Steve Landman, said: “I think we should stop teaching companies to look for investments; we should teach them how to do business.”

Mr. Hung said that there are only a few exits reaching the return on investment rate of two to three times. However, healthcare, media, agriculture, and restaurants are segments in which averagely-invested startups have margins to be made.  

Mr. Landman also noted that startup founders in Vietnam are inexperienced but very willing to learn. As a network, both investors and startups can study from failed cases and become a stronger community.

In an emerging economy like Vietnam, investors are not only paying attention to making money but also developing technology and potential markets. Growing markets in healthcare, tech businesses, and e-commerce have limitless potential and could benefit much more from investors, whose interests are widespread around Southeast Asian countries.

Voice of starters

Startups, on their own, have many problems when it comes to seeking investors and dealing with related matters. “Vietnam has great potential but we lack the chance to approach foreign investors, as we don’t have the opportunity to attend major conferences to get to know them,” said Ms. Dao Thu Phuong, Sales Director at Coc Coc. Foreign investors tend to not pay too much attention to Vietnamese startups, as the focus at the moment is on the US, Singapore, and Israel, where the startup community is better known.

As investors have the upper hand in investment discussions, startups hope to persuade them to think beyond the money being spent and money to be made. “I hope that they can see our products from the customer’s perspective, because cash in and out is only short term while demand is long term,” said Mr. Phan Thanh Tung, founder of LST Media, a small media startup. Potential must be seen from a wider angle, and cooperation can last long term.

Cash flow is a basic necessity startups seek from investors, and while successful fund raising may be viewed as the greatest achievement it is still not enough, according to Mr. Nguyen Dac Viet Dung, Chairman of Management Board at Sendo.vn. When an investment is made, other needs are born. “Money is only the initial factor, and a good investor is someone who can provide the startup with experience in the field and a business network,” he said. Startups therefore need to study the investor too.

Other matters may subsequently arise. In the case of Mr. Tung, the investor he teamed up with asked him to complete some media work. It was outside of their contract, and no payment was ever forthcoming. “If I prepared an invoice, the figure at the bottom would be huge,” he said. The investor - startup relationship is a cooperation between the two sides, and startups should not feel they “owe” the investor solely because they put money into the venture.

Vingroup partially exiting Giang Vo Exhibition Center

Vingroup (Security Code: VIC) has recently announced its intention to sell 15.8 million shares in the Vietnam Exhibition Fair Center (VEFAC), the owner of the Giang Vo Exhibition Center in Hanoi. The shares represent 9.42 per cent the company’s charter capital.

Transactions will take place from December 22 to January 20. It is expected that VEFAC’s shares will be put on the UpCom stock market on December 22.

After selling the shares Vingroup will still have 133.3 million, or 80 per cent of VEFAC’s charter capital. The aim of the move is to lower Vingroup’s shareholding in its subsidiary and attract other investors.

In its equitization plan VEFAC estimated its charter capital at VND1.666 trillion ($73.97 million), in which the State would hold 10 per cent, strategic investors 80 per cent, with the remainder to be sold at auction.

The IPO was unsuccessful, however, so Vingroup had to hold another 9.42 per cent, for a total holding of 89.42 per cent. “Buying an additional 9.42 per cent was not in the initial plan of the group, and this would be a long-term investment that would need a financial commitment for many years,” a representative of the group told local media. He added that the sale would ensure transparency in later activities and have no effect on its commitment and ownership.

VEFAC is located at 148 Giang Vo Street in Ba Dinh district on an area of 7 ha, with a showroom system, conference rooms, and full infrastructure. It can be used to hold exhibitions of international scale or a few events at the same time.

Over the last three years, profit after tax was from VND3 billion ($133,200) to VND6.2 billion ($275,280) per year, with a profit margin on sales of around 1.6 to 9 per cent.

Vietnam Youth to Business Forum on way

AISEC Vietnam, a branch of the global organization AIESEC, has worked with the Vietnam Chamber of Commerce and Industry (VCCI) to hold the Vietnam Youth to Business Forum on January 17 at the Academy of Banking and Finance in Hanoi. The event will be attended by 20 famous corporations in Vietnam, have the theme “Value-Creating Generation”, and is an opportunity for employers to seek employees from a talented pool of selected candidates.

The warm-up event, “Preparation for the Turning Points”, was held at HATCH! NEST in Hanoi on December 20, with speeches by Ms. Do Kim Hang, Manager of PERM & Consulting Services at ManpowerVietnam, Mr. Bui Quang Minh, CEO and Founder of Beta Media, and Mr. Pham Khanh Hoa, Founder of Wisami and SEA Regional Manager of Spicy Cinnamon.

According to Ms. Hang there is a high concentration in fields of study in Vietnam, as 59.62 per cent of students are pursuing majors in business, economics, marketing, or banking and finance. There are a high number of new graduates, however, who are unable to find a job. In her view there are two reasons behind this. The first is the unavailability of suitable jobs and the second is the graduates’ employability. Employability comes from professionalism, soft skills and mindset. The working environment will only get harder for new graduates, she believes, with agreements such as the AEC and TPP on the way.

AIESEC is a global platform for young people to explore and develop their leadership potential. It is a non-political, independent, not-for-profit organization run by students and recent graduates of higher education institutions. Its members are interested in global issues, leadership, and management.

Ethanol gasoline consumption accounts for 4.2 percent in HCMC

Ho Chi Minh City has implemented a pilot program selling ethanol gasoline E5 for one month but the blend’s consumption output has accounted for only 4.2 percent, according to the city’s Department of Industry and Trade.

So far, 262 out of 518 filling stations in the city have attended the program.

However, Ron 92 and Ron 95 gasoline accounts for 95.8 percent of the total consumption output of 130,100 cubic meters a month.

According to plan, the blend will be available at 100 percent filling stations in the city by the end of this month.

The Department of Industry and Trade said it has positively worked with wholesale businesses to boost E5 gasoline consumption. However the sold output has fallen behind business targets because consumers have still hesitated about using the new fuel.

EU fourth largest wood export market of Vietnam

The EU is the fourth largest export market of Vietnamese wood and wooden products after the U.S., Japan and China, reported the Vietnam Timber and Forest Product Association (Viforest).

The block has captured one fourth of the global consumption demand of wooden products.

Vietnam’s export turnover to the EU hit US$703 million last year and approximated US$442 million for the first eight months this year. Growth rate averaged 2.2 percent a year in the phase 2012-2014.

The most important markets of Vietnam in the block include England, Germany and France that hold two thirds of the country’s total turnover.

Key exports fulfil set goals

Vietnamese key exports – garments and textiles, footwear, and telephone - have fulfilled the set goals for 2015.

According to the latest report of the Viet Nam Customs, garments and textiles earned US$20 billion from export in the first 11 months.

In November, export turnover of garments and textiles reached US$1.71 billion, bringing the total number to US$20.63 billion in the first 11 months, representing a year-on-year surge of 8.9% (or US$1.69 billion).

In January-November, shipment of the products to the U.S. valued US$9.88 billion (up 11.7%); the EU US$3.09 billion (up 3.5%), Japan US$2.53 billion (up 6.2%); the RoK US$1.98 billion (up 1.3%).

The Viet Nam Customs also reported that exports of telephones and spare parts reached a record high of US$2.78 billion in November, up 4.4% against last month.

In the first 11 months, the products earned US$28.44 billion in export turnover, posting a year-on-year growth of 29.5% (or US$6.47 billion).

The EU was the largest importer of made-in-Viet Nam telephones and spare parts with US$9.48 billion (up 19.2%) and accounted for 33.3% of the market share. The UAE ranked second with US$4.26 billion; followed by the UK with US$1.58 billion.

Meanwhile, Viet Nam pocketed nearly US$15 billion from shipping leather products and footwear abroad, meeting the set goal.

The Ministry of Industry and Trade announced that in November, around 22.5 million leather and footwear products, representing a year-on-year growth of 16.9%. Footwear export turnover was estimated at US$1.05 billion in November, up 10.2% against the same period last year.

Generally, around 282.1 million footwear products were exported in the first 11 months, representing a year-on-year growth of 18.3%. Export turnover valued nearly US$11 billion, up 16.3% against the same period last year.

The sector was forecast to attain the goal of earning over US$12 billion of export turnover.

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