In 2023, Vietnam’s cement industry faced many challenges, and some producers had to shut down or reduce output to minimise losses. Quang Ninh Construction and Cement, for example, is struggling due to especially slow consumption and the high competitiveness of the domestic cement market.

Input costs were too high in 2023, according to Vu Trong Hiet, deputy general director of the company. The clinker export tax rate rose from 5 to 10 per cent and was not subject to the law on VAT.

“Besides this, electricity prices have risen twice with an increase of about 7.5 per cent, and the electricity supply was unstable on hot days and there was often scaled down production due to a lack of electricity,” Hiet said. “Raw materials for production, such as coal, ash, and slag from thermal power plants, and production additives raised prices and materials were difficult to buy due to tightening mineral resource management.”

Against these general difficulties, in 2023 the company had to stop production of a line for three months to stretch production, and reduce output to save costs.

“Due to the low domestic cement consumption market, the company’s domestic sales made up less than 10 per cent of total product sales,” he said.

At last December’s workshop on solutions for the cement industry, Luong Duc Long, general secretary of the Vietnam National Cement Association, said, “Since the establishment of the cement industry more than 100 years ago, this is the most difficult period. Because this industry is under the pressure of output, when the absorption capacity of the domestic economy is poor, and input costs are soaring due to high energy prices, the cement industry is under significant pressure.”

Many other industry insiders reported the same issues.

“When input prices are high, product costs will inevitably also be high, exceeding the selling price that the market accepts, resulting in a decrease in sales. In addition, the supply of cement is too large, affecting the sales output of some companies, including Vissai Ha Nam JSC,” said Pham Viet Cuong, deputy director of Vissai Ha Nam.

“Currently, production line 2 has been stopped since May, while line 1 is considering whether to continue production or temporarily stop because the loss is too large.”

Dao Nguyen Khanh, a representative of INSEE Vietnam, said, “While domestic consumption is too hard, 2023 is considered to have the lowest sales in dozens of years of operation of the company. Sales output is estimated to be the worst over 30 years of establishment and operation of the company, with a decrease of 35 per cent on-year.”

According to the Ministry of Construction (MoC), in the first 11 months of 2023, cement production exceeded 81 million tonnes, down 12 per cent on-year. Of this, domestic consumption was 52 million tonnes, a drop of 16 per cent, and the export volume was 52 million tonnes, down 29 per cent on-year.

The reason is the relatively quiet real estate market of the past two years, with numerous businesses encountering problems, so their projects had to delay progress or scale down. On the other hand, public investment construction activities are slow, so cement demand has decreased.

Most recently, 10 of the 12 cement producers listed on the stock exchanges that have released their financial statements for the third quarter of 2023 have already reported losses, one enterprise reported lower profits, and only one declared a profit growth, Hiet of Quang Ninh Construction and Cement added.

Regarding the cement market in 2024, SSI Securities Corporation said that consumption in the domestic and export markets would continue falling to the lowest level in the first quarter of 2024 due to seasonal factors and decreasing demand.

A positive point is that large public ventures, such as Long Thanh International Airport and highway projects in the central and southern regions, may partially offset weak demand in 2024.

“We expect cement consumption volume to improve over the same period in the second half of 2024, partly thanks to the low base level established in the second half of 2023,” SSI reported.

Hiet suggested developers and investors of infrastructure projects raise the rate of using reinforced concrete viaducts for highway projects in the design stage, especially in areas with flood drainage requirements, weak soil areas, and areas lacking road embankment materials such as the Mekong Delta. “Localities should increase the use of cement in concrete roads to build rural, mountainous roads and roads in frequently flooded areas,” he said.

The MoC, the State Bank of Vietnam, and localities will continue to deploy a credit package of VND120 trillion ($5.06 billion) to develop social housing, and worker housing, and renovate and rebuild old apartments, which should help matters.

Tuna exports to Canada enjoy constant growth in late 2023

Vietnam's tuna exports to Canada enjoyed constant growth during the final months of 2023, reaching an 11-month export turnover of more than US$772 million, the Vietnam Association of Seafood Exporters and Producers (VASEP) has reported.

Despite suffering a year-on-year fall of 37%, the nation's tuna export value to the north American country soared by 117% in November 2023 alone, bringing the total export value to the highly lucrative market throughout the reviewed period to nearly US$31 million.

VASEP cited statistics from the International Trade Center (ITC) as saying that during the past nine months, Canada's tuna imports from other countries neared US$154 million. Vietnam ranked third, with a market share of 12%, behind Thailand and Italy.

Among tuna products, Vietnam mainly supplies frozen tuna meat/loin and canned tuna to the Canadian market, with a proportion of 54% and 40%, respectively.

Canada was the 12th largest tuna import market in the world in 2022, with its import turnover reaching an excess of US$272 million, an increase of 40% compared to 2021. With this growth, Canada is considered is a potential tuna market for Vietnam, especially following the enforcement of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

However, it is expected that tuna exports to the Canadian market will not be able to fully recover in the coming months, especially in the context of growing consumer credit debt of Canadians that led to tighter spending.

Timber industry in Vietnam awaits FSC certification drive

Strict Forest Stewardship Council certification regulations pose both challenges and opportunities for the Vietnamese timber industry.

One of the largest retailers in the United States, William Sonam, is seeking to procure Forest Stewardship Council (FSC)-certified timber products from Vietnam.

David Williams, William Sonam’s representative at the FSC Asia Business Encounter 2023 on December 14 said, “Part of the strategy to ensure that half of the wood products sold in our retail chain are FSC certified by 2025 is to increase product awareness and promote responsible consumption. When a forest product receives an FSC certification, it indicates that the manufacturing process has ensured environmental responsibility and social benefits.”

Vietnam has an increased demand for FSC-certified timber materials due to requirements from import markets, the largest of which are the US and Europe. However, there are restrictions on the origin of such materials.

“We are investing in a factory in the south-central province of Binh Dinh to gain access to raw material regions with FSC,” said Tekcom Corporation’s purchasing manager, Cao Thi Thuy An. “At present, the company requires 18,000 square metres of FSC timber per month as an input material to manufacture plywood boards intended for export to the US and European markets.”

The timber industry is experiencing heightened pressure due to consumer demand for FSC-certified wood products. Dr. Tran Le Huy, general secretary of the Forest Products Association of Binh Dinh, said that domestic wood resources are insufficient for the production of export wooden furniture and lack proper certification, whereas 70 per cent of materials must be FSC-certified and the remainder must be sourced wood, according to European and American standards.

“Both domestic and imported sources hamper the supply of FSC,” said Huy. “Firstly, the furniture sector is where the wood products’ industry is organised for smallholder producers. Furthermore, the import turnover pertaining to timber and wood products that possess FSC certification is relatively insignificant. Vietnam imported timber and wood products worth approximately $3 billion in 2022, but FSC wood imports accounted for only 2.2 per cent.”

Vietnam primarily purchases FSC wood from South American and South African countries, but arriving here will present challenges due to passive lengthy shipping times, and high sea freight costs, Huy added.

In recent years, the Vietnamese government has implemented priority policies, such as the Vietnam Forestry Development Strategy for 2021–2030 and a scheme to develop a sustainable and effective wood processing industry, which promotes the growth of large plantation timber with FSC certification.

As a consequence, an increasing number of companies operating in the timber processing sector are actively pursuing prospects for direct involvement in the certified forest supply chain. A number of companies, including Woodsland, NAFOCO, and Scancia Pacific, have achieved raw material self-sufficiency by collaborating with foresters.

Woodsland Tuyen Quang, an enterprise that manufactures interior and exterior wood products for IKEA Group, has collaborated with five forestry companies in the northern province of Tuyen Quang since 2015, investing in and procuring certified planted forest wood products.

At present, Woodsland and its partners have collaborated to establish more than 28,000ha of certified and sustainable forests, which supply between 150,000 and 200,000cu.m of round wood annually, with over 90 per cent of the demand for raw wood coming from certified forests.

In 2024 and subsequent years, Woodsland’s strategic goal remains the construction of an FSC-certified raw material area, according to the company’s president, Do Thi Bach Tuyet.

“Presently, the company is engaged in collaboration with forestry firms and domestic organisations to formulate a forest management strategy spanning a minimum of seven years, with the objective of establishing timber material areas that satisfy processing requirements,” Tuyet said.

Vu Thi Que Anh, the FSC representative in Vietnam, remarked that the ability to access more developed global markets is one of the greatest benefits for forest owners in Vietnam through obtaining FSC certification. This increases forest owners’ revenue and establishes advantageous market connections for business operations.

“Consumers in European markets are frequently willing to pay a premium for wood products, such as paper or furniture, if they are assured that the product is sourced sustainably and does not lead to increased deforestation,” she said.

According to Que Anh, the proportion of forested land in Vietnam with FSC certification has reportedly increased in recent years. The FSC-certified forest area in Vietnam is projected to encompass approximately 282,960ha, representing 64 per cent of the country’s total planted forest area. “Nevertheless, we advise companies to enhance their capabilities and remain informed about the latest market trends, standards, and guidelines to secure affordable raw material sources and maintain a streamlined supply chain that guarantees traceability,” Que Anh said.

Agro-forestry-fishery exports see bright prospects

The new record export turnover of key agricultural produce contributed a pivotal role in the agricultural industry’s growth in 2023, and simultaneously paves the way for bright prospects in 2024.

The increase of the agricultural exports was the pride of the industry in 2023. The total export turnover of agro-forestry-fishery products is estimated to reach over $53 billion for the whole year, the Ministry of Agriculture and Rural Development announced last week.

GDP growth of the entire agricultural sector reached 3.83 per cent, the highest in several decades. The industry-wide trade surplus in 2023 is estimated to hit more than $11 billion, the highest level in recent years and accounting for over 42.5 per cent of the country’s trade surplus.

Vietnam’s fruit and vegetable exports touched a record of $5.6 billion. With this record, fruit and vegetable export turnover made a strong breakthrough, exceeding 40 per cent of the plan set at the beginning of the year and increasing nearly 66 per cent over the same period in 2022.

At the same time, many exported agricultural items recorded new records such as rice, vegetables, and coffee.

Notably, durian has become a champion in the group of exported fruits and vegetables, achieving high growth figures. This is due to the effort of businesses and ministries to open the Chinese market for Vietnamese durian products.

China remains the biggest importer of Vietnam’s fruits and vegetables, buying two-thirds of the total exported fruits and vegetables of Vietnam. Other major importers were the US, South Korea, and Japan.

According to the agriculture ministry, these achievements came amid a challenging global context. The export of aquatic products in particular faces many difficulties as many key export markets are narrowing demand, and input material prices remain high.

In 2023, total turnover of aquatic exports is estimated to have hit $9.2 billion, down 8 per cent as compared to the initial plan of $10 billion. This includes $3.45 billion for shrimps, $1.9 billion for basa fish, $900 million for tuna, and $800 million for shellfish.

“Amis these difficulties, the agricultural sector reversed the psychosphere from being confused, and passive to being proactive, confident, and creative to remove difficulties. The industry also changed its status from defence and resistance to attack, making breakthroughs in some industries and setting records,” Prime Minister Pham Minh Chinh said at the conference to review the industry’s performance on January 3.

The business community is also proactive in improving the quality of products and expanding the markets, contributing to fostering the growth of the whole industry.

Nguyen Dinh Tung, CEO of Vina T&T, said, “We participate in many export forums to look for new orders in new markets, cooperate with local farmers to establish close links, and collaborate with cooperatives to build brands for Vietnam’s key agricultural produce. It is essential work, as Vietnam is trying to foster export in tough markets.”

In 2024, the export market is wide open thanks to 16 currently implemented free trade agreements, and more on the way. Strong political relations have been consolidated and upgraded with major partners such as China, the US, and the EU, creating a premise for wider exports. However, agricultural products are inherently sensitive and have many risks, especially technical barriers set up by many large markets.

“To ensure sustainable development and establish a stable import market, businesses need to proactively build links, and regularly update standards from import markets to have countermeasures in building raw material sources as well as processing and packaging for export,” the prime minister said. “Enterprises exporting in these industries need to focus on building production chains, closely following requirements from import markets and ensuring sustainable growth.”

Alcoholic beverage groups urged to track trends

The alcoholic beverage industry is expected to continue facing hiccups until 2024 as revenue and profit of many brands remain on the decline.

Alcoholic beverage businesses are placing high expectations on an increase in purchasing power during the 2024 Lunar New Year, but many experts assess that the difficult situation cannot yet improve.

According to Nguyen Phuong Nga, senior business development director of market data company Kantar Vietnam, consumers will still tighten their spending and not give much priorities for beer and wine products. “Some customers are limiting their choices of some products such as wine and beer, and sharply increasing spending on healthy beverage products,” said Nga.

Although there are no official statistics for the entire year, according to the latest third quarter report, most alcoholic beverage businesses have experienced an unfavourable business year.

According to the financial report for the 2022-2023 period, revenues of ThaiBev, the managing unit of Saigon Beer-Alcohol-Beverage Corporation (SABECO) in the Vietnamese market, reached about $1.77 billion, down 5.7 per cent compared to the same period last year.

In the first three quarters of 2023 alone, SABECO recorded an on-year decrease in both revenue and profit after tax of 12 and 26 per cent, respectively.

Vietnam accounts for nearly 21.5 per cent of ThaiBev’s total consolidated revenue. Although revenue in the Vietnamese market decreased slightly, the group’s total revenue still increased by about 2 per cent over the same period.

Meanwhile, Hanoi Beer Alcohol and Beverage JSC (Habeco) also recorded a reduction in revenue of nearly 6.3 per cent in the first nine months of 2023 and a drop in profit of about 39 per cent, reaching $237.6 million and $12.3 million.

Consumption of Vietnam Brewery, a Vietnamese brewery joint venture which distributes Heineken and Tiger, also went down by 16.5 per cent.

Nguyen Van Viet, chairman of the Vietnam Beer Alcohol Beverage Association, said that the alcoholic beverage consumption market decreased by 20-30 per cent last year due to disruption of the global supply chain, which has caused the price of raw materials in the beer industry to increase by about half.

“In addition, the explosion of imported beer brands in the high-end segment also affects the market share of domestic beer businesses, which are strong in the mid-range segment,” Viet said.

According to data from the General Statistics Office, in the first nine months of 2023, beer production in Vietnam reached 3.41 million litres, an increase of only 0.02 per cent over the same period.

While big brands are struggling to do business amid a gloomy market, small-scale domestic craft beer brands are easily going upstream thanks to flexible business strategies and cost reduction from lean machinery.

Cuong Nguyen, founder and CEO of C-Brewmaster Craft Beer, said that although still suffering from general negative impacts from the market, its sales volume will still increase by about 7-8 per cent in 2023.

“In addition to quality and brand, consumers are increasingly interested in experiential culture,” Cuong said. “Craft beer products are made from local ingredients with rich flavours and colours, and have their own stories, so they easily bring emotions to customers than industrial beer products,” he said.

The products of this brand are currently distributed mainly in 4-5 star hotels, resorts, restaurants, and golf courses in the biggest markets in the country.

In addition to efforts to diversify new products and flavours, Nguyen confirmed that the business will build a third factory in the south-central province of Phu Yen, coordinating with two factories in Hanoi and the Mekong Delta province of Tien Giang to ensure the best customer service.

According to Vietdata, Vietnam’s beer consumption is 3.8 million litres per year, accounting for 2.2 per cent of the global market. Vietnam is the top country in the entire ASEAN region, and third in Asia, in beer consumption.

However, Dr. Vo Van Quang, a strategic marketing expert, said that the alcoholic beverage industry will grow at a low, stable rate over the next 3-5 years. “Beer businesses are forced to invest more in advertising, promotions, and retail systems to protect points of sale and maintain market share. The profit rate is no longer as high as in previous years, but it is still a playground where investors can earn profits,” he said.

Imported fruit gaining a bigger foothold in market

The total import turnover of fresh fruit products grows steadily each year, making Vietnam a promising market for Australian and New Zealand businesses.
 
Containers filled with ripe Australian peaches and nectarines arrived in Vietnam at the end of December, marking the second crop since the Australian government officially licensed the export of summer fruit products to the Vietnamese market in March 2022.

Australian summer fruit is produced in approximately 26 regions across the country. Production has risen by approximately a quarter over the last decade, and 400 growers now produce over 125,000 tonnes per annum, according to a 2022 industry report.

Chris Morley, commissioner at the Australian Trade and Investment Commission in Vietnam (Austrade), said that after testing a number of batches, businesses in both countries will have more advantages when importing, distributing, and retailing these two fruits.

“Agricultural products and fresh fruits will continue to become a key trade promotion centre in the close diplomatic relationship between the two countries,” Morley said. “Vietnam is also Australia’s second-largest export market for agricultural products, and we will be interested in developing fruit products here in the near future.”

Australia’s total fruit export turnover to Vietnam is expected to have reached $1.4 billion in 2022-2023, according to data from Austrade. Besides peaches and nectarines, the country also has great potential to export other fresh fruits such as grapes, oranges, or cherries.

Elsewhere, imported fruit products originating from New Zealand are also very popular in the Vietnamese market. Some of the most popular fruits in New Zealand include kiwi, apples, and blueberries.

Duong Gia Linh, deputy head of Import Department of Viet Products Development JSC (VPD), commented that Vietnamese consumers are increasingly concerned about their health than ever before, they are willing to spend more on imported food, especially fresh fruit products.

“Compared to fruits imported from Japan, South Korea, or North America, Australia and New Zealand have fruits of stable quality and diverse types, so they are very popular with consumers and their prices are more reasonable,” Linh said.

VPD is one of the more reputable fresh fruit importers in Vietnam with nearly 20 years of experience. Currently, 80 per cent of products imported by this business are mainly distributed and wholesaled in Ho Chi Minh City, while also still operating retail stores in Hanoi.

In addition to the quality, Linh said importers tend to choose fruits from Australia and New Zealand because of the preferential tax rate of zero per cent, while fruits imported from other markets are still subject to a tax of 8 per cent.

“Importers face many risks in terms of seasonal fruit quality, storage and transportation costs. The import market in recent years has also become more competitive. Tax incentives are an attractive solution for importers, conversely, consumers also benefit when they can buy goods at lower prices,” Linh explained.

New Zealand Trade and Enterprise (NZTE) said the total two-way trade between New Zealand and Vietnam by June 2023 is valued at $1.66 billion.

Food and beverages account for 77 per cent of New Zealand’s total exports to Vietnam, with produce fruits and nuts forming 23.4 per cent of that sector’s exports. New Zealand has consistently posted double-digit growth of the exports of apples and kiwi to Vietnam over the past few years.

“With consistent growth of New Zealand’s export of apples and kiwis to the Vietnamese market over the last few years, the potential for further growth of imported fruit consumption looks to continue, especially in terms of apples,” said Giang Nguyen, head of business development at NZTE.

“Taste, price, and product safety are currently the key drivers for consumers when purchasing fruit. New Zealand exporters who are able to clearly define and highlight these factors to Vietnamese consumers can position themselves better in the long run,” Nguyen said.

Some exporters admit that barriers in transportation and weather conditions will greatly affect the quality of the fruit when reaching consumers.

Trevor Ranford, CEO of Summerfruit Australia, said, “The other challenge is the aspect of having the right conditions within the stores to ensure that fruit retains its freshness. Currently, there are discussions in relation to Vietnamese passion fruit coming to Australia. We’re hopeful that a decision will be made very shortly between the two governments.”

Gen-Z saying “meh” to social media

Factors that were once plus points that helped social networks develop rapidly with the younger generation are now becoming reasons for them to turn their backs on them.

Three weeks ago, a lavish launch ceremony for Vdiarybook took place at My Dinh National Stadium in Hanoi with the participation of thousands of people. Interestingly, the majority of attendees were from so-called Gen X and Gen Y, with an average age of about 30-50 years old.

Vdiarybook is a Vietnamese social network. Although it operates similarly to other social networks on the market, Vdiarybook does not focus on entertainment or trends that serve the interests of young individuals, but prioritises sharing information on traditional culture and history.

“We want to create an official and useful information environment. Vdiarybook does not serve the masses but seeks more sustainable value,” said Le Trung Hieu, director of Vzone Global Technology Group, the unit that developed Vdiarybook.

Vdiarybook’s differences mean that patience may be required for it to succeed. Thus far, the social network has fewer than 100 active accounts and few interactions from members. Hieu said that a number of features are still in active development.

The history of Vietnamese social media efforts point to an uphill struggle for Vdiarybook. Many Vietnamese social networks have appeared and quickly failed because they could not compete with bigger names.

In 2019, Gapo and Lotus both held grand launches and confidently challenged successful social networks such as Facebook, YouTube, and Instagram. Lotus aimed to become an all-in-one social network, providing news and entertainment and connecting key opinion leaders with fans with promises of bringing income to users through tokens.

Meanwhile, Gapo had the ambition to create a separate social network for Vietnamese people after announcing investment of $21 million from G-Capital fund. The social network aimed to reach 50 million users by the end of 2022. Only three months after launch, both Lotus and Gapo sank into oblivion.

According to the Connected Consumer 2023 report for the third quarter of 2023 published by Decision Lab, a digital media company specialising in market research in Vietnam, Vietnam’s Gen Z (typically people born in 1997-2012) is showing a trend of unplugging from social media.

About 75 per cent of Gen Z want to quit at least one social media platform, and their wish to disconnect suggests a need to regain control over their time and mental space from the networks they have so heavily populated, the report said.

However, the report also emphasises that disengaging from social media is challenging as it has become such an integral part of daily life.

On average, individuals claim they cannot live without at least two social media apps. They are also quick to adopt new platforms, with 4.9 per cent of Gen Z people using Threads, Meta’s new platform. This number doubles with Gen Y (people typically born 1981-1996) and even triples with Gen X (1965-1980).

“I will quit social networks,” said Thao Chibi, an employee of a technology company in Hanoi after she stopped using the phone to surf the internet during her spare time for a week. She decided to delete Facebook and TikTok but still uses other entertainment and newspaper apps and keeps in touch with relatives.

“I’m used to spending hours surfing social networks, participating in debates about things that don’t matter, and always being afraid of missing out,” Chibi said.

Attacks in the cyber environment and malicious information that is not strictly verified have also made more people realise that social networks have invisible effects on their physical and mental health. Therefore, some are gradually thinking about limiting their online time or leaving them altogether.

“I was shocked when I realised the time I wasted surfing social networks over the years,” said Habe, a 24-year-old from Hanoi. “When I deleted Facebook and Instagram in 2022, I spent time reading books, being with my family, or cooking.”

Dr. Bui Nguyen Hong Bao Ngoc, deputy head of Substance Use and Behavioural Medicine at the Institute of Mental Health under Bach Mai Hospital said, “Internet and social network addiction can cause mental disorders such as depression, anxiety, and stress. At the same time, it reduces social interaction, causing insomnia and sleep disorders, and affecting academic and work performance.”

The Ministry of Information and Communications says that Vietnam currently has over 930 domestic social media platforms with some 130 million registered accounts. However, social networks in Vietnam all face losses and cannot exploit business or advertising. Most social networks are not used regularly, and do not generate revenue or profit.

Meanwhile, Facebook (70 million accounts), YouTube (60 million accounts), and TikTok (45 million accounts) account for 70 per cent of the online advertising market share in Vietnam, bringing in more than $1 billion in revenue.

VinFast plans first EV factory in India

Vietnamese carmaker VinFast said it will build its first electric vehicle factory in India as part of a planned $2 billion investment, as it looks to expand into the rapidly growing market.
 
The facility will be in the southern state of Tamil Nadu, according to a VinFast statement released Saturday, which said there was an initial intended commitment of $500 million for the first five years of the project.

The communist state's first homegrown car manufacturer is hoping to compete with EV giants such as Tesla, and is trying to crack international markets.

But VinFast's expansion overseas has faced a rocky start.

Of the 11,300 vehicles it sold in the first half of last year, 7,100 were bought by a company owned by the same parent company as VinFast.

The firm listed on the Nasdaq in August, hitting headlines around the world as its valuation skyrocketed and then crashed.

In the statement, the company said that the "VinFast Tamil Nadu project aims to evolve into a first-class electric vehicle production hub in the region, with an annual capacity of up to 150,000 units".

Construction of the plant is expected to begin this year, and create up to 3,500 local jobs.

"This initiative forms a crucial part of VinFast's strategy to establish a strong presence in key markets and strengthen its supply chain for global expansion," the statement added.

Tamil Nadu state chief minister M.K. Stalin welcomed the deal, calling it a "great leap in the industrial development" of the state, in a post on social media.

The announcement comes as VinFast named Pham Nhat Vuong, chairman of parent company Vingroup, as its new CEO on Saturday.

Vuong will "directly oversee the operations of VinFast, including global production, sales, and marketing", the statement said.

Vuong, Vietnam's richest man, replaces Le Thi Thu Thuy, who has held the post since 2021 and now becomes the chairwoman of the board of directors.

His net worth is around $4.6 billion, according to Forbes, and in April last year, he provided VinFast with a $1 billion grant.

Three key trends shaping consumer industry’s journey towards digital maturity

Deloitte's latest report reveals three key trends that encapsulate the forces shaping the consumer industry’s journey towards digital maturity.
 
On January 3, Deloitte released its report on the consumer industry’s journey towards digital maturity. The report seeks to explore the evolution of data analytics and digital commerce strategies among consumer companies in three of Southeast Asia’s largest digital economies, namely Indonesia, Thailand, and Vietnam.

Investments in data analytics have resulted in cost savings and revenue growth, with the majority of survey respondents expecting their organisation’s spending to increase. A third of them reported having experienced a 10-30 per cent saving in their operational costs, as well as an equivalent increase in revenue growth.

This proven value creation potential of data analytics could be one contributory factor to the optimistic outlook on future spending. Nearly two-thirds of survey respondents expect their organisation’s spending on data analytics tools to increase over the next three years, of which 60 per cent expect to see an increase of 10-20 per cent, and another 20 per cent envisage a rise of 20-50 per cent.

Digital marketing capabilities are perceived to be the principal advantage of utilising digital commerce channels. Nearly three-quarters of respondents considered the ability to obtain more effective digital marketing capabilities as the main advantage of digital commerce channels, followed by operational cost reductions (60 per cent) and better customer service (50 per cent).

However, their efforts to utilise digital commerce channels are hindered by several pain points – in particular, those relating to channel conflicts, fears of cannibalisation, and gaps in IT support capabilities.

The report unveils three major trends shaping the consumer industry’s journey towards digital maturity.

The first is building a digital enterprise. By embedding data analytics in their digital commerce strategies, consumer companies across Southeast Asia are looking to capitalise on opportunities to better meet customer expectations and improve business performance. Achieving this, however, will require a doubling down on commercial analytics tools, such as dynamic pricing and digital marketing analytics.

The second is embracing a digital culture. To truly achieve digital maturity, companies will need to focus on making intentional changes to their organisational culture. This, in turn, necessitates the development of a digital mindset, as well as a clear leadership direction.

The last involves adopting a seamless omnichannel approach. Post-pandemic, there has been a noticeable resurfacing of the consumer preference for traditional sales channels. For consumer companies, this underscores the importance of developing and adopting an omnichannel approach – one that seamlessly integrates customer experiences across both online and offline stores.

LS Eco Energy diversifies its rare earth supply to Vietnam

On January 10, South Korea's LS Eco Energy announced that it has signed a rare earth oxide purchase agreement with Vietnamese mining company Hung Thinh Minerals.
 
Under the agreement, LS Eco Energy will supply neodymium, dysprosium, and other rare earth oxides refined by the Hung Thinh Group to domestic and international permanent magnet manufacturers. These magnets are used in the production of essential components, such as motors.

The company will bolster its supply from 200 tonnes in 2024 to more than 500 tonnes annually starting in 2025. Currently, the market price of neodymium is around KRW100 million ($76,000) per tonne.

The tie-up will help LS Eco Energy maintain the stability of its rare earth supply chain by diversifying import resources and reducing dependence on China.

This deal marks the South Korean firm's first large-scale rare earth supply chain outside of China, the world's top processor of rare earths. However, sourcing rare earth from China is becoming tough due to its restrictions on the export of some rare earth technologies.

In terms of reserves, Vietnam ranked second in the world behind China in 2022, and is predicted to provide a steady supply of rare earth in the future. Leveraging a local network spanning over three decades in Vietnam, LS Eco Energy intends to become the market leader in the country's rare earth industry.

"We will expand our supply through additional contracts with other mining companies, and for this purpose, we plan to secure rare earth oxide separation and refining technology," said Lee Sang-ho, CEO of LS Eco Energy.

Rare earths are groups of elements that are crucial to the world's shift to cleaner energy sources, since they are used in batteries and the production of electronics. Vietnam plans to step up its technologies for mining and processing to achieve a total output of more than 2 million tonnes per year.

Vietnam's FDI story continues to blossom

Vietnam's appeal to foreign investors continued to improve last year, as did the quality of the foreign direct investment (FDI) the country attracted, according to a VinaCapital report that was released on January 9.
 
The report pointed out that there are some key factors contributing to Vietnam's appeal to overseas investors.

Firstly, wages are lower than those in China, but the quality of the workforce is comparable, according to surveys by the Japan External Trade Organization.

Vietnam's geographic proximity to Asia's high-tech industry supply chains is another major benefit, as is the nation's position among the friendshoring cohort of countries that are at low risk of having tariffs imposed on their exports to the US.

Last year, Vietnam's FDI story kept improving. The United States and Vietnam raised their diplomatic relationship to a Comprehensive Strategic Partnership, further cementing Vietnam's position in the US' friendshoring orbit.

Furthermore, Xi Jinping came to the country three months after Joe Biden, making Vietnam the only nation in Asia Xi visited last year, and the only one to host both Biden and Xi.

Michael Kokalari, chief economist of VinaCapital said, "This illustrates Vietnam's unique position in the world's evolving geopolitical landscape, which benefits investors because multinational companies that set up a factory in Vietnam need not worry about being able to sell their products in the US market nor their ability to access production inputs from China since Vietnam is being actively courted by both countries."

The International Monetary Fund, Atlantic Council, and others have highlighted that geopolitics is becoming an increasingly important factor in how companies decide which countries to invest in.

Apple's announcement that it will move some of its research and development activities to Vietnam for the first time follows its 2022 decision to start making the Apple Watch in Vietnam, which is a particularly complicated product to manufacture. The transition from assembling products to designing them is a further step up in the complexity of the activities the company conducts in Vietnam.

The single most powerful growth driver for a country like Vietnam is an increase in the complexity of the products and services it can produce, according to research from Harvard.

VinaCapital's economists believe Apple's latest move is a step – albeit a modest one – towards the development of a semiconductor industry in Vietnam, which is currently the subject of considerable discussion among executives from leading US and Taiwanese firms such as Nvidia.

The main caveat to all the positive points above is that Vietnam needs to accelerate infrastructure development to maximise high-quality FDI inflows. Its transportation and logistics infrastructure urgently needs to be upgraded, and foreign-led companies have concerns about the nation's ability to reliably supply electricity to industrial users – following last summer's power outages in the North.

Global minimum tax is not seen as a risk to Vietnam's FDI inflows. The primary reason is that tax incentives are not the main motivation for multinational companies to invest in one developing country versus another, according to research by the World Bank. These corporations consider a wide range of factors such as wages, the quality of the workforce, the quality of infrastructure, and the ease of doing business when deciding where to invest.

More actions in need for EU bonanzas

The European investment picture in Vietnam is still some way off reaching its potential, but trends indicate forward motion moving through this year and beyond.

The European Chamber of Commerce in Vietnam (EuroCham) will launch its annual whitebook on January 16, providing a comprehensive set of recommendations under the theme of boosting investment in Vietnam towards a green and sustainable economy.

While having strong attention in Vietnam, European investment in Vietnam yet to meet expectations. According to statistics from the Ministry of Planning and Investment, about $2 billion was the total investment of EU member countries in Vietnam in 2023, compared to more than $2.45 billion in 2022.

Administrative and bureaucratic inefficiencies persist as the primary obstacles, despite various pieces of legislation being put into effect over the past five years on improving business environment reform and enhancing competitiveness.

Nevertheless, major ventures continue to be realised or put into motion in Vietnam, led by European groups.

John Cockerill from Belgium is finalising procedures to invest in a high-tech project for the energy industry in the Saigon High-tech Park (SHTP) in Ho Chi Minh City. The company has strengths in manufacturing machinery and industrial solutions in energy, environment, hydrogen, and industrial services.

High-tech and green investment have been among the investment trends among European companies in Vietnam in recent years. In November, BE Semiconductor Industries from the Netherlands was licensed to inject nearly $5 million in the first phase of manufacturing semiconductor equipment components at the SHTP.

In general, the global economic pace has been slow since 2019 due to the pandemic and geopolitical uncertainty. Diversification of supply chains has been a priority for the West and Vietnam is a destination that offers many advantages in the region.

Key sectors for investments continue to be renewable energy, seaports, semiconductors, vehicles, electronics, footwear, textiles, coffee, pharmaceuticals, and food processing.

According to EuroCham, which represents the voice of more than 1,000 businesses, Vietnam’s growing middle class has led to a significant increase in consumer spending. It can expect this trend to continue for decades to come.

European investors are making the most of this trend by investing in food and beverages, retail, fashion, and services, for example. With Vietnam’s skilled workforce and competitive production costs, European investors are also attracted to high-tech manufacturing sectors such as electronics, precision engineering, and advanced materials.

This interest continues to be shown in the Business Confidence Index (BCI) for Q4 of 2023, released early this week. A notable number of businesses express positive sentiment about their performance (increasing from 24 to 32 per cent), and anticipate maintaining this elevated level into the first quarter of 2024 (29 per cent).

The BCI states that while Vietnam’s macroeconomy may not have maintained the robust performance observed in 2022, the country is still seen as an attractive investment destination, with more than 60 per cent of businesses considering it within their top 10 destinations. Additionally, a larger number of businesses anticipated a more substantial increase in their company’s foreign direct investment in Vietnam compared to last year.

Le Net, lawyer at LNT & Partners, admitted that several factors can affect the realisation of expected investment outcomes.

“The most important factor is unpredictable and unstable regulatory issues. The second factor is the environment. Vietnam is notorious for the polluted environment, albeit being a beautiful country, and traffic jams, caused partly by mindsets that can impact investor confidence,” Net said.

“To enhance the attractiveness of the investment environment and encourage more EU investments, Vietnam could consider regulatory reforms, infrastructure development, transparency in rule of law, and more investor protections.”

According to Vaibhav Saxena, lawyer at VILAF, the EU and Vietnam are yet to realise their full potential for bilateral investment and trade.

“This year is expected to revive the economic situation worldwide and we foresee sizable investments flowing from EU member countries into Vietnam,” Saxena said.

Vietnam has already provided a 2 per cent VAT cut until June and is further considering supportive policies to cope up with the global minimum tax regime, he added.

“There seems to be two key areas for consideration: easing admin procedures to support doing business, and encouraging international financing standards with a domestic banking industry blend,” Saxena added.

IFC proposes $60 million financing for Vietnam's KES Group

The International Finance Corporation (IFC) is proposing to invest up to $60 million in Vietnamese industrial wood panel producer KES Group.

KES Group Corporation (KES) is the largest Vietnamese producer of engineered wood panels, focusing on Medium Density Fiberboard (MDF) products and the leading provider of innovative solutions for the construction and interior industry.

The company currently has an annual MDF production capacity of 500,000 cubic metres, an annual flooring production capacity of 6.5 million sq.m and an annual melamine paper printing and dipping production capacity of 40 million sq.m.

According to IFC's disclosure on January 5, the proposed IFC financing will support the company’s vertical integration strategy, provide funding for a new warehouse and maintenance capex and working capital for MDF production. The project is expected to cost $92 million, of which will be funded by $60 million IFC loan; and $32 million from the company’s internal cash generation.

In addition, IFC is exploring an advisory opportunity to support the company on obtaining green building certification for its new warehouse and distribution showrooms.

This financing will help KES realise its vision to become one of the top five Southeast Asian companies in the field of industrial wood by 2026. At the heart of this vision is sustainability. Accordingly, KES constantly seeks and pushes the envelope on its journey to create a solution that balances the finitude of resources and the infinity of human needs sustainably.

The company has chosen the more difficult path of choosing 100 per cent natural wood fibre materials to help improve the quality of life without harming the environment.

As of present, KES owns five wood factories with an area of nearly 1,200,000 square metre and modern machinery systems. In addition, the company also boasts a closed wood production chain from input materials to finished products, ensuring good control of product quality as well as environmental and health protection.

Apple suppliers spend billions diversifying from China

A recent research report from TD Cowen cited by newswire ​​Appleinsider has revealed that Apple suppliers are diversifying their manufacturing bases from China as a result of production delays, the country's COVID-19 measures, problems with energy supply, and the ongoing trade tensions with the United States.
 
These concerns have led to Apple suffering a considerable loss of earnings as a direct result of China, further influencing this shift to other countries. "Over the last four years since the start of the pandemic, we estimate Apple's revenues have been impacted by over $30 billion," according to TD Cowen's report.

As a result, Apple and its 188 key suppliers are making investments to speed up the relocation plan. However, the plan also comes with a cost. It is estimated that Apple's suppliers have spent around $16 billion on diversifying production assets away from China to India, Mexico, the US, and Vietnam since 2018.

"While supplier relocation entails higher costs near-term, we believe there will be long-term cost benefits once the ex-China capacity is fully at scale," said the report. "We envisage a multi-year process before Apple sees full operating margin benefits as partners leverage the local labour pool."

TD Cowen estimates that it will take up to 18 months for a company to establish a new manufacturing plant, and potentially even longer to organise the whole supply chain. "If even one critical component cannot be produced away from the region that the supply chain is relocating from, then the move will only be partial," according to the analysis.

TD Cowen has analysed over 1,000 financial filings, using numbers from key firms such as Foxconn, Pegatron, Luxshare Precision, Wistron, and Compal. The majority of iPhone production remains centred in China, but recent investments in India are only just beginning to create a new manufacturing hub from which the company could export large volumes to the US. India is quickly becoming a major consumer of the iPhone, and increased localised production would reduce distribution logistics costs and improve affordability as import tariffs do not apply.

By contrast, Mac and iPad are making good headway with new manufacturing capacities in Southeast Asia. Supply chain field work suggests Vietnam has evolved into a major production hub for computers recently, and small volumes of MacBooks, iPads, and the Apple Watch are already being manufactured there.

TW Cowen estimates that capacity in Vietnam can support about 40 per cent of annual US Mac/iPad demand. While this is good progress, additional capacity is still required to meet US consumption needs.

Source: VNA/SGT/VNS/VOV/Dtinews/SGGP/VGP/Hanoitimes