BUSINESS IN BRIEF 14/6
Wood furniture firms advised to optimise domestic materials
The world’s wooden interior décor market is predicted to grow 3.5 percent in 2018 and continue expanding, bringing chances for Vietnamese businesses to raise exports of the products.
If Vietnamese businesses optimise the material sources they have and make the best use of trade promotion activities, their export earnings can surpass 8 billion USD.
According to Huynh Van Hanh, Vice President of the Handicraft and Wood Industry Association of Ho Chi Minh City, in the past 15 years, the wood industry has maintained the growth rate of 8-15 percent a year despite world economic fluctuation.
The biggest issue of the wood processing enterprises in Vietnam is they are focusing on a market section with low added value, mostly concentrating on outsourcing for foreign clients.
To further develop the domestic wood sector, the businesses should pay attention to a higher target of selling abroad the whole space of high-end interior décor instead of doing outwork and selling separate products.
Meanwhile, the Vietnam Timber and Forest Product Association (VIFORES) asserted that it is necessary to make full use of domestic material sources to create a breakthrough for the sector.
Statistics showed that Vietnam has more than 3 million hectares of acacia with an output of 150 cubic metres of wood in one hectare per year. If exploiting only a half of the total area, Vietnam will have 22.5 million cubic metres of wood a year, meeting the material demand of the whole sector for both domestic and foreign markets.
Especially, acacia wood is much cheaper than imported wood, which will help facilitate a closed production chain for made-in-Vietnam wooden products.
Along with optimizing material sources, trade promotion activities should also be strengthened to help domestic increase sales.
Hanh said that currently, trade fairs and exhibitions are considered the most economic and effective method of promotion. Therefore, in 2018, HAWA has informed its members of a number of events abroad and support them in joining the events to seek partners and broaden markets.
However, Hanh said that exhibitions in the country have drawn an increasing number of enterprises, especially small ones, as they would know the number of deals they secure immediately.
He noted that the Vietnam International Furniture and Home Accessories Fair (VIFA Expo) 2018 attracted 4,528 firms, while the 2017 event gathered only 2,000. Transactions at the event also increased.
Besides traditional trade promotion, digital marketing is popular in many countries such as the US, Germany, Italy and China. However, it is hard to find Vietnamese wooden décor firms on the Internet as the Vietnamese firms have yet to efficiently exploit this method.
Three consultants commit to assisting SMEs
Corporate consultants the Verco JSC, the PDCA Education and Consultant JSC, and the Onnet JSC signed a memorandum of understanding (MoU) on June 11 to cooperate together to support small and medium-sized enterprises (SMEs) in tackling the difficulties they currently face.
Mr. Nguyen Kim Hung, General Director of Verco, said that some SMEs are unaware of the importance of financial management and lack critical thinking and vision in planning their financial operations. Financial control tends to be weak and passive.
Understanding the difficulties and limitations of SMEs and with a mission of “Raising the level of Vietnamese enterprises”, Verco offers restructuring services, fund management and capital solutions, corporate valuations, merger and acquisition (M&A) consulting, and corporate training.
The three will provide SME business owners with a five-in-one solution that will assist them during Industry 4.0: capital - administration - automation - marketing - business. The cooperation between Verco, PDCA and Onnet will bring to the SME community a solution package that helps them improve their business operations and develop automation.
They will also provide strategic capital and financial solutions, help businesses avoid any loss of capital structure, and develop financial strategies for development over the next five to ten years.
Marketing and sales solutions would help SMEs compete and gain market share, so represent a key service.
Representatives from the three companies confirmed that the package will resolve all difficulties facing SMEs and improve their performance in corporate governance and development. Through the SME support program, the three leaders in corporate consultancy will act in line with the government to achieve the target that, by 2020, Vietnam will have 1 million active enterprises.
Livestock production projected to be hit by several FTAs
Vietnam’s livestock production industry is expected to suffer from several free trade agreements (FTAs), in which import tariffs for husbandry products are to be truncated after the agreements take effect.
At present, NTTS Trading JSC is busy making preparations for the expansion of its warehouse system, which is expected to commence operations by the end of this year.
The system, covering more than 6,000 square metres in the northern province of Hung Yen, will be used by the firm to preserve meat and meat-related products imported from Australia and New Zealand.
“We are importing meat and meat-related products from India and the US, and will now expand import markets to Canada, Australia and New Zealand,” said the firm’s vice director Nguyen Thi Nguyet. “Various types of meat products from these three new markets will enjoy a 0% import tax rate beginning from 2019, under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).”
For example, Vietnam will have to cut import tariffs for a number of key Canadian husbandry exports, such as beef (tariffs of up to 31% on fresh, chilled and frozen beef will be eliminated within two years, and tariffs of up to 34% on all other beef products will be eliminated within seven years), and pork (tariffs of up to 31% on fresh, chilled, frozen and prepared pork products will be eliminated within nine years).
From 2018, the domestic husbandry sector will face bigger difficulties due to import tariff slashes under several free trade agreements (FTAs), including the CPTPP signed in early this March, the ASEAN Trade in Goods Agreement (ATIGA) and the ASEAN-China Free Trade Agreement (ACFTA).
For example, upon CPTPP’s entry into force, expected to begin in early 2019, import tariffs of many livestock products, such as beef, pork, sheep, goat, poultry, many types of frozen aquatic products, dairy products, animal feed, and poultry eggs, will begin to be gradually reduced to 0% within three or five years.
Products from nations that have strong advantages in husbandry, such as Canada, Japan and Australia, will come to Vietnam in great numbers. This will have negative impacts on the domestic livestock production, according to the Ministry of Agriculture and Rural Development’s Livestock Production Department.
Furthermore, after the CPTPP becomes valid, all products with registered national brand names will also be allowed to be exported to all CPTPP countries without any quotas, providing they meet the importing nation’s conditions. Even, not only raw products, but also finished products from CPTPP markets will be able to be imported into Vietnam.
According to the Ministry of Industry and Trade, under its commitments this year, Vietnam will have to remove the remaining 669 tariff lines under ATIGA, and 588 tariff lines under ACFTA. In which the average import tariffs for livestock-related products will almost be reduced to 0%.
Under the ASEAN Economic Community (AEC), ACFTA, and CPTPP, enterprises and investors may concentrate production lines in a chosen partner country, and then export finished products tariff-free to other member countries, as well as to ASEAN’s free-trade partners in the region (Australia, China, India, Japan, New Zealand, and South Korea).
According to a recent survey by the Vietnam Institute for Economic and Policy Research on the impacts of the AEC on Vietnam’s livestock sector, local livestock production would drop because of harsh competition from AEC partners.
The survey revealed that within the AEC, tariff cuts by Vietnam in the husbandry sector would negatively affect the total production value of the sector mainly because of higher competition from imported goods.
Besides, animal, meat and dairy products are the most affected by tariff cuts, among the livestock sub-sectors. Once the tariffs are removed by the AEC, substitutions for cheaper imports of meat products reduces the demand for domestically produced meat products, and this effect is projected to result in a US$107 million loss for the livestock sector.
Under the impacts of AEC tax slashes, livestock exports, mainly in swine meat and poultry, from Vietnam to other ASEAN countries are forecast to decline. Reductions of 82% to Thailand, 7% to the Philippines, and 3% to Indonesia are expected.
At present, Vietnam is importing meat and meat-related products from many foreign markets, including Australia, Canada, China, India, New Zealand, and the US. Vietnam is also Australia’s second largest importer of live cattle and wheat.
In 2017, Vietnam-based enterprises spent nearly US$500 million importing assorted types of meat, including over 6,500 tonnes of pork worth nearly US$12 million, and over 81,000 tonnes of poultry meat worth nearly US$76 million.
Moreover, last year, the enterprises also imported more than 262,300 live cattle, and nearly 420,000 tonnes of beef and buffalo meat, worth a total of US$410 million.
Women face multiple career challenges
Women are coping with a host of challenges in the workplace and with career advancement at companies in Vietnam, according to the results of a survey released by Navigos Group on June 11.
The lack of fair capability assessments and promotion opportunities for women compared with men, the lack of support and understanding from their families and common perceptions of women’s role in the household were the three key barriers to female leadership development, said the respondents of the survey.
These barriers are the main sources of worry and stress faced by female leaders, according to the survey available from Navigos Group Vietnam’s database, managed by VietnamWorks and Navigos Search. The survey attracted almost 1,000 respondents, with the majority working at middle and senior management levels.
Respondents holding management positions were greatly interested in developing female leaders at their companies. However, the survey indicated that 39% of respondents reported their companies did not have plans for a female leadership, and 37% shared that development plans for female employees were not included in the top strategies of their companies.
Respondents pointed out that the major challenges to female leadership development included a lack of empowerment, mentors and advisors and training designed especially for female leaders. They said women also had to grapple with strong pressure to maintain a work-life balance.
However, these challenges should not put off women’s strong desire to becomecompetent leaders. Passion for the job, the desire to prove themselves and human development are among the major factors expected to motivate women to achieve their leadership goals.
Respondents underscored the importance of gender diversity in enterprise development. Half of the respondents noted that gender diversity would contribute to more effective resolutions to problems, 41% assumed it would enable companies to better serve diverse groups of customers and 26% believed it would better help with talent recruitment and retention.
Respondents acknowledged that female employees had been given more opportunities to hold management positions. More than 40% of respondents said the number of middle and senior managers at their companies accounted for at least 30% of female employees.
Nguyen Phuong Mai, managing director of Navigos Search, suggested companies need to identify the importance of gender diversity in their development strategies to make the most of the strength of their staffers, especially managers.
Despite difficulties related to the deployment of gender diversity plans, Mai suggested enterprises should promptly adopt policies to assist their female employees with health, work-life balance and training issues as well as to create equal development opportunities for male and female employees.
AEON seeks Vietnamese suppliers
Leading Japanese retailer AEON is currently looking for Vietnamese goods suppliers and manufacturers for its retail chains, which include four commercial centers, AEON Mall, 53 supermarkets and 110 convenience stores across the country, company officials have said.
The retailer plans to expand its business scale in the years to come. Further, AEON TOPVALU, one of the company’s brands, is currently in search of local manufacturers to produce TOPVALU products for local consumption as well as for export to its overseas retail outlets.
AEON Vietnam on June 11 marked its fifth anniversary of operation in the country by collaborating with the AEON Association to host a meeting for AEON suppliers, attracting over 100 local enterprises and 30 foreign firms that have been in partnership with AEON Vietnam, AEON TOPVALU and AEON Retail over the years. This was the first time the association had hosted such an event for its potential and strategic partners in the country.
As shared by one AEON representative, the corporation is placing emphasis on TOPVALU products, which boast high quality and reasonable prices, to gain competitive advantages, so qualified local providers are required.
At the event, distributors at home and abroad were briefed on AEON’s retail orientation and strategies in Vietnam, as well as strategies for developing new products that serve local consumption and exports to promote cooperation with local distributors with the aim of achieving sustainable development together with the company’s strategic partners and making a contribution that boosts economic growth and the export turnover of Vietnamese commodities in both the Japanese market and other Asian nations, noted the head of AEON Vietnam.
Later, representatives of AEON TOPVALU Vietnam and Japan shared information on policies and requirements for developing products that serve local consumption and foreign shipments, especially in the three main sectors of foodstuff, apparel/fashion and household appliances.
AEON TOPVALU Vietnam operates in collaboration with 15 Vietnamese suppliers and has launched 15 product lines in AEON supermarkets. It aims to sell 100 diverse products through local distributors this year.
ACV seeks funding for local airports from Canadian bank
The Airports Corporation of Vietnam (ACV) on June 8 signed a memorandum of understanding (MoU) with the National Bank of Canada on technical support required to enhance the management of, investment in and use of airports in Vietnam.
The signing ceremony took place at a Vietnam-Canada business roundtable discussion in Canada attended by Prime Minister Nguyen Xuan Phuc.
According to a source from the Ministry of Transport, apart from signing the MoU, the head of ACV introduced the Canadian partners to projects involving the upgrade of existing airports and building of new ones across the country, including Long Thanh International Airport. ACV plans to seek overseas investment to build this airport, after selecting a potential research consultant at the beginning of this month.
The Long Thanh airport will be financially backed by two sources: The State fund will be used for site clearance and building State management head offices at the airport, while the private capital will be used for developing sites that will provide commercial services such as aircraft maintenance, a food-processing area and fuel-pumping stations.
Regarding the private fund, ACV will balance the financial resource, ensuring that 50% of the total amount is used to execute phase one in terms of building runways, an airport apron, passenger terminals, cargo terminals and parking lots. ACV will mobilize the remaining capital by issuing shares or taking out banks loans.
ACV recently announced its investment plan for key airport projects for the 2018-2021 period, with a vision toward 2025, using total capital exceeding VND116 trillion to increase the capacities of Noi Bai International Airport, Tan Son Nhat International Airport and Long Thanh International Airport.
Land speculators in Bac Van Phong take flight
Speculators on land in Khanh Hoa Province’s Van Ninh District are now looking for ways to withdraw their capital, having cashed in on the land fever in the area, Phap Luat newspaper reports.
Land transactions in Van Ninh have dropped considerably following earlier instructions by local authorities to stop accepting applications for land handover or a switch in land use rights until the draft law on Special Administrative and Economic Units is passed by the National Assembly (NA). The transactions have almost come to a dead halt after the NA decided to adjourn a vote on the draft law to the next sitting of the law-making body.
Van Ninh is scheduled to convert to a special administrative and economic unit named Bac Van Phong.
Most real estate transaction offices in the area saw few clients on June 9 and 10, and some have even shut their doors. Reporters of Phap Luat saw no staff in charge on entering a few agencies, or they received no reply when calling these firms.
Further, crowds have dwindled at neighboring coffee shops, where people once gathered to discuss land prices. One coffee shop near real estate agency VPL, where transactions amounting to tens of billions of dong once took place, now sees only a few local people stopping by for drinks. The owner indicated that many people were at their wits’ end, wondering when they would get back their invested capital, as they had spent billions on land speculation.
According to Nguyen Cong Bang, chairman of Van Gia Town’s People’s Committee in the district, most of the land transactions came to a halt following instructions from the provincial leader, with the exception of wholly residential lots. However, many property experts pointed out that some land speculators are carrying out underground transactions to quickly regain their capital, including performing illegal land transfers without having the agreement notarized or land use rights authorized.
Suspending the vote on the draft land law only adversely affects the land speculators as they have no long-term plans for their monetary flow, noted Tran Dinh Quy, chairman of Khanh Hoa Province's Association of Real Estate Brokers. Meanwhile, large professional investors have more time to perform better research and analyze the land market, Quy added.
Around 9,500 tons of litchis exported overseas
The northern province of Hai Duong has exported 9,500 tons of litchis, accounting for 34% of the total output, according to the province’s Department of Industry and Trade.
As many as 28,000 tons of litchis were consumed, reaching nearly 47% of the expected quantity.
China has been the largest importer of Viet Nam’s litchis with 9,340 tons. It was followed by the Republic of Korea 120 tons and Australia, the United Kingdom and France with 40 tons.
A total number of 18,500 tons of litchis were consumed domestically, especially in large cities such as Ha Noi, Ho Chi Minh City and Hai Phong City, accounting for 66% of the output.
The province’s Department of Agriculture and Rural Department forecasted the total quantity of litchis to 55,000-60,000 tons this year.
Currently, 131.68 ha of litchis were granted with area code by the U.S. Plant Protection and Quarantine to export to the U.S., the EU and Australia.
New decree clarifies PPP projects
The Government will abolish administrative procedures for issuing investment registration certificates for Public-Private-Partnership (PPP) projects, according to the government’s Decree 63.
This is one of the key contents of the newly-issued decree on investment under the PPP model, which is set to replace a previous one. It will come into effect on June 19 this year and is expected to simplify administrative procedures and save time for investors.
Deputy Minister of Planning and Investment (MPI) Vu Dai Thang said that the PPP investment model was not new in Vietnam. It had been developed with the participation of the private sector and foreign investors at different levels. There were infrastructure projects, notably those in the transport and energy sectors, that had been deployed.
With some important amendments, Thang said the new decree introduced regulations and made procedures for PPP projects clearer and more transparent. Meanwhile, the authority to decide PPP projects was also detailed.
“This increases transparency and publicity in PPP investment projects. The abolition of the procedures for issuing investment registration certificates for PPPs will contribute to simplifying administrative procedures for investors,” said Thang.
With the new points introduced in the decree, Thang said he hoped that there would be practical innovations in the implementation of the PPP model for ministries, departments, provinces, localities and investors in the future.
To overcome the problems arising from this abolition, ensuring that information on the project contract is publicly supporting State management agencies and the communities in supervision, the decree supplemented the regulation on the disclosure of project contract information. The contractors are required to make their bids accessible to the public on the National Procurement Network (NPN).
Tran Viet Dung, Chief of the Office of the MPI’S Procurement Management, said that Decree 63 also contained some other important new points such as strengthening decentralization (more authority given to localities), self-control and self-responsibility at ministries, sectors and localities.
Dung said it was necessary to remove the investors who were weak in financial capacity, increase participation of the State in PPP projects and vice versa, and strengthen participation of investors in public investment projects converted to PPP projects, helping reduce the burden on the State budget.
At the meeting, the participants also discussed and gathered ideas for the orientation for the development of the circular guiding the implementation of the Decree 63.
Prudential commits long-term investment in Vietnam
Prudential Vietnam has got approval from the Ministry of Finance to increase its chartered capital to 4,128 billion VND (around 181.8 million USD).
The move affirmed the company’s commitment to make long-term investment in the Vietnamese market.
Besides strengthening the company’s financial capacity, the additional capital will also enable Prudential Vietnam to further improve its products and services and expanding its reach across the country.
In recent years, Prudential Vietnam has actively expanded its business activities and recorded strong growth. In 2017, it reported revenues of 16,019 billion VND (some 705.7 million USD), an increase of 20 percent year on year.
It paid out 6,261 billion VND (275.8 million USD) in insurance settlements last year.
The company’s total assets were valued at 74,112 billion VND (3.26 billion USD) by the end of 2017, while its total investment into the economy was 66,241 billion VND (2.91 billion USD) in 2017, the highest by a life insurance company in the country.
In line with its long-term business strategies, Prudential Vietnam has acquired 5,188 billion VND (228.5 million USD) and 2,100 billion VND (92.5 million USD) worth of 30-year and 20-year bonds.
Showing appearance in Vietnam in 1995 and officially commencing operations in 1999 with the motto of “Always Listening. Always Understanding”, Prudential Vietnam has successfully been the pioneer of the life insurance sector.
The business system of Prudential Vietnam has stretched nationwide with more than 300 customer care centres and branches located in 63 cities and provinces of Vietnam thanks to the cooperation with seven partner banks.
Prudential Vietnam has achieved multiple awards from domestic and foreign prestigious organisations. Especially, in 2014, it was awarded a second-class Labour Order by the Vietnamese President in recognition for its contributions to the country’s socio-economic development.
Along with business activities, Prudential Vietnam has paid due attention to the social contributions for the community development and sustainable growth purposes.
HCM City, IFC target result-oriented cooperation
Ho Chi Minh City will work closely with the International Finance Corporation (IFC) in translating the memorandum of understanding (MoU) signed by the two sides into projects, said a municipal official.
At a reception for Kyle Kelhofer, IFC Country Manager for Cambodia, Laos and Vietnam, in HCM City on June 12, Vice Chairman of the municipal People’s Committee Tran Vinh Tuyen thanked the institution’s financial support and technical consultations as well as its assistance to Vietnam in mobilising foreign investments, especially from the private sector.
IFC has actively implemented the MoU it inked with HCM City in December 2017, particularly through the project on building a programme assessing credit confidence in the city, and training courses on green cities for municipal officials, Tuyen said.
He urged the corporation to share experience with and provide consultations for the city in mobilising financial resources and investors having adequate experience and technologies in order to help the locality develop in a sustainable and environmentally friendly fashion.
The official called on IFC to assist the city in addressing issues regarding green city building, waste treatment and efficient use of energy resources through consultations and connection with investors.
In reply, Kyle Kelhofer said IFC commits to continuing its assistance to the city in carrying out public-private partnership (PPP) projects, stressing that IFC has enough experienced personnel to help the Vietnamese southern metropolis build green facilities.
IFC hopes that with successes in using the PPP, mobilising capital from financial confidence and building green facilities, HCM City would become an example of development for other major urban areas in Vietnam and Asia.
Vietnam vegetable oil company eyes 4.8 trillion VND in revenue
The Vietnam Vegetable Oil Industry Corporation (Vocarimex) has set a target of 4.8 trillion VND (211.2 million USD) in revenue and 300 billion VND (13.2 million USD) in after-tax profit for 2018, heard the company’s shareholder meeting held on June 12.
The corporation’s revenue is expected to rise 9 percent year on year.
Vocarimex’s representative said that the company will focus on developing whole sale channels and exploring more export markets while enhancing access to organisations using vegetable oil in their production process in an effort to expand its markets.
It will join hands with KIDO Group, an integrated food and beverage consumer company, to complete market development strategies for regions, and study to design rational products, meeting demands of different groups of customers.
By increasing its presence in foreign markets and investing in specialised products appealing to the consumers’ taste, Vocarimex eyes to become Vietnam’s leading exporter of vegetable oil.
Also, attending international trade fair will help the corporation to branch out its brand in target markets, break into potential ones, and set up long-term and sustainable cooperative ties with its partners.
According to the firm’s report in 2017, Vocarimex recorded a revenue of 4.38 trillion VND (192.72 million USD) and 300 billion VND (13.2 million USD) in after-tax profit, surpassing 50 percent of the set plan.
Last year, the company slashed 59 percent of its operation costs as compared to 2016, or 212 billion VND (9.3 million USD).
Apart from paying due attention to investment restructuring in its joint ventures, focusing on whole sale customers and export, the company has given priority to research and development activities.
72 percent of Fintech firms in Vietnam cooperate with banks
“In Vietnam, 72 percent of financial technology (Fintech) firms chose to cooperate with banks in their business and service delivery, instead of entering a direct competition,” according to an official from the State Bank of Vietnam (SBV).
The local banking system has made slow changes and lacked flexibility when it comes to application of new technologies, leading to high banking fees and banking services failing to satisfy customers’ needs, said Le Anh Dung, Director of the SBV’s Payment System Department, at a national workshop on Industry 4.0 and new changes in the finance – banking sector held in Hanoi on June 12.
Meanwhile, Fintech firms are capable of providing innovative, flexible and effective technology-based services that help reduce fees and enhance customer experience, he noted.
Fintech companies, however, still lack experience in finance-banking activities, capital, customers and a system for internal compliance control and risk management. Meanwhile, banks now have all of these factors, he added.
Therefore, cooperation between banks and Fintech firms is viewed as a foundation for improving financial service assess, the official stressed. “Fintech is a fast-growing sector and a dynamic intersection between technologies and financial services that reflects the impact of Industry 4.0 on the banking and finance industry.”
Operating costs of a bank will be cut by 80 percent if Fintech is applied, said Prof. John Wong from the Paris Graduate School of Management, adding that thanks to Fintech, banks can reduce the numbers of transaction offices and unnecessary ATMs; and with only a smartphone, Visa or Master cards will be no longer needed.
Nguyen Dinh Thang, Chairman of the Board of LienVietPostBank, pointed out three major challenges to Vietnamese commercial banks in developing the digital banking system: legal environment, capital, and human resources and risk management.
The slow change of related regulations that does not keep up with the pace of technological growth has hindered the development of high technologies and digital banking, posing great legal risks for banks and Fintech firms, he explained. At the same time, research and development of digital banking requires big investment while technological risks and threats of banking frauds remain, he added.
The SBV acknowledged these challenges and has been continuously investing in upgrading the local financial infrastructure to prevent cyber risks and introduce warnings and new policies on information security, Dung said.
He urged the commercial banks to strengthen system security themselves to avoid card frauds that can negatively affect the industry’s reputation.
The Fintech industry is thriving in Vietnam with the market value expected to increase from 4.4 billion USD in 2017 to 7.8 billion USD by 2020, according to a report by Solidiance, a management consulting firm in the Asia-Pacific.
Amongst three segments of Fintech services, the digital payment leads the way, accounting for 89 percent of the local market share. The personal finance and the corporate finance, meanwhile, are forecast to experience respective Compound Annual Growth Rates (CAGRs) of 31.2 percent and 35.9 percent between 2017 and 2025.
The main factors driving the Fintech development in Vietnam include the Government’s plan to expand the local access to banking services to 70 percent by 2020; the respective increases of 52 percent and 72 percent in the numbers of Internet and smartphone users in urban areas in 2016; and the growth of e-wallet services driven by the small number of bank account holders.
The number of e-wallet users in Vietnam was estimated at 10 million people last year.
In addition, increasing income is leading to the expansion of the middle class and as a result, consumption is on the rise.
The growth of Fintech has been also fueled by the robust development of e-commerce which will see the number of users hitting 42 million by 2021 alongside the improvement of the country’s regulatory framework.
Hao Hao instant noodle rated as top fast moving consumer goods
Hao Hao instant noodle has come first in Vietnam’s Top 10 most chosen fast moving consumer goods (FMCG) brands by sector 2018 for the category of food in the Brand Footprint 2018 ranking by Kantar Worldpanel, a global expert in shoppers’ behaviour.
Kantar Worldpanel, which has over 60 years’ experience, a team of 3,500, and services covering 60 countries directly or through partners, placed Hao Hao in number one spot in Urban 4 cities, making its way into the kitchen of an additional 65,000 households in 2017.
The debut of Hao Hao Handy (cup noodle), a new pack type of Hao Hao, taps into the rising need for convenience and contributes an important part to the brand’s success.
Hao Hao noodle is also ranked fourth in the top 5 best sellers in rural areas.
Introduced 18 years ago by Vina Acecook, Hao Hao has become popular among the community due to its special taste.
The noodle packs are manufactured in accordance with Japanese standards and technology, with the support and supervision of trained Japanese and Vietnamese staff.
According to the Vietnam Investment Review, instant noodle market in Vietnam is considered extremely attractive with a market value of 27 trillion VND (about 1.19 billion USD).
At present, Vina Acecook ranks first in Vietnam in sales, with 43 percent of the market share. It sold nearly 3 billion packages of instant noodles in 2016 for 9 trillion VND (396.1 million USD).
Kien Giang eyes large investment
The Cuu Long (Mekong) Delta province of Kien Giang aims to mobilise VND215 trillion (US$ 9.5 billion) for socio-economic development by 2020 and VND 1,000 trillion (US$ 45 billion) by 2030.
The adjusted target was recently approved by the PM as part of a master plan to 2020 and towards 2030 for the province.
Pham Vu Hong, chairman of the province’s People’s Committee, said that Kien Giang targeted becoming a well-developed locality and a transportation and tourism service destination in the Mekong Delta, and a development hub of the southern key economic region.
As part of the target, Kien Giang will adjust and improve the quality of its planning activities and its master plans and plans for specific sectors such as tourism, agriculture, aquaculture and industry.
It will also create favourable conditions for enterprises to upgrade technologies and access markets at home and abroad, and credits, as well as offer training to labourers.
The province aims for an average Gross Regional Domestic Product (GRDP) of 7.5-8 per cent per year by 2020 and 8-9 per cent per year in the 2020-30 period, an average income per capita of around $3,000 and a poverty rate of below 3 per cent by 2020, according to Hong.
With the population of more than 1.8 million, the authorities will try to create jobs for 38,000 residents per year as well as achieve a 67 per cent training rate from now to 2020.
Tourism will become a key economic sector with investment in construction of key tourism areas like Ha Tien, Rach Gia and U Minh Thuong National Park.
Also, Phu Quoc Island will become a center of modern, high quality tourism services, and international trade in the region.
The province is striving to hit 10 million tourists by 2020.
It is striving to improve quality of transport services, while promoting its advantageous geographical location and natural conditions of the province
This will help improve transport system of waterways and the marine economy.
To meet this target, the province has drawn up measures to improve its investment environment, which includes establishing one-stop shop administrative procedures for granting investment licences and improving connectivity with other provinces and cities.
The province also plans to have modern infrastructure in both rural and urban areas; invest in infrastructure of industrial zones and clusters to attract investment; upgrade transportation systems; modernise communication systems; improve electrrical power and safe water supply; and address environmental pollution.
It will also invest in key products and sectors, particularly agriculture and tourism, to create long-term advantages for the province.
In addition, the province will hasten urbanisation, and develop central urban and outlying areas, as well as rural residential areas.
The plan also calls for a focus on high quality human resources and on fostering scientific and technological potential to meet international integration needs.
Vocational training institutions will also be improved to meet the demand of the province and other localities.
Last year, Kien Giang attracted 690 domestic projects worth VND451.5 trillion. Of this, 321 projects are in operation, accounting for 31 per cent of the registered capital.
The province has attracted 41 FDI projects from 19 countries and territories with a total registered capital of $1.44 billion, of which 37 per cent has been disbursed.
VCSC downgrade local pharmacy firm
The Viet Dragon Securities Company (VCSC) has forecast a bleak outlook on sluggish sales and rising input costs for Hậu Giang Pharmaceutical Joint Stock Company (DHG).
The company has downgraded the potential growth of DHG to 'Underperform', VCSC said in its report.
VCSC predicts that the compound annual growth rate (CAGR) of DHG’s after-tax profit in the 2017-2020 period would stand at only 3 per cent per year.
In the first quarter of 2018, DHG’s in-house sales slid 4 per cent year-on-year, VCSC said, adding that amid stiff competition in the over-the-counter (OTC) channel, DHG still lacks distinctiveness in its products.
OTC or over-the-counter means distributing drugs through drugstores.
“We have not seen enough changes in DHG to overcome the headwinds in the OTC channel.”
DHG’s past success was premised on its market-leading distribution network. However, its sales of in-house products have stalled over the last four years as DHG’s distribution coverage has matured, VCSC said.
Its OTC channel, which accounts for 90 per cent of DHG’s sales, is losing its share to hospitals due to the wide coverage of public insurance and domestic pharmacy players, who are intensifying their efforts in the OTC channel, as they struggle to compete against cheaper imported drugs in the hospital bidding process.
“In the coming years, we will see DHG’s in-house sales grow in a low- to mid-single-digit range, bolstered by sales force expansion to provide better services to the pharmacies,” the company said in its report.
Besides this, VCSC said DHG’s in-house products’ gross profit margin (GPM) is poised to contract in 2018, owing to a sharp increase in active pharmaceutical ingredient (API) prices.
The GPM narrowed by 3.1 percentage points year-on-year to 53 per cent in Q1 of 2018. Given DHG’s inventory period of some 3.5 months, we believe the effect of higher API prices will be even more pronounced from Q2 of 2018, given that the rally in Chinese API prices only started in November 2017.
“As such, we project the in-house GPM will reach 51.8 per cent in full-year 2018, down 3.5 percentage points compared to 2017.
In addition to this, DHG has announced its plan to raise its foreign ownership ratio cap from 49 per cent to 100 per cent, which means that the firm will have to stop its pharmaceutical provision to two foreign partners of MSD and Mega.
Another factor negatively affecting DHG’s profit is taxation.
In Q4 of 2017, the tax authority issued a decision on the calculation of DHG’s tax rate, which resulted in a significant upward adjustment in the company’s effective tax rate, VCSC said.
“DHG’s reported tax rate in Q1 of 2018 was not adjusted in accordance with this tax decision, but this will be rectified in H1 2018 financial statements,” VCSC said.
DHG planned to earn a net revenue of more than VND4 trillion (US$175 million), equivalent to the target set for 2017. However, its pre-tax profit is expected to increase by 6.7 per cent to reach VND768 billion.
The revenue from self-manufactured products will account for VND3.5 trillion and grow by more than 13 per cent compared to 2017.