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BUSINESS IN
BRIEF 14/12
ICAEW:
Blockchain could replace banks and lawyers
Smart
contracts that use blockchains could lead to widespread disruption of
financial systems, according to the accountancy and finance body. With the
ability to directly interact, the technology could save firms the cost and
effort of doing business with a ledger owner and increase transparency and
security against financial crime.
“Blockchains
mean organizations can work together without an intermediary but no longer
need to have institutional trust in one another. This is potentially a
seismic shift in how we do business,” Mr. David Lyford-Smith, ICAEW’s IT
Faculty Technical Manager, said. “It will have knock-on effects on everything
from record keeping to supply chain management and accounting and audit,
while could potentially remove middleman institutions, gain transactional
certainty, reduce costs and bias, and open up access to more participants.”
Instead
of having one-single owner, blockchain records propagate identical copies to
all their users. Any participant in the ledger can trace all previous
transactions, allowing increased transparency and making the blockchain
“self-auditing” and transactions permanent.
“At
the moment, the trustworthiness of a ledger comes from the central
controller. By distributing records among users, the trust is instead in the
record-keeping system itself, which means a greater degree of reliability,”
Mr. Lyford-Smith went on. Blockchain has the potential to be used in a number
of areas, such as smart contracts, inter-bank reconciliation and the transfer
of assets, such as land registry. However, it is not just of use to
businesses.
“There
are potential applications beyond commerce. This is especially appealing in
cases where transparency and accountability are key. For example, if aid
spending were provided in a blockchain-based asset, the end receiver of the
funding is easily identified. This would help deliver much greater confidence
in the process.”
Still,
there are some constraints and challenges that need to be overcome before
blockchains can be used to their full potential. These are both logistic -
related to aspects like computing power and when encryption might be
necessary - and legal, as new legal frameworks would need to be created, for
example to enforce contracts.
“Ultimately,
blockchain is likely to be a foundational technology,” Mr. Lyford-Smith said.
“It will take years - perhaps even decades - for it to be developed, standardized,
and bedded into the architecture of the internet and the financial system. It
will need to be sped up, made more efficient, and have its operating costs
reduced. However, it is highly likely that it will eventually come to
represent a step change in how commerce works.”
In
A
few Vietnam FinTech startups have been working on providing basic
infrastructure layers in order to enhance the local ecosystem around these
technologies, yet there has not been attempts to implement any advanced use
cases of blockchain technology in order to improve the efficiency and
unforgeability of data and documents in the local economy.
However, the State Bank of Vietnam
(SBV)’s ruling does leave mining and the use of blockchain technologies
alone, and so traders in the area can still operate as long as they do not
use their proceeds to buy or sell products.
Policy changes cause confusion for investors 
Mr. Adam Sitkoff was speaking at the workshop (Photo: VGP)
Mr.
Adam Sitkoff, executive director of the American Chamber of Commerce
(AmCham), was quoted by the Vietnam News Agency as saying that although
foreign direct investment (FDI) has played an important role in boosting
Vietnam’s economic growth, recent changes in policies and regulations, which
are not consistent with international best practices, have exposed many
foreign investors to considerable risks and obstacles in executing their
investments.
The
AmCham official was speaking at the workshop themed “Challenges of
policy and regulatory changes for foreign investors in
Meanwhile,
Professor Nguyen Mai, Chairman of the Vietnam Foreign Investment Enterprises
(VAFIE) said the economic statistics in
FDI
enterprises contributed some 19 per cent of domestic revenue, 19 per cent of
GDP and more than 70 per cent of export turnover in 2017, Prof. Mai said.
However,
he shared Mr. Sitkoff’s view that there was a lack of consistency and
transparency in the adjustment process of some State policies, causing
confusion for investors and making it difficult for them to determine
directions for investment and business operation.
Since
2006, the Government has empowered the city-level or province-level people’s
committees to decide the licenses for FDI projects. However, some of them
have abused this power and made decisions beyond their authority and not in
line with laws, leading to unhealthy competition among localities, seriously
damaging the interests of investors when investing in
According
to Mr. Sitkoff, American companies operate across the spectrum of economic
activity in
“However,
we often see investments that don’t materialise due to challenges dealing
with corruption and an over-complicated, restricted, and unclear licensing
and regulatory environment,” the AmCham Executive Director said.
“Our
members need greater reform efforts that help create a fairer and more
competitive environment where decisions are made faster, procedures are less
complicated, rules are fairly enforced, and companies compete on their merits
- including for access to land and opportunities,” he added.
Notably,
the workshop discussed typical regulatory changes that either have come into
effect or are being drafted during the 2016-2019 period, such as the draft
law amending and supplementing five tax laws including the Law on Special
Consumption Tax (“SCT”), Decree 54/2017/ND-CP guiding the implementation of
the Law on Pharmacy and amendments to the Law on Tax Management.
Mr.
Herbert Cochran, Director of the Vietnam Trade Facilitation Alliance, said at
the workshop that frequent regulatory changes make
An
investor, when making decisions on investment or expansion in a country,
would develop a five to ten year business plan to estimate the returns on
investment. Changes in taxation will adversely impact the entire business
plan, potentially causing higher costs, lower revenue and therefore a lower
rate of return or longer time to get a return on their investments, he said.
Citing
the draft law amending and supplementing five tax laws including the addition
of sweetened beverages to the group of objects subjected to SCT, Mr. Cochran
shared international practices showing that such an imposition would harm the
industry, indicating that small and medium enterprises (SMEs) will be hurt
the most and may even be eliminated.
If
tax is applied,
He
highly recommended that the Government take into serious consideration the
potential socio-economic impacts of the changes in tax policy, which have a
major effect on society and industries which have contributed to the State
budget, whereas the effectiveness hasn’t been proven.
At the workshop, Mr. Le Net, AmCham Healthcare Committee representative, spoke of the situation and challenges faced by investors in the pharmaceutical industry.
Although
the Law on Pharmacy has some advanced provisions and offers an opportunity to
promote pharmaceutical business development, some documents such as Decree
54/2017/ND-CP guiding the implementation of the Law on Pharmacy includes
provisions that are inconsistent with the law and WTO commitments, he said.
According
to this decree, foreign importers must have a proper location in
Mr.
Net said such enforcement, which leads to the shutting down of current
foreign investors who acquired their licenses or forces them to change their
business model, would have a negative impact on the reputation and investment
environment in
Big data the future of supply chain management and logistics In the age of digitalization, cloud computing, and the Internet of Things (IoT), the data from everyday life can be collected and kept in storage, creating a huge collection of “big data”. As data is captured at a higher velocity and with more diversity, the analysis of big data can provide valuable information to improve many aspects of life, including business, customer service, and supply chain management, according to CEL Consulting Vietnam, an advisory firm in supply chain and operations. In recent years, the topic of big data has gained major attention as it is considered most relevant to the supply chain strategy of companies and organizations. In discussing the application of big data in Vietnam, “there are enterprises that choose to take small but smart steps to gradually learn and apply big data instead of making massive investments only to follow the trend,” said Mr. Julien Brun, CEO of CEL Consulting Vietnam. For instance, he added, a lot of Vietnamese firms have shaken hands with each other to together use big data in analyzing customers’ needs, so that they can best approach potential clients. Quoting the Harvard Business Review, Mr. Brun said there are many businesses around the world that choose to follow the big data trend with huge investments and they recruit a large number of data scientists, which has dramatically pushed up the salary range in the profession globally. According to an IBM report, in 2015, global vacancies for data scientists reached 4.4 million, but only one-third were filled. However, not all investments in big data produce the expected results. Mr. Brun believes that unless you are a tech giant like Google, Amazon, or Facebook, the wiser approach is to invest in small steps, focusing on processes that have potential for improving profitability. For example, “if you are an express courier or last-mile logistics company, you can consider starting your big data investment in delivery routing optimization,” he said. “The small steps you can make could be to begin collecting data relating to delivery performance. Some examples include delivery lead-time, late delivery rate, traffic conditions, road conditions, and weather conditions for each delivery route.” According to the Supply Chain Insight Report, it is estimated that 18 per cent of businesses worldwide have started exploring ways to utilize big data to improve sales and operations performance. The number of companies utilizing big data is forecast to rise to 43 per cent within the next ten years. Supply Chain Insight also projects that although only 6 per cent of businesses currently possess big data (over 1 million GB), 38 per cent will do so within the next decade. Big data is forecast to continue growing in terms of volume, diversity, and velocity in the context of fast-growing IoT. CEL Consulting, a member of the CEL Asia Group, is a management consulting firm specializing in supply chain and operations in emerging markets like Vinh Long pledges optimal conditions for foreign investors The Mekong Delta Secretary of the provincial Party Committee of Tran Van Ron made the statement at a seminar to introduce local potential on economy, trade, investment, tourism and education to foreign diplomatic agencies, consulate generals, associations and firms in Prominent attendees at the event included representatives from Consulate Generals in The seminar discussed green energy, hi-tech agriculture, clean water, the environment, climate change adaption, ecotourism and human resources training. Ron introduced six key aspects of the province, including agriculture, aquaculture and livestock, handicrafts, tourism, human resources training and industrial parks (IPs). He called on investors to pay attention to local IPs, while describing the event as preparation for the Vinh Long Investment Promotion Conference to be chaired by Prime Minister Nguyen Xuan Phuc in March 2018. International participants also shared experience to promote local potential, thus luring foreign investors, particularly in industry, tourism and agriculture. They expressed their hope that the province will offer more incentives for investors and focus on training human resources to meet requirements of investors. 94 per cent of Vinaconex unmarketable on stock exchange Only 5.35 million shares of Vietnam Construction and Import-Export JSC (Vinaconex) out of the 96.24 million on offer were sold via the auction organised by State Capital Investment Corporation (SCIC) this morning, indicating that 94 per cent of Vinaconex may be unmarketable. According to newswire NDH, three investors, including one organisation, bought five million shares and two individuals registered to buy 5.35 million shares. After the auction, SCIC acquired VND137 billion ($6.03 million) from selling the stakes at the price of VND25,600 ($1.12) apiece (the initial offering price), decreasing its holdings in Vinaconex to 52.2 from 57.79 per cent. Previously, SCIC released the plan to auction off 96.24 million shares in Vinaconex, equal to a 21.79 per cent stake, on December 8 on the HNX. SCIC set the minimum bidding price for the competitive share offering at VND25,600 ($1.12) apiece. At this price, the state investment company expected at least VND2.46 trillion ($108 million) in proceeds, while retaining a 36-per-cent stake in the company. Each prospective investor had to register to buy a minimum of 5,000 and a maximum of 96.24 million shares. The cash deposit must be equal to 10 per cent of the value of the booked purchase at the offering price. A few days ago, Vinaconex divested its entire 25.5-million shareholding in Vinaconex Water Supply JSC (Viwasupco) through an auction. Sinh Thai LLC bought 17.3 million shares and REE 8.2 million shares at the price of VND39,904 ($1.76) apiece. After the purchase, Vinaconex acquired $47.1 million, and Sinh Thai LLC and REE increased their holdings in Viwasupco to 50.4 and 34.7 per cent, respectively. Vinaconex operates in diverse fields, including property development, design consultancy, industrial production, financial investment, education and training, and commercial activities. It currently manages nine subsidiaries and affiliates. eTax services started in two The General Department of Taxation (GDT) on Monday began the provision of electronic tax (eTax) services to all enterprises in the With the eTax system, businesses can access and manage all electronic tax services on a single system, rather than having to log into various applications. Specifically, taxpayers only need to use one account and login to a system to use all services and manage all tax records, without changing the page address or logging in again. This will help taxpayers easily complete the steps in the process of tax declaration, payment, tax refund and search of tax records and information, according to the GDT. For large enterprises, apart from a main account of each tax code, an enterprise can create additional accounts for various positions in the enterprise such as director, chief accountant and accounting, which will help monitor the responsibility of members in a flexible way. In addition, the eTax system has a look-up function, so taxpayers can look up tax records sent to the tax office and check the results of the tax processing. For businesses that have already been using the tax authorities’ tax filing systems, all information of transaction accounts and business records will be automatically transferred to the eTax system to continue using the services. The taxpayers will not have to re-register. According to the GDT, when the eTax system is officially put to use, enterprises will stop using the old electronic tax declaration and payment system. Tax authorities have also sent taxpayers specific instructions so that they will be able to use the new system. The centralised one-stop shop will be on held on a trial basis in the two provinces until March 10, 2018. JC&C reinforces presence in Vietnam After spending over $1 billion on acquiring a large stake in Vinamilk, the largest automotive group from Singapore, Jardine Cycle & Carriage Limited Company (JC&C), has poured VND45 billion ($1.98 million) into acquiring an additional 1.1 million shares in Refrigeration Electrical Engineering Corporation (REE). According to newswire Vnexpress, JC&C, through its investment fund Platinum Victory Pte., Ltd. completed the purchase of 1.1 million shares in REE to increase its holding to 23.9 per cent. In late November, JC&C announced that it spent over VND87 billion ($3.8 million) buying 2.1 million REE shares. After the deal, JC&C increased its holding in REE to 23.55 per cent from the previous 22.87 per cent. JC&C has ambitions to acquire a member in the REE board of directors but fail due to the barrier of foreign ownership limit. JC&C now holds an aggregate 145.6 million Vinamilk shares, representing approximately 10.0 per cent of the company’s issued share capital. JC&C is now the third largest shareholder, following State Capital Investment Corporation of Vietnam (SCIC) with 36 per cent and Fraser & Neave Ltd. with 18.74 per cent. The taking of this relevant interest in Vinamilk is in line with JC&C’s strategy of investing in market-leading companies in Along with Vinamilk and REE, JC&C has been present in JC&C is 75 per cent held by Jardine Matheson, a diversified business group focused principally in Asia, which also has interest in other Vietnamese businesses, including Asia Commercial Bank, Pizza Hut, KFC Vietnam, and several real estate assets. Established in 1977, REE is a publicly-traded diversified business group operating in the primary fields of mechanical and electrical engineering services (M&E), manufacturing, assembling and sales of Reetech air-conditioner systems, real estate development and management, and power and water utility infrastructure construction. Wood exports set US$8 bil export turnover target Vietnam’s wood exports may fetch between US$7.8-US$8 billion this year, far exceeding the set target of US$7.3 -US$7.5 billion, according to the Vietnam Timber and Forest Product Association (Vifores). The association forecasts that wood exports to major markets such as the US and China have posted the highest growth rate over the past few years but this will prove only a temporary boom with these markets likely to see a downward trend and the focus shifting to exporting timber to the EU market. Nguyen Ton Quyen, Vifores General Secretary says that from the start of the year to late November, export turnover soared an impressive 10.5% to nearly US$7 billion when compared to the same period last year. The wood sector has witnessed strong growth in the 11-month period surpassing last year’s 1.1% growth rate. The The increase is attributable to the high export growth of artificial wood board, particle board, melamine-faced chipboard (MDF) and wood pellet while exports of such products were on a downturn trajectory in previous years. In addition, new market expansion will provide solid foundation for the wood sector to bolster export growth in the coming years. With an average growth rate of 11% per month and the peak season in the rest of the year for wood exports, the turnover of US$7.8 billion for the whole year is within reach and is likely to touch US$8 billion. For the EU market, Mr Quyen says that recently, wood trade between Some experts forecast that wood exports to the Owing to the rapid growth rate, the wood sector has faced a number of challenges including a scarcity of raw timber and fierce competition between foreign and domestic material suppliers. Dong Nai: trade surplus predicted to hit US$2 bln The southern Export turnover of the locality is estimated at nearly US$17 billion this year, up 11.8% year-on-year, while the figure for imports is US$15 billion, up 13.5%. According to the provincial Statistics Office, in November alone, the locality’s export turnover hit US$1.54 billion, 6.9% above October. Among commodities with high export growth compared to October, footwear ranked first with 34.4%, followed by wooden products with 34.1%, textiles with 32.1% and fiber with 19.2%. The results were attributed to local exporters’ access to new markets and effective exploitation of traditional markets. Businesses in Dong Nai have taken advantages of free trade agreements signed between The increased export price of farm produce in 2017 has also contributed to Dong Nai’s export growth, Thai said. Director of the provincial Department of Industry and Trade Duong Minh Dung said the agency will continue providing support for local exporters in trade promotion, seeking new markets and connecting to foreign direct investment businesses operating in the locality. It will also do its best to fight fake goods and trade fraud to protect producers and consumers, he added. Truong Hai Auto Corporation to export nearly 1,200 buses to ASEAN Truong Hai Auto Corporation (Thaco) will export nearly 1,200 buses bearing the Vietnamese brand name to ASEAN markets, said Thaco CEO Tran Ba Duong at the launch ceremony of a bus manufacturing plant on December 8. Mr Duong said the company have signed a series of trade deals on exporting 1,150 buses to markets such as Once the new factory is officially put into operation bus exports will grow to meet regional demand. The factory, equipped with a modern production line, was built on an area of 17ha at Chu Lai Open Economic Zone in Quang Nam Province at a cost of VND7,000 billion and boasts a design capacity of 20,000 vehicles per year (8,000 coaches and 12,000 mini-buses). This is the first bus plant in An R&D centre was set up at the plant to facilitate the design of a wide range of vehicles and raise the rate of locally produced components to 60%. At present, with sales of 14,000 units, the company holds 54% of bus market shares. Vinh Long pledges optimal conditions for foreign investors The Mekong Delta Secretary of the provincial Party Committee of Tran Van Ron made the statement at a seminar to introduce local potential on economy, trade, investment, tourism and education to foreign diplomatic agencies, consulate generals, associations and firms in Prominent attendees at the event included representatives from Consulate Generals in The seminar discussed green energy, hi-tech agriculture, clean water, the environment, climate change adaption, ecotourism and human resources training. Ron introduced six key aspects of the province, including agriculture, aquaculture and livestock, handicrafts, tourism, human resources training and industrial parks (IPs). He called on investors to pay attention to local IPs, while describing the event as preparation for the Vinh Long Investment Promotion Conference to be chaired by Prime Minister Nguyen Xuan Phuc in March 2018. International participants also shared experience to promote local potential, thus luring foreign investors, particularly in industry, tourism and agriculture. They expressed their hope that the province will offer more incentives for investors and focus on training human resources to meet requirements of investors. Supply and demand chain links promoted at A two-day conference on supply and demand connections opened at Phu Tho Indoor Stadium in The conference features industrial and industrial support products, typical rural industrial goods, and other products meeting export criteria, in addition to farm produce and local specialties. It promises to assist in linking exports through retail and distribution networks in The Vice Director of the HCM City Department of Industry and Trade, Nguyen Huynh Trang, said the aim of the conference is to find markets for new products and facilitate a smooth transaction process while enhancing cooperative ties between relevant actors in the process of developing optimal supply chains. In a first for the conference, networking activities have gone digital on their website www.ketnoicungcau.vn, which provides businesses with access to expanded information channels. Since its debut in 2011, the conference has become a trusted destination for retailers, producers, and the domestic and foreign business communities. Aquaculture output scales up 8% Aquaculture output in the first 11 months of 2017 totalled more than 3.5 million tonnes, up 8% from the same time last year, as estimated by the Ministry of Agriculture and Rural Development. Tra fish farming areas in the period expanded by 2% year on year to 5,822 hectares and total yield is expected at over 1.2 million tonnes. Large tra fish raising localities are Dong Thap with total output of nearly 436,000 tonnes, An Giang with 258,000 tonnes and Can Tho with 171,500 tonnes. Shrimp output during January-November also picked up 9.9% from the same time last year to 636,000 tonnes thanks to good control of diseases. Also in the period, seafood catches were 3 million tonnes, 4% higher than the corresponding period last year. Fishing activities were hugely impacted by unfavourable weather conditions in November, the ministry said. According to statistics, three KPMG The KPMG Vietnam Tax Institute 2017 series held its first session in The seminar provided a comprehensive overview of Partners and directors from KPMG Vietnam also discussed the impact of recent regulatory updates and provided insights into new tax-related issues that can affect companies. Some of the topics covered in the seminar include corporate tax, value-added tax, indirect taxes, transfer pricing, and tax dispute resolution. Participants were particularly interested in At the seminar, KPMG also introduced its tax intelligence solutions for companies. The series will continue with another session in VBF 2017 to reassess Vietnam Business Forum (VBF) 2017 will discuss and offer solutions to enhance productivity and evolve industrial sectors in the context of Industry 4.0, spurring private sector investment and boosting international integration. The forum consists of three sessions presented by foreign business associations present in The theme of the second session is strengthening private sector investment to improve the country’s financial situation, focusing on the PPP format and means to develop banking. The theme of the third session is improving business climate, facilitating private businesses to achieve breakthroughs. The forum will take place on December 12, 2017 at Lotte Hotel in Hanoi and will be co-chaired by Minister of Planning and Investment Nguyen Chi Dung, IFC senior country manager for Vietnam, Laos, and Cambodia Kyle F. Kelhofer, chairman of the Vietnam Chamber of Commerce and Industry (VCCI) and VBF co-chairman Vu Tien Loc, and VBF co-chairman Hirohide Sagara. Prime Minister Nguyen Xuan Phuc will attend and talk at the forum. Earlier, the mid-term VBF took place in June 2017 with the theme "Strengthening the linkages between FDI and domestic businesses in the new global context." The forum reviewed and proposed solutions to maintain and attract capital from the private sector, the linkages between FDI and domestic businesses, the impacts of recent global policies to the Vietnamese economy, and assessing the enforcement of investment laws in order to improve the efficiency of law enforcement. VBF, which was established in 1997, is a channel of policy dialogue between senior leaders of the Vietnamese government and the business community, covering almost all economic fields in order to develop a favourable business climate, mobilise private sector investment, and spur sustainable economic development in Hai Phong city tries to keep top position in FDI attraction Hai Phong City is implementing various measures to maintain last year’s leading position in foreign direct investment attraction against fierce competition with Hanoi and Quang Ninh. Statistics released by Hai Phong’s Department of Planning and Investment show that so far this year Hai Phong has attracted more than US$1 billion from 47 newly registered and 35 revised projects. Last year, Hai Phong ranked second nationwide in luring FDI, which reached nearly US$3 billion. Major investment projects include the US$1.5 billion project by LG Display and US$550 million project of LG Innotek. Investors say they selected Hai Phong for its potential. Tran Thuy Trang, Deputy General Director of Jasan Company Trang said “Since the company was established, we have received support from the local administration. Currently we have 1,500 workers and plan to double the number by the end of next year. Jasan Company 1 began operations in 2015; Jasan 2 began operations this year; and Jasan 3 will start next year. In the next 3 years, we will continue to increase investment in Hai Phong to US$50 million. Jasan group wants to raise its investment in The Hai Phong is implementing comprehensive measures to attract investment. They will implement a national strategy on green growth until 2020, focus their budget on key projects, especially in transportation infrastructure, and complete the infrastructure of industrial parks and industrial clusters, particularly the Dinh Vu - Cat Hai Economic Zone. Hai Phong has defined strategic, potential partners from Le Trung Kien, Director of the municipal Department of Planning and Investment, said “Improving the local business and investment environment has been chosen as this year’s theme. We will continue to step up reforming administrative procedures and procedures related to the investment environment, land clearance, land access, and maximizing support for businesses. Hai Phong has promulgated a series of policies to meet investors’ demands for an improved business and investment environment and personnel quality, quicker completion of administrative procedures, and fewer unnecessary regulations hindering investors.” PYN Elite invests US$40 million in banking sector for the first time PYN Elite Fund signed an agreement to purchase a 4.99 per cent stake in Tien Phong Commercial Joint Stock Bank (TPBank) for $40 million, marking its first investment in the banking sector. Do Anh Tu, deputy chairman of the board of directors of TPBank, said that with the financial potential as well as the reputation of PYN Elite at the international and domestic markets, the fund is a perfect match to co-operate with TPBank to bring high-quality banking services for customers in general and small- and medium-sized enterprises (TPBank’s target customer segment) in particular. In order to mobilise funds for new its investments, including the investment in TPBank, PYN Elite divested from a series of companies. Notably, in early December, PYN Elite released that it had completed the sale of 839,810 shares of Development Investment Construction JSC (DIG) for VND17 billion ($746,300). Besides, a number of days later, PYN Elite handed over 2.13 million shares of Mobile World Investment Corporation (MWG) to Vietnam Securities Deporsitory for VND280 billion ($12.3 million). In addition, PYN Elite sold over two million shares in Kinh Bac City Development Holding Corporation (KBC) and 325,000 shares of Hoa Binh Construction and Real Estate Corporation (HBC). Entering At present, PYN Elite owns 8,027,890 shares or 7.14 per cent stake in Japan Vietnam Medical Instrument JSC (JVC), 7 per cent in Ho Chi Minh Infrastructure Investment JSC (CII), 4.1 per cent in Vietnam Construction and Import-Export JSC (Vinaconex), among other large-scale domestic enterprises. TPBank is privately-owned. Its major shareholders include Japan-based investment firm SBI Holdings, Vietnamese gemstone trader DOJI Group, and telecommunications giant FPT Corporation, as well as SBI Ven Financial Group Holding Singapore Pte. Convenience costs Vietnam’s out-of-home food service industry Ho Chi Minh City-based market research firm Decision Lab has confirmed the continued rise of the convenience store at a breakfast seminar co-hosted by the European Chamber of Commerce in Ho Chi Minh City. If you were in the business of opening convenience stores in However, the continued emergence of the channel hasn’t been without its fallouts. According to a presentation by Ho Chi Minh City-based market research firm Decision Lab this month, convenience stores are disrupting Tracking performance since April 2016, data from the agency’s Foodservice Monitor*, which is based on thousands of continuous online interview responses by consumers in Ho Chi Minh City, Hanoi and Da Nang, suggests that the continued expansion of convenience chains like Family Mart, VinMart+ and Circle K, is not only diverting foot-traffic away from mid-to high-end food outlets, but has also devalued the market by sparking a voucher war. Responding to a question about what they’d eaten or drank out of home yesterday, a sample of 18,000 responders reported eating out slightly more often in Q3 2017 compared to Q3 2016; 147 times on average, up from 144. However, according to Decision Lab senior consultant Nghiem Vu Huong Linh, who presented the data, they did so a lot more selectively, and a lot more frequently at the lower end of the market. It was this change, combined with what Linh described as 2017’s ‘discount tornado,’ whereby even fine dining restaurants engaged in heavy vouchering as the market got tough, that resulted in average spend declining by 18 percent per head per visit, to just over VND60,000 (US$2.65). According to their numbers, this fall in average spend translates to a drop in total sales revenue of approximately VND3.3 trillion (US$145.3 million) or about 10% year on year. During the same period, as bubble tea outlets also proliferated, the number of convenience locations grew rapidly, with consumers quick to adapt to their extended offer of around-the-clock hot food, cold drinks, free-wifi and other snacks in air-conditioned comfort. The result has been an increase in market share to 14%, which translates to a lot of tuna sandwiches, bento boxes and warmed up chicken wings. Commenting on the results, Linh said it was a reflection of convenience stores greatest strengths; speed of service, variety of goods and most importantly, availability. “The convenience channel poses a direct threat to the quick-service industry,” she said, “the increase in market share is a nightmare for operators in this segment, because unless total demand suddenly increases dramatically, Vietnamese consumers will continue to make trips to convenience stores at the expense of other channels.” According to Decision Lab’s research, the number of visits to quick service outlets, which include staples like McDonalds, KFC, Highlands Coffee and Starbucks, reduced by 34 million nationwide between Q32016 and Q3 2017. That decrease was in stark contrast to an increased flow of approximately 81 million visitors to categories classified as low-end, including convenience stores, street food vendors and workplace or school canteens. Total visits to street food outlets fluctuated over the period and then went up to 87 million during Q3 2017, which was higher than Canteen’s at 73 million and Convenience Stores, at 64 million total visits in the most recent quarter. Significantly, according to numbers from the International Grocery Research Organization, By 2020, it’s expected there will be one convenience store per 17,815 Vietnamese residents, which sounds like a lot in a nation of 94 million, but is still a long way from Unsurprisingly, according to Decision Lab’s data, the rise of the convenience store is being driven by young people, specifically Gen Zers, classified as 15-23 year old ‘digital natives’, who are either entering the labor market for the first time, or are about to finish school. According to Decision Lab co-founder Thue Quist Thomasen, who spoke about this segment of the population, Gen Z are ‘early adopters in the out-of-home food market’, and as such wield significant power. They also report eating outside of the home substantially more often than the national average – 197 times compared to 147. With a growing population base of around 14.4 million across the three major capitals, and reported average out-of-home spend of VND892,000 per month, Thomasen said to the assembled industry players, “it’s time to take the kids seriously.” Reaching out to them, Tuoi Tre News spoke to Justin, 23, who was hanging out with friends Huyen, 20, and Dana, 18, at the Family Mart store on Xuan Thuy in District 2’s Thao Dien in When asked why they chose to spend time in convenience stores, Justin said it was about ‘more choice’ and ‘better service’. “Here we have more choice, more comparisons on price, better service and overall its better for us young people,” he said. “It’s comfortable, there is air-conditioning and the coffee here is cheaper than across the road. It’s VND50,000 over there compared to only 10 or VND20,000 here.” Huyen, 18, echoed his thoughts, and said she visited convenience stores almost everyday, either to sit and study or sometimes to meet friends. “I often go in the evening, sometimes around midnight. Sometimes I’ll stay for five minutes, or sometimes for 2 hours.” Also there were co-workers Pham, 32, Nhien, 21 and Vy, 22 who were enjoying an after-work drink. “It’s friendly here,” said Nhien, “and comfortable. We can sit around on tables with friends like a coffee shop, and it’s open all day. It’s relaxing.” Notably, of all the young people Tuoi Tre News spoke to inside convenience stores, almost without fail they said that they recognized that the ‘food was better outside.’ It seemed that rather than replace meals, food eaten in convenience stores was most often supplementary to their regular diet, where the first meal of the day is still a priority. “I eat here sometimes,” said Long, 22 “but usually the food here is small, and not enough for a full breakfast, so most of the time I prefer local street food restaurants.” “It’s cheaper and more convenient on the street,” said Yen, 19 “and the quality is better.” Both of these sentiments are supported in Decision Lab’s own findings, which say that Gen Z consumers choose street food only slightly less often than the rest of the population, and that the popularity of street food is anything but on the wane. This in a year when many vendors were forced ‘off the street’ by city administrations and were the subject of the usual number of hygiene inspections. It should be music to the ears of people like street food identity Nguyen Thi Thanh, aka ‘The Lunch Lady”, who serves hot bowls of delicious soup in a well-frequented, but hard to find hem just off Hoang Sa in the Da Kao ward of Ho Chi Minh City’s district 1. Addressing the potential disruption to her own market posed by convenience stores, she said she was aware of convenience stores popularity but believed that it was a cyclical change. Internet Famous: Nguyen Thi Thanh aka “The Lunch Lady” known for featuring in Anthony Bourdains ‘Parts unknown’ Photo: Vu Ha Kim Vy “It’s temporary,” Thanh said. “Teenagers love something new, but I don’t think it will last long. It’s the same with fashion, food, everything. It changes all the time.” Asked if she thought it was harder to be a street vendor now, she said she thought people would always recognize good food, no matter where they get it. “If you cook with passion and you maintain the quality at a reasonable price, people will return. “But if all you offer is air-con, free wi-fi and a comfortable space, you won’t succeed because the cost is too high and people won’t come back. “ Food for thought? This market is one to watch.
VNN
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Thứ Năm, 14 tháng 12, 2017
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