Vietnam Prepares for Wave of Russian Tourist

  Vietnam is preparing to welcome waves of Russian to enter Vietnam tourism market, set up tour operator company and also conduct M&A activity in tourism industry.

Currently, there were complicated situations occurred in the favorite destinations of Russian tourists such as Egypt, Turkey and Goa of India, the Russian Government recommend, forbid or even stop the tours and flights to these destinations. Vietnam, Cuba and China have been recommended as safe destinations for Russian citizens to travel.

The A321 of Kogalymavia Airlines (Russia) had an accident in the Sinai Peninsula (Egypt) on October 31^st killed 224 people on the flight. The Security Agency of the Russian Federation determined that this is a terrorist attack after finding traces of explosives in the debris. Soon after, Russian President Vladimir Putin ordered the suspension of all flights from Russia to Egypt.

On November 11^th, Russia officially banned all aircraft of the national airline of Egypt (Egypt Air) and advised their citizens should not come here. This led the Egyptian tourism industry hit hard. According to Al-Ahram newspaper in Arabic of Egypt, there were 72,000 Russian tourists have left this country after the tragedy. Egyptian Tourism Minister predicted that in the last 3 months of 2015, their tourism industry could suffer over 820 million USD losses.

Goa, a state in India is the favorite destination of Russians in the new year holiday continues to go to "blacklist" due to threats to local security problems as well as the increase in prices at tourist sites.

The crisis started in 2014 when the Ruble devaluation, the number of Russian tourists travel to Goa halved. The number of 2016 will continue to decline. The negative impacts caused Transaero Airlines, which often serving 50% of guests are Russians goes bankruptcy. According to statistics, Russian tourists accounted for nearly 50% of foreign visitors to Goa, with nearly 250,000 visitors in 2013.

According to the Wall Street Journal, the House of Russia published a list of the safe destinations, which encouraging its citizens to come after a series of favorite destinations are included in the "blacklist". In the three alternative candidates, there was Vietnam.

At the Russia – Vietnam business forum occurred last November in Moscow, Russia suggested that Vietnam should prepare to welcome waves of tourist to come here after many difficulties in Egypt. Moreover, Vietnam should improve the mechanisms to support the Russian tour operators to enter the Vietnam tour market.

This is good sign for Vietnam's tourism industry after the number of Russian tourists has reduced from the end of 2014 due to the Ruble devaluation causing them to tighten spending. According to the Vietnam National Administration of Tourism, as of November 2015, there are 297,384 Russian visitors come to Vietnam, reached only 90% compared to the same period last year. However, from October, the number of Russian arrivals to Vietnam has increased slightly.

The high season of Russian for traditional wintering lasts from October to the end of March next year. Therefore, it is time for Vietnam to attract the large number of tourists coming from Russia. Moreover, it is particularly advantageous in the context of many favorite destinations of the Russian are no longer safe and Vietnam is recommended by the Russian Government.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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FDI Capital Pouring to Binh Duong Province

  Binh Duong province of Vietnam has marked early success in attracting investment with large projects licensed in setting up business, mainly in manufacturing.

On October 23^rd, 2015 the Provincial People's Committee of Binh Duong has just granted the investment certificate phase 3 of 2015 for 38 enterprises with foreign direct investment (FDI). Total capital reaches nearly 532 million USD, bringing the total FDI capital into this province in 10 months to 1.63 billion USD, increase by 40% compared to the same period in 2014.

Also at the ceremony, the Provincial People's Committee of Binh Duong has witnessed the signing of the lease 80 hectares of land in Bau Bang Industrial Zone to deploy factories specialized in manufacturing bicycles of Active International VN Company (Taiwan).

This is a large-scale projects, concentrating 45-60 enterprises specialized in manufacturing bicycles with total investment of 200-250 million USD, which is expecting to create more than 8,000 jobs.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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Numerous Furniture Companies Moved from Indonesia to Vietnam

  Since early 2015, there were 6 foreign furniture companies moved their factories from Indonesia to Vietnam.

There is a large furniture company invested by Taiwan in Sidoarjo - East Java has decided to move their factory to Vietnam. This company was started dismantling and will move in early 2016.

Companies from Taiwan have been operating for 3 years in Indonesia then want to switch to manufacturing in Vietnam because of the labor cost and the minimum wage. The minimum wage in Vietnam has increased by 150% in the past 3 years. After considering the costs, they decided to move to Vietnam to operate more efficiently. Moreover, manufacturing in Vietnam is 35% more efficient than in Indonesia.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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Signing of TPP in 2016 Will Promote FDI into Vietnam

  The investment flow will be strong into Vietnam for setting up company, factory once the commitments in the TPP agreement takes effect.

The Trans-Pacific Partnership (TPP) agreement will be signed on February 4^th 2016 in New Zealand. In order to capture the opportunities that it will bring, many foreign companies have invested in Vietnam.

The parties have also agreed to a term of 2 years for national parliaments to ratify the agreement. Thus, the TPP can be effective in 2018.

12 members of TPP include: US, Japan, Vietnam, Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Canada, Peru and Singapore. The current country members of TPP accounted for 40% of the world GDP and 26% of global trade merchandise. The agreement will not be effective without the participation of both the US and Japan.

To this point, it is probably not debatable about the opportunities that the TPP brings to Vietnam, especially in trade development and investment attraction. When the trade is opened thanks to the commitment to eliminate tariff barriers between the 12 country members, it will impact to investment, not only in internal, but also from other investment markets.

Manufacturing Companies Set-up Business in Vietnam

HanesBrands (NYSE: HBI), US’s leading textile corporation has recently announced raising total investment in Vietnam market to nearly 55 million USD, increase by more than 11 million USD compared to 2014. After 8 years of operation in Vietnam, they have 3 factories located in Hung Yen and Hue.

HanesBrands is not the only business that can see these opportunities in Vietnam when the TPP was signed. Many large enterprises of textile industry have decided to expand investment in Vietnam to capture the opportunities brought by the TPP.

And it is not only the textile industry, there are a lot of examples to prove that foreign investors are looking at Vietnam as a tremendous opportunity to invest in. The appearance of high-tech giants such as Samsung, LG, Microsoft, Jabil... with investment capital of up to tens of billions USD, of which only the capital of Samsung has reached over 14 billion USD is the clearest evidence. The presence and moreover the expansion of the foreign retail giants such as Aeon, Auchan, Metro Cash & Carry, Big C, Lotte... are also the typical examples. More than 290 billion USD of FDI capital has been committed to pour into Vietnam during the past years.

According to Nikkei news agency, Pou Chen Company, which is the world’s largest footwear manufacturer, specializing in providing goods for two famous brands that are Nike, Adidas and many other major brands, are planning to move their factories to Vietnam to take advantage of TPP.

By the end of September 2015, the number of footwear manufacturing by Pou Chen in Vietnam accounted for 42%, increase by 39% compared to the same period in 2014. The total annual production of Pou Chen (headquartered in Taiwan) is more than 300 million pairs of footwear, sales from footwear and garment accounted for 75% of total revenues of the company.

According to the representative of Pou Chen, the company has gradually shifted production bases to Vietnam since 2012 as the labor costs in China are rising rapidly in recent years. They see the long-term stability in Vietnam in both economic and politics.

Pou Chen is not the only company that moving production bases to Vietnam. Currently, many Taiwanese companies are actively investing in Vietnam, including competitor of Pou Chen that is Feng Tay (over 50% of Feng Tay’s production is concentrated in Vietnam).

Besides, Far Eastern New Century Company (FENC) has also planned to pour 307 million USD to a new factory in Vietnam in June 2015 and is expected to start production in the second half of 2016.

It is clear that footwear suppliers are actively moving their factories to Vietnam to capture the opportunities that the TPP will bring. Once the TPP is approved, the goods from the members in TPP export to the US market will enjoy preferential tariffs. As a result, the famous international brands like Nike and Adidas will prefer Vietnam as the location of their factory.

In this context, the TPP would be a "catalyst" for this capital flow to flow stronger. The catalyst is not just come from the opportunity of an open trade market, but also from the commitments of the TPP members relating to investment.

According to Mr. Hoang Manh Phuong, Deputy Director of Legal Affairs (Ministry of Planning and Investment) - the one who participating in the TPP’s negotiating session related to investment - said that there are a lot of commitments bringing big advantages for foreign investors in Vietnam. TPP allows investors to invest and do business in all sectors, except the one that is still in the reserved category.

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Lotte Wants to Open 60 Supermarkets in Vietnam

  Vietnam's retail market has the highest growth rate in the region, therefore Lotte expects to grow further through setting up more retail business or M&A activity in Vietnam.

South Korea is the largest investor in Vietnam with over 4,000 enterprises, total investment in Vietnam as of July 2015 is 32.8 billion USD.

Among South Korean firms investing in Vietnam, Lotte Mart is one of the corporations with the most powerful investment force and they are leading in a number of areas with the models of retail, hotel, cinema...

Mr. Hong Won Sik, CEO of Lotte Mart Vietnam said that Vietnam's retail market has the highest growth rate in the region, therefore Lotte wants to invest more. The target is to open 60 supermarkets till 2020 and now they have opened 11 supermarkets in Vietnam.

Some of the current Lotte shopping centers have made a big impression on Vietnam consumers and the investment from Lottle makes it to be one of the biggest players on the retail landscape in Vietnam.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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Vietnamese Restaurant Chain Attracts Foreign Funds

  To meet the demand of growing of young consumer, the food and beverage services in Vietnam have been attracting investment in setting up business, M&A activity.

The Vietnam business community recently is not out of surprise when a series of Vietnamese restaurant chains are invested by famous overseas funds with millions of USD.

The start-up project with the restaurant chain named “Kafe Group” by Chi Anh Dao, a female chef and businesswoman born in 1984 has just got the attention by receiving an investment amount of 5.5 million USD (over 120 billion VND) from Cassia Investments - an investment fund from Hong Kong (China).

Previously at the end of 2014, the chain of 100 restaurants named “Mon Hue” (Hue Dishes) of Huy Vietnam Food Processing Co., Ltd has been invested by Franklin Templeton fund, a fund managed by billionaire Mark Mobius with 11 million USD investment capitals.

According to the owner of “Mon Hue” restaurant, this food chain also receives investment capital from 4 other investors from Singapore, Hong Kong (China)... Currently, this chain includes 3 brands: Mon Hue, Rice Express and Mr. Hung Noodles.

Before KAfe Group and Huy Vietnam, Golden Gate – including such brands as Kichi Kichi, Sumo BBQ, Ashima, Vuvuzela... received the investment flow with 2.6 million USD from Mekong Capital Fund in 2009. Next, Standard Chartered Private Equity Fund from Standard Chartered Bank has spent 35 million USD to repurchase these shares.

Besides buying shares of Vietnam companies, the culinary market has continuously welcome many foreign brands opening restaurant in Vietnam such as Tokyo Deli, Coca Suki, Sakura, Oshima...

According to experts, investing in culinary market is the trend of modern business model. In particular, food chains seem to be less affected by the economic downturn as they meet the indispensable needs of life. Therefore, this food and beverage service sector in Vietnam is always attractive to funds.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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M&A in Vietnam: Strong Flow from Thailand

  It is expected to have a strong capital flow from Thailand to Vietnam in the coming time to through M&A activities.

According to a research, the main trend of the M&A market Vietnam in the period of 2015 - 2016 and subsequent years have been focusing on some key sectors: retail, consumer goods, real estate, finance - banking. Notably, in the coming time, investors from Thailand will become "dual key" in its role as the acquisition of the project, and incorporation in Vietnam.

Not until now, it has been realized that Thai is serious rival in the M&A market. From the period of 2010 - 2011 till now, the Thai people through their corporations like Charoen Pokphand, TCC Group, PTT, Siam Cement (SCG), BJC, Central Group... by the way of M&A or direct investment have quietly entered in  Vietnam’s retailing, building materials, gas sectors.

M&A Trend from Thai Investors in Vietnam

In 2012, SCG has spent 240 million USD to acquire 85% stake in Prime Group. Currently, SCG has nearly 20 subsidiaries and associated companies in Vietnam. As of June 30^th 2015, the total asset value of SCG in Vietnam reached approximately 716 million USD... In the next 5 years, SCG will spend 6-8 billion USD for countries in the region, in which a large part will be poured into Vietnam.

At the end of 2014, Berli Jucker Pcl (BJC) announced to spend 879 million USD to acquire Metro Cash & Carry Vietnam. Earlier, in 2013, BJC has acquired 60 stores of Family Mart and buy 65% ​​stake in Thai An Group, who owns a network of 200 distributors, 2,500 wholesalers and thousands of retailers in traditional markets.

In 2014, F&N Dairy Investments Pte Ltd (F&N), a subsidiary of BJC bought shares of Vinamilk, raising the percentage of ownership in Vinamilk to 11.04%, reaching a value of about 591 million USD. The owner of BJC also offered to hold 40% stake in Sabeco and pricing SABECO at approximately 2.4 billion USD.

In addition, the Central Group through its subsidiaries - Power Buy bought 49% stake in NKT technology development and new solution JSC – the owner of Nguyen Kim Trading Company, which was priced at 200 million USD.

According to a statistics from HSBC Thailand, the Thai companies were involved in at least 377 projects in Vietnam with a total registered capital of 6.7 billion USD, becoming the 10^th largest investors in Vietnam market and their ranking are improved quickly. In particular, Vietnam and Thailand have set a target of raising bilateral trade to 15 billion USD by 2020.

The M&A trend of Thai corporations are clearly showed in 2014 - 2015 with the typical deals of PowerBuy - Nguyen Kim and BJC - Metro. Through M&A activities in the retail sector, Thai investors want to reach and grasp the distribution market of Vietnam.

M&A in Retail, Consumer Goods, and Distribution Services in Vietnam

The areas interested by Thai investors from 2011 to now are the retail and consumer goods sectors. The reason is Vietnam is a vast potential market for the retail sector and consumers goods. According to the research from Statista (Germany), Vietnam's retail market sales could reach 100 billion USD/year in 2016.

The wave of M&A from Thai investors to acquire retail and consumer goods sector are to capture the opportunities when Vietnam participated in the agreements of free trade, as well as the formation of the ASEAN Economic Community (AEC) at the end of 2015.

Thai investors are increasingly buying supermarket chains, making every effort to catch the opportunities brought by AEC when Thailand goods imported into Vietnam with the tax rate equal 0%.

According to CEO of HSBC in Vietnam, in the next 5 years, major corporations of Thailand will turn Vietnam into a production center for re-export of Thai products to other countries because Vietnam has a cheap and skilled labor force.

It can be seen that Vietnam has welcomed a strong capital flow coming from large corporations of Thailand with fast and powerful acquisition speed. Thai investors show no sign of stopage. In addition to the retail and consumer goods sectors, some other sectors are also getting the attention of investors from Thailand as oil and gas, infrastructure, transportation, agriculture...

These signals indicate that Vietnam is still an attractive destination for the capital inflow from Thailand. In the short term, M&A market will continue to witness the M&A activities that Thai investors continued to act as the purchaser.  M&A due diligence assessment on Vietnam targets will be needed to ensure the success post-merger intergration.

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