Solidiance shares the current opportunities and challenges of the Vietnamese market. Where is Vietnam going from here? After formidable economic growth for the past 5 years, will Vietnam be able to sustain high level of foreign direct investment during the 2009 economic crisis.

1. Where is
Vietnam
going from
here ?
Damien Duhamel
Managing Director Asia
www.solidiance.com

2. Where is Vietnam going from here?
Damien Duhamel
3 objectives
We were keen to invest in Vietnam, now
we will definitely move forward
We were not so keen to invest in
Vietnam but we may now explore
further
We were not very keen to invest in
Vietnam and now we probably won’t
2

3. some
basic
Vietnam
facts

4. Where is Vietnam going from here?
Damien Duhamel
strong GDP growth
Vietnam’s economic growth - on average – Real GDP growth 1980 – 2006 (in %)
well above 7% since 1990 12
10
8
Vietnam has been consistently topping
6
the economic growth performance in
ASEAN since 1990. 4
2
0
80-90 90-03 2004 2005 2006 2007 2008 2009f
CAGR GDP growth overt the past 15 years
is 8% - Only China has better numbers to China Thailand Vietnam
show in Asia (9%)
GDP per capita 2003 – 2006 (in US$)
5000
Despite Vietnam’s impressive growth 4000
performance over the past two decades 3000
it is still catching up with Thailand and 2000
China in terms of GDP per capita. Its GDP
1000
per capita is – at this moment – still roughly
5 times lower than that of Thailand and 2.5 0
times lower than that of China 2003 2004 2005 2006 2007 2008 2009f
China Thailand Vietnam
4

5. Where is Vietnam going from here?
Damien Duhamel
20,000
timid and inconsistent FDI
Steadily growing flow of FDI into 16,000
Vietnam, more to come.
14,000
Vietnam’s regime has been gradually
liberalizing its economy since the 80s.
Further liberalization was and will continue
to be facilitated by WTO obligations.
As a result, Vietnam has become
increasingly attractive to foreign
investors, particularly in light of its strategic
location in Southeast Asia, large
population, and abundance of natural
resources
A steadily growing flow of FDI into
Vietnam is testimony to this growing
attraction, and underlines the success of
Vietnam’s efforts to develop the country
into a force in Asia to reckon with
2007 2008 2009f
Yearly FDI flow 1988 – 2009 (USD M)
5

6. Where is Vietnam going from here?
Damien Duhamel
asia dominates FDI – where is the EU ?
Top 10 Investors in Vietnam 1988 – 2008 (USD B)
Rank Country USD Billions
1 Korea 14
Asia 2
3
Singapore
Taiwan
12
11
4 Japan 10
5 BVI 9.5
6 HK 6
7 Malaysia 4.2
GC 8
9
USA
Netherlands
4.1
2.6
10 France 2.3
…12 China 1.8
EU …15 UK 1.5
6

7. Where is Vietnam going from here?
Damien Duhamel
south dominates FDI inflow
FDI is focused on the South of Vietnam
25% More than 55% of the total investment
capital
between was invested into the
South whilst the North accounted for a little
over 24%
Besides the key cities, i.e. HCMC and
Hanoi,
investment poured mainly into provinces
bordering HCMC such as Dong Nai
(16.22%), Binh Duong (9.44%), and Vung Tau
(5.56%)
55%
7

8. Where is Vietnam going from here?
Damien Duhamel
industrial & manufacturing revolution
8%
22%
Key FDI sectors
Roughly 70% of FDI is undertaken in the
70% Industry and Construction Sector, 22% in the
Services Sector and the remainder in Agro-
Fishery & Forestry. The investment into
services is mostly in the area of
Hotels, Offices, Transport and Telecom
8

9. Where is Vietnam going from here?
Damien Duhamel
Vietnam 2008 - growing pains…
-Overheating economy
-Over speculative mentality
“25% !”
-Too fast banking sector
liberalization
-Commodity climbing prices
impact
-Natural market
CPI readjustment
-FDI still very impressive
-Country remains most
attractive in Asean
-Pains will ease after Tet 2009
-Vietnam remains insulated
-Timed M&A activities
9

10. vietnam’s
little
dirty
secrets

11. should
we enter
vietnam
now ?

12. Where is Vietnam going from here?
Damien Duhamel
should we enter VN ?
Yes, if…
You are selling machinery with unique
technology and applications
You are in the IT and e-commerce fields –
80,000 IT graduates a year and growing
You are looking for a safe and affordable
manufacturing hub for exports (furniture /
textile / CPG / Toys / etc.)
Your products serve the infrastructure needs
of the country or the new consumerism of its
people
12

13. Where is Vietnam going from here?
Damien Duhamel
should we enter VN ?
Not really if…
If your shareholders hope for immediate
quarterly earnings. The Vietnamese have
time, your shareholders don’t…
If you are in industries with low barriers to
entry or solely capitalizing on your IP/Brand.
13

14. what
specific
sectors?

15. Where is Vietnam going from here?
Damien Duhamel
what specific sectors?
15

16. is vietnam
still a communist
country?

17. Where is Vietnam going from here?
Damien Duhamel
is Vietnam a communist country?
Yes just like China…
Vietnamese are pragmatic. “Why rock the
boat when it takes us to destination?”
Personal economic advancement takes
over political challenge.
Modern and dynamic youth, they also want
their MTV… (or youtube as matter of fact)
Vietnam has embraced globalisation
through its membership of AFTA (1995), APEC
(1998), the US Bilateral Trade Agreement
(2001) and WTO (2007).
17

18. sustainable growth ?
probably…

19. Where is Vietnam going from here?
Damien Duhamel
sustainable growth ? probably…
Saving rates have spiraled from 5% to 35%.
Lots of native investment. The Vietnamese are
now taking control of their nation.
Managed costs by default : Ten years
ago, Vietnam’s manufacturing wage cost
represented 95% of that of China’s.
Today, that figure is about 65%, as growth has
forced Chinese wages up.
Unlike neighbors: Political stability. Industrious
nation. Investment in education.
The model of growth is very “Singaporean”
19

20. a few
deja vu road
blocks

21. Where is Vietnam going from here?
Damien Duhamel
a few déjà vu road blocks
Infrastructure: The Government has
committed 10% of GDP to infrastructure but
this will not be enough
Everything is in need of total rehaul: airports /
train / road / power / telecom / even
complete cities. Investment and upgrades
can’t cope with demand. Sectors need to
be liberalized to bring more private
investment
SOE. Like in China they once were the
backbone of the Nation. They still represent
30% of GDP. SOE financing and NPL remain
a dark cloud
21

22. how do I
sell and
get my
money
(safely)?

23. Where is Vietnam going from here?
Damien Duhamel
how do I sell and get my money (safely)?
You don’t !
Like in most developing nations, payments
and financing are an issue. There are no
magic formula for this thorn…
Suggestions: some home banks have co-
financing schemes, use agents (but their risk-
carrying has a cost!), take your time and do
your homework
Lots of suspicion with foreigners in and out for
quick dirty deals (their time is now over).
Good news, if you sell expensive
machinery, your clients are likely to be
Singaporeans…
23

24. is job
hopping
a national
sport?

25. Where is Vietnam going from here?
Damien Duhamel
is job-hopping a national sport?
The rule of supply and demand works the
same in VN. Right now there is lots of
demand. Expect staff attrition a la Shanghai…
Successful companies that have been able to
sustain growth without HR issues hindering
along the way have staffed key positions with
1/3 expats, 1/3 Vietkhieu, “2/3” locals and
provided all with First World opportunities as
opposed to working in a Third World
environment.
Wage inflation has shoot up and will continue.
Current meltdown brings reality back, but
reality will fade away fast.
25

26. do I need
expats
in vietnam ?

27. Where is Vietnam going from here?
Damien Duhamel
do I still need expats in Vietnam ?
Most likely yes. Especially for two positions:
Leadership and Financial “Controller”
Very small local pool of expats
Warning: few expat families survive the
country. Families break, contracts are cut
short, expensive relocations. A previous Asian
experience does not warrant success in VN. A
tough emerging nation experience is
probably best.
Vietkhieu are more welcome now than in the
past. Employing overseas Vietnamese will
deliver either the best or the worst.
27

28. “vietnam is
(still) hot,
don’t get
burned…”

29. Where is Vietnam going from here?
here ?
Damien Duhamel
VN is (still) hot, don’t get burned…
Don’t think they don’t know or won’t know…
Don’t go in for a quick buck. It will be quick-burn
Work as diligently as you would elsewhere. Once
you cross to the Dark Side, you are in quick sands
The ATM syndrome. If you start to bribe, you will
never stop
GDP growth does not equate to earnings growth
Look for growth and returns in three years ++
Learn to navigate the red tape and
bureaucracy, there is no escape
Integrate CSR into your strategy. The authorities
are sensitive to it.
29

30. Where is Vietnam going from here?
Damien Duhamel
Cám òn qúi vi rhât
damien@solidiance.com
Solidiance is a marketing strategy consulting firm with focus on growth in Asia Pacific. We are devoted to working side-by-side with our clients to outpace the competition, close gaps
in growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better understanding of intrinsic Asia and regional issues.
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30

31. VIETNAM
MARKET ACCESS AND LEGAL
CHALLENGES
Eurochamber Breakfast Club
Nov 12 2008
Shanghai
Seck Yee Chung
Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in
professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference
to an “office” means an office of any such law firm.

32. CONTENT
• What is keeping us busy?
• Why?
• What are the legal challenges?
©2008 Baker & McKenzie 32

33. WHAT IS KEEPING US BUSY?
• Market access: FDI; M&A; rep offices
• WTO; trade and distribution
• Pharma and health care
• Cosmetics
• Multi-Level Sales (MLS)
• Property; casino
• ITC; online activities
• Labor
• Customs and tax
• Compliance and dispute resolution
• Banking
• Clean Development Mechanism (CDM)?
©2008 Baker & McKenzie 33

34. WHY?
• Business does not sleep
• Geo-political stability; insulated
• Export; natural resources
• Growth - mid to long term
• Manufacturing; industrial products
• Consumer products
• Foreign investment; M&A
©2008 Baker & McKenzie 34

35. WHAT ARE THE LEGAL
CHALLENGES?
• Rep office; Chief rep; PIT
• Investment Certificate; lease; translation
• M&A: foreign/local; private/OTC; 51%; management
• WTO compliance: Import vs distribution; warehousing;
retail and Economic Needs Test (ENT)
• Customs; import valuation; automatic import license
• Selling pharmaceuticals
• Court and enforcement
©2008 Baker & McKenzie 35

36. Standard Chartered Bank’s Success
A case study
Simon Taylor
Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in
professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference
to an “office” means an office of any such law firm.

37. The Deal
• Standard Chartered Bank (SCB) buying shares
and convertible bonds in Asia Commercial Bank
(ACB) from the International Finance
Corporation (IFC)
• Took stake from just over 7% to 15%
©2008 Baker & McKenzie 37

38. The Players
• SCB: Two branches and now a subsidiary in Vietnam;
long-term investment as strategic investor in ACB
• IFC: Active role in Vietnam; but keen to exit ACB
• ACB: Largest listed bank; supportive of transaction
• SBV: Banking regulator
• SSC: Stock market regulator
• HASTC: Exchange
©2008 Baker & McKenzie 38

39. The Issues
• Trading outside price trading band for listed
shares
• Unclear regulatory approval requirements
• Sensitive industry
©2008 Baker & McKenzie 39

40. The Solutions
• SSC/HASTC approval for one-off trading
mechanism
• Communication with SBV to clarify regulatory
approvals
• Involvement of ACB in process
©2008 Baker & McKenzie 40

41. The Lessons
• Be patient; plan for problems
• Maintain and utilize relationship with all key
players
©2008 Baker & McKenzie 41

42. THANK YOU …
BAKER & McKENZIE
12th Floor, Saigon Tower
29 Le Duan, District 1
Ho Chi Minh City, Vietnam
Tel: 848 3829 5585
Fax: 848 3829 5618
Yeechung.seck@bakernet.com
©2008 Baker & McKenzie 42