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



3 objectives
 We were keen to invest in Vietnam, now
 we will definite...
some
   basic
Vietnam
    facts
Where is Vietnam going from here?
  Damien Duhamel



strong GDP growth
Vietnam’s economic growth - on average –          ...
Where is Vietnam going from here?
  Damien Duhamel
                                                                       ...
Where is Vietnam going from here?
Damien Duhamel



asia dominates FDI – where is the EU ?
                               ...
Where is Vietnam going from here?
Damien Duhamel



south dominates FDI inflow

                               FDI is focu...
Where is Vietnam going from here?
Damien Duhamel



industrial & manufacturing revolution
                 8%


          ...
Where is Vietnam going from here?
Damien Duhamel



Vietnam 2008 - growing pains…
                                        ...
vietnam’s
     little
     dirty
   secrets
should
we enter
vietnam
  now ?
Where is Vietnam going from here?
Damien Duhamel



should we enter VN ?
 Yes, if…

 You are selling machinery with unique...
Where is Vietnam going from here?
Damien Duhamel



should we enter VN ?
 Not really if…

 If your shareholders hope for i...
what
 specific
sectors?
Where is Vietnam going from here?
Damien Duhamel



what specific sectors?




                           15
is vietnam
still a communist
          country?
Where is Vietnam going from here?
Damien Duhamel



is Vietnam a communist country?
 Yes just like China…
 Vietnamese are ...
sustainable growth ?
         probably…
Where is Vietnam going from here?
Damien Duhamel



sustainable growth ? probably…
 Saving rates have spiraled from 5% to ...
a few
deja vu road
      blocks
Where is Vietnam going from here?
Damien Duhamel



a few déjà vu road blocks
 Infrastructure:    The    Government       ...
how do I
sell and
get my
money
(safely)?
Where is Vietnam going from here?
Damien Duhamel



how do I sell and get my money (safely)?
 You don’t !
 Like in most de...
is job
hopping
a national
sport?
Where is Vietnam going from here?
Damien Duhamel



is job-hopping a national sport?
 The rule of supply and demand works ...
do I need
expats
in vietnam ?
Where is Vietnam going from here?
Damien Duhamel



do I still need expats in Vietnam ?
 Most likely yes. Especially for t...
“vietnam is
(still) hot,
don’t get
burned…”
Where is Vietnam going from here?
                            here ?
Damien Duhamel



VN is (still) hot, don’t get burned...
Where is Vietnam going from here?
    Damien Duhamel




                                  Cám òn qúi vi rhât
            ...
VIETNAM
MARKET ACCESS AND LEGAL
CHALLENGES
Eurochamber Breakfast Club
Nov 12 2008
Shanghai

Seck Yee Chung

Baker & McKenz...
CONTENT
• What is keeping us busy?
• Why?
• What are the legal challenges?




                                   ©2008 Ba...
WHAT IS KEEPING US BUSY?
•   Market access: FDI; M&A; rep offices
•   WTO; trade and distribution
•   Pharma and health ca...
WHY?

•   Business does not sleep
•   Geo-political stability; insulated
•   Export; natural resources
•   Growth - mid to...
WHAT ARE THE LEGAL
CHALLENGES?
• Rep office; Chief rep; PIT
• Investment Certificate; lease; translation
• M&A: foreign/lo...
Standard Chartered Bank’s Success

                                                      A case study




Simon Taylor

Ba...
The Deal
• Standard Chartered Bank (SCB) buying shares
  and convertible bonds in Asia Commercial Bank
  (ACB) from the In...
The Players
• SCB: Two branches and now a subsidiary in Vietnam;
  long-term investment as strategic investor in ACB
• IFC...
The Issues
• Trading outside price trading band for listed
  shares
• Unclear regulatory approval requirements
• Sensitive...
The Solutions
• SSC/HASTC approval for one-off trading
  mechanism
• Communication with SBV to clarify regulatory
  approv...
The Lessons
• Be patient; plan for problems
• Maintain and utilize relationship with all key
  players




               ...
THANK YOU …
  BAKER & McKENZIE
  12th Floor, Saigon Tower
  29 Le Duan, District 1
  Ho Chi Minh City, Vietnam


  Tel: 84...
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Vietnammarket 2009

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Vietnammarket 2009

  1. 1. Where is Vietnam going from here ? Damien Duhamel Managing Director Asia www.solidiance.com
  2. 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. 3. some basic Vietnam facts
  4. 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. 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. 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. 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. 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. 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. 10. vietnam’s little dirty secrets
  11. 11. should we enter vietnam now ?
  12. 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. 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. 14. what specific sectors?
  15. 15. Where is Vietnam going from here? Damien Duhamel what specific sectors? 15
  16. 16. is vietnam still a communist country?
  17. 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. 18. sustainable growth ? probably…
  19. 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. 20. a few deja vu road blocks
  21. 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. 22. how do I sell and get my money (safely)?
  23. 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. 24. is job hopping a national sport?
  25. 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. 26. do I need expats in vietnam ?
  27. 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. 28. “vietnam is (still) hot, don’t get burned…”
  29. 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. 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. To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com China Singapore Suite 801 Suite 17-01 Hong Kong Plaza High Street Center 283 Huaihai Road Central 1 North Bridge Road Shanghai 200021 Singapore 179094 Tel: +86 21 5168 8905 Tel: +65 6408 8208 asia@solidiance.com asia@solidiance.com 30
  31. 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. 32. CONTENT • What is keeping us busy? • Why? • What are the legal challenges? ©2008 Baker & McKenzie 32
  33. 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. 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. 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. 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. 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. 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. 39. The Issues • Trading outside price trading band for listed shares • Unclear regulatory approval requirements • Sensitive industry ©2008 Baker & McKenzie 39
  40. 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. 41. The Lessons • Be patient; plan for problems • Maintain and utilize relationship with all key players ©2008 Baker & McKenzie 41
  42. 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

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