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CAPTURING VIETNAM’S
FULL POTENTIAL
TRENDS, OPPORTUNITIES AND BEST PRACTICES TO SUCCEED IN VIETNAM
December 2016
Business Sweden in Vietnam
BUSINESS SWEDEN 15 MAY 2017 2
HIGH GROWTH DRIVES NEED FOR MODERN SOLUTIONS
AND SERVICES FOR AN URBANIZED VIETNAM
01
02
TRENDS
OPPORTUNITIES
Urbanization spurs huge
infrastructure investments
Double urban population between
2009 – 2020, to 52 mn ppl
A new and modern Vietnamese consumer class is
emerging. More spending on luxury goods and
high-end products: Retail market is forecasted to
reach around USD 180 bn by 2020
More care for health and health service quality: Private health spending USD 9 bn in 2018
A new and modern Vietnamese
consumer class is emerging
Double middle class from 2012 to
2020, to 33 mn ppl
Heavy investment in transport infrastructure
and solutions, including USD 110 billion during
2015-2035 in BRT systems, metros and airport
projects in Hanoi, Da Nang and Ho Chi Minh City
Energy demand growing at c.12% p.a. in coming
years: energy investment will increase from USD
2.7 billion p.a in 2015 to USD 5 billion in 2021.
Demand of modern energy solutions that provide
good quality power supply with low down time
EXECUTIVE SUMMARY
OPPORTUNITIES FOR SWEDISH SOLUTIONS WITHIN TRANSPORT, ENERGY, RETAIL AND HEALTH
BUSINESS SWEDEN 15 MAY 2017 3
VIETNAM IS STRENGTHENING ITS ATTRACTIVENESS AS
A MANUFACTURING HUB AND TRADE PARTNER
03
04
TRENDS
OPPORTUNITIES
Vietnam growing as attractive
manufacturing hub
Industrialization-led growth
Nearly 470 industrial parks in 2020
New free trade agreements
strengthens Vietnam’s attractiveness
12 signed FTAs, and 3 under
negotiation (incl. EU – VN FTA)
Industrial equipment that can support Vietnam’s
national agenda of becoming a stronger
manufacturing hub
Highest potential: machinery & parts, textiles,
electronics, food and beverage, and furniture
Demand for technical know-how
Attractive conditions for sourcing, import & export
EXECUTIVE SUMMARY
OPPORTUNITIES FOR SWEDISH SOLUTIONS WITHIN INDUSTRIAL EQUIPMENT, & REDUCED COSTS OF TRADE
15 MAY, 2017 BUSINESS SWEDEN 4
VIETNAM IS A HIGH GROWTH AND HIGH POTENTIAL
MARKET – INVESTMENT IS REQUIRED TO TAP INTO IT
Ensure strong local
presence
Invest in talent Protect from
corruption
Think global, act
local
You cannot build
business in Vietnam
from Sweden or
Singapore
Vietnam is high growth
and high potential, but
also requires high level
of commitment & focus
Crucial to build in-depth
market understanding,
and to establish strong
local presence
Salary costs are low in
Vietnam, but
international quality
demands international
compensation
Important to recruit high
quality top
management, and to
recruit carefully
Not easy to find suitable
and skillful staff/
partners – key to invest
in training
Design incentives for
employees and
partners that protects
from corruption
Focus on right values in
recruitment and
partnerships, but also:
Good reimbursement
schemes required to
help staff face social
impacts of systemic
corruption
It’s key to localize
both value offering
and go-to-market
strategy
Relationship bonding,
long-term investment on
client and partner
relationship
Copying an existing
Western product &
marketing strategy for
use in Vietnam is
unlikely to work
1 2 3
OVERVIEW OF BEST PRACTICES FOR DOING BUSINESS IN VIETNAM
4
IT’S KEY TO LOCALIZE BOTH VALUE OFFERING AND GO-TO-MARKET STRATEGY
EXECUTIVE SUMMARY
BUSINESS SWEDEN 15 MAY, 2017 5
VIETNAM HAS EMERGED FROM A WAR TORN COUNTRY
TO AN EMERGING ECONOMY
SOURCE: UN, WO, BUSINESS SWEDEN
Just after end
of Vietnam War
War with
China
Liberalization of
economy, “Doi Moi”
Lifting of US
embargo
Became middle-
income country
VIETNAM GDP PER CAPITA
1976 – 2015, USD PER PERSON & YEAR
COUNTRY OVERVIEW
91
2 111
1976 1982 1988 1994 2000 2006 2012
VIETNAM HAS GRADUALLY TRANSFERED FROM AN AGRICULTURE-BASED COUNTRY TO AN INDUSTRIAL-BASED ONE
BEFORE NOW
15 MAY, 2017 BUSINESS SWEDEN 6
THIS HAS BEEN VISIBLE THROUGH DRASTIC CHANGES
IN VARIOUS BASIC PARAMETERS
AIR PASSENGERS CARRIED
As a result of the growth of the middle class segment as well
as growing tourism arrivals in Vietnam, the travel sector in
the country has blossomed
6K 30M
CONSUMER SPENDING
The increase of per capita income and the emergence of the
Vietnamese middle class has seen consumer spending
increase by close to 100 times since 1990
1.6 BUSD 116 BUSD 2014 1990
MONTHLY CAR SALES
The Vietnamese middle class has used their new spending
power to increasingly buy cars instead of bicycles and motor
cycles in the last decade
2.9K 24K 2006 2016
2014 1990
VIETNAM HAS EMERGED AS A NEW CONSUMER MARKET IN SOUTH EAST ASIA
COUNTRY OVERVIEW
SOURCE: UN, WO, EUROMONITOR, BUSINESS SWEDEN
FUTURE GROWTH IN VIETNAM
BUSINESS SWEDEN 15 MAY, 2017 7
LOOKING INTO THE FUTURE, VIETNAM WILL OFFER
FOREIGN COMPANIES PLENTY OF OPPORTUNITIES
SOURCE: UN, WO, EUROMONITOR, BUSINESS SWEDEN
Vietnam’s
extraordinary
growth is
expected to
continue
* Annual income of USD 15 000 – 75 000
> 240 000 cars p.a. to be
purchased by 2020 Middle class households*
of 16 million by
2020
~ 150 USD
billion investments in
infrastructure until
2030
Most
competitive major production economy
in South East Asia
COUNTRY OVERVIEW
OPPORTUNITIES RANGE FROM CONSUMER MARKET TO INFRASTRUCTURE
VIETNAM’S ECONOMY VS. THE REGION
BUBBLE SIZE REFLECTS 2015 NOMINAL GDP, USD BILLION
BUSINESS SWEDEN 15 MAY, 2017 8
BETWEEN 2015 - 2019 VIETNAM’S GDP IS EXPECTED TO
INCREASE BY 70%
SOURCE: WORLD BANK, EUROMONITOR, BUSINESS SWEDEN
Indonesia 862
Malaysia 296
Philippines 292
Thailand 395
Vietnam, 2015 194
Vietnam*, 2019f 330
0%
1%
2%
3%
4%
5%
6%
7%
8%
-2% 0% 2% 4% 6% 8% 10% 12% 14% 16%
Re
al G
DP
Gro
wth
, 2
01
5
Nominal GDP, CAGR 2011-2015
*NOMINAL GDP, CAGR 2016-2019
VIETNAM WILL CONTINUE TO BE AMONG THE FASTEST GROWING ECONOMIES IN THE REGION
COUNTRY OVERVIEW
BUSINESS SWEDEN 15 MAY, 2017 9
SWEDEN’S RELATIONSHIP WITH VIETNAM HAS ALSO
TRANSFORMED OVER THE YEARS…
SOURCE: UN, WO, BUSINESS SWEDEN
SWEDISH EXPORT & IMPORT TO / FROM VIETNAM
1992 – 2014, USD MILLION
7
166
8
943
1992 1996 2000 2004 2008 2012
Export Import
End of Bai Bang
SIDA Project
Increasingly trade focused
SWEDEN & VIETNAM
THE RELATIONSHIP HAS TRANSFORMED FROM BEING AID FOCUSED TO AN INCREASING TRADE FOCUS
Mainly aid focused
MANUFACTURING ENERGY &
ENVIRONMENT HEALTHCARE
TRANSPORT/TELECOM
BUSINESS SWEDEN 15 MAY, 2017 10
… AND TODAY MORE THAN 40 SWEDISH COMPANIES
ARE PRESENT IN VIETNAM
SWEDEN & VIETNAM
SOURCE: BUSINESS SWEDEN
A LARGE NUMBER OF SWEDISH COMPANIES ARE ALSO DOING BUSINESS THROUGH DISTRIBUTORS
EXPORT OF NORDIC COUNTRIES TO VIETNAM
1992 – 2014, USD MILLION
166
236
250
103
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Sweden Norway Denmark Finland
BUSINESS SWEDEN 15 MAY, 2017 11
HOWEVER, SWEDEN IS FALLING BEHIND NORDIC
COMPETITORS IN EXPORTS TO VIETNAM
SOURCE: UN COMTRADE
NORWAY AND DENMARK EXPORT FOR A GREATER VALUE TO VIETNAM DESPITE THEIR SMALLER SIZE
Sweden
SWEDEN & VIETNAM
681
321
131
89
Den
Fin
Swede
Norwa
ACCUMULATED FDI, 2015 (USD MILLION) NUMBER OF PROJECTS
BUSINESS SWEDEN 15 MAY, 2017 12
SWEDEN ALSO LAGS BEHIND ITS PEERS IN TERMS OF
FDI
SOURCE: FOREIGN INVESTMENT AGENCY, MINISTRY OF PLANNING AND INVESTMENT
45
14
115
30
THE SIZE OF SWEDISH FDI PROJECTS REMAINS SMALL COMPARED WITH ITS NORDIC PEERS
SWEDEN & VIETNAM
INDUSTRIALIZATION GROWING MIDDLE
CLASS
URBANIZATION PROMOTION OF
FREE TRADE
BUSINESS SWEDEN 15 MAY, 2017 13
FOUR KEY DISRPUTIVE TRENDS ARE DRIVING THE
VIETNAMESE ECONOMIC GROWTH
SOUCE: BUSINESS SWEDEN’S ANALYSIS, BMI
TRENDS OVERVIEW
URBANIZATION As of 2014, urban
population accounted for
33% and is expected to
grow to 50% by 2025
URBANIZATION
Disposable income has
risen gradually over the
past few years, boosting
purchasing power and
growing consumer
expenditure. By 2019,
35.6% of the
population is expected to
earn USD 5,000 p.a.
A new and modern
Vietnamese consumer
class is emerging,
demanding a modern
shopping experience
There is high demand
for public transportation
facilities and energy
consumption
Vietnam has a potential
opportunity to emerge
as a new global
manufacturing hub
Vietnam is expected to
benefit from 12 FTAs
signed, 3 FTAs under
negotiation
In 2015, Industrial zones
reached USD 135
billion in turnover,
generating exports of
USD 80 billion
To meet the expectation
of global customers, the
need of modern
technical machinery
and equipment is on the
rise
VIETNAMESE MIDDLE CLASS EXAMPLE FACTS
15 MAY, 2017 BUSINESS SWEDEN 14
VIETNAM’S MIDDLE CLASS WILL DOUBLE FROM 2012 TO
2020 – THE IMPLICATIONS ARE ALREADY VISIBLE
SOURCE: BCG, BMI, NIELSEN VIETNAM, MINISTRY OF HEALTH, BUSINESS SWEDEN’S ANALYSIS
GROWING MIDDLE CLASS TRENDS
12 million ppl.
In 2012
VIETNAMESE HOUSEHOLD EXPENDITURE
BUSD 78.5
In 2012
BUSD 159.9
In 2019
33 millions ppl.
In 2020
THE NEW VIETNAMESE CONSUMER CLASS DEMANDS MODERN SHOPPING EXPERIENCES
Increasing domestic travel
CAGR 09-14 of # of domestic
visitors serviced by
accomodation establishments
and travel agencies: 14%
and 10% respectively
Growing number of overseas
treatment
40 000 Vietnamese people went
abroad for medical treament
and spent around USD 1
billion in 2015
Foreign studies growing
+ 410% Vietnamese students sent to
USA from 2004 – 2014,
reaching 18 722 in
2014/15
Foreign baby products in
demand
> 80 foreign brands for
powdered baby milk,
accounting for 75% of
market share
VIETNAMESE URBAN POPULATION
BUSINESS SWEDEN 15 MAY, 2017 15
RAPID URBANIZATION IS CAUSING INFRASTRUCTURE
DISRUPTIONS THROUGHOUT SOCIETY
SOURCE: VIETNAM ASSOCIATION OF MOTORCYCLE MANUFACTURERS, VIETNAM ELECTRICITY (2014), ADB
TRENDS URBANIZATION
26 million ppl.
In 2009
URBANIZATION SPURS HUGE INFRASTRUCTURE OPPORTUNITIES & CHALLENGES
52 million ppl.
In 2025
EXAMPLE IMPACTS
The total electricity consumption increased from 11.5
TWh in 1995 to 115.1 TWh in 2013 - an
average growth rate of 11%
8,000 new bikes, 750 cars commune on
Vietnamese streets everyday
Over 10,000 buses with around 500 bus
routes in Vietnam
BUSINESS SWEDEN 15 MAY, 2017 16
SOURCE: BUSINESS SWEDEN ANALYSIS
IN FORCE:
1. ASEAN Free Trade Area
2. ASEAN - China
3. ASEAN - South-Korea
4. ASEAN - Japan
5. ASEAN - Australia and New Zealand
6. ASEAN - India
7. Vietnam - Japan
8. Vietnam - Chile
9. Vietnam – Korea
10. Vietnam - EAEU
COMING INTO FORCE IN 2018:
11. EVTA
12. TPP
1
2
3
4
5
6
VIETNAM IS CURRENTLY BENEFITTING FROM A LARGE
AMOUNT OF FREE TRADE AGREEMENTS
NEW FTAS STRENGTHEN VIETNAM’S ATTRACTIVENESS AS A TRADING AND SOURCING PARTNER
11
TRENDS PROMOTION OF FREE TRADE
8
7
9
* FTAS = FREE TRADE AGREEMENTS; **TPP = TRANS PACIFIC PARTNERSHIP; ***EVTA = EU - VIETNAM FTA
MANUFACTURING INVESTMENT IN INDUSTRIAL
ZONES, 2006 – 2014, BUSD
1,8
2,5
2006 2014
THE NUMBER OF INDUSTRIAL PARKS IN VIETNAM
15 MAY, 2017 BUSINESS SWEDEN 17
VIETNAM SEES LARGE INVESTMENTS IN INDUSTRIAL
PARKS AS PRODUCTION MOVES FROM CHINA
SOURCE: VIETNAM INDUSTRIAL PARKS, MINISTRY OF INDUSTRY AND TRADE, BUSINESS SWEDEN’S
ANALYSIS
TRENDS INDUSTRIALIZATION
CAGR
4,2%
CONSEQUENTLY THERE WILL BE DEMAND FOR BOTH MACHINERY AND INDUSTRIAL CONSTRUCTION
260 304
463
2010 2015e 2020 (*)
(*)GOVERNMENT’S APPROVED FIGURES
15 MAY, 2017 BUSINESS SWEDEN 18
LARGE SCALE TRANSFORMATIVE TRENDS IN VIETNAM
CREATE BOTH SALES & SOURCING OPPORTUNITIES
SOURCE: EUROMONITOR, EMARKETER, ATKEARNEY, UBS,VIETNAM CUSTOMS HANDBOOK
OPPORTUNITIES OVERVIEW
Retail market value
(2015): BUSD 112
SALES SOURCING
71% of export value
46%
of export value
2005 2014
$ 15
bn
$ 106
bn
Manufacturing
output (2013):
BUSD 160
2018f:
Pvt health spending
BUSD9
Pharma sales BUSD
0,7 Medical device
trade
BUSD0,1
Infrastructure
construction value
(2015): BUSD 3,2
IN THE COMING YEARS, SWEDISH COMPANIES CAN CAPITALIZE ON NEW, LARGE OPPORTUNITIES IN VIETNAM
BUSINESS SWEDEN 15 MAY, 2017 19
SALES OPPORTUNITIES EXIST IN BOTH B2B AND B2C
FORMS
OPPORTUNITIES SALES > OVERVIEW
Manufacturing contributes about 15% to
Vietnam’s total GDP
The most high potential manufacturing sectors
are machinery / apparatus & parts, textiles,
electronics, food and beverage, and furniture
In 2015, Vietnam’s infrastructure sector (i.e.
transport, energy & utilities) had value of BUSD
3.2. This figure is expected to be BUSD 4.8 in
2020
In-plan / Under construction projects include BRT
systems, metros and airport projects in the cities
of Hanoi, Da Nang and Ho Chi Minh City
KEY SALES OPPORTUNITIES RELATE TO INFRASTRUCTURE SOLUTIONS, INDUSTRIAL EQUIPMENT AND CONSUMER PRODUCTS
Vietnam’s retail market is forecasted to reach
around BUSD 180 by 2020
The modern trade is expected to expand widely,
accounting for 45% of the total retail market by
2020
There is an increasing M&A trend between
domestic retailers and foreign players
Many new hospitals will be built, both public and
private
The government aims at improving the amount of
domestically produced drugs
There is strong need for imported medical devices
SELLING TO MANUFACTURER RETAIL
INFRASTRUCTURE HEALTHCARE
GROSS OUTPUT OF KEY MANUFACTURING INDUSTRIES AT CONSTANT PRICES
USD BILLION
BUSINESS SWEDEN 15 MAY, 2017 20
BOTH LABOR AND CAPITAL INTENSIVE
MANUFACTURING SECTORS ARE GROWING STRONGLY
SOURCE: GSO
OPPORTUNITIES SALES > SELL TO MANF.
THERE ARE OPPORTUNITIES TO PROVIDE MACHINERY, EQUIPMENT, TOOLS AND SPARE PARTS TO MANUFACTURERS
4,7
5,4
8,7
6,2
25,7
129,3
5,3
7,1
11,2
16,0
29,5
160,5
2009 2013
Food products
Textiles
Furniture
Computer, electronic
and optical products
Overall manufacturing
CAGR 2009 - 2013
7.9%
11.3%
7.5%
32%
10%
Fabricated metal products
(except machinery and
equipment)
11%
OPPORTUNITIES TO SELL TO LOCAL
MANUFACTURERS The positive performance of manufacturing
activities implies potential demand to equip
manufacturers with new machinery,
equipment and tools
The government has encouraged localization
of spare part sector by developing supporting
industries. The progress to realise such goal
is still slow and local manufacturers still rely
on imported components
THE MARKET SIZE OF RETAIL INDUSTRY IN VIETNAM
USD BILLION, 2015 - 2020
VIETNAM’S SPENDING IN RETAIL SECTOR
USD BILLION, 2012 – 2018F
15 MAY, 2017 BUSINESS SWEDEN 21
VIETNAM’S RETAIL INDUSTRY IS EXPECTED TO REACH
USD 180 BILLION BY 2020
SOURCE: VIETTRADE, BMI
OPPORTUNITIES SALES > RETAIL
HIGH CONSUMER GOODS CONSUMPTION EXPOSE HUGE SALES POTENTIAL FOR SWEDISH RETAILERS
To date, the modern trade accounts for
25% of the total retail market. There are
around 700 supermarkets, 125 shopping
centers and 8,600 traditional markets in
Vietnam
32,3
3,6 2,8
45,5
4,5 3,3
67,9
6 4,2
Food & non-alcoholic drinks
Household goods Clothing &footwear
2012
2015f
2018f
112
180
2015 2020
CAGR
10%
EXAMPLES OF IMPORTANT TRANSPORT PROJECTS 2015 – 2020
BUSINESS SWEDEN 15 MAY, 2017 22
HEAVY INFRASTRUCTURE SPENDING PRESENTS
OPPORTUNITIES FOR COMPANIES IN THE SECTOR [1/2]
SOURCE: BUSINESS SWEDEN’S ANALYSIS
BRT Hanoi MRT Hanoi
BRT Da Nang
OPPORTUNITIES SALES > TRANSPORT INFRASTRUCTURE
MRT HCMC BRT HCMC
Expressway Da Nang
– Quang Ngai
In 2016 – 2020, total
investment for
transport infrastructure
is estimated ~ USD
45 billion
SWEDISH COMPANIES CAN OFFER INNOVATIVE SOLUTIONS TO NEW TRANSPORT PROJECTS
EXAMPLES OF PLANNED & ONGOING ENERGY PROJECTS 2011 - 2027
BUSINESS SWEDEN 15 MAY, 2017 23
HEAVY INFRASTRUCTURE SPENDING PRESENTS
OPPORTUNITIES FOR COMPANIES IN THE SECTOR [2/2]
SOURCE: BMI, FPTS, BUSINESS SWEDEN’S ANALYSIS
Lai Chau hydropower plant
Location: Lai Chau province
Value (USD mn): 1831
Capacity: 1200 MW
Time frame: 2011 - 2017
Nghi Son 2 coal fired power plant
Location: Thanh Hoa city
Value (USD mn): 1831
Capacity: 1200 MW
Time frame: 2011 - 2017
Thai Binh 2 coal fired power plant
Location: Thai Binh province
Value (USD mn): 1600
Capacity: 1200 MW
Time frame: 2011 - 2016
OPPORTUNITIES SALES > ENERGY INFRASTRUCTURE
SWEDISH COMPANIES CAN OFFER SUSTAINABLE SOLUTIONS REDUCING OVERALL ENVIRONMENTAL IMPACT
Long Phu 1 coal fired power plant
Location: Soc Trang province
Value (USD mn): 1200
Capacity: 1200 MW
Time frame: 2011 - 2018
Quang Trach 1 coal fired power plant
Location: Quang Binh province
Value (USD mn): 2250
Capacity: 1200 MW
Time frame: 2011 - 2015
Ninh Thuan 2 nuclear power plant
Location: Ninh Thuạn province
Value (USD mn): 12000
Capacity: 4000 MW
Time frame: 2014 - 2027
Vinh Tan 1 power plant
Location: Binh Thuạn
Value (USD mn): 1750
Capacity: 1200 MW
Time frame: 2014 - 2018
BUSINESS SWEDEN 15 MAY, 2017 24
ALL HEALTHCARE SEGMENTS SHOW STRONG GROWTH
SOURCE: BMI
Preference for imported medical devices
Hospitals prefer imported devices (Vietnam currently imports up to 95% of medical devices)
Growing demand for medical equipment as healthcare facilities expand
5 896
3 295
645
7 415
5 259
1 018
9 227
7 070
1 388
Private health spending Pharmaceutical sales Medical device trade
2013
2016f
2018f
CAGR
9,4% CAGR
16,5%
CAGR
16,6%
Many new hospitals
will be built
Heavily laden public
hospitals leading to
new facilities (private
& public) of thousands
of beds in total to be
built in big cities until
2020
Locally produced drugs
are encouraged
Aging population
presents growing
demand for medicines
Traditional medicine
sector shows high
potential for investors in
extraction technologies
OPPORTUNITIES SALES > HEALTHCARE
HEALTH SPENDING COVERS BOTH IN-HOSPITAL AND OUT-OF-HOSPITAL SPENDING (E.G. SPENDING ON
CLINICS, MATERNITY HOMES, MEDICAL SERVICES, PRESCRIPTION AND OTC DRUGS, ETC.)
SALES OF MEDICAL DEVICES AND DRUGS OFFER THE LARGEST OPPORTUNITIES FOR SWEDISH FIRMS
GROWTH OF VIETNAM HEALTHCARE MARKET
USD MILLION, 2013 - 2018
MONTHLY WAGE IN MANUFACTURING
USD
790,7
693,0
358,7
245,1
155,2
128*
15 MAY, 2017 BUSINESS SWEDEN 25
VIETNAM IS EMERGING AS AN ALTERNATIVE SOURCING
DESTINATION IN ASIA, COMPETING WITH CHINA
SOURCE: TRADINGECONOMICS.COM
*GARMENT AND SHOES INDUSTRY
OPPORTUNITIES SOURCING > OVERVIEW
~1/3
Labor-intensive
manufacturing
Swedish companies can
consider Vietnam for labor-
intensive manufacturing
industries as garment, shoes
and bags
01
Cost effective manual
work Industries requiring manual
work such as wooden
furniture, large steel structures
and machine parts are also
cost-effective in Vietnam
02
Valuable experience of
existing companies The long experience of Swedish
sourcing companies in Vietnam
can be very useful for new
comers to the market to leverage
03
KEY OPPORTUNITIES:
COMPANIES MOVING TO VIETNAM DON'T LOOK ONLY FOR LOW COST LABOUR, BUT GOOD ENVIRONMENT
THE MOST ATTRACTIVE INDUSTRIES FOR SOURCING:
BUSINESS SWEDEN 15 MAY, 2017 26
VIETNAM IS AN EMERGING & ATTRACTIVE SOURCING
DESTINATION
SOURCE: BUSINESS SWEDEN
OPPORTUNITIES SOURCING > OVERVIEW
Electronics
& ICT
A preferred global center for electronics production and IT outsourcing
2014: BUSD 35 exports of electronics + hardware
2015: No. 1 global outsourcing location
Textile
In 2015, the garment sector earned an export turnover of USD 27.1 billion
The main products are cotton fiber, fiber and fabric of all types, sewing products
US is the main export country followed by EU and Japan
Wood
processing
Vietnam wood and furniture export accounts for 2.5% of the world market
Domestic demand is also increasing significantly, accounting for an increasing share of the
total wood product turnover in the last 5 years
SWEDISH COMPANIES CAN CONSIDER SOURCING FROM THREE KEY INDUSTRIES IN VIETNAM
ELECTRONICS IMPORTS & EXPORT
2010 – 2014, USD BILLION
15 MAY, 2017 BUSINESS SWEDEN 27
VIETNAM IS BECOMING A GLOBAL ELECTRONICS
ASSEMBLY HUB FOR OEMS
SOURCE: VIETNAM CUSTOMS PORTAL, GSO
OPPORTUNITIES SOURCING > ELECTRONICS
Manufacture in Vietnam
Locally set up factories can enjoy low labour cost and
various incentives in land use right, tax holiday and tariff
reduction, especially in industrial zones
Supply to OEMs
The establishment of large electronics MNCs such as
Samsung, Microsoft Mobile, Intel, LG, etc.in the market
bring opportunities for sub suppliers
KEY OPPORTUNITIES
VIETNAM IS AN EMERGING DESTINATION FOR ELECTRONICS PRODUCTION AND OUTSOURCING SERVICES
5,9 11,1 20,6
31,9 35,0 5,2
11,1
18,9
26,7 28,2
2010 2011 2012 2013 2014
Import
Export11,1
22,2
39,5
58,6 63,3
VIETNAMESE WOOD & FURNITURE EXPORTS
USD BILLION, 2011 - 2020
KEY FACTS
15 MAY, 2017 BUSINESS SWEDEN 28
VIETNAM IS A LARGE WOOD SOURCING DESTINATION
WITH STRONG EXPORT GROWTH
SOURCE: GENERAL STATISTIC OFFICE
WOOD PROCESSING & FURNITURE MANUFACTURING IS AN ATTRACTIVE AREA FOR SWEDISH COMPANIES
OPPORTUNITIES SOURCING > WOOD
3,7 4,5
5,6 6,5
7
10
2011 2012 2013 2014 2015 2020f
Key driver for growth
Competitive labour
cost
Many FTAs in place
The share of export in the
world market
Vietnam wood export
accounts for 2.5% of the
world market (70 export
countries), which is
expected to increase to
5% in 2020
KEY OPPORTUNITIES
Wood processing Furniture
manufacturing
TEXTILE AND LEATHER INDUSTRY IN VIETNAM
It is expected that Vietnam garment exports will reach
around USD 25 billion by 2020. However, in 2015,
the garment sector already earned an export turnover of
USD 27.5 billion
There are about 6,000 garment factories in Vietnam,
attracting 2.5 million workers
US is the main export country (48%), followed by EU
(15%), Japan (13%)
The main exporting products are jackets, T-
shirts, trousers and dresses
KEY TEXTILE AND LEATHER HUBS
15 MAY, 2017 BUSINESS SWEDEN 29
VIETNAM HAS A LARGE AND DIVERSIFIED TEXTILE AND
ACCESSORY INDUSTRY
BUSINESS SWEDEN ANALYSIS
Hung Yen:
- Textile &
Accessories
- Fashion Design
Center
- Shoes
Nam Dinh:
- Textile
- Garment
Hue:
- Textile & Garment
- Fashion Design
Center
Long An, Binh
Duong:
- Textile
- Fashion Design
Center, Garment
- Shoes
Ho Chi Minh City
Area:
- Textile & Garment
- Shoes
OPPORTUNITIES SOURCING > TEXTILE
EXAMPLE INTERNATIONAL RETAILERS SOURCING FROM VIETNAM
BUSINESS SWEDEN 15 MAY, 2017 30
CONSUMER
SUCCESS CASE
Entered Vietnam 20 years ago
Core products: specialized garments, 100% exported
Vietnam is considered the most efficient and profitable manufacturing base in
the history of the company, with very successful R&D center
Production located in an industrial zone to avail of good environment
OUTSOURCING
SUCCESS CASE
SELL TO MANU.
SUCCESS CASE
ALL SUCCESSCASES HAVE A LONG PRESENCE IN THE COUNTRY AND HAVE INVESTED TO SEE SUCCESS
THREE NORDIC COMPANIES IN VIETNAM HAS SEEN
SUCCESS WITH STRONG LOCAL PRESENCE & MINDSET
SUCCESS CASES OVERVIEW
A history of almost 20 years in Vietnam
Core products: Decorative paints and marine coatings
Revenue has grown 50% - 100% p.a, and
200/ 550 shops were renovated since 2013 (new foreign manager)
Opening a new plant
A DANNISH TEXTILE
& FABRICS
MANUFACTURER
EXAMPLES OF NORDIC SUCCESS CASES DOING BUSINESS IN VIETNAM
In Vietnam for nearly 20 years
Revenue growth is ~30% - 50% p.a
Recruiting more staff in both Hanoi and HCMC
Selling products at reduced prices to get long term revenue & achieve
customer conversion from competing brands
A NORWEGIAN
PAINT PRODUCER
AND SELLER
A SWEDISH
MACHINERY
COMPANY
15 MAY, 2017 BUSINESS SWEDEN 31
A PAINT MANUFACTURER WENT FROM 1 TO 20 MUSD IN
TURNOVER IN THREE YEARS
SOURCE:
SUCCESS CASES SALES
PROFILE OF BUSINESS KEY SUCCESS FACTORS
SOURCE: BUSINESS SWEDEN
Type of business: 100% foreign - owned company
Total investment: MUSD 16,1
Establishment year: 1998
Offices: Hanoi, Hai Phong, Da Nang, Binh Duong
Sales: MUSD 8 (2015), MUSD 12 (as of Jul 2016)
Factory: Binh Duong Province
Capacity: 25 million litre / year
DESCRIPTION OF THE CASE
Revenue
MUSD1
2013
MUSD20
2016 (e.)
Local general manager
substituted by foreigner in
2013
New factory in 2 years to
expand production
Companies should have international
management resources
Hard to find suitable local managers with
suitable skills, qualifications & ethics
Management
Logistics/
distribution
Brand
awareness
Dealer and
staff training
Strong and clear logistics/ distribution
strategy is essential given poor
infrastructure
Slow goods transportation to be expected
Worth investing to educate clients
Vietnamese people’s purchasing decisions
tends to be based on brand familiarity
Invest in dealer / distributor and staff
training
Training both in basics as well as technical
knowledge of product may be needed
Incentives should be provided
INTERNATIONAL MANAGEMENT SKILLS, WELL-TRAINED LOCAL STAFF/DISTRIBUTORS CRITICAL FOR SUCCESS
PROFILE OF BUSINESS KEY SUCCESS FACTORS
15 MAY, 2017 BUSINESS SWEDEN 32
A SPECIALIZED GARMENT COMPANY HAS ITS MOST
PROFITABLE SOURCING OPERATION IN VIETNAM
SOURCE: BUSINESS SWEDEN
USING AN EXPERIENCED TEAM AND SETTING UP IN INDUSTRIAL ZONES IS CRITICAL TO SUCCESS
SUCCESS CASES
Type of business: 100% foreign - owned company
Establishment year: 1996
Factory: 2 in Hai Duong Province, 1 upcoming in Laos
Products: Specialised garments
Materials/textiles: ~98% imported
No. of staff: 2 000 (80% are blue collar)
VIEW ON VIETNAM BUSINESS ENVIRONMENT
SOURCING
Should have strong local-based
management team, i.e. strong Vietnamese
team on-board, to support expat CEO
Critical to have good experience and well
educated staff for company establishment,
espcially with greenfield setup
Recruitment
strategy
Factory
location
Official
support
Inside an industrial zone is the best option
for a greenfield establishment
Whenever issues arise, i.e. needs legal/
commercial advice, support of the Embassy
and other official organizations can be very
helpful)
The biggest challenge in Vietnam is systemic corruption
Vietnam General Director
✓ Easy to get business
license
✓ Advantageous geographical
position
✓ Politically and socially
stable
✓ High staff quality
Systemic corruption
Social impact corruption on
staff
Poor education system
Lack of power supply
Staff retention
Keep key staff by consistently offering
attractive incentives / reimbursement
Invest in staff training
15 MAY, 2017 BUSINESS SWEDEN 33
A GLOBAL MACHINERY MANUFACTURER ACHIEVES 30-
40% GROWTH P.A. IN VIETNAM
SOURCE: BUSINESS SWEDEN
SUCCESS CASES SELL TO MANF
PROFILE OF BUSINESS KEY SUCCESS FACTORS
IT IS CRITICAL TO BE CLOSE TO CLIENTS AND TO THINK ABOUT LONG TERM REVENUE
Type of business: Representative office
Establishment year: 1999
No. of staff: 14 in Hanoi and HCMC
DESCRIPTION OF THE CASE
Companies should have local office, either
with local staff or local agent / distributor
Local staff plays important role in
investigating the market, signals
commitment in the market
Market
presence
Customer
relationship
Critical to stay close to customer to train
customers, change their mindset (with
those who chose Chinese products) and
maintain relationship (i.e. opportunities for
maintenance service)
This is even more important for companies
selling high technology equipment 30% - 50% sales growth p.a
Sales activities are conducted in Vietnam
Contract agreement signed by the entity in Singapore
Training & maintenance handled from Vietnam
Sometimes we have to wait for customer to experience on their
own before persuading them that our product is better than the
ones they are using
Division manager
Pricing
strategy
Selling price can be reduced to attract
customers, revenue is taken from long
term sales & maintenance service
15 MAY, 2017 BUSINESS SWEDEN 34
VIETNAM IS A HIGH GROWTH AND HIGH POTENTIAL
MARKET – INVESTMENT IS REQUIRED TO TAP INTO IT
Ensure strong local
presence
Invest in talent Protect from
corruption
Think global, act
local
You cannot build
business in Vietnam
from Sweden or
Singapore
Vietnam is high growth
and high potential, but
also requires high level
of commitment & focus
Crucial to build in-depth
market understanding,
and to establish strong
local presence
Salary costs are low in
Vietnam, but
international quality
demands international
compensation
Important to recruit high
quality top
management, and to
recruit carefully
Not easy to find suitable
and skillful staff/
partners – key to invest
in training
Design incentives for
employees and
partners that protects
from corruption
Focus on right values in
recruitment and
partnerships, but also:
Good reimbursement
schemes required to
help staff face social
impacts of systemic
corruption
It’s key to localize
both value offering
and go-to-market
strategy
Relationship bonding,
long-term investment on
client and partner
relationship
Copying an existing
Western product &
marketing strategy for
use in Vietnam is
unlikely to work
1 2 3
OVERVIEW OF BEST PRACTICES FOR DOING BUSINESS IN VIETNAM
4
IT’S KEY TO LOCALIZE BOTH VALUE OFFERING AND GO-TO-MARKET STRATEGY
SUCCESS FACTORS
BUSINESS SWEDEN’S PRESENCE IN ASEAN WE SUPPORT MARKET ENTRY AND GROWTH
15 MAY, 2017 BUSINESS SWEDEN 35
BUSINESS SWEDEN HELPS SWEDISH COMPANIES REACH
THEIR FULL INTERNATIONAL POTENTIAL
MALAYSIA
VIETNAM
THAILAND
SINGAPORE
INDONESIA
WE SUPPORT SOME OF SWEDEN’S LARGEST COMPANIES, AND SME’S, WITH MARKET ENTRY AND GROWTH
Business Sweden shorten time to market, find new
revenue streams, and manage risks
BUSINESS SWEDEN IN ASEAN
ACCELERATE
LANDING
PROPEL
GROWTH
EXPAND
BUSINESS
We are internationalization and growth experts
– with expertise on local markets, industry and
business logics, and internationalization strategies
CONTACT US
BUSINESS SWEDEN 36
Contact information
Business Sweden
Commercial Section at The Swedish Embassy in Vietnam
Daeha Centre, 15th floor, 360 Kim Ma Street, Hanoi, Vietnam
T: +84 4 3726 0400
W: www.business-sweden.se
BUSINESS SWEDEN IN VIETNAM