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SEIKO IDEAS CORPORATION Vietnam Business Review

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Vol 05, February 04th 2015

BUSINESS REVIEW VIETNAM

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Vietnam builds M&A momentum for banking sector


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INSIDE THIS ISSUE

Highlights

Vietnam, Japan lift industrial cooperation Vietnam shopping mall leases booths at zero fee for 50 years

Hanoi retail market retains lustre

Economy

Vietnamese manufacturing on the rise: HSBC

Vietnam becomes the second largest mobile exporter to Peru

Banks & Finance Major banks may ease lending rates

SBV to take over loss-making lender

SBV sets new rules to prevent big companies from dominating stock market

Investment Investors flock to Vietnam as e-commerce market expands Aeon invests in Vietnamese retailers: report

Enterprises

Vietnam's shrimp king courts foreign investors to expand

Toyota Vietnam CEO elected VAMA chair

Flappy Bird maker in "30 under 30" list

Market & Prices VN food consumption surge 5.1% every year: MoIT forecast

Cement consumption rises 30%

Legal Updates

New investment policies to take effects


1

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ECONOMY

Vietnamese manufacturing on

the rise: HSBC

VOV - Vietnamese manufacturing

continued to strengthen in January,

supported by a further growth in

new orders, according to HSBC's

Vietnam Manufacturing Purchasing

Managers' Index monthly report

released on February 2.

As a result, employment increased

at a solid pace that was the

sharpest since December 2013.

Meanwhile, input costs decreased

at the fastest pace in the survey's

history as a result of falling fuel

prices. This in turn led

manufacturing firms to reduce their

output prices sharply.

The headline seasonally adjusted

Purchasing Managers' Index (PMI) –

a composite indicator designed to

provide a single-figure snapshot of

operating conditions in the

manufacturing economy – pointed

to a further modest strengthening

of business conditions at

Vietnamese manufacturing firms,

posting 51.5 in January compared

to 52.7 in December.

Operating conditions have now

improved in each of the past 17

months. Both output and new

orders continued to rise at the start

of 2015, albeit at weaker rates than

seen in December. Improving client

demand had been behind the rise

in new work, in turn leading firms to

raise production. New export orders,

meanwhile, rose only slightly amid

some reports of weakening

demand in export markets.

A slowdown in growth of new

orders, as well as reported

productivity improvements, led to a

reduction in backlog of work in the

sector. The decline in outstanding

business was also reflective of a

solid rise in employment. Moreover,

the rate of job creation was the

sharpest in just over a year, and

one of the fastest in the history of

the series.

Falls in the global price of oil led a

number of respondents to report

reduced fuel costs in January.

Consequently, input prices

decreased at the sharpest pace in

the survey's history, surpassing the

previous record set in June 2012.

Vietnam becomes the second

largest mobile exporter to Peru

VNA - Vietnam was the second

largest mobile phone exporter to

Peru in 2014, according to the

Centre for Foreign Commerce.

The South American nation last year

spent $55m to import mobile

phones from Vietnam, an increase

of $50m against 2013. Vietnamese-

made products now account for

5% of Peru’s mobile phone market,

ahead of those from the Republic

of Korea (3%) and Taiwan (1%).

Last year, Peru imported 12.7 mln

mobile phones, up 31% in terms of

value &23% in terms of quantity.

Vietnamese telecom group Viettel

officially began its operation in Peru

in October 2014 with the launch of

its Bitel-branded mobile service. At

that time, Bitel was the only mobile

service provider offering 3G with a

network that reached 80% of Peru’s

population.


2


BANKS & FINANCE

Major banks may ease lending

rates Reuter - Major banks in VN may

reduce their interest rates in

response to a central bank call,

while smaller lenders are still

hesitant to take similar moves.

Last week the State Bank of VN

asked banks to cut the interest

rates for medium & long-term loans

by 1.0-1.5%age point.

Banks are charging medium and

long-term loans in the Vietnamese

dong at between 9.0% & 11% per

annum now, while they pay 6.7-

7.3% per year for dong deposits,

according to the central bank.

SBV to take over loss-making

lender Reuter - Vietnam's central bank

(SBV) said on Monday it will acquire

all shares in a small, loss-making

unlisted commercial bank based in

the Mekong Delta.

The move by SBV is part of efforts to

help clean up VN's fragmented

banking sector, which is weighed

down with bad loans after a

decade of rapid expansion.

All shares in the Long An province-

based Vietnam Construction Bank

will be taken by SBV at no cost in

order to "develop business

operations more safely and more

effectively", SBV said in a statement

on its website. (http://sbv.gov.vn/)

The Vietnam Construction Bank had

"losses, bad debts and unstable

operation", it said in a December

2014 proposal calling on

shareholders to raise registered

capital. SBV said the plan had

failed to win support from investors

at a meeting last week.

Several mergers are expected this

year in VN's banking sector of 42

local lenders, which economists

consider overcrowded, with too

many small & undercapitalised

operators.

SBV sets new rules to prevent

big companies from

dominating stock market VNN - The stock market has been

stirred up with the news that credit

institutions’ loans to investors to

fund their stock investment must not

be higher than 5% of the institutions’

chartered capital.

Some analysts cited the current

regulation as saying that

commercial banks can provide

loans to securities investors if the

loans are not higher than 20% of

their chartered capital. Meanwhile,

under the new legal document to

be released in some days, the

proportion is 5% only.

However, Pham Huyen Anh, a

senior official at SBV, denied the

fact that credit limits for securities

investments will be cut.

The current regulation says that

banks can provide loans worth up

to 20% of their chartered capital to

fund securities trading deals.

The total chartered capital of

operating credit institutions in

Vietnam, including foreign bank

branches, is about VND435.5 trillion,

which means that banks can

provide loans worth up to VND20

trillion (5%) to fund stock

investments.

Stock market reactions

The VN Index fell just two days after

the news about the new regulation.

On Nov-19, the VN Index of the

HCMC bourse decreased by 1%,

while the HNX Index of the Hanoi

bourse dropped by 0.68%.

A report from BIDV Securities

Company says that once the new

regulation officially takes effect,

banks will have to urge customers

to pay debts in order to reduce the

lending index to below 5% of

chartered capital.


3


INVESTMENT

Investors flock to Vietnam as

e-commerce market expands

SGT - Foreign-run online shops in the

past have been less popular than

Vietnamese-run ones, which

understand local customers, but

that trend is changing as more

retailers invest in Vietnam.

Last year, the German Rocket

Internet announced a huge

investment deal of $250m in

Lazada, and Rakuten, an online

retail group from Japan, is

reportedly considering the

possibility of cooperating with a

Vietnamese e-commerce firm.

Observers commented that now is

the right time for foreign investors to

gear up their investment plans in

VN. Most market reports have

predicted there would be an online

boom in the near future.

VN customers use online shopping

through smart mobile devices such

as smartphones and tablets.

A 2013 report of Epinion, a market

survey firm, showed that 50% of VN

internet users use online shopping.

Vietnam expects to have an online

Black Friday this year.

Flurry Analytics, a market survey firm,

has reported that Vietnam ranks

second in the world in terms of an

increase in the number of

smartphone users. This gives one

more reason for e-commerce firms

to open more online retail channels

through mobile apps.

Large traditional retailers in Vietnam

like FPT Shop, Nguyen Kim and The

Gioi Di Dong last year began to

increase their investments to

develop online retailing.

Payment problems

Though Vietnamese often surf on

the internet and place orders online,

making payments remains a

problem for online shopping.

Pham Tien Dung, chair of

Banknetvn, noted that troubles

occur more regularly with payment

from domestic cards than int'l credit

cards, causing consumers to

hesitate to buy goods online.

Nguyen Ngoc Dung, from VECOM,

noted that the problem does not lie

in technological solutions, but in

consumers’ habits.

Vietnamese want to see products

in person before buying. Therefore,

e-commerce firms now have to

accept payments after delivery of

goods to customers.

Aeon invests in Vietnamese

retailers: report

Thanh Nien News - Aeon has

announced its purchases of a 30%

stake in Fivimart & 49% in Citimart, 2

major retail chains in Vietnam.

Fivimart now operates 20 stores in

Hanoi, while Citimart runs 27 stores,

mainly in HCMC.

Speaking to local media the same

day, the Vietnamese retailers

confirmed the purchases, but

refused to reveal details.

Aeon opened its first shopping mall

here in January last year in HCMC,

and another one in the neighboring

province of Binh Duong.

It planned to open the third mall in

Hanoi this year.

Aeon considers Vietnam its second

most important market in Southeast

Asia after Malaysia. It has planned

to open 200 stores across the

country, and increase sales to

¥100b ($6.78b).


4


ENTERPRISES

Vietnam's shrimp king courts

foreign investors to expand

Bloomberg - Minh Phu Seafood

Corp., which sells black tiger shrimp

to Costco Wholesale Corp. and

Wal-Mart Stores Inc., will seek to sell

half of itself to foreign strategic

investors to help fund overseas

expansion.

Vietnam’s largest seafood exporter

by value aims to complete the

stake sales this year after it gets

approval to delist from the HCMC

Stock Exchange this quarter, Chief

Executive Officer Le Van Quang

said in an interview. The company

forecasts net income will jump 55%

to 1.416 trillion dong ($66m) this

year, with sales reaching $1b,

mainly from exports, he said.

“We’re looking for strategic foreign

investors to help maximize our

advantages and potential as our

goal is to become a global shrimp

company by 2020,” Quang,

dubbed the “king of shrimp” by

local media, said in an interview

Jan. 24 in the Mekong delta

province of Hau Giang.

Vietnam is considering proposals to

raise the foreign-ownership limits of

listed companies. Vietnamese

companies are increasingly in need

of foreign strategic investors for

capital and expertise to expand

internationally.

Under current rules, foreign investors

can hold a maximum 49% of a

listed company’s stakes. A draft

measure proposes that foreign

investors be allowed to make

“unlimited” investments in non-

voting shares of public companies.

Foreign investors

“If we stay on the HCMC Stock

Exchange, we can’t raise enough

target capital,” said Quang, who

plans to raise the registered capital

20% to 840 bln dong.

Minh Phu dropped 0.9% to 109,000

dong a share in HCMC trading on

Wed, Jan. 28. Its share price rose

more than four-fold last year as the

company bought back shares,

giving it a market capitalization of

7.5 trillion dong now, according to

data compiled by Bloomberg.

A dozen foreign investors from the

U.S, Japan and Canada have

expressed interest in the stake sales,

Quang said at his office at

company subsidiary Minh Phu Hau

Giang Seafood Processing Joint-

Stock Company. Mitsui & Co. Ltd.

holds a 31% stake in the Mekong

delta-based subsidiary.

Minh Phu will choose one or two

partners this year, Quang said.

France-based Artemis’s Red River

Holding owns a 9.47% stake and

Vietnam Investment Fund holds

7.38%, said Quang. The company

failed to secure a partnership deal

with CP Group, Thailand’s largest

shrimp exporter, in 2012, he said.

Quang said he and his family want

to drop their stake holdings to no

less than 35% from 79% currently.

Vietnam seafood

Minh Phu’s sales and profit will grow

15% to 20% annually over the next

five years, Quang said. The

company has helped propel

Vietnam to become one of the

fastest-growing seafood exporters

in the world, with the national

industry’s shipments rising 18% to

$7.9b in 2014. Vietnam’s shrimp

exports climbed 25% to a record

$4.1b last year.

Shrimp prices hit a record last year

due to a lack of global supply

when diseases affected shrimp

from Thailand, said Dinh Duc Minh,

senior analyst at Saigon Securities

Inc.


5


ENTERPRISES

“If Thailand resolves shrimp diseases

and the supply increases again, the

shrimp prices will drop,” Minh said.

“In that case, Minh Phu and other

shrimp companies in Vietnam can’t

earn profits as high as in 2014.”

The company’s exports to more

than 60 countries jumped 41% to

$730mi last year, Quang said. The

US is its largest market, comprising

more than 1/3 of last year’s exports,

followed by Japan and Europe.

Quang wants to find strategic

investors who can help the

company expand its production

and market overseas, he said. The

company is working with Edmond

de Rothschild Suisse SA to find

investors, he said.

Quang said his company plans to

build shrimp processing companies

and distribution units in India,

Indonesia and the Philippines in the

next five years. The company,

which runs a distribution unit in

California, plans to build a 40,000-

ton shrimp processing plant in Ca

Mau province this year and another

with the same capacity in Hau

Giang province in the next 3 years.

“My goal is to produce shrimp for

everyone’s meal,” said Quang,

“Shrimp isn’t food only for the rich

any more.”

Toyota Vietnam CEO elected

VAMA chair

The Chief Executive Officer (CEO)

of Toyota Vietnam has replaced

Ford Vietnam’s CEO to assume the

chairmanship of the Vietnam

Automobile Manufacturers

Association (VAMA) as of Jan-30,

according to VAMA.

Mr. Yoshihisa Maruta

Accordingly, Mr. Yoshihisa Maruta

will hold the position for the term

2015-2017, replacing Mr. Jesus

Metelo N. Arias Jr, who is now the

second vice chair of the

association.

Representing wholly-Vietnam

owned firms is Mr. Bui Kim Kha, a

representative of Truong Hai Auto

(THACO), who is the first vice

president.

This is the first time a Vietnamese

representative joining the

management board of VAMA.

According to the review report of

VAMA, 157,810 cars were sold in

2014, up 43% compared to 2013.

The members of VAMA sold 133,588

cars, up 38% compared to 2013.

Flappy Bird maker in "30 under

30" list

VNS - Forbes VN, the Vietnamese

edition of renowned American

business magazine Forbes, has

listed Nguyen Ha Dong, the Flappy

Bird game creator, among its top

"30 Under 30."

Forbes VN yesterday released its

first-ever list of 30 of VN's brightest

stars under the age of 30 in

different fields, including business,

communications, entertainment

and sports.

Nguyen Ha Dong and Nguyen Huu

Cat Thu, founder and CEO of

Mindstep, are among nine talented

Vietnamese in the technology and

e-commerce fields.

Meanwhile, Dinh Nhat Nam,

founder and marketing director of

Urban Station coffee, and Mai

Truong Giang, founder and CEO of

the Khuong Viet JSC, are among

the six achievers named in the

business field.

Actor and MC Tran Thanh and Le

Quang Liem, the world blitz chess

champion, are among the

achievers listed in the

entertainment and sports fields.


6


MARKET & PRICE

VN food consumption surge

5.1% every year: MoIT forecast

VNS - Vietnam's food consumption

is expected to grow by 5.1%

annually to an estimated $29.5b by

2016, according to a Ministry of

Industry and Trade (MoIT) forecast.

The forecast also pegged food

consumption per capital growing

to VND5.8 million (about $276) by

2016, reflecting an increase of 4.3%.

The expected growth is a result of

consumers' increasing incomes and

the development of the retail

industry.

At present, VN consumers still focus

on the daily essential food demand.

However, the trend will change

when the income of urban

residents rises, which will allow them

to spend more on high-quality food

and beverages.

"In order to meet demand from

local consumers, the quality of local

food products need to be

controlled more closely," said Bui

Truong Thang, Deputy head of

MoIT's Light Industry Department.

However, most VN food processing

enterprises have weak competitive

capacity in the regional and global

market.

Cement consumption rises

30%

VNS - Cement consumption in VN

posted a 30% YOY rise in Jan 2015,

reaching 5.87 mln tons.

The latest figures from the

Department of Building Materials

under the Ministry of Construction

showed that local cement

consumption in the first month of

the year was higher than those in

the previous month and in the

same period last year.

Specifically, the consumption was

4.37 mln tons, which is 6% and 47%

higher than last December and

January, respectively.

Of the total, the VN Cement

Industry Corporation (VICEM) sold

1.41 mln tons of cement in local

markets, 46% higher than its sales in

the corresponding period last year.

The amount of cement exported

was estimated at 1.5 mln tons.

The department said that the selling

price of cement last month was

more stable than its price last year,

thanks to the balance in supply and

demand of cement production

and consumption.

Furthermore, the ministry predicted

that cement consumption this year

would reach 71 to 73 mln tons,

which would be a 4 to 7% rise from

that in 2014. Of this total, local

consumption is expected to be 52

to 53 mln tons and exports will

reach 21 to 22 mln tons.

Several private cement producers

have seen positive results in their

exports.

Chairman of the Vissai Cement

Group in northern Ninh Binh

province, Hoang Manh Truong,

affirmed that they had been active

in their production and

consumption activities, adding that

the company's cement exports

were equivalent to domestic

consumption.

Truong also remarked that the

group had signed an export

contract of 1.2 mln tons of clinker

with Bangladesh, which brought its

market count to 20 countries and

territories. These include Germany,

Mozambique, Congo, Indonesia,

China, Hong Kong, France,

Australia and the US.


7


LEGAL UPDATES

New investment policies to

take effects

PLF - The Law on Investment 2014

(coming into effect on July 1st,

2015) shall contain significant

changes, in comparison with

existing provisions, specifically in

investment forms, new regulations

on Investment Registration

Certificate, and projects entitled for

investment incentives.

1. Forms of investment

Also, multiple investment methods

such as BOT, BTO, BT contracts,

investing in business developments,

and investing in merger and

acquisition, were abolished in the

Law on Investment 2014, a new

form of investment has been

supplemented, which involves

investing under a Public-Private

Partnership ("PPP") contract.

Accordingly, investors and project

management companies shall

enter into PPP contracts with

competent authorities in order to

execute investment projects to

implement new construction

investment projects, to improve,

upgrade, expand, manage, and

operate infrastructure works, or to

provide public services. In addition,

there are significant modifications

in the remaining investment

methods, specifically as follows:

Investment in the establishment of

economic organisation

Before establishing an economic

organisation, foreign investors are

required to have one investment

project, apply for an Investment

Registration Certificate ("IRC") and

must satisfy certain conditions on

ownership rates of charter capital

and other conditions prescribed in

international treaties, to which the

Socialist Republic of Viet Nam is a

signatory. Regarding ownership

rates of charter capital, in particular,

foreign investors are eligible for an

indefinite amount of charter capital

in economic organisations, except

for certain cases restricted by

provisions of law on securities and

equitisation and conversion of

state-owned companies, and

international treaties to which the

Socialist Republic of Viet Nam is a

contracting party.

Investment in the forms of capital

contribution, purchase of shares or

capital contributed into economic

organisations, and under BCC

contracts:

In comparison with the Law on

Investment in 2005, the Law on

Investment 2014 contains more

detailed regulations on investment

conditions and procedures, as well

as the primary contents of BCC

contracts.

2. Grant of IRC

In the Investment Law 2014, cases

in which IRC procedures are not

compulsory have been expanded,

including: investment projects of

domestic investors; investment

made by contributing capital,

purchasing shares or capital

contributions from economic

organisations; etc. In addition, any

investor wishing to obtain an IRC is

entitled to request competent


8


LEGAL UPDATES

authorities to implement the

procedures.

Furthermore, the provision in Law on

Investment 2005 stating that

"Investment Registration Certificate

also acts as a Business Registration

Certificate" has also been

abolished from the Investment Law

2014. More importantly, investors

who were granted Investment

Licences or Investment Certificates

before July 1st 2015 are permitted

to continue executing their

investment project, in accordance

with the granted Investment

Licence or Investment Certificate

(which can be replaced with an

IRC by the investment registration

authorities, if requested by the

investors).

3. More projects eligible to enjoy

investment incentives

The following projects eligible for

investment incentives have been

supplemented into the Investment

Law 2014:

i. Several business sectors given

investment incentives are

concretised, such as: production of

clean and renewable energy,

production of products with at least

30 per cent value added and

energy-saving products, etc.;

whereas traditional business sectors

are removed from those investment

fields eligible for incentives;

ii. Investment projects in which the

scale of capital is at least VND6

trillion (US$280.3 million), or at least

VND6 trillion is disbursed within 3

years from the date of issuance of

the IRC or decision on investment

policies;

iii. Investment projects in rural areas

that employ 500 workers and more;

iv. High-tech companies, scientific

and technological companies, and

scientific and technological

organisations.

It is essential to note that the

projects mentioned in points iii and

iv above cannot enjoy investment

incentives for mineral extraction

activity; manufacture/sale of

goods/services subject to special

excise taxes, except for car

manufacturing.

4. Overseas investment

While Investment Law 2005 did not

contain regulations on the forms in

which domestic investors may

invest in foreign countries, the Law

on Investment 2014 has concretised

overseas investment forms, such as:

establishing an economic

organisation under the provisions of

law of the country receiving

investment; undertaking BCC

contracts overseas; or repurchasing

part or all of the charter capital of

the economic organisation

overseas; etc. Furthermore, the

competence to decide on policies

of investment abroad, as well as

the conditions and procedures to

grant IRC overseas, have also been

clearly regulated in the Investment

Law 2014.


9


HIGHLIGHTS

Vietnam, Japan lift industrial

cooperation

VNS - The Deputy Prime Minister has

urged relevant ministries and

agencies to rapidly implement the

Viet Nam Industrialisation Strategy

(VIS), which is part of the Viet Nam-

Japan cooperation framework

through 2020.

Deputy PM Hoang Trung Hai has

given the directive to the following

ministries: Finance; Science and

Technology; Labour, Invalids, and

Social Affairs; Foreign Affairs;

Education and Training; Natural

Resources and Environment;

Construction; Industry and Trade;

Agriculture and Rural Development;

Planning and Investment; and

Transportation, as well as the State

Bank of Viet Nam.

They have been asked to carry out

their assigned tasks in a timely

fashion, including submitting reports

to the Deputy PM – who also heads

the Steering Committee for VIS – by

April this year.

Under the strategy approved by

the Prime Minister on July 1, 2013,

priority has to be given to

developing the electronics,

agricultural machinery, agricultural

and seafood processing, ship

building, environment and energy

saving, and automobile and spare

parts manufacturing sectors.

The development of these industries

is expected to nurture high value-

added products, boost

technological innovation and

productivity, and improve global

competitiveness of local firms.

The Ministry of Planning and

Investment was assigned to

supervise progress in the

implementation of the action plan

and conduct research on potential

products or areas for cooperation

with Japan.

Additionally, it will collaborate with

the Ministries of Foreign Affairs and

Finance to seek support from

foreign partners and enterprises for

the projects stipulated within the

plan.

Meanwhile, the Ministry of Industry

and Trade will work with the

Japanese Embassy to finalise an

action plan for the development of

the automobile and spare parts

manufacturing industry in March

2015.

Vietnam shopping mall leases

booths at zero fee for 50 years

Tuoi Tre News - A shopping center

where traders can rent a stall for

zero dong for half a century was

inaugurated in Hanoi on Saturday.

Hoa Binh Co. Ltd. said thousands of

booths at its five-story V+ shopping

mall in Hai Ba Trung District are now


10


HIGHLIGHTS available for free with a 50-year

term.

Businesses have to pay only one

percent of profit to cover power,

water, and cleaning costs,

according to company chairman

and general director Nguyen Huu

Duong.

“As for those that have yet to make

a profit, we will exempt them from

such fees,” he added.

The total exempted leasing fee is

estimated at more than VND500

billion (US$23.3 million).

The first floor of the 25,000-square-

meter venue was filled with new

stalls on the opening day, most of

which are fashion stores.

As of the end of Saturday, many

booths managed to empty their

stocks thanks to the competitive

selling prices, according to Lao

Dong (Labor) newspaper.

V+ is only open to Vietnamese

businesses that sell locally

manufactured products. Foreign

firms or local businesses that sell

imported goods are not allowed to

open a stall there.

Duong told a press conference in

Hanoi on January 28 that he

wanted to set up a pure

Vietnamese shopping mall to

encourage the production, sale,

and consumption of Vietnamese

products.

A major supermarket chain in Hanoi

had asked to acquire a large area

at the shopping center for VND300

billion ($13.98m), but Duong turned

down the proposal, he said.

With a zero leasing fee, products on

sale at V+ will be 30-50% cheaper

than at other venues, he said.

Duong expressed his hope that

more V+ shopping centers will be

opened across Vietnam to support

more local businesses.

Hanoi retail market retains

lustre

VNA - The retail market in Hanoi is

still attractive for investors, even

though it has experienced business

impediments during the past, a

Hanoi Industry and Trade

Department official said.

Last year was continuously marked

by numerous fluctuations in the

modern retail market nationwide,

as well as in Hanoi, which

encountered many challenges in

business, said Tran Phuong Lan,

Director of the Department.

Some trading centres in the city

had to sell or temporarily stop their

operations, including the Thai Berli

Jucler Group buying Metro Vietnam,

and the operations at Parkson

Landmark 72 and Trang Tien Plaza

being stopped for restructuring of

retailers in the plaza, Lan stated.

The market share of the modern

retail model stooped to a new low,

she said, with the circulation of

good in the modern distribution

system accounting for 15 percent

of the market and other goods

distribution systems being traditional

markets and sale agents of

producers.

These trading centres faced

difficulties in business because

there was a growing supply of retail

spaces in the medium and high-

end segments, while almost all

retailers were small and medium-

sized enterprises, Lan explained.


11


HIGHLIGHTS They have also found it difficult to

seek retail spaces that were

suitable for their financial ability. If

they leased spaces in trading

centres for a high rent, their goods

would also have to be priced

higher and would become difficult

to sell.

Meanwhile, low purchasing power

at present due to the economic

crisis also affected the consumption

of goods at these trading centres,

said Lan, adding that customers

could also buy goods via other

channels, such as online trading,

direct orders at home and through

sales agents abroad and did not

need to go shopping at trading

centres.

However, in general, trading

centres in Hanoi follow a high

development level, and have

garnered attention from many

foreign and home investors, such as

the South Korean Lotte Group, the

Japanese AEON Group, the Thai

Central Group and Vietnam's

Vingroup, according to Lan.

According to CBRE's report, Hanoi

was ranked 13th in the list of 19 hot

retail markets in the world and one

of the top ten cities in the world

that retailers planned to open their

retail system in 2014.

This is because the retail system in

Hanoi has been developed strongly

in scale and quality to meet

demand from the local people and

foreign visitors.

In 2015, approximately 397,000 sq.

m of retail space from 19 projects

enter the market. Of these, two

projects have been completed, but

their opening date is uncertain, and

nine projects are currently being

fitted out, according to Savills

Vietnam.

In 2016, five projects will come

online with an area of 356,000 sq. m.

Four projects are currently under

construction.

"The retail market is on its way to

improvement and seems to have

found the right direction. The new

trend is focused on developing

supermarket models, food and

beverage items and entertainment,

with the main purpose being

satisfying the clients' needs," said

Do Thu Hang, the Head of

Research and Consultancy, Savills

Hanoi.

According to CBRE Vietnam stable

economic factors in the future are

expected to boost sales and boost

buyers' confidence.

Rents are constantly dropping to

maintain occupancy, but at a

modest pace. The expansion of

retail space and the arrival of new

entrants are expected to drive the

retail market in 2015 due to

Vietnam's commitments to the

World Trade Organisation. But, the

Economic Needs Test (ENT) has

remained a barrier for foreign

retailers.

Projects have been restarted and

the production of future supplies

has sped up, following an

economic recovery, according to

the report.

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