Three Reasons Japan Invests in Vietnam

In accordance with the statistics from the Ministry of Planning and Investment (MPI), accumulating to the end of May 2014, Japan is still the leading investor into Vietnam, with more than USD 35,57 billion registered for investment. Following Japan are Korea and Singapore, with the respective gross figures of USD 31,01 billion and USD 30,33 billion.

The gross FDI capital invested into Vietnam from Japan is not significant larger than investment from Singapore and Korea .  However, taking into consideration of the economic potential of Japan and Japanese companies which are perceived much higher than Singapore and Korea’s counterparts, it appears that the FDI from Japan has a lot potential.

The MPI expects the FDI capital from Japan might increase strongly in the next period. A few investment sectors which Japanese business shall keep on focusing in the next period are the pharmaceutical and chemical industry, steel and metal production, machine in general and other electronic devices, devices of transportation sector, wholesale and retail.

The reasons for the above mentioned expectation are:

First, after many natural catastrophes such as earthquakes, tsunamis, Japanese businesses has acknowledged that focusing too much in one investment location might has its risks. Therefore, to diversify the investment is to divide the risks, too. Many Japanese companies have been identifying the new destinations for investment.

Second, China has always been one of the most FDI-attractive nations of Japan.  But the increasing cost for labour and in contrast the decrease in incentive from Chinese Government for foreign investors, along with many tensions between Japan and China regarding border and territorial issues have been cooling down the interest of Japan investors. Pursuant to the annual survey report of the Commercial Promotion Agency of Japan, for production companies of Japan currently operating in Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam and India, with the relocation of investment destination, amongst those above mentioned nations, Vietnam has been rated best by most Japanese companies, with the percentage of 20,5%, 2,8 times higher than the nation in the following spot which is Thailand.

Third and finally, the commitment on strategic partnership and the implementation of incentives attracting investment, such as the establishment and development of the Industrial Zone for business supporting industry in Ba Ria – Vung Tau and HaiPhong, shall come fruity in the near future.

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Is Apple About to Set-up Company in Vietnam?

In the August 2015 work plan of the Ho Chi Minh City People’s Committee, it has been recently revealed that a section to review the registration of a company named Apple Vietnam company limited. Is it the American multinational teconology company with its famous products i.e. Mac, Ipod, Iphone, Ipad, Apple watch…about to set-up company in Vietnam to promote and distribute its own products i.e. the upcoming Iphone 6s, and Iphone 6s plus?

According to the information from the official dealer of Apple in Vietnam, Apple has already had a representative in Vietnam and began contacting with agents in the country from early 2015. The current business activities of Apple with domestic partners are done through Apple Thailand. Therefore, Apple’s representative in Vietnam will help to smooth out this arrangement because of the better understanding the local market and no language barrier.

Although Apple has not had their representative office or official company in Vietnam but they have many authorized dealers to sell its products. Apple products like the iPhone 6 and iPhone 6 Plus have always led the top 10 selling phones in many domestic retail systems since its launching in late 2014. According to the statistic of IDC, in the first quarter of 2015, Apple ranked 2nd in value in the largest smart phone manufacturers in Vietnam; in the tablet market, Apple accounted for 16.6% of the market – ranked 2nd in the market – but accounted for 29.1%, the highest in terms of market value.

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Risk Management Necessity in Vietnam?

As Vietnam further integrates into the world business, more investors are eyeing Vietnam for investment. As part of investment due diligence, risk management are always well considered before foreign investors decide to do business with Vietnam partners.

In any parts of the world inluding Vietnam, risk is an inevitable factor in business operation activities; higher return is always accompanied by higher risks. Coping and managing risk is an integral part of any business in order to make profit and create value to shareholders in import export transaction, investment, or merger and acquisition activities in Vietnam.

However, in our daily consulting practice, we have seen a number of businesses whom do not manage risk effectively and furthermore not fully understand about the risks that they are facing.

Typical risks in developing countries like Vietnam are political risks, policy risks, regulations risks, credit risks, bribery and corruptions, and organized crimes.

On daily transaction in trading, according to Vietnam Ministry of Industry and Trade, there are situations a number of corporate scams between Vietnam and foreign enterprises are reported. In particular, foreign companies sell goods or provide services to partners in Vietnam and in return the Vietnam partner fail to pay.

On a larger scale in FDI through setting up business or M&A, businesses that do not improve the risk management process will have to face with a lot of different types of risks: serious financial losses, adversely affecting cash flows and the value of shares, decreasing prestige with customers, employees and investors.

Many business leaders often put heavy emphasis on the business activity, profit, and revenues instead of concentrating more on risk management especially understading business partners through corporate intelligence investigation, background studying, adverse media search through professional consultants in Vietnam whom understand languages, cultures, legal environment and busienss practices. Further searches could help foreign investors to understand the company itself, owners, shareholders, members of board of directors of partner companies whom make daily decisions of the business.

In the period that global crisis has been predicted that almost bottom out and start to show signs of recovery, although the recovery process can occur with different speed and characteristics depending on sector and location of the business, the fully preparation of business in all aspects including process and risk management strategy could helps business not falling into the passive and also have more possibilities to take advantage of growth opportunities after the recession.

Recently, with the impact of high inflation rate and economic recession caused by the global financial crisis, enterprises are increasingly concern about risk management activities. Many experts believe that an effective and well organized risk management system will help businesses withstand and overcome fluctuations.

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Vietnam is Increasingly Attracting Capital from the US

Vietnam is taking every opportunity to grow its economy and improve the living standard. This is not a vain dream since Vietnam has young and plentiful work force. That is why multinational companies wish to come and set up company in Vietnam.

• Japan Increases Investment in Vietnam in Finance and Services
• Why Japan Investors Invest in Vietnam

The year 2015 marked the 40 years since the war end and the 20 years of normalized the relationship between Vietnam and the US. Vietnam began the process of innovation since 1986 but not until 1995, foreign investment in Vietnam began to flow in when the Government established formal diplomatic relations with the United States and joined the National Association of the South East Asia (ASEAN).

In recent years, foreign investment in Vietnam has accelerated. The Korean company is particularly excited with this market. Samsung Electronics is operating and building three plants at three locations – Ho Chi Minh City, Thai Nguyen and Bac Ninh. In total, this giant electronic corporation has poured more than USD 10 billion in Vietnam.

Vietnam is also expected soon to welcome a “wave” of investment from the US. The Procter & Gamble (P&G) – a consumer goods manufacturer is building a factory in Binh Duong with the cost of 100 million USD. The plant will produce Gillette razors.

Since starting operations in Vietnam in 2008, Intel is also pouring money into this market. This semiconductor giant is planning to manufacture in Vietnam the most of advanced processor for personal computers in the future.

Moreover, other big names come from the US that are expanding operations in Vietnam are Starbucks and McDonald’s. They opened their first store here in December 2013 and February 2014.

There are a number of factors that make foreign investment in Vietnam explode. One of the most important reasons is the low labor cost. Labor cost hikes in China are the reason why many multinational manufacturers turned their attention to Vietnam where the cost is 50% cheaper. Besides, the purchasing power of Vietnam consumer is increasing, inflation has been curbed and many easing regulations to boost growth are also the reason why continuous investments are poured tin..

However, the biggest attraction for most foreign investors is the Trans-Pacific Partnership agreement (TPP) about free trade in which Vietnam is one of 12 countries that participate in negotiations. In mid of this year, General Secretary of Vietnam, Mr. Nguyen Phu Trong will visit the United States. TPP agreement will be the main topic of the conversation with the US officials. If the two countries can reach an agreement, the US will become even more important partner of Vietnam’s economy in the future.

In a press conference in HCM city in January 2015, US Ambassador in Vietnam – Mr. Ted Osius was upbeat about the impact of the TPP to Vietnam economy and the US investment here. TPP agreement “will allow the US to become the number one investor and trading partner of Vietnam” he said.

In about 4.5 million Vietnamese living overseas, about 2 million are living in the US. In particular, many people have made a name in the business world. They are Mr. Henry Nguyen – who brought McDonald’s to Vietnam and Mr. David Thai – founder of Highlands coffee chain.

According to the Ministry of Foreign Affairs of Vietnam, approximately 180,000 companies in the United States are owned by Vietnamese, achieved a total revenue of 20 billion USD. Strengthening ties between the two countries could stimulate greater cash flow stream across the Pacific.

The Ministry of Planning and Investment of Vietnam is estimated to spend 500 billion USD in over 10 years to develop the infrastructure necessary for sustainable growth. However, Vietnam can only able to meet 40% of the above figure, through the Government budget, ODA and private capitals.

That is why the Government wants to attract FDI. The Vietnam Government has set a target to create an industrial economy by 2020. Six priority areas are agriculture, forestry and fisheries processing, agricultural machinery, electronics, shipbuilding, environmental and energy saving, automobile production.

The transition from growth based on FDI into industrial-based growth can be rather difficult. However, Vietnam has shown it is serious and is still on track.

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WSJ: “Made in Vietnam” Goods will Soon Popular Globally

Numerous foreign investors relocating factorties to Long An (Vietnam) to set up business and take advantage of young and low cost workforce.

This province has a dozen industrial zones. As of May 2015, they have attracted 3.67 billion USD foreign investments, 40% of which is poured into textiles sector.

The economists said that this process could accelerate if the Trans-Pacific Partnership agreement (TPP) is agreed. This agreement will reduce import tariffs on many goods exchanged between member states, mainly to benefit the developing country like Vietnam or Malaysia – countries where growth rate depends heavily on exports.

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Benefits of Setting up Business in Hanoi

Benefits of Setting up Business in Da Nang

Benefits of Setting up Business in Ho Chi Minh City

Assistance in Setting up Business in Vietnam

M&A Services in Vietnam

Wages soared and labor shortages in China are making Vietnam become more attractive. Last year, FDI into Vietnam have reached 12.4 billion USD, increase by nearly 25% compared to 2009. One of the largest investors as Samsung Electronics of South Korea whom have plan to double investment in electronics manufacturing in Vietnam.

If TPP takes effect, Vietnam economy will be the biggest beneficiaries because this country has more opportunities to access the large consumer market. TPP will give member countries privileged access to the US and Japan.

The Government of Vietnam is estimated that TPP could bring the economy 33.5 billion USD over the next decade, equivalent to a fifth of current GDP. The export turnover of the main industries, such as textiles and footwear, will increase by 46% to 165 billion USD in 2025 due to tax-free imports into other countries.

In Long An, the 3-storey factory of Avery Dennison is preparing for the influx of orders on clothing labels and price tags. Dozens of concrete houses for workers are also being built – a signal that many other manufacturers are also coming here.

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