TNS reviews 20 years of growth in Vietnam

Source: Tuoi Tre 30 May 2015

 

TNS Vietnam has released a special report to review 20 years of growth in Vietnam, in celebration of two decades of tracking and providing insight into Vietnamese consumers by the market research firm.

Part of Kantar, the data investment management division of WPP and one of the world's largest consultancy groups, TNS began its operations in Vietnam in 1996.

Over the past two decades, TNS has observed “just how much the Vietnamese market has grown, changed, and developed into one of the world’s most vibrant economies,” it said in a press release on Monday.

20 years of economic growth

Ashish Kanchan, managing director of TNS Vietnam, said the Southeast Asian country is “an incredible growth story.”

In 1996 when TNS Vietnam was founded, the Vietnamese economy was booming, boasting a 9.3 percent growth rate.

The world has since gone through an economic crisis, which was followed by a global slump that dampened growth across markets, but Vietnam “has consistently remained relatively strong,” Kanchan said.

“For the past 20 years Vietnam’s GDP has far exceeded the world average, and the GDP per capita growth proves the strength of the rapidly growing productivity and prosperity of the Vietnamese people,” Kanchan commented.

“The numbers highlight the potential and viability of this rapidly emerging market.”

 

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Over the past 20 years TNS has studied how personal incomes have grown.

Workers in Vietnam’s biggest cities are now earning nearly five times as much on average as they did in 1999, Kanchan said, citing findings from TNS’s VietCycle and Consumer Pulse reports.

In 1999, the goods people most aspired to have were motorbikes, personal computers, and washing machines.

But aspirations have shifted to bigger ticket items such as cars, smart TVs, and air conditioners, as rising incomes have made those items more attainable.

“However, even these new aspirational items are becoming attainable to a growing segment of the population which is borne out in the massive boom in car sales,” Kanchan noted.

“When we look at other past aspirational categories such as travel for leisure, rising incomes have allowed that industry to blossom.”

In the past, travel, even domestic, was out of reach for most consumers, while Vietnamese today are able to travel thanks to increased incomes and the rise of budget airlines to meet consumer needs.

“Even travel by land has become easier with continued investments into the country’s infrastructure making land travel more comfortable and efficient,” Kanchan concluded.

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20 years of consumer insight

In its Quarter 2, 2016 Consumer Pulse study, TNS placed Vietnam’s Consumer Confidence Index at the highest-ever 91 points.

The index is based on Vietnamese expectations for the value of the Vietnamese dong, employment, Vietnam’s economy, and personal standards of living, according to the market researcher.

“The high Consumer Confidence Index shows continued positivity in 2016 by Vietnamese consumers but that index has changed over the years,” Kanchan said.

The TNS official underlined that it is important to remember the landscape that existed back in the 1990s.

“The country had recently normalized relations with the United States, the world economy was doing well, and as a result, consumer expectations and outlooks were sky-high,” he elaborated.

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Kanchan noted that although consumers are still highly optimistic, they are more reserved in their expectations, as the Consumer Pulse survey shows.

“Vietnamese are realizing that even though the country continues to grow rapidly, improvements to daily life will become more gradual than in the early days,” he added.

Ninety-six percent of Vietnamese expect stability or improvement in their standard of living, while at the same time, expectations for a worse standard of living have declined, leaving the vast majority of Vietnamese holding positive or neutral sentiments, according to the study.

TNS has also tracked how consumers have changed their lifestyles and ways of thinking, and how their interest in entertainment has changed over the last 20 years.

For example, in 1999 TNS found that 78 percent of consumers thought women must focus only on traditional roles, but that number had fallen greatly to 51 percent in the latest Consumer Pulse study.

Similarly, while Internet surfing was nearly non-existent back in the 1990s, it is the most commonly reported activity to relax at home by urban Vietnamese today.

 

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The next 20 years

After observing the Vietnamese consumer’s evolving tastes and habits over the past 20 years, TNS said there are some game-changing trends that are shaping the landscape for brands and consumers in Vietnam.

Three of those trends to watch, according to the market researcher, are the rise of digital, the convince category, and the importance of emotional drivers.

Kanchan concluded that Vietnam has been “an amazing country to watch,” with consumers' overall optimism for the future remaining steady despite changes the nation has made over the years.

“We are eager to see how the rest of the year concludes with our rolling Consumer Pulse studies to be conducted later in 2016, and are looking forward to our next 20 years in Vietnam,” he said.

 

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Frontier Vietnam Eyes Promotion to Emerging-Market Big Leagues

Source: from Bloomberg 29 April 2016 -  by Giang NguyenBonnie Cao

 

Vietnam says it’s on track to attain the holy grail of emerging-market status, which would put its fledgling capital markets on the radars of the world’s biggest asset managers. Index provider MSCI Inc. isn’t so sure.

All of MSCI’s criteria for emerging-market classification are expected to be met as soon as the end of 2016, Nguyen Son, head of market development at the State Securities Commission, said in an interview in Hanoi. The “most difficult” remaining obstacle is to alter foreign-exchange policy to improve the ease of fund flows, he said. Raman Subramanian, managing director of equity research at MSCI in New York, isn’t convinced, saying the country is not yet on the watch list for emerging-market inclusion.

Vietnam has grown faster than its Southeast Asian neighbors in recent years, but its economy is still dominated by state-owned banks and its stock market is only around a quarter the size of that of the Philippines. The United Arab Emirates and Qatar - the last two countries to be promoted to emerging-market status by New York-based MSCI - saw their benchmark share gauges jump by at least a third in the 12 months following their addition in June 2013.

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“If it happens, it will definitely be a real game changer,” said Attila Vajda, the Ho Chi Minh City-based managing director of Project Asia Research & Consulting Pte, a Singapore-based advisory firm. “It will attract a different type of investor: the big guys so to speak.”

Vietnam has a stock market capitalization of $64 billion, compared with $250 billion in the Philippines and $373 billion in Thailand. An emerging-market ranking requires “significant” openness to foreign ownership and ease of capital flows, as well as minimum levels of liquidity and market value, according to MSCI’s website.

“We haven’t heard anybody across the globe telling us that Vietnam should be there, into the emerging-market pool,” said MSCI’s Subramanian. “It’s not even there yet” and needs to go through a whole process to get there, he said.

Foreign Ownership

Certain industries including securities firms were opened up to 100 percent foreign holdings last year. There are another 18 sectors including transport, construction and real estate where offshore investors can take a degree of ownership subject to certain conditions. Some of the country’s many state-owned companies are also proceeding with partial privatization plans. Vietnam Meat Industries Ltd. sold a 14 percent stake to the public in March and Vietnam National Shipping Lines and Mobile Telecom Services Co. are planning initial public offerings later this year.

A merger of the Hanoi and Ho Chi Minh City stock exchanges, which was firstannounced in 2012, is expected to be completed by early 2017, said the commission’s Son. A composite index will be built and products such as covered warrants as well as a derivatives market will be added in 2017, he said. The government would like to partially float the merged bourse, although this won’t happen until after 2020, said Son. The exchange and bigger listed companies are also publishing more information in English, he said.

Vietnam’s economy will expand 6.7 percent this year, the same pace as in 2015, the government forecasts, although a drought and slumping oil revenue are creating headwinds. Disbursed foreign direct investment surged 17.4 percent to a record $14.5 billion last year, while foreign funds added a net $100 million to their holdings of the nation’s stocks.

Still, the average daily turnover on the Ho Chi Minh City bourse is just 2.26 trillion dong ($101 million), less than a quarter of the amount in Indonesia. A lack of liquidity and limits on foreign ownership of companies need to be improved “markedly” said Project Asia’s Vajda. It’s difficult for a big fund to invest $100 million to $200 million in Vietnam if it wants flexibility of entry and exit, he said.

The VN Index has risen 2.2 percent in 2016, trailing gains in Thailand and Indonesia, after advancing 6.1 percent the year before. The commission’s Son said he expected the market to perform better in 2016 than last year due to economic and credit growth as well as a continued increase in foreign direct investment.

“We have met or surpassed some criteria” of MSCI, he said. “I think it’s gonna be a positive year for the market.”

 

 

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Toward the development of Capital Ventures in Vietnam and so easier access to funding for SMEs

 

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Without the existence of capital ventures, may be there would be no Silicon Valley in the US. Recognizing that capital is a pre-requisite for the success of any start-up business and in view to promote innovation and make Vietnam an entrepreneur nation, a draft legislation is currently submitted by Vietnam’s Ministry of Planning and Investment to public review with the aim to make easier and simpler the set-up, management and operation of venture capital funds.

Basically, with this new legislation:

  • Venture capital into start-ups is defined as investment with high level of risk either through loans or equity stake in view to launch and develop a business in its early stage for its potential and which is not yet profitable.
  • The time needed to launch a venture capital fund would be minimum, only three days
  • The existing regulations on the securities investment funds (eg. have a minimum capital of VND50 billion or US$2.2 million or at least 100 investors) would not be applicable to the operation of a venture capital fund.  A venture capital fund however would not be allowed to borrow money for investments.

This should contribute to accelerate the development of start-ups and SMEs in Vietnam particularly in the industries such as IT, medical industry.. .where the country has significant competitive advantages.

Today the number of capital ventures dedicated to SMEs in Vietnam is very limited (eg. FPT Venture). Most of the other funds, coming from the banks and the large State-owned enterprises, target mainly large projects for established companies.

Some foreign funds have a representation in Vietnam (eg. CyberAgent , 500 Startups, Golden Gate Ventures) but the number of transactions is limited, about 10 per year currently.

 

 

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Vietnam 2035: A growing global middle class from 11% of the 90 million population market in 2015 to more than 50% in 2035

 

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With Vietnam’s aspirations to be a modern and industrial nation moving toward becoming a prosperous, creative, equitable, and democratic society, five specific quantitative criteria were set forth in the joint Vietnam – World Bank report “Vietnam 2035” in relation to that objective:

§ A GDP per capita of at least $18,000 (in 2011 PPP) with a growth rate of 6% year
§ An urbanization of the Vietnamese population > 50%
§ A share of industry and services in GDP at more than 90% and in employment at more than 70%.
§ A private-sector share in GDP of at least 80%.
§ A score of at least 0.70 on the UN’s Human Development Index.

Such a realization which will not be straighforward, will require i) a strong-willed economic government with enhanced capacity and clear accountability by the State and ii) an acceleration of the needed transformations particularly in the building of a competitive and leading private sector and in the acquisition and transfer of technological and innovative capacity.

Vietnam however is well placed for the challenge:

§ with its political stability and the higher integration into world trade
§ having achieved a GDP per capita fastest growth rate (behind China only) over 1991-2014 . Continuing with the high growth pace to 2035 and so for more than a 50 year period, will create conditions for the country to reach the high come rank and avoid the risk of middle income trap,
§ with a large domestic market of 90 millions people, of which more than half is global middle class (note).

and so Vietnam is and should be clearly a country of first choice for your now and long term investments

Note:
Global middle class consumer is defined as consumer with a daily consumption of $15 a day or more in 2011 purchasing power parity (PPP) terms.

Pushing for FinTech accelerated development in Vietnam and Asean

 

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Financial transactions are done up to recently mostly through the intermediary of financial institutions (banks, insurance companies, stock brokers).
Even in countries where there are stringent regulations on antitrust and customer protection, with the key instruments at their control (ie. rules of the game’s setting, funding with central bank, risk management…) , the financial institutions keep the upper hand in the relationship with customers.

Such a situation may not last longer now with the larger use of internet and smartphones and the development of financial technology (“FinTech”) using software. Effectively, an increasing number of financial services are now open to new players either:
- as part of the financial service process (eg. advisory on best offers, use of big data analytics and predictive modeling)
- as new financial service provider (Peer-to-peer lending & investments, crowdfunding, private insurance…)

Such new services which can be quite similar across national borders and so can be sold internationally. The most successful and popular are the ones that are the more disrupting, the most simple to process, the lower cost thanks to to the suppression of traditional intermediaries. FinTech services are however still today in the early stage in most countries. There is thus a window of opportunities that is open for any country willing to take part and build its own position in the global financial services market. This will also contribute to make the financial services industry more competitive and so with easier credit access and lower costs particularly for the SMEs.

Like Singapore, Malaysia , Thailand in the region, Vietnam should push and accelerate its development of FinTech industry and the corresponding ecosystems (regulations, customer protection, intellectual property, startup funding, incubators), leveraging particularly on the country’s strong position on information technology and the population’s high entrepreneurial motivation and the now Asean important market.

ATTP Capital is ready to accompany your business in this FinTech development either through our involvement during the startup process or direct investment in your capital funding.

 

 

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IFRS from 2016 : Vietnam moving towards a financial reporting more comprehensive and in line with international practice

 

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As part of the deeper integration of the country in the global economy and also in order to further attract foreign investments, Vietnam is making effort in view to have financial reporting more comprehensive and in line with international practice:

-For all companies listed on the stock exchange, financial reporting in English is accepted and encouraged (Ministry of Finance's Circular 155/2015/TT-BTC dated October 6, 2015 on Financial reporting on the Stock Exchanges)

-From 2016, international financial reporting standards (IFRS) will be used instead of Vietnamese accounting standards (VAS). The change underlines the now common understanding that the primary objective of financial reporting is no longer intended mainly for tax collection but to provide a fair image of the business and to serve as a key tool for the management of the business (Ministry of Finance's Circular 200/2014/TT-BTC dated December 22, 2014 on accounting rules). A migration roadmap over 2015-2020 will be established by the Finance Ministry to facilitate the change implementation.

-The annual financial statements of the following categories of companies have to be audited by independent auditors: foreign investment companies, Credit institutions, Financial institutions, Insurance and insurance brokerage, companies listed on stock exchange.

It is to note that from late 2015, foreign ownership on listed companies is now without restriction for the following sectors : real estate , tourism, entertainment, computing, research and development, information, leasing, transportation, construction, health care and trading.

ATTP Capital can assist your company in this important move which will particularly facilitate your access to international financial markets.

 

 

 

2016 Wish List - State's concrete supports be made available to SMEs at earliest date

 

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In parallel to the prochain adaptation of the Trade Law which should clarify further the legal framework of doing business in Vietnam and particularly the principle and enforcement for a fair competition for all participants in the marketplace, a new legislation aimed at providing support to SMEs is in the process to be prepared in Vietnam. According to the Ministry of Planning & Investments, this preparation process can take up 2 to 3 years before its submission to the Parliament for vote.

While such a long delay may be justified by the law-making process, the competitiveness of Vietnam domestic enterprises and SMEs particularly is deterioting visibly by the days ( -10% in Vietnam’s total export vs +21% for FDIs in 3Q2015 compared to a year earlier – Source : Vietnam’s customs department / Bloomberg Nov 9, 2015), and this in a context of higher integration of Vietnam in global economy with the coming entry in force of large free trade agreements (TPP, Vietnam-European Union, Asean …) and so more fierce competition from other countries.

Urgency is thus required that necessary supports to SMEs be implemented and effective at earliest date. Such supports which are in fact needed to re-etablish the fair competition for SMEs as recognized by many countries including the US, Japan, Korea, European Union, could include:

In terms of infrastructure


- A one-stop-center administration to help / assist SMEs across the country
- A percentage of all public procurement tendering is reserved to SMEs
- A guaranteed access of SMEs through Partnership contracts to public technical resources (universities,      Research centers…)
- Develop specific industrial parks with favorable terms and conditions for SMEs encouraging industry cluster
- Develop training centers to cover key needs of SMEs particularly in high technology skills

In terms of funding

- Create conditions for the development of venturre capital funds
- A public fund dedicated to equity investments in SMEs and start-up upon economic criteria
- Set up mutual to provide collective collaterals for loans to SMEs
- Set up legal framework to develop crowdfunding for SMEs with tax deduction for public investors
- Provide subsidies and grants for R&D costs
- Provide tax incentives to startups/SMES in their beginning years

This is also ATTP Capital's wish for 2016.

 

 

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An appropriate management system and corporate governance to enhance your business' effectiveness and prepare for future evolution

 

 

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In view to prepare for the tough competition ahead as a result of the large free trade agreements already and to be signed (TPP, European Union..) and in parallel to the need to create quality products and services, to market in close understanding of consumers, to provide customer services with care, a management system, adapted to the company's stage of development, is a component indispensable to ensure the organization' effectiveness, continuity and sustainable growth. It prepares also for the business's future evolution.

A management system includes:

- A clear set of management controls, including procedures for preparing budget and plan and for monitoring actual performances vs budget and plan, responsibility for variances and revisions to forecasts, review of treasury management, procedures for approving capital expenditure, schedule of authority
- A management information system with high level of integrity, capable to provide simply and reliably the data required on all key aspects of the business to the needs of management and of business analysis
- A set of management reporting covering all the key areas of the business (evolution of revenue and corresponding volumes, profitability, pipelines, key project follow-up..), including the Key Performance Indicators (KPIs), for the regular monitoring and effective management of the business,
- A corporate governance with clear rules regarding Board and management structure and process, Corporate responsibilities and controls, Auditing, Financial transparency and information disclosure, rules regarding capital structure evolution including exit plan for founders

ATTP Capital is ready to accompany you in the set up and implementation of a management system adapted to your business.

Join force to transform Vietnam SMEs into Global Champions on world market

 

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Vietnam is a market of 90 million people. It succeeds to establish itself as a global manufacturing hub thanks to a high skilled but low wages workforce, a favorable geographic position close to China, a stable and business-oriented government and being the member of a large free trade zone.

In terms of industrial achievement however, Vietnam’s success is limited.

It has leading position on world market for some farm products (rice, pepper, rubber, coffee …) or seafoods . Its products however are still not part of the best quality or price in the marketplace.

For industrial products, Vietnam is a world exporter for garments, footwear, leather, electronics and telephone. It is however mainly a labor provider to foreign-direct-investment companies established in Vietnam (FDIs).

So there is still a lot to be done for Vietnam to be at the level in comparison to other countries in the region (particularly Malaysia, Taiwan, Korea) and to be able to build global champion positions under its own brands, with products and services created and engineered by its own people, with most added value kept in the country.

Small and medium enterprises (SMEs) are the main force in this battle. Taking into account Vietnamese SMEs’ main recognized weaknesses :

  • working mostly in isolation
  • unsufficient access to up-to-date technology
  • lack of funding for growth investment,
  • focus mainly on domestic market and low cost product
  • lack of concrete and sufficient support from the state,
  • unfair competition from state-owned enterprises and FDIs

At ATTP Capital, we believe important to provide the SMEs with the facilities to easily join force through cooperation and partnership, within the business community at large, Vietnamese and foreign enterprises, in the key areas of business development: technology transfer, marketing and distribution, manufacturing, supply chain, equity funding, in view to accelerate growth .

This is also the objective of our service, free of charge, of Business Cooperation Search & Offering. ATTP Capital can assist you in the negotiation of the contractual agreement between the parties.

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