Vietnam SMEs and Growth strategy

 

prelim overview

 

 

Vietnam now is at the center of a free trade zone covering a major part of world economy thank to the free trade agreements already signed and implemented ( Asean, Japan, Korea, China, India, Australia, New Zealand, Chile, Customs Union of Russia, Belarus and Kazakhstan) or being finalized ( Trans-Pacific Partnership which has a much larger scope than just tax and customs, signed in October 2015 and pending ratification, European Union, negotiation concluded and to be signed in beginning 2016).

With its lower wages but educated workforce, its relatively good infrastructure and easy business environment and the State’s volontarist industrial policy, Vietnam will benefit a significant competitive advantage, not only on cost, to attract foreign investments to become a stronger world manufacturing hub compared to its most direct competitors (China, India, Thailand, Philippines) and to increase its export power particularly within its large free trade zone.

Meantime, the local business, particularly SMEs, will face in its domestic market with tougher competition from other countries as a result of a long time priority given to export at the detriment of home market and of unsufficient funding and so investments in product quality, innovation and marketing compared to competitive products from other countries.

Overall however, being part of large free trade zone, which includes the most important consumer markets such as the US, Europe, China, Russia, India, Mexico and Asean countries, provides the historic opportunity for Vietnam’s enterprises to enter and develop and grow market share, not only on labor contribution but more importantly on value added products and services. To make this happens requires :

- A clear understanding of the business current status
- A careful thinking , planning and execution by business leaders in respect of market and product offering, business organization, profitability and funding over a period of 3 to 5 years.

At ATTP Capital, we work together with our clients in this critical process through the preparation of the preliminary Business Overview in the first stage and then the building of the Growth Strategy in the second stage.

 

 

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It is time for foreign SMEs to consider investments in Vietnam

 

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This is a right timing for foreign companies, particularly small and medium enterprises (SME) to consider an investment in Vietnam either to develop production capacity, build partnership or take part of the 90 million people domestic market. Effectively, with the lifting of most restrictions on foreign ownership of public/listed companies starting from September 2015 except in banking, securities and insurance industries, Vietnam is now a particularly attractive destination for foreign SMEs to invest in:

- Foreign companies may buy shares or take equity control of public or private companies without any restrictions except in some specific sectors. The sectors that are open to foreign investment without limi include real estate and providing services in tourism, entertainment, computing, research and development, information, leasing, transportation, construction, healthcare and trading (Update in December 2015 based on the government website dautunuocngoai.gov ).

- The country’s growth continue at high rate, about 6.5% in 2015, in a context of low inflation and further integration of Vietnam economy in the world trade through the set-up of Asean Economic Community end 2015, the coming signature of major free trade agreements with Europe (Vietnam-EU FTA) and with the 12 Pacific Rim countries (TPP).

- Vietnam's stronghold as a world manufacturing hub exploiting its key advantages (young, educated and technophile workforce, strategic location at the center of Asia manufacturing eco-system and particularly close to China, low total labor costs, welfare included (about 47% of China and 50% of Thailand) (1)

- The current relatively low average PER (about 12.4 times for HCM-Vietnam vs 19.8 times for Thailand and 21.9 for Philippines (see graph above and note 2), noting the good performance of Vietnam’s VN Index which tops in 2015 the MSCI South East Asia Index (+15% vs -12%) (3). Vietnam eyes by the way for a possible upgrade by Morgan Stanley from Frontier to Emerging market now most of the caps on stocks’ foreign ownership is being lifted.

- Vietnam’s government commits to improving the business climate and the ease of doing business in the country (ranked 78th by World Bank in June 2014 ) with the target to reach the average level of Asean-4 in 2016 : Singapore - 1st in June 2014 ranking, Malaysia - 18th, Thailand - 26th, Philippines - 95th.

ATTP Capital is ready to accompany your company in this development strategy.

Notes:
(1) China Briefing - June 3, 2014
(2) Barry Weisblatt -VP Bank Securities- April 24, 2015
(3) Bloomberg - August 9, 2015

Welcome from ATTP Capital

 

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In the context of an accelerated integration of Vietnam in the South East Asian region, with the beginning of 10-country Asean Economic Community planned for end 2015 and in the world economy with the coming signature of the Trans-Pacific Partnership agreement grouping 12 Pacific Rim countries representing 40% of global GDP and about 1/3 of world trade, ATTP Capital aims to actively participate in and push for the growth of Vietnam's small and medium enterprises through our corporate and business advisory services for i) the company's management ii) the foreign companies with planned business development in Vietnam or Asean iii) the regional and global investment funds.

Our advisory services include:

- Management consulting in particular with identification, elaboration and implementation of projects to improve profitability or performance.
- Strategy consulting, including the development of medium and long term business plan which could prepare the ground for future family business transition or IPO.
- Interventions in key stages of M&A (pre, during and post-transaction)
- Identification and search for new capital funding (for the company) and for investment opportunities (for investors)

We intervene in Vietnam and Asean countries and in western Europe directly or through our correspondants' network.

We are committed to building up our clients' trust and satisfaction. We practice success-based fees.

For all contacts:
ATTP Capital, Ltd
Hoi An City (Vietnam)
F: +84 510 393 3079 M: +84 168 324 8441
E: attpcapital@gmail.com

 

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