Vietnam ranked 6th in AT Kearney's Global Retail Development Index

The 2017 edition of A.T. Kearney's Global Retail Development Index (GRDI) ranked Vietnam 6th after India, China, Malaysia, Turkey and United Arab Emirates.  

For the other South East Asian countries, Indonesia is ranked 8th, Philippines 16th and Thailand 30th.

Vietnam's high ranking (up 5 positions vs last year) is explained mainly by i) the continuing growing economy ( 6.7% planned in 2017), ii) the increasing importance of private owned businesses and higher value export, iii) a growing and young middle class and iv) a favorable government policies particularly in terms of 100% ownership by foreign retailers and of the opening of the economy through the conclusion of free trade agreements.




The GRDI ranks the top 30 developing countries for retail investment worldwide. The Index analyzes 25 macroeconomic and retail-specific variables to help retailers devise successful global strategies to identify emerging market investment opportunities. The study is unique in that it not only identifies the markets that are most attractive today, but also those that offer future potential.

This year’s study includes a special section about the rise of mobile shopping and its impact on global retail expansion. In many developing markets, mobile retail is the primary form of online shopping.



mna ad2


Singapore and Vietnam are among top places for business expansion in Southeast Asia: UOB survey


Source :  Vnexpress, Ha Phuong   October 25, 2016 

Taking into account the main requirements by Asian enterprises:

main requirements



Vietnam only comes after Singapore in terms of attractiveness.

In the Southeast Asia region, Singapore tops the list of most favorable expansion destinations for Asian companies, with 32 percent of respondents saying they will invest more, followed by Vietnam, according to a recent survey by United Overseas Bank.

Approximately one in four companies will consider Vietnam because of the country’s stable political setting as well as the favorable economic conditions of low inflation and accommodative monetary policy.

Vietnam’s young and active workforce adds value to its attractiveness as an expansion destination. When it comes to labor cost, no country in the region except Myanmar can beat Vietnam.

Vietnam has become a magnet for investment even for investors from Southeast Asia. Malaysian, Thai and Singaporean companies are the keenest on Vietnam, with 38 percent, 35 percent and 29 percent respectively planning to pour more money in the next three to five years.


country rank

In the first nine months, the country has attracted $16.43 billion foreign investment, latest data from the government shows.

However, according to the survey, fewer firms are operating in Vietnam than originally anticipated in 2014. Meanwhile, in Malaysia and Singapore the number of running enterprises has exceeded the expectations.

There remain some obstacles affecting businesses in Vietnam such as corruption, red tape and the lack of a long-term strategy.

Asia’s rising importance continues unabated in the global economy. The region’s share of global economy has jumped from 18 percent in 1980 to 31 percent in 2015, and is forecast to reach 45 percent by 2030.

A total of 2,500 business leaders and key financial decision makers of Asian enterprises based in six regional countries and territories -- China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand -- participated in the survey.

Vietnam, part of the "Mighty Five" in Deloitte's Global Manufacturing Competitiveness Index 2016


In Deloitte's 2016 Global Manufacturing Index, CEO survey respondents were asked to rank nations in terms of current and future manufacturing competitiveness. Top performing nations have each demonstrated strengths across multiple drivers of manufacturing excellence. They also clearly illustrate the close tie that exists between manufacturing competitiveness and innovation. The 2016 study underlines the shifting dynamics among global manufacturing nations

  • CEOs say advanced manufacturing technologies a key to unlocking future competitiveness: As the digital and physical worlds converge within manufacturing, executives indicate the path to manufacturing competitiveness is through advanced technologies.
  • Shift to higher value, advanced manufacturing tilts the advantage to developed nations in the future: As the manufacturing industry increasingly applies more advanced and sophisticated product and process technologies and materials, traditional manufacturing powerhouses of the 20th century (i.e. the United States, Germany, Japan, and the United Kingdom) are back toward the very top of the 10 most competitive nations in 2016.
  • Two regional clusters of strength emerge: Out of the top 10 manufacturing competitive nations, two regions, North America and Asia Pacific dominate the competitive landscape. All three North American countries in the top 10 today and are expected to remain in the top 10 ranking five years from now. As many as five Asia Pacific nations (China, Japan, South Korea, Taiwan and India) are expected to factor in the top 10 by 2020, leaving only two spots remaining for Germany and the United Kingdom to represent Europe in the top 10.
  • BRIC breaks down: Of the BRIC countries (Brazil, Russia, India and China), only China is viewed by executives as a top manufacturing nation in 2016. The other three BRIC nations have experienced a decline in their rankings over the last few years.
  • The rise of the “Mighty Five": The five Asia-Pacific nations of Malaysia, India, Thailand, Indonesia and Vietnam (MITI-V or the “Mighty Five”) are expected to be included into the top 15 nations on manufacturing competitiveness over the next five years.




View or download the PDF





Vietnam the big winner from China’s move up the value chain

Source : FT 29 July 2016 - Steve Johnson


China’s ongoing transition from low-wage manufacturer to budding high-tech hothouse is creating waves across the rest of Asia.

The biggest winner from the Middle Kingdom’s move up the value chain looks set to be Vietnam, while the biggest loser could be South Korea, at least if two recent reports are to be believed.


South Korea under pressure as China competes head on

Korea’s problem is twofold. Firstly, as Chinese manufacturers have become more technologically proficient, they have started to produce more of the high-value intermediate goods that China used to import from advanced economies such as South Korea.

As Gareth Leather, senior Asia economist at Capital Economics, notes, the proportion of China’s imports accounted for by intermediate goods has fallen from two-thirds in 2011 to 52 per cent, as of 2015.

Secondly, South Korea is a traditional exporter of many of the higher tech goods that China is now muscling in on. Over the past five years, Korean companies have lost market share to China in sectors such as mobile phones and flatscreen televisions, as the first chart shows.

Worse still, Mr Leather fears a far wider range of Korean exporters could be hit as China continues to develop its manufacturing prowess.

“So far, it has been mostly Korea’s electronics companies that have suffered, but this could start to change,” he warns. “Chinese car companies have been doing well in emerging markets, and could soon start to gain market share from Korean companies.”

“China is also rapidly gaining market share in the shipbuilding industry. In recent years it has gained market share at the expense of shipbuilders from Japan, and recently overtook Korea as the world’s biggest shipbuilder,” he adds.




Indeed, in the first quarter of this year, Chinese shipbuilders tightened their grip on the global market by winning almost half of new commercial ship orders, leaving South Korea trailing with a mere 7.4 per cent, according to Clarksons, a brokerage.

In theory, at least, Korean companies should be in a position to benefit from rising consumer spending in China, positioning themselves as exporters of premium consumer goods.

However, given that consumer goods currently account for just 3.4 per cent of South Korea’s exports to China, a figure that has actually fallen a fraction over the past decade, Mr Leather argues that “even a surge in Chinese imports of consumer goods would not make much difference to Korea”.

China’s growing competitive threat to South Korea is one of the reasons — alongside high levels of household debt, a falling working-age population and a lack of a meaningful government response — why Capital Economics believes the country will struggle to achieve economic growth of more than 2 per cent a year over the next decade.

Vietnam set to be the biggest winner from the Middle Kingdom’s move up the value chain

The likely winners from China’s move up the value chain are low-end manufacturing centres that are increasingly picking up business no longer prized by China, such as in the textile industry.

Capital Economics notes that in countries such as Bangladesh, Sri Lanka and Vietnam, the monthly salary of a factory worker is typically between $100 and $200, a fraction of the $420 or so in China.

Standard Chartered has developed this theme further with the latest iteration of its annual survey of manufacturers in China’s Pearl River Delta, a densely populated region encompassing cities such as Guangzhou, Shenzhen and Dongguan.

The 290 manufacturers surveyed expect, on balance, to see labour supply tightening further this year, continuing a recent trend driven by the peaking of China’s working-age population, despite the slowing economy.

Partly as a result, they expect to see wage rises of 7.7 per cent in 2016, on average, just a fraction below last year’s 7.8 per cent and the 8.1 per cent seen in 2014. Amid the economic slowdown, the respondents expect their margins to fall by an average of 6.1 per cent this year, a sharp deterioration from the 0.4 per cent margin contraction witnessed in 2015.

Given this backdrop, 30 per cent of the 290 manufacturers told StanChart they wanted to move production elsewhere.

Shifting capacity elsewhere within China remains the favoured ploy, but only just, with 17 per cent of manufacturers favouring this option, down from 20 per cent last year and 28 per cent in 2014. However, 13 per cent said they favoured moving overseas, up from 9 per cent in 2013.

In particular they cited better labour supply (in terms of quantity and quality of workers) and the benefits of being within various free trade areas as reasons for favouring the overseas option, even if internal relocation is preferable in terms of tax incentives and the economic outlook.

Of those companies that are planning to export capacity, Vietnam has emerged as the clear favourite destination, followed by Cambodia, as the second chart shows. In contrast, the relative attractions of a phalanx of countries elsewhere in south-east and south Asia have dimmed.




These manufacturers typically expect to cut their costs by 20-25 per cent by moving overseas, with Bangladesh in particular seen as a cheap option.

However Vietnam, and to a lesser extent Cambodia, trounce their potential rivals in terms of labour supply, tax incentives, non-wage business costs, economic outlook, proximity to new buyers and customers and the trade pact-related benefits they can offer, as the third chart shows.

Southeast Asia “is set to become the world’s next manufacturing hub, in our view, as China continues its transformation into a more services-oriented economy”, says Chidu Narayanan, Asia economist at StanChart.


As well as the obvious benefits of a cheaper labour force, Mr Narayanan argues that Southeast Asia’s strong economic growth and “rising middle class” offers manufacturers that opt to relocate there the opportunity to tap into a “large and growing” consumer market.

“We believe Vietnam in particular is in a sweet spot to gain from this trend, given its mix of a cheap and educated labour force, a large and growing working-age population and an increasingly affluent middle class,” says Mr Narayanan.



StanChart argues that for Southeast Asia to fully seize its chance, it needs to improve its infrastructure and do more to encourage foreign direct investment.

Even then the path may not be straightforward, with the rise of the robots a threat looming on the horizon.

“Technology is [the region’s] greatest challenge to becoming the world’s manufacturing hub. Low-skill, repetitive jobs, which are more likely to move to Southeast Asia, are also prone to replacement by programmed machines and engineering advancements,” Mr Narayanan concludes.





Vietnam at the top for foreign direct investment's attractiveness

Source: Financial Times


Vietnam has topped an EM index for greenfield foreign direct investment for the second year running, ranking far ahead of other emerging economies.

The Southeast Asian country came top in the second annual study of 14 countries by fDi Intelligence which looked at inbound greenfield investment in 2015 relative to the size of each country’s economy.

Vietnam scored 6.45 in the index, punching almost 6.5 times above its economic weight and far ahead of next placed Hungary and Romania, and its regional competitors Malaysia and Thailand, as the table shows.

Vietnam’s performance cements several years of efforts to make its economy more receptive to investment.

According to the World Bank’s latest Doing Business report, improvements include reducing the time taken to register a company and to get it connected to the electricity supply, better access to information on credit and cuts in the rate of corporate income tax, as well as making it easier to pay.

Greenfield FDI performance index, emerging markets






Having attained middle-income status, Vietnam aims higher


Source: The Economist Aug 6th 2016


WHEN Jonathan Moreno’s company was looking for a location for a new factory in 2009 to make its medical devices, it ruled out much of the world. Europe and the Americas were too expensive, India was too complex and intellectual-property rights in China too patchy. In the end, Vietnam was the one candidate left standing. It still seemed risky as the country was just emerging as a destination for foreign investors. Seven years on, Mr Moreno surveys the scene—employees assemble delicate diagnostic probes in a room that resembles a laboratory—and has no doubt about where his company, Diversatek, will expand next. “To the back, there and there,” he says, pointing to either side.

It is far from alone. Foreign direct investment in Vietnam hit a record in 2015 and has surged again this year. Deals reached $11.3 billion in the first half of 2016, up by 105% from the same period last year, despite a sluggish global economy. Big free-trade agreements explain some of the appeal. But something deeper is happening. Like South Korea, Taiwan and China before it, Vietnam is piecing together the right mix of ingredients for rapid, sustained growth.

Vietnam already has a strong, often underappreciated, record. Since 1990 its growth has averaged nearly 6% a year per person, second only to China. That has lifted it from among the world’s poorest countries to middle-income status. If Vietnam can deliver 7% growth for another decade, its trajectory would be similar to those of China and the Asian tigers (see chart). But that is no sure thing. Should growth fall back to 4%, it would end up in the same underwhelming orbit as Thailand and Brazil.




Perhaps the biggest factor in Vietnam’s favour is geography. Its border with China, a military flashpoint in the past, is now a competitive advantage. No other country is closer to the manufacturing heartland of southern China, with connections by land and sea. As Chinese wages rise, that makes Vietnam the obvious substitute for firms moving to lower-cost production hubs, especially if they want to maintain links back to China’s well-stocked supply chains.

A relatively young population adds to Vietnam’s appeal. Whereas China’s median age is 36, Vietnam’s is 30.7. Soon enough, it will start ageing more rapidly but its urban workforce has much scope to grow. Seven in ten Vietnamese live in the countryside, about the same as in India—and compared with only 44% in China. The reservoir of rural workers should help dampen wage pressures, giving Vietnam time to build labour-intensive industries, a necessity for a nation of nearly 100m people.

Many other countries also boast young workforces. But few have had as effective policies as Vietnam. Since the early 1990s the government has been very open to international trade and investment. This has given foreign companies the confidence to build factories. Foreign investors are responsible for a quarter of annual capital spending. Trade accounts for roughly 150% of national output, more than any other country at its level of per-person GDP.

Investors have also taken heart from the stability of Vietnam’s long-term planning. Like China, it has used five-year plans as rough blueprints for development. But also like China, its governance allows scope for innovation: its 63 provinces compete with each other to attract investors. A model of developing industrial parks with foreign money and managers began in Ho Chi Minh City in 1991 and has since been replicated elsewhere.

And Vietnam’s workforce is not just young but skilled. Public spending on education is about 6.3% of GDP, two percentage points more than the average for low- and middle-income countries. Although some governments spend even more, Vietnam’s expenditures have been well focused, aiming to boost enrolment levels and ensure minimum standards. In global rankings, 15-year-olds in Vietnam beat those in America and Britain in maths and science. That pays dividends in its factories. At Saitex, a high-end denim manufacturer, workers must handle complex machinery—from lasers to nanobubble washers—all to produce the worn jeans so popular in the West.

On top of this solid foundation, Vietnam is reaping benefits from trade deals. It is set to be the biggest beneficiary of the Trans-Pacific Partnership (TPP), a 12-country deal that includes America and Japan. With American politics turning hostile to trade, there is a risk that the TPP will fail. But even if that happens, Vietnam will do well. The TPP has already helped to advertise its capabilities. And there are other major agreements: a free-trade pact with the EU is in the works, and one with South Korea went into force in December.

Yet Vietnam also faces a series of challenges, any of which could impede its rise. Speculative excesses in the past helped fuel a property bubble. It burst in 2011, saddling banks with bad debts. Vietnam created a “bad bank” to house the failed loans and has started cleaning up its banks. However, it has been slow to inject new capital into its banks and hesitant about modernising their operations.

In one crucial area it compares poorly with China: getting the most out of the private sector. Private Chinese companies generate about 1.7 yuan of revenue per yuan of assets, more than double the 0.7 ratio for state-owned enterprises (SOEs). In Vietnam private-sector productivity has slumped over the past decade to the 0.7 level, the same as SOEs, says the World Bank. One reason is that large groups in Vietnam sprawl across 6.4 separate industries on average; those in China operate in just 2.3, according to the OECD.

Furthermore, although Vietnam has benefited from foreign investment, only 36% of its firms are integrated into export industries, compared with nearly 60% in Malaysia and Thailand, according to the Asian Development Bank (ADB). In some cases Vietnam has gone too high-end. Much has been made of Samsung’s plans to invest $3 billion in mobile-phone production in Vietnam, but domestic suppliers provide it with little except plastic wrapping. Vu Thanh Tu Anh, director of the Fulbright Economics Teaching Program in Ho Chi Minh City, says the government needs to help build up supply chains—for example, training companies in textile production to support the apparel sector.

There are grounds for cautious optimism. The Ministry of Planning and Investment teamed up with the World Bank to lay out a strategy for change earlier this year. Their joint report, “Vietnam 2035”, details how the country can make SOEs more commercial and reinvigorate the private sector. Weakened public finances—the fiscal deficit is set to be more than 6% of GDP for the fifth straight year in 2016—are putting pressure on the government. To bolster its revenues, it sold shares in more than 200 SOEs last year, the biggest annual tally ever. These were mostly small deals but in July it took a bolder step, scrapping a foreign-ownership limit (previously 49%) on Vinamilk, the country’s main dairy company. Investors are hopeful this will serve as a template for more such reforms.

After years of solid growth, Vietnam has nearly reached a milestone. Now it is classified as a middle-income country, it is about to lose access to preferential financing from development banks. In 2017 the World Bank will start to phase out concessional lending. For Vietnam it is a moment to reflect on how far it has come and also on the trickier path ahead. It has a chance to be Asia’s next great success story. It will take courage to get there.





Vietnam: M&As grow 9.7% in 2015 following high investor appetite

Source :, March 9th, 2016


Mergers and acquisitions in Vietnam grew 9.7 per cent to touch $5.2 billion across 341 deals in 2015, according to research company Stoxplus.

The number of transactions also increased 23.1 per cent over 2014.

Meanwhile, an earlier report by the Institute of Mergers, Acquisitions and Alliances indicated that the value of 2015 stayed at $4.2 billion, surging 40 per cent year-on-year.

As per the Stoxplus report, the segment that dominated the region’s M&A activity were in the sub-$25-million range, categorised as small and medium deals, that amounted to a total of 288.

Meanwhile, inbound M&A into the country accounted for 46 per cent of the $5.2 billion figure last year, dropping 21 per cent year-on-year. There were 98 inbound deals from countries like Hong Kong, Thailand, Japan, South Korea, US, Malaysia and Singapore. While Japanese companies were the most active with 15 inbound investments, totaling $310.4 million, Hong Kong investors topped in terms of value, landing $1.1 billion in Vietnamese businesses.

Real estate, industrial goods and services, and retail were the most favoured sectors for overseas investors.

For domestic M&A, banking was the most vibrant area due to the country’s effort to restructure the financial market. The momentum is expected to continue in 2016 as Vietnam looks to create regional competitive lenders through consolidation.




The ramp-up in deal-making was bolstered by Vietnam’s further integration into the global market, the report noted, calling 2015 “a year of new FTAs”. The country concluded negotiations for four free trade pacts, including those with the Eurasian Economic Union, the European Union, South Korea and the Trans-Pacific Partnership.

“FTAs are likely to boost capital flows into Vietnam in the coming time, both in terms of trading as well as investment, including M&A activities,” it said.




Asian investors appetite

Fueled by the FTAs, Asian investors, typically South Korean, Japan and Thailand, came to the spotlight of inbound M&As into Vietnam last year.

With the Vietnam-Korean tie-up signed and taking effect, bilateral trade of the two countries is expected to double in 2017 to $70 million. Statistics of South Korean Embassy in Vietnam showed over 4,000 South Korean businesses investing in Vietnam. In upcoming years, this figure is expected to surpass 10,000 businesses.

For inbound M&A deals, South Korean investors conducted four deals in 2015 with total investment value of $62.5 million, including Lotte Korea Group acquiring Diamond Plaza, Koswire Co Ltd acquiring Dong Bang Stainless Steel Co Ltd, Dongbu Insurance Co Ltd acquiring Post and Telecommunication Insurance and Shinhan Investment Corporation acquiring Nam An Securities Company.

Meanwhile, capital flow from Japan has dropped in recent years, but is expected to bounce back after TPP has been signed.

Japanese firms increased investments in textile, a favourite investible bet. One such case is Itochu, which purchased 5 per cent equity stake inVinatex – the leading textile corporation in Vietnam – back in 2014. After the deal, Itochu continued to sign a business alliance with Vinatex to build its capacity on dyeing and textile materials production.

“By observing the current M&A market, we find that Japanese investors are setting sights on Vietnamese market for some sectors such as travel and leisure, financial services, retail, oil & gas, real estate and industrial goods and services,” StoxPlus said.




Among ASEAN investors, Thailand was the most active M&A partner. Home-grown Thai corporates have been very successful in the domestic market, and are pursuing growth overseas, and Vietnam becomes one of their potential investment destinations with numerous opportunities and advantages that can be exploited.

In 2015, Thai firms completed six M&A deals in Vietnam, the highest number accounted for over the last five years. The M&A value stood at $209 million.


Central Group is the most active Thai buyer in Vietnam with two acquisitions of electronics retailers Nguyen Kim and Pico Mart, according to Stoxplus. It was rumoured last year that the Thai retailing major acquired 49 per cent of Pico after doing the same to Nguyen Kimearlier in the year. However, Central Group then declined the speculation in an email sent to DEALSTREETASIA. But Stoxplus believes that the number was no less than $150 million for both Vietnamese investees.


Real estate as a hit

Vietnam M&A market in 2015 continued to witness the upward trend in real estate sector after a buoyant 2014, especially for deal value. According to StoxPlus’ database, real estate was the most attractive sector for foreign investors with 19 deals totaling approximately $1.64 billion.

Typical investments made last year include Gaw Capital Partners’involvement in Empire City and Indochina’s assets, Chow Tai Fookbuying Nam Hoi An project, Creed Group investing in An Gia, and Warburg Pincus adding follow-on investment in Vincom Retail.

The strong GDP growth and warming real estate market of Vietnam are expected to continue to boost M&A activities in 2016. Jen Capital is reportedly looking for a potential M&A target in Vietnam real estate market. Meanwhile, a lot of local developers, including Hoang Quan andNam Long, are planning to raise fund from foreign investors.


Turning SOE privatisation into M&A

According to a government report, only 104 state-owned companies were privatised, accounting for 40 per cent of the IPO target of the year.

For a state corporate IPO to become an M&A deal, the participation of strategic investor is crucial, given their allocated stake of at least 15 per cent. However, attracting strategic investor has been consistently a constraint for these firms.

Participation of foreign investors in such IPOs is still very limited. The Stoxplus report shows that of 248 recorded deals during the past five years, inbound M&As from IPO held a modest value of only 5 per cent of the total M&A value from IPO. Remarkably, all deals had the involvement of Japanese investors.

They include partnership between construction firm Cienco 1 and Yen Khanh – Hassyu joint venture, Vinatex and Itochu, and construction firm TEDI and Oriental Consultant Co Ltd.


Looking forward, “blockbluster” IPOs of Mobifone, cement producer Vicem and Saigon Trading Group are expected to happen during the 2016 – 2018 period.

2015 also marked significant improvement in legal framework on foreign investment, supporting M&A activities in the coming years, as Vietnam slashed the foreign ownership limit in the stock market.

In addition, the revised investment law has offered foreign investors simplified investment procedures.

“These legal improvements, coupled with Vietnam’s full market openings in 2015 as well as the local economy’s heightened productivity rates, suggest that now is the right time for buyers and sellers to actively engage in M&A transactions,” Stoxplus commented.







Vietnam Set to Gain From Brexit


Source : Eugenia Lotova, Vietnam Briefing,, June 25, 2016





As the British people decided that they wanted to leave the European Union in a 52 to 48 percent vote, much more than a decision over Britain’s self-conception hung in the midst. While many citizens have long expressed frustrations regarding their own country’s inability to self-govern due to their EU ties, the impact of a Brexit will be reaching far beyond Britain and the European Union. In the case of investment, the Brexit will compel British investors to reconsider their business strategy in Vietnam.

Alternatively, the effects on the Vietnamese export sector will be minimal and may even present opportunities for the communist nation to solidify consumer bases in the United States and European Markets.

Post Brexit Market Volatility

As the polls began to close, the British pound was quick to react — hitting a 31 year low against the US dollar. There is some uncertainty regarding the medium and long term impact of the referendum, but there seems to be a general consensus among financial experts that the currency may plummet in the near future and the country will experience a decrease in GDP growth—anywhere between 0.2 and 2.2 percent. The Euro may also experience a drop of 4 percent. The Vietnamese Dong is up 3.74 percent against the Euro and a massive 12.55 percent against the British Pound.

While fluctuations in the Euro and Pound may have an impact on Vietnamese exports to Europe, the most important currency paring to watch will be the Dong to Yuan (China) exchange. Heavily restricted in trading by both Chinese and Vietnamese Governments, the wild fluctuation of the Euro, Dollar, and Pound, is likely to put immense pressure on monetary authorities in both countries as they struggle to maintain control. In the event that the either runs out of resources or willpower to continue currency controls, the fallout will be substantial. Vietnamese imports from China currently  account for nearly a 30 percent share of its total global purchases. If the cost of these goods were to rise as a result of a float by either currency, it would certainly be a significant blow to Vietnamese export competitiveness. 

News of Brexit also wiped more than US $1 billion from Vietnam stock market with 500 Vietnamese stocks dropping and 1.9 percent off VN-Index at closing on June 24th, as bearish sentiment dominated for both local and foreign investors. However, the sell-off is attributed to the investors’ panic rather than actual negative effects on Vietnam. While consumers will be able to purchase more from British companies, it also means that potential British investors will have less purchasing power in Vietnam and any companies exporting to Britain may experience a decrease in demand. 

Long Term Trade Implications

The Bilateral Investment Treaty, which was signed in 2002, was recently replaced by the EU-Vietnam FTA (EVFTA). Talks ended in 2015 and the agreement is expected to come into force in 2018, and thereby provide investors with additional incentives to set up business in Vietnam. Nonetheless, the referendum will force Great Britain to renegotiate trade agreements with Vietnam, disrupting the tax breaks that British investors would have been able to take advantage of under the EVFTA.

The top exports to the UK, which include electronics, footwear, machines, and clothing will be negatively impacted by a depreciating currency. In the first 8 months of 2015 revenue from exports to the UK reached nearly 3 billion USD and investments have been spreading to sectors such as banking, manufacturing and garments, indicating a British interest in the Vietnamese markets. Currently the largest companies investing in Vietnam are in the logistics, food and drink, and insurance sectors.

Therefore, although the UK is only 16th in amount of foreign investment into Vietnam, the country is Vietnam’s largest trading partner amongst the European Union nations so the referendum will have a major effect on trade relations in the region. However, compared to Hong Kong, Singapore, and Japan, Vietnam won’t feel as much of a shock according to Ms. Do Thi Ngoc, Deputy Head of Vietnam’s Price Statistics Department, because the EUVFTA hasn’t been implemented yet.


Opportunities for Investment

Despite the volatility it has caused in currency markets, Brexit may end up increasing demand for Vietnamese goods and lead to investment in certain sectors. With the current crisis unfolding in mainland Europe, many of the ongoing EU-ASEAN agreements, with countries such as Thailand, Singapore and the Philippines will be stalled. This will encourage Europeans to invest in Vietnam over other ASEAN destinations as EU consumers pursue discounted imports. The impetus for increased demand is likely to be brought on by devaluations in the Euro as well as potential declines in EU growth. As Vietnam is the only country in ASEAN to have successfully concluded an agreement with the EU, imports from the country will presented a significant discount over traditional imports as well as alternative low cost export markets.

Although Euro and Pound depreciation may inhibit EU and UK foreign direct investment to a certain degree, this is likely to be made up for by US investment. In the case of the United States, the US dollar’s position as a global safe haven currency has caused it to appreciate significantly against other currencies. Although strong currency management on the part of Vietnamese authorities has thus far prevent significant movement on the Dong to Dollar currency pair, US based investors will likely have more money to spend in the years ahead. In conjunction with reduced trade barriers, converged regulatory standards, and increased access to restricted sectors soon to be unlocked under the TPP, it is highly likely that Vietnam will reap the benefits of US investment in the years ahead.

Naturally, any investment made during such a period of volatility should be done with extreme care and with a up to date understanding of market dynamics. 





Renesas Embraces Change With Plans to Outsource Chip R&D in Vietnam

Source:  By Pavel Alpeyev,, June 30th, 2016




Renesas Electronics Corp. is doing something that only a decade ago would be unthinkable for a Japanese semiconductor maker -- outsource research overseas.

Outsourcing more R&D reduces the cost of developing components for new applications in autonomous cars and the internet of things, Chief Executive Officer Bunsei Kure said on Thursday. It’s also a way to hedge against currency swings, Kure told reporters days after Renesas shareholders approved his appointment as CEO and president.

Japanese companies like Hitachi Ltd., NEC Corp. and Toshiba Corp. dominated the semiconductor market in the 80s and 90s by closely guarding their manufacturing and design know-how. They’ve since struggled to adapt to a shift in demand toward cheaper components in consumer electronics and PCs, ceding ground to Asian rivals like Samsung Electronics Co. Renesas, struggling after years of posting losses, is betting that cost discipline and a focus on automotive and industrial applications will revive the business.

“Development costs are becoming even more important to us than manufacturing costs,” Kure said. “It’s just not possible to secure enough engineers domestically.”

Renesas has already begun to relocate some development overseas, employing about 600 researchers in Vietnam and 300 in China, as well as some in Malaysia, Kure said. He declined to give details about his further outsourcing plans.

Renesas was formed in 2010 when government-backed investment fund Innovation Network Corp. of Japan brought together the struggling chip operations of Mitsubishi Electric Corp., Hitachi and NEC. INCJ controls about 69 percent of the company, according to data compiled by Bloomberg. While Nidec Corp., Kure’s previous employer, has expressed interest in that stake, Kure said he prefers the chipmaker remained independent.

“There is a pattern of success emerging among global chipmakers, which all focus on a specific segment,” Kure said. “All of these companies are independent. We intend to follow that success pattern.”

Subscribe to Vietnam