CAPTURING VIETNAM S FULL POTENTIAL

Transcription

1 CAPTURING VIETNAM S FULL POTENTIAL TRENDS, OPPORTUNITIES AND BEST PRACTICES TO SUCCEED IN VIETNAM Business Sweden in Vietnam September 2017

2 EXECUTIVE SUMMARY HIGH GROWTH DRIVES NEED FOR MODERN SOLUTIONS AND SERVICES FOR AN URBANIZED VIETNAM TRENDS Urbanization spurs huge infrastructure investments Double urban population between , to 52 mn ppl A new and modern Vietnamese consumer class is emerging Double middle class from 2012 to 2020, to 33 mn ppl OPPORTUNITIES Heavy investment in transport infrastructure and solutions, including USD 110 billion during in BRT systems, metros and airport projects in Hanoi, Da Nang and Ho Chi Minh City Energy demand growing at c.12% p.a. in coming years: energy investment will increase from USD 2.7 billion p.a in 2015 to USD 5 billion in Demand of modern energy solutions that provide good quality power supply with low down time A new and modern Vietnamese consumer class is emerging. More spending on luxury goods and high-end products: Retail market is forecasted to reach around USD 180 bn by 2020 More care for health and health service quality: Private health spending USD 9 bn in 2018 OPPORTUNITIES FOR SWEDISH SOLUTIONS WITHIN TRANSPORT, ENERGY, RETAIL AND HEALTH BUSINESS SWEDEN 9 NOVEMBER

3 EXECUTIVE SUMMARY VIETNAM IS STRENGTHENING ITS ATTRACTIVENESS AS A MANUFACTURING HUB AND TRADE PARTNER TRENDS Vietnam growing as attractive manufacturing hub Industrialization-led growth Nearly 470 industrial parks in OPPORTUNITIES Industrial equipment that can support Vietnam s national agenda of becoming a stronger manufacturing hub Highest potential: machinery & parts, textiles, electronics, food and beverage, and furniture Demand for technical know-how New free trade agreements strengthens Vietnam s attractiveness 12 signed FTAs, and 3 under negotiation Including EU VN FTA which will take effect in Attractive conditions for sourcing, import & export OPPORTUNITIES FOR SWEDISH SOLUTIONS WITHIN INDUSTRIAL EQUIPMENT & REDUCED COSTS OF TRADE BUSINESS SWEDEN 9 NOVEMBER

4 EXECUTIVE SUMMARY VIETNAM IS A HIGH GROWTH AND HIGH POTENTIAL MARKET INVESTMENT IS REQUIRED TO TAP INTO IT OVERVIEW OF BEST PRACTICES FOR DOING BUSINESS IN VIETNAM Ensure strong local presence Invest in talent Protect from corruption 4 Think global, act local You cannot build business in Vietnam from Sweden or Singapore Vietnam is high growth and high potential, but also requires high level of commitment & focus Crucial to build in-depth market understanding, and to establish strong local presence Salary costs are low in Vietnam, but international quality demands international compensation Important to recruit high quality top management, and to recruit carefully Not easy to find suitable and skillful staff/ partners key to invest in training Design incentives for employees and partners that protects from corruption Focus on right values in recruitment and partnerships, but also: Good reimbursement schemes required to help staff face social impacts of systemic corruption It s key to localize both value offering and go-to-market strategy Relationship building, long-term investment on client and partner relationship Copying an existing Western product & marketing strategy for use in Vietnam is unlikely to work IT S KEY TO LOCALIZE BOTH VALUE OFFERING AND GO-TO-MARKET STRATEGY BUSINESS SWEDEN 9 NOVEMBER,

5 COUNTRY OVERVIEW VIETNAM HAS EMERGED FROM A WAR TORN COUNTRY TO AN EMERGING ECONOMY VIETNAM GDP PER CAPITA , USD PER PERSON & YEAR Just after end of Vietnam War War with China Liberalization of economy, Doi Moi Lifting of US embargo Joined WTO Became middleincome country VIETNAM HAS GRADUALLY TRANSFERED FROM AN AGRICULTURE-BASED COUNTRY TO AN INDUSTRIAL-BASED ONE SOURCE: UN, WO, BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

6 COUNTRY OVERVIEW THIS HAS BEEN VISIBLE THROUGH DRASTIC CHANGES IN VARIOUS BASIC PARAMETERS BEFORE NOW 6K 1990 AIR PASSENGERS CARRIED As a result of the growth of the middle class segment as well as growing tourism arrivals in Vietnam, the travel sector in the country has blossomed 30M 2014 CONSUMER SPENDING The increase of per capita income and the emergence of the Vietnamese middle class has seen consumer spending increase by close to 100 times since BUSD 122 BUSD MONTHLY CAR SALES The Vietnamese middle class has used their new spending power to increasingly buy cars instead of bicycles and motor cycles in the last decade 2.9K 24K VIETNAM HAS EMERGED AS A NEW CONSUMER MARKET IN SOUTH EAST ASIA SOURCE: UN, WO, EUROMONITOR, BMI, BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

7 COUNTRY OVERVIEW LOOKING INTO THE FUTURE, VIETNAM WILL OFFER FOREIGN COMPANIES PLENTY OF OPPORTUNITIES FUTURE GROWTH IN VIETNAM Vietnam s extraordinary growth is expected to continue > cars p.a. to be purchased by 2020 Most competitive major production economy in South East Asia Middle class households* of 16 million by 2020 ~ 150 USD billion investments in infrastructure until 2030 OPPORTUNITIES RANGE FROM CONSUMER MARKET TO INFRASTRUCTURE SOURCE: UN, WO, EUROMONITOR, BUSINESS SWEDEN * Annual income of USD BUSINESS SWEDEN 9 NOVEMBER,

8 Real GDP Growth, 2016 COUNTRY OVERVIEW BETWEEN VIETNAM S GDP IS EXPECTED TO INCREASE BY 37% VIETNAM S ECONOMY VS. THE REGION BUBBLE SIZE REFLECTS 2016 NOMINAL GDP, USD BILLION 9% 8% 7% 6% 5% 4% 3% Malaysia 296 2% 1% Indonesia 932 Thailand 407 Philippines 305 Vietnam, Vietnam*, 2020f 278 0% -1% 1% 3% 5% 7% 9% 11% 13% 15% Nominal GDP, CAGR VIETNAM WILL CONTINUE TO BE AMONG THE FASTEST GROWING ECONOMIES IN THE REGION SOURCE: WORLD BANK, EUROMONITOR, BUSINESS SWEDEN *NOMINAL GDP, FORECASTED 2020 BUSINESS SWEDEN 9 NOVEMBER,

9 SWEDEN & VIETNAM SWEDEN S RELATIONSHIP WITH VIETNAM HAS ALSO TRANSFORMED OVER THE YEARS SWEDISH EXPORT & IMPORT TO / FROM VIETNAM , USD MILLION End of Bai Bang SIDA Project Mainly aid focused Export Import Increasingly trade focused THE RELATIONSHIP HAS TRANSFORMED FROM BEING AID FOCUSED TO AN INCREASING TRADE FOCUS SOURCE: UN, WO, BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

10 SWEDEN & VIETNAM AND TODAY MORE THAN 40 SWEDISH COMPANIES ARE PRESENT IN VIETNAM MANUFACTURING TRANSPORT/TELECOM ENERGY & ENVIRONMENT HEALTHCARE RETAIL A LARGE NUMBER OF SWEDISH COMPANIES ARE ALSO DOING BUSINESS THROUGH DISTRIBUTORS SOURCE: BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

11 SWEDEN & VIETNAM HOWEVER, SWEDEN IS FALLING BEHIND NORDIC COMPETITORS IN EXPORTS TO VIETNAM EXPORT OF NORDIC COUNTRIES TO VIETNAM , USD MILLION Sweden Sweden Norway Denmark Finland NORWAY AND DENMARK EXPORT FOR A GREATER VALUE TO VIETNAM DESPITE THEIR SMALLER SIZE SOURCE: UN COMTRADE BUSINESS SWEDEN 9 NOVEMBER,

12 SWEDEN & VIETNAM SWEDEN ALSO CONSIDERABLY LAGS BEHIND NORDIC PEERS IN TERMS OF FDI ACCUMULATED FDI, (USD MILLION) NUMBER OF PROJECTS Den Norwa Swede Fin THE AMOUNT OF FDI AND THE NUMBER OF PROJECTS REMAIN SMALL COMPARED WITH NORDIC PEERS SOURCE: FDI MARKETS BUSINESS SWEDEN 9 NOVEMBER,

13 TRENDS OVERVIEW FOUR KEY DISRPUTIVE TRENDS ARE DRIVING THE VIETNAMESE ECONOMIC GROWTH GROWING MIDDLE CLASS URBANIZATION PROMOTION OF FREE TRADE INDUSTRIALIZATION Disposable income has risen gradually over the past few years, boosting purchasing power and growing consumer expenditure. By 2019, 35.6% of the population is expected to As of URBANIZATION 2014, urban population accounted for 33% and is expected to grow to 50% by 2025 Vietnam is expected to benefit from 12 FTAs signed, 3 FTAs under negotiation In 2015, Industrial zones reached USD 135 billion in turnover, generating exports of USD 80 billion earn USD 5,000 p.a. A new and modern Vietnamese consumer class is emerging, demanding a modern shopping experience There is high demand for public transportation facilities and energy consumption Vietnam has the potential to emerge as a new global manufacturing hub To meet the expectation of global customers, the need of modern technical machinery and equipment is on the rise SOUCE: BUSINESS SWEDEN S ANALYSIS, BMI BUSINESS SWEDEN 9 NOVEMBER,

14 TRENDS GROWING MIDDLE CLASS VIETNAM S MIDDLE CLASS WILL DOUBLE FROM 2012 TO 2020 THE IMPLICATIONS ARE ALREADY VISIBLE VIETNAMESE MIDDLE CLASS EXAMPLE FACTS 33 millions ppl. 12 million ppl. In 2020 In 2012 VIETNAMESE HOUSEHOLD EXPENDITURE BUSD 78.5 BUSD In 2012 In 2019 Increasing domestic travel CAGR of # of domestic visitors serviced by accomodation establishments and travel agencies: 14% and 10% respectively Growing number of overseas treatment Vietnamese people went abroad for medical treament and spent around USD 2 billion in 2015 Foreign studies growing + 410% Vietnamese students sent to USA from , reaching in 2014/15 Foreign baby products in demand > 80 foreign brands for powdered baby milk, accounting for 75% of market share THE NEW VIETNAMESE CONSUMER CLASS DEMANDS MODERN SHOPPING EXPERIENCES SOURCE: BCG, BMI, NIELSEN VIETNAM, MINISTRY OF HEALTH, BUSINESS SWEDEN S ANALYSIS BUSINESS SWEDEN 9 NOVEMBER,

15 TRENDS URBANIZATION RAPID URBANIZATION IS CAUSING INFRASTRUCTURE DISRUPTIONS THROUGHOUT SOCIETY VIETNAMESE URBAN POPULATION 26 million ppl. In million ppl. In 2025 The total electricity consumption increased from 11.5 TWh in 1995 to TWh in an average growth rate of 11% EXAMPLE IMPACTS 8,000 new bikes, 750 cars commune on Vietnamese streets everyday Over 10,000 buses with around 500 bus routes in Vietnam URBANIZATION SPURS HUGE INFRASTRUCTURE OPPORTUNITIES & CHALLENGES SOURCE: VIETNAM ASSOCIATION OF MOTORCYCLE MANUFACTURERS, VIETNAM ELECTRICITY (2014), ADB BUSINESS SWEDEN 9 NOVEMBER,

16 TRENDS PROMOTION OF FREE TRADE VIETNAM IS CURRENTLY BENEFITTING FROM A LARGE AMOUNT OF FREE TRADE AGREEMENTS IN FORCE: 1. ASEAN Free Trade Area 2. ASEAN - China 3. ASEAN - South-Korea 4. ASEAN - Japan 5. ASEAN - Australia and New Zealand 6. ASEAN - India 7. Vietnam - Japan 8. Vietnam - Chile 9. Vietnam Korea Vietnam - EAEU COMING INTO FORCE IN 2018: 11. EVTA NEW FTAS STRENGTHEN VIETNAM S ATTRACTIVENESS AS A TRADING AND SOURCING PARTNER SOURCE: BUSINESS SWEDEN ANALYSIS * FTAS = FREE TRADE AGREEMENTS; ***EVTA = EU - VIETNAM FTA BUSINESS SWEDEN 9 NOVEMBER,

17 TRENDS INDUSTRIALIZATION VIETNAM SEES LARGE INVESTMENTS IN INDUSTRIAL PARKS AS PRODUCTION MOVES FROM CHINA MANUFACTURING INVESTMENT IN INDUSTRIAL ZONES, , BUSD THE NUMBER OF INDUSTRIAL PARKS IN VIETNAM CAGR 4,2% 2,5 1, (*) CONSEQUENTLY THERE WILL BE DEMAND FOR BOTH MACHINERY AND INDUSTRIAL CONSTRUCTION SOURCE: VIETNAM INDUSTRIAL PARKS, MINISTRY OF INDUSTRY AND TRADE, BUSINESS SWEDEN S ANALYSIS, VIETNAMNET (*)GOVERNMENT S APPROVED FIGURES BUSINESS SWEDEN 9 NOVEMBER,

18 OPPORTUNITIES OVERVIEW LARGE SCALE TRANSFORMATIVE TRENDS IN VIETNAM CREATE BOTH SALES & SOURCING OPPORTUNITIES SALES SOURCING Manufacturing output (2013): BUSD f: Pvt health spending BUSD9 Pharma sales BUSD 0,7 Medical device trade BUSD0,1 Retail market value (2015): BUSD 112 Infrastructure construction value (2015): BUSD 3,2 $ 15 bn 46% of export value $ 137 bn 77% of export value IN THE COMING YEARS, SWEDISH COMPANIES CAN CAPITALIZE ON NEW, LARGE OPPORTUNITIES IN VIETNAM SOURCE: EUROMONITOR, EMARKETER, ATKEARNEY, UBS,VIETNAM CUSTOMS HANDBOOK BUSINESS SWEDEN 9 NOVEMBER,

19 OPPORTUNITIES SALES > OVERVIEW SALES OPPORTUNITIES EXIST IN BOTH B2B AND B2C FORMS SELLING TO MANUFACTURER Manufacturing contributes about 15% to Vietnam s total GDP The most high potential manufacturing sectors are machinery / apparatus & parts, textiles, electronics, food and beverage, and furniture RETAIL Vietnam s retail market is forecasted to reach around BUSD 180 by 2020 The modern trade is expected to expand widely, accounting for 45% of the total retail market by 2020 There is an increasing M&A trend between domestic retailers and foreign players INFRASTRUCTURE In 2015, Vietnam s infrastructure sector (i.e. transport, energy & utilities) had value of BUSD 3.2. This figure is expected to be BUSD 4.8 in 2020 In-plan / Under construction projects include BRT systems, metros and airport projects in the cities of Hanoi, Da Nang and Ho Chi Minh City HEALTHCARE Many new hospitals will be built, both public and private The government aims at improving the amount of domestically produced drugs There is strong need for imported medical devices KEY SALES OPPORTUNITIES RELATE TO INFRASTRUCTURE SOLUTIONS, INDUSTRIAL EQUIPMENT AND CONSUMER PRODUCTS BUSINESS SWEDEN 9 NOVEMBER,

20 OPPORTUNITIES SALES > SELL TO MANF. BOTH LABOR AND CAPITAL INTENSIVE MANUFACTURING SECTORS ARE GROWING STRONGLY GROSS OUTPUT OF KEY MANUFACTURING INDUSTRIES AT CONSTANT PRICES USD BILLION CAGR Furniture 2,1 6,1 OPPORTUNITIES TO SELL TO 19.7% LOCAL MANUFACTURERS Textiles 3,5 The positive performance of manufacturing activities implies potential 6,2 demand to equip manufacturers with new 10% machinery, equipment and tools Transport Equipment 7,0 14,7 13.2% Metal products 9,4 18,0 The government has encouraged localization of spare part sector by developing supporting industries. The progress to realise such goal is still slow and local manufacturers still rely on imported components 11.3% Computers & Communication Equipment 5,8 37,7 36.8% Food 23,8 49,0 12.8% THERE ARE OPPORTUNITIES TO PROVIDE MACHINERY, EQUIPMENT, TOOLS AND SPARE PARTS TO MANUFACTURERS SOURCE: PASSPORT BUSINESS SWEDEN 9 NOVEMBER,

21 OPPORTUNITIES SALES > RETAIL VIETNAM S RETAIL INDUSTRY IS EXPECTED TO REACH USD 180 BILLION BY 2020 THE MARKET SIZE OF RETAIL INDUSTRY IN VIETNAM USD BILLION, CAGR 10% 180 VIETNAM S SPENDING IN RETAIL SECTOR USD BILLION, F 64,9 56,7 42, e 2018f To date, the modern trade accounts for 25% of the total retail market. There are around 700 supermarkets, 125 shopping centers and 8,600 traditional markets in Vietnam Food & nonalcoholic drinks 5,9 7,1 8 Health goods & medical services 4 5,3 6,1 Clothing & footwear HIGH CONSUMER GOODS CONSUMPTION EXPOSE HUGE SALES POTENTIAL FOR SWEDISH RETAILERS SOURCE: VIETTRADE, BMI BUSINESS SWEDEN 9 NOVEMBER,

22 OPPORTUNITIES SALES > TRANSPORT INFRASTRUCTURE HEAVY INFRASTRUCTURE SPENDING PRESENTS OPPORTUNITIES FOR COMPANIES IN THE SECTOR [1/2] EXAMPLES OF IMPORTANT TRANSPORT PROJECTS MRT Hanoi Expressway Da Nang Quang Ngai BRT Hanoi BRT Da Nang In , total investment for transport infrastructure is estimated to ~ USD 45 billion MRT HCMC BRT HCMC SWEDISH COMPANIES CAN OFFER INNOVATIVE SOLUTIONS TO NEW TRANSPORT PROJECTS SOURCE: BUSINESS SWEDEN S ANALYSIS BUSINESS SWEDEN 9 NOVEMBER,

23 OPPORTUNITIES SALES > ENERGY INFRASTRUCTURE HEAVY INFRASTRUCTURE SPENDING PRESENTS OPPORTUNITIES FOR COMPANIES IN THE SECTOR [2/2] EXAMPLES OF PLANNED & ONGOING ENERGY PROJECTS Lai Chau hydropower plant Location: Lai Chau province Value (USD mn): 1831 Capacity: 1200 MW Time frame: Nghi Son 2 coal fired power plant Location: Thanh Hoa city Value (USD mn): 1831 Capacity: 1200 MW Time frame: Long Phu 1 coal fired power plant Location: Soc Trang province Value (USD mn): 1200 Capacity: 1200 MW Time frame: Ninh Thuan 2 nuclear power plant Location: Ninh Thuạn province Value (USD mn): Capacity: 4000 MW Time frame: Vinh Tan 1 power plant Location: Binh Thuạn Value (USD mn): 1750 Capacity: 1200 MW Time frame: SWEDISH COMPANIES CAN OFFER SUSTAINABLE SOLUTIONS REDUCING OVERALL ENVIRONMENTAL IMPACT SOURCE: BMI, FPTS, BUSINESS SWEDEN S ANALYSIS BUSINESS SWEDEN 9 NOVEMBER,

24 OPPORTUNITIES SALES > HEALTHCARE ALL HEALTHCARE SEGMENTS SHOW STRONG GROWTH GROWTH OF VIETNAM HEALTHCARE MARKET USD MILLION, CAGR 7,2% CAGR 10,5% Many new hospitals will be built Heavily laden public hospitals leading to new facilities (private & public) of thousands of beds in total to be built in big cities until CAGR 9,3% Locally produced drugs are encouraged Aging population presents growing demand for medicines Traditional medicine sector shows high potential for investors in extraction technologies f 2020f Private health spending Pharmaceutical sales Medical device trade Preference for imported medical devices Hospitals prefer imported devices (Vietnam currently imports up to 95% of medical devices) Growing demand for medical equipment as healthcare facilities expand SALES OF MEDICAL DEVICES AND DRUGS OFFER THE LARGEST OPPORTUNITIES FOR SWEDISH FIRMS SOURCE: BMI HEALTH SPENDING COVERS BOTH IN-HOSPITAL AND OUT-OF-HOSPITAL SPENDING (E.G. SPENDING ON CLINICS, MATERNITY HOMES, MEDICAL SERVICES, PRESCRIPTION AND OTC DRUGS, ETC.) BUSINESS SWEDEN 9 NOVEMBER,

25 THAILAND VIETNAM MALAYSIA INDIA OPPORTUNITIES SOURCING > OVERVIEW VIETNAM IS EMERGING AS AN ALTERNATIVE SOURCING DESTINATION IN ASIA, COMPETING WITH CHINA MONTHLY WAGE IN MANUFACTURING USD KEY OPPORTUNITIES: CHINA MYANMAR 128* 155,2 245,1 358,7 ~1/3 693,0 790,7 Labor-intensive manufacturing Swedish companies can consider Vietnam for laborintensive manufacturing industries as garment, shoes and bags Valuable experience of existing companies The long experience of Swedish sourcing companies in Vietnam can be useful for newcomers to leverage Cost effective manual work Industries requiring manual work such as wooden furniture, large steel structures and machine parts are also cost-effective in Vietnam 02 COMPANIES MOVING TO VIETNAM DON'T LOOK ONLY FOR LOW COST LABOUR, BUT ALSO A GOOD ENVIRONMENT SOURCE: TRADINGECONOMICS.COM *GARMENT AND SHOES INDUSTRY BUSINESS SWEDEN 9 NOVEMBER,

26 OPPORTUNITIES SOURCING > OVERVIEW VIETNAM IS AN EMERGING & ATTRACTIVE SOURCING DESTINATION THE MOST ATTRACTIVE INDUSTRIES FOR SOURCING: Electronics & ICT A preferred global center for electronics production and IT outsourcing 2014: BUSD 35 exports of electronics + hardware 2015: No. 1 global outsourcing location Textile In 2015, the garment sector earned an export turnover of USD 27.1 billion The main products are cotton fiber, fiber and fabric of all types, sewing products US is the main export country followed by EU and Japan Wood processing Vietnam wood and furniture export accounts for 2.5% of the world market Domestic demand is also increasing significantly, accounting for an increasing share of the total wood product turnover in the last 5 years SWEDISH COMPANIES CAN CONSIDER SOURCING FROM THREE KEY INDUSTRIES IN VIETNAM SOURCE: BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

27 OPPORTUNITIES SOURCING > ELECTRONICS VIETNAM IS BECOMING A GLOBAL ELECTRONICS ASSEMBLY HUB FOR OEMS ELECTRONICS IMPORTS & EXPORT , USD BILLION 79,5 87,5 58,6 63,3 33,7 34,8 39,5 26,7 28,2 22,2 11,1 18,9 5,9 11,1 20,6 31,9 35,0 45,8 52,7 5,2 11, Import Export KEY OPPORTUNITIES Manufacture in Vietnam Locally set up factories can enjoy low labour cost and various incentives in land use right, tax holiday and tariff reduction, especially in industrial zones Supply to OEMs The establishment of large electronics MNCs such as Samsung, Microsoft Mobile, Intel, LG, etc.in the market bring opportunities for sub suppliers VIETNAM IS AN EMERGING DESTINATION FOR ELECTRONICS PRODUCTION AND OUTSOURCING SERVICES SOURCE: VIETNAM CUSTOMS PORTAL, GSO BUSINESS SWEDEN 9 NOVEMBER,

28 OPPORTUNITIES SOURCING > WOOD VIETNAM IS A LARGE WOOD SOURCING DESTINATION WITH STRONG EXPORT GROWTH VIETNAMESE WOOD & FURNITURE EXPORTS USD BILLION, KEY FACTS Key driver for growth Competitive labour cost Many FTAs in place The share of export in the world market Vietnam wood export accounts for 2.5% of the world market (70 export countries), which is expected to increase to 5% in ,7 4,5 5,6 6,5 7 KEY OPPORTUNITIES Wood processing Furniture manufacturing f WOOD PROCESSING & FURNITURE MANUFACTURING ARE ATTRACTIVE AREAS FOR SWEDISH COMPANIES SOURCE: GENERAL STATISTIC OFFICE BUSINESS SWEDEN 9 NOVEMBER,

29 OPPORTUNITIES SOURCING > TEXTILE VIETNAM HAS A LARGE AND DIVERSIFIED TEXTILE AND ACCESSORY INDUSTRY TEXTILE AND LEATHER INDUSTRY IN VIETNAM KEY TEXTILE AND LEATHER HUBS It was expected that Vietnam garment exports would reach around USD 25 billion by However, in 2015, the garment sector already earned an export turnover of USD 27.5 billion There are about 6,000 garment factories in Vietnam, with 2.5 million workers US is the main export country (48%), followed by EU (15%), Japan (13%) The main exporting products are jackets, T- shirts, trousers and dresses Nam Dinh: - Textile - Garment Long An, Binh Duong: - Textile - Fashion Design Center, Garment - Shoes Hung Yen: - Textile & Accessories - Fashion Design Center - Shoes Hue: - Textile & Garment - Fashion Design Center Ho Chi Minh City Area: - Textile & Garment - Shoes EXAMPLE INTERNATIONAL RETAILERS SOURCING FROM VIETNAM BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 9 NOVEMBER,

30 SUCCESS CASES OVERVIEW THREE NORDIC COMPANIES IN VIETNAM HAVE SEEN SUCCESS WITH STRONG LOCAL PRESENCE & MINDSET EXAMPLES OF NORDIC SUCCESS CASES DOING BUSINESS IN VIETNAM A history of almost 20 years in Vietnam Core products: Decorative paints and marine coatings Revenue has grown 50% - 100% p.a 200/ 550 shops were renovated since 2013 (new foreign manager) Opening a new plant CONSUMER SUCCESS CASE A NORWEGIAN PAINT PRODUCER AND SELLER OUTSOURCING SUCCESS CASE A DANISH TEXTILE & FABRICS MANUFACTURER Entered Vietnam 20 years ago Core products: specialized garments, 100% exported Vietnam is considered the most efficient and profitable manufacturing base in the history of the company, with very successful R&D center Production located in an industrial zone to avail of good environment In Vietnam for nearly 20 years Revenue growth has been ~30% - 50% p.a Recruiting more staff in both Hanoi and HCMC Selling products at reduced prices to get long term revenue & achieve customer conversion from competing brands SELL TO MANU. SUCCESS CASE A SWEDISH MACHINERY COMPANY ALL SUCCESS CASE COMPANIES HAVE A LONG PRESENCE IN THE COUNTRY AND HAVE INVESTED TO SEE SUCCESS BUSINESS SWEDEN 9 NOVEMBER,

31 SUCCESS CASES SALES A PAINT MANUFACTURER WENT FROM 1 TO 20 MUSD IN TURNOVER IN THREE YEARS PROFILE OF BUSINESS Type of business: 100% foreign - owned company Total investment: MUSD 16,1 Establishment year: 1998 Offices: Hanoi, Hai Phong, Da Nang, Binh Duong Sales: MUSD 8 (2015), MUSD 12 (as of Jul 2016) Factory: Binh Duong Province Capacity: 25 million litre / year KEY SUCCESS FACTORS Management Logistics/ distribution Companies should have international management resources Hard to find suitable local managers with suitable skills, qualifications & ethics Strong and clear logistics/ distribution strategy is essential given poor infrastructure Slow goods transportation to be expected DESCRIPTION OF THE CASE MUSD (e.) MUSD Revenue Local general manager substituted by foreigner in 2013 New factory in 2 years to expand production Brand awareness Dealer and staff training Worth investing to educate clients Vietnamese people s purchasing decisions tends to be based on brand familiarity Invest in dealer / distributor and staff training Training both in basics as well as technical knowledge of product may be needed Incentives should be provided INTERNATIONAL MANAGEMENT SKILLS, WELL-TRAINED LOCAL STAFF/DISTRIBUTORS CRITICAL FOR SUCCESS SOURCE: BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

32 SUCCESS CASES SOURCING A SPECIALISED GARMENT COMPANY HAS ITS MOST PROFITABLE SOURCING OPERATION IN VIETNAM PROFILE OF BUSINESS Type of business: 100% foreign - owned company Establishment year: 1996 Factory: 2 in Hai Duong Province, 1 upcoming in Laos Products: Specialised garments Materials/textiles: ~98% imported No. of staff: (80% are blue collar) DESCRIPTION OF THE CASE Easy to get business license Advantageous geographical position Politically and socially stable High staff quality Systemic corruption Social impact corruption on staff Poor education system Lack of power supply KEY SUCCESS FACTORS Recruitment strategy Staff retention Factory location Official support Should have strong local-based management team, i.e. strong Vietnamese team on-board, to support expat CEO Critical to have good experience and well educated staff for company establishment, espcially with greenfield setup Keep key staff by consistently offering attractive incentives / reimbursement Invest in staff training Inside an industrial zone is the best option for a greenfield establishment Whenever issues arise, i.e. needs legal/ commercial advice, support of the Embassy and other official organizations can be very helpful) The biggest challenge in Vietnam is systemic corruption Vietnam General Director USING AN EXPERIENCED TEAM AND SETTING UP IN INDUSTRIAL ZONES IS CRITICAL TO SUCCESS SOURCE: BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

33 SUCCESS CASES SELL TO MANF A GLOBAL MACHINERY MANUFACTURER ACHIEVES 30-40% GROWTH P.A. IN VIETNAM PROFILE OF BUSINESS KEY SUCCESS FACTORS Type of business: Representative office Establishment year: 1999 No. of staff: 14 in Hanoi and HCMC Market presence Companies should have local office, either with local staff or local agent / distributor Local staff plays important role in investigating the market, signals commitment in the market DESCRIPTION OF THE CASE 30% - 50% sales growth p.a Sales activities are conducted in Vietnam Contract agreement signed by the entity in Singapore Training & maintenance handled from Vietnam Customer relationship Pricing strategy Critical to stay close to customer to train customers, change their mindset (with those who chose Chinese products) and maintain relationship (i.e. opportunities for maintenance service) This is even more important for companies selling high technology equipment Selling price can be reduced to attract customers, revenue is taken from long term sales & maintenance service Sometimes we have to wait for customer to experience on their own before persuading them that our product is better than the ones they are using Division manager IT IS CRITICAL TO BE CLOSE TO CLIENTS AND TO THINK ABOUT LONG TERM REVENUE SOURCE: BUSINESS SWEDEN BUSINESS SWEDEN 9 NOVEMBER,

34 SUCCESS FACTORS VIETNAM IS A HIGH GROWTH AND HIGH POTENTIAL MARKET INVESTMENT IS REQUIRED TO TAP INTO IT OVERVIEW OF BEST PRACTICES FOR DOING BUSINESS IN VIETNAM Ensure strong local presence Invest in talent Protect from corruption 4 Think global, act local You cannot build business in Vietnam from Sweden or Singapore Vietnam is high growth and high potential, but also requires high level of commitment & focus Crucial to build in-depth market understanding, and to establish strong local presence Salary costs are low in Vietnam, but international quality demands international compensation Important to recruit high quality top management, and to recruit carefully Not easy to find suitable and skillful staff/ partners key to invest in training Design incentives for employees and partners that protects from corruption Focus on right values in recruitment and partnerships, but also: Good reimbursement schemes required to help staff face social impacts of systemic corruption It s key to localize both value offering and go-to-market strategy Relationship bonding, long-term investment on client and partner relationship Copying an existing Western product & marketing strategy for use in Vietnam is unlikely to work IT S KEY TO LOCALIZE BOTH VALUE OFFERING AND GO-TO-MARKET STRATEGY BUSINESS SWEDEN 9 NOVEMBER,

35 BUSINESS SWEDEN IN ASEAN BUSINESS SWEDEN HELPS SWEDISH COMPANIES REACH THEIR FULL INTERNATIONAL POTENTIAL BUSINESS SWEDEN S PRESENCE IN ASEAN VIETNAM WE SUPPORT MARKET ENTRY AND GROWTH Business Sweden shorten time to market, find new revenue streams, and manage risks THAILAND ACCELERATE LANDING EXPAND BUSINESS MALAYSIA SINGAPORE INDONESIA PROPEL GROWTH We are internationalization and growth experts with expertise on local markets, industry and business logics, and internationalization strategies WE SUPPORT SOME OF SWEDEN S LARGEST COMPANIES, AND SME S, WITH MARKET ENTRY AND GROWTH BUSINESS SWEDEN 9 NOVEMBER,

36 CONTACT US BUSINESS SWEDEN IN VIETNAM Contact information Business Sweden Commercial Section at The Swedish Embassy in Vietnam 15 th floor, Daeha Business Center, Ba Dinh District, Hanoi, Vietnam T: E: W: BUSINESS SWEDEN 36