GBE VIETNAM Report

Country Proposal for a Two-Wheeler Auto Components Manufacturer
By,
Vietnam – The next Mahesh Sundar (1803017)
Sethupathi
Economic Miracle Kavipriya M (1803015)
1
IIM Trichy – GBE report on Vietnam
Table of Contents
1.1. Introduction to Vietnam.......................................................................3
1.2. Culture.................................................................................................4
1.3. Social Beliefs And Customs In Vietnam.................................................4
1.4. Power Distance in Vietnam..................................................................4
1.4.1. INDIVIDUALISM...............................................................................................5
1.4.2. MASCULINITY..................................................................................................5
1.4.3. UNCERTAINITY AVOIDANCE............................................................................5
1.4.4. LONG TERM ORIENTATION..............................................................................6
1.4.5. INDULGENCE...................................................................................................6
2
1. About the Country - Vietnam
1.1. Introduction to Vietnam
Vietnam is a Southeast Asian country on the South China Sea known for its beaches, rivers, Buddhist
pagodas and bustling cities. Hanoi, the capital, pays homage to the nation’s iconic Communist-era leader,
Ho Chi Minh, via a huge marble mausoleum. Ho Chi Minh City (formerly Saigon) has French colonial
landmarks, plus Vietnamese War history museums and the Củ Chi tunnels, used by Viet Cong soldiers.
Vietnam, a one-party Communist state, has one of south-east Asia's fastest-

growing economies and has set its sights on becoming a developed nation by
2020. It became a unified country once more in 1975 when the armed forces
of the Communist north seized the south.
This followed three decades of bitter wars, in which the Communists fought
first against the colonial power France, then against South Vietnam and its US backers. In its latter stages,
the conflict held the attention of the world.
The US joined the hostilities in order to stem the "domino effect" of successive countries falling to
Communism.For nearly three decades Vietnam has haunted
Americans, first as a far-off Cold War engagement that probably
couldn't be won, and since 1975 as a war that was lost.
But today Vietnam is "a country, not a war." Not only a country but
a place widely reported to be growing rich; a likely candidate to
become Asia's newest economic miracle.
1.2. Vietnam Overview
Vietnam’s development over the past 30 years has been remarkable. Economic and political
reforms under Đổi Mới, launched in 1986, have spurred rapid economic growth, transforming what
was then one of the world’s poorest nations into a lower middle-income country. Between 2002 and
2018, more than 45 million people were lifted out of poverty. Poverty rates declined sharply from over
70% to below 6% (US$3.2/day PPP), and GDP per capita increased by 2.5 times, standing over
US$2,500 in 2018.
In the medium-term, Vietnam’s economic outlook is positive, despite signs of cyclical

moderation in growth. After peaking at 7.1% in 2018, real GDP growth in 2019 is projected to
slightly decelerate in 2019, led by weaker external demand and continued tightening of credit and
fiscal policies. Real GDP growth is projected to remain robust at around 6.5% in 2020 and 2021.
Annual headline inflation has been stable for the seven consecutive years – at single digits, trending
towards 4% and below in recent years. The external balance remains under control and should
continue to be financed by strong FDI inflows which reached almost US$18 billion in 2018 –
accounting for almost 24% of total investment in the economy.
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Vietnam is experiencing rapid demographic and social change. Its population reached 97 million
in 2018 (up from about 60 million in 1986) and is expected to expand to 120 million before
moderating around 2050. Today, 70% of the population is under 35 years of age, with a life
expectancy of 76 years, the highest among countries in the region at similar income levels. But the
population is rapidly aging. And an emerging middle class, currently accounting for 13% of the
population, is expected to reach 26% by 2026.
Vietnam ranks 48 out of 157 countries on the human capital index (HCI), second in ASEAN
behind Singapore. A Vietnamese child born today will be 67% as productive when she grows up as
she could be if she enjoyed complete education and full health. Vietnam’s HCI is highest among
middle-income countries, but there are some disparities within the country, especially for ethnic
minorities. There would also be a need to upgrade the skill of the workforce to create productive jobs
at a large scale in the future.
Over the last thirty years, the provision of basic services has significantly improved. Access of
households to modern infrastructure services has increased dramatically. As of 2016, 99% of the
population used electricity as their main source of lighting, up from 14 % in 1993. Access to clean
water in rural areas has also improved, up from 17% in 1993 to 70% in 2016, while that figure for
urban areas is above 95%.
Vietnam performs well on general education. Coverage and learning outcomes are high and
equitably achieved in primary schools — evidenced by remarkably high scores in the Program for
International Student Assessment (PISA) in 2012 and 2015, where the performance of Vietnamese
students exceeds that of many OECD countries. Health outcomes have improved in tandem with rising
living standards. Between 1990 and 2015, the maternal mortality ratio fell from 139 to 54 deaths per
100,000 live births, and infant mortality dropped from 44 deaths per 1,000 live births to 16.7.
Vietnam’s universal health coverage index is at 73 - higher than regional and global averages - with
87% of the population covered.
6.6 %
average GDP growth
GDP Growth (%/year) rate achieved, over 3
decades
2007
1992 (WTO 2014
-1997 accession) -2017
1986 2001 2011 2018
-1990 -2004 -2013
4.4 % <8 % 7.25 % 8.46 % 5.6 % 6.4 % 7.08 %
4
5
6
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Ease of Doing Business in DB RANK
Region East Asia & Pacific

Vietnam
Income Category Lower middle income
Population 95,540,395
City Covered Ho Chi Minh City
Rankings on Doing Business
Starting a Business in Vietnam and comparator economies – Ranking and Score
DB 2020
0 100
92.4: Thailand (Rank : 47)
85.1: Vietnam (Rank : 115)
83.9: Regional Average (East Asia & Pacific )
83.3: Malaysia (Rank : 126)
81.2: Indonesia (Rank : 140)
62.7: Lao PDR (Rank : 181)
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Enforcing Contracts in Vietnam and comparator economies – Ranking and Score
DB 2020 Enforcing Contracts Score
0 100
53.0: Regional Average East Asia & Pacific
42.0: Lao PDR (Rank : 161)
Trading across Borders – Ranking and Score
0 100
78.1: Lao PDR (Rank : 78)
71.6: Regional Average (East Asia & Pacific)
Enforcing Contracts in Vietnam and comparator economies – Ranking and Score
0 100
53.0: Regional Average (East Asia & Pacific )
42.0: Lao PDR (Rank : 161)
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Economic Outlook
Economic environment 2018 saw a record GDP growth of 7.08%, the highest rate since 2008, beating
the target to hit 6.7% by the Government and well close to the forecast of 7.1% by the Asian
Development Bank (ADB). The 10-year record high growth was a result of an improved business
climate, positive economic structure transformation and impressive exports. The country witnessed
another record trade surplus of close to US$7 billion in 2018, of which, the domestic sector posted a
trade deficit of US$25.6 billion and the foreign-invested sector had a trade surplus of US$32.8 billion.
The majority of the top export items belong to the foreign direct investment (FDI) sector, contributing
US$143 billion, or about 71% of the total export value. Textiles and garments, electronic components
and mobile phones remained top contributors to Viet Nam’s export economy. Overcoming many
difficulties, agricultural exports in 2018 hit about US$40 billion, ranking 15th in the world and has
exported to more than 180 countries and territories. Specifically, fruit and vegetables became one of
the top three agricultural export products with a value of US$3.8 billion. Viet Nam’s imports largely
comprised raw materials and mechanical spare parts for manufacturing and production purposes as
well as for projects in power and energy. In terms of inflation rate, price management and inflation
control were successful in 2018 with CPI growth of 3.5%, much lower than the target of about 4%.
This marked the third consecutive year with inflation maintained at below 4%, contributing
substantially to the success of socio-economic development and improved business.
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Major Export Countries
Foreign Direct Investment
Intellectual property (“IP”) As a member of the WTO, Viet Nam must conform with the WTO’s
requirements on Intellectual Property. The Law on Intellectual Property Rights (“IPR”) was passed in
2005, which was amended and supplemented in 2009. According to the Law on IPR, three major IP
rights are protected in Viet Nam: copyright and related rights; industrial property rights; and rights in
plant varieties. Viet Nam’s participation in both the EVFTA and the CPTPP Agreement requires Viet
Nam to meet high standards of IPR protection. Viet Nam has taken steps to improve its IP framework
to the same level as other Southeast Asian countries, according to the sixth annual US Chamber
International IP Index, which analyses the IP climate in 50 world economies, released in February
2018 by the US Chamber of Commerce Global Innovation Policy Center (GIPC).
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1.3. Culture
The Vietnamese culture is one of the oldest in Southeast Asia and is heavily influenced by the
Chinese culture. Despite the changes over the years, some elements of the Vietnamese culture like the
veneration of the ancestors, respect for family values, devotion to study, etc., remained intact.
After Vietnam attained independence from China in the 10th

century, the country began to expand southwards which led to the
incorporation of elements of the Champa and Khmer cultures into
the Vietnamese culture. Later, French colonial rule in Vietnam
introduced the Western culture to the country and led to the spread
of Catholicism and the adoption of the Latin alphabet . Once the
communist regime started in Vietnam, several restrictions were
placed over cultural exchanges with the Western civilization and instead exposure to the cultures of other
communist nations like Cuba, Soviet Union, and others was encouraged. Despite the changes over the
years, some elements of the Vietnamese culture like the veneration of the ancestors, respect for family
values, devotion to study, etc., remained intact.
1.4. Social Beliefs and Customs in Vietnam

In Vietnam, family and clan are valued over individualism. Clan is the most important social unit in the country
and each clan features a patriarch heading the clan and a clan altar. Even today, in some parts of the country, the
tradition of clan members living together in longhouses is quite prevalent. It is also not uncommon to see three
to four generations of a family living under the same roof. Members of a clan are related by blood and often
name their villages based on their clan names
1.5. Power Distance in Vietnam

1.5.1. INDIVIDUALISM
The fundamental issue addressed by this dimension is the degree of interdependence a society
maintains among its members. It has to do with whether people´s self-image is defined in terms
of “I” or “We”. In Individualist societies people are supposed to look after themselves and their
direct family only. In Collectivist societies people belong to ‘in groups’ that take care of them in
exchange for loyalty.
Vietnam, with a score of 20 is a collectivistic society. This is manifest in a close long-term

commitment to the “member” group, be that a family, extended family or extended relationships.
Loyalty in a collectivist culture is paramount and overrides most other societal rules and
regulations. Such a society fosters strong relationships, where everyone takes responsibility for
fellow members of their group. In collectivistic societies, offence leads to shame and loss of face.
Employer/employee relationships are perceived in moral terms (like a family link), hiring and
promotion take account of the employee’s in-group. Management is the management of groups.
1.5.2. MASCULINITY
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A high score (Masculine) on this dimension indicates that the society will be driven by
competition, achievement and success, with success being defined by the winner/best in field – a
value system that starts in school and continues throughout organisational life.
A low score (Feminine) on the dimension means that the dominant values in society are caring for
others and quality of life. A Feminine society is one where quality of life is the sign of success and
standing out from the crowd is not admirable. The fundamental issue here is what motivates
people, wanting to be the best (Masculine) or liking what you do (Feminine).
Vietnam scores 40 on this dimension and is thus considered a Feminine society. In Feminine
countries the focus is on “working in order to live”, managers strive for consensus, people value
equality, solidarity and quality in their working lives. Conflicts are resolved by compromise and
negotiation. Incentives such as free time and flexibility are favoured. Focus is on well-being; status
is not shown. An effective manager is a supportive one, and decision making is achieved through
involvement.
1.5.3. UNCERTAINITY AVOIDANCE
The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that
the future can never be known: should we try to control the future or just let it happen? This
ambiguity brings with its anxiety and different cultures have learnt to deal with this anxiety in
different ways. The extent to which the members of a culture feel threatened by ambiguous or
unknown situations and have created beliefs and institutions that try to avoid these is
reflected in the score on Uncertainty Avoidance.
Vietnam scores 30 on this dimension and thus has a low preference for avoiding uncertainty. Low
UAI societies maintain a more relaxed attitude in which practice counts more than principles and
deviance from the norm is more easily tolerated. In societies exhibiting low UAI, people believe
there should be no more rules than are necessary and if they are ambiguous or do not work they
should be abandoned or changed. Schedules are flexible, hard work is undertaken when necessary
but not for its own sake, precision and punctuality do not come naturally, innovation is not seen as
threatening.
1.5.4. LONG TERM ORIENTATION

This dimension describes how every society has to maintain some links with its own past while
dealing with the challenges of the present and future, and societies prioritise these two
existential goals differently. Normative societies. which score low on this dimension, for example,
prefer to maintain time-honoured traditions and norms while viewing societal change with
suspicion. Those with a culture which scores high, on the other hand, take a more pragmatic
approach: they encourage thrift and efforts in modern education as a way to prepare for the future.
Vietnam scores 57, making it a pragmatic culture. In societies with a pragmatic orientation, people
believe that truth depends very much on situation, context and time. They show an ability to adapt
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traditions easily to changed conditions, a strong propensity to save and invest. thriftiness and
perseverance in achieving results.
1.5.5. INDULGENCE
One challenge that confronts humanity, now and in the past, is the degree to which small children
are socialized. Without socialization we do not become “human”. This dimension is defined as the
extent to which people try to control their desires and impulses, based on the way they were raised.
Relatively weak control is called “Indulgence” and relatively strong control is called “Restraint”.
Cultures can, therefore, be described as Indulgent or Restrained.
A low score of 35 on this dimension indicates that the culture of Vietnam is characterised as
Restrained. Societies with a low score in this dimension have a tendency to cynicism and
pessimism. Also, in contrast to Indulgent societies, Restrained societies do not put much emphasis
on leisure time and control the gratification of their desires. People with this orientation have the
perception that their actions are Restrained by social norms and feel that indulging themselves is
somewhat wrong.
Business etiquette and culture Many Vietnamese are more comfortable using their native
language rather than English. However, many English speakers can be found in Viet Nam,
especially in the larger cities. Presenting business cards is an important ritual in the Vietnamese
business world. Cards are exchanged at the beginning of a meeting using both hands. Translating
written materials into Vietnamese shows respect for Vietnamese colleagues and business partners.
Face to face business meetings are important in Viet Nam and an appropriate level of respect must
be shown according to rank and seniority.
3.7. Advertising and Promotion

MARKET OPPORTUNITY
4. Market Opportunity
With many Two-wheeler OEMs like Suzuki, Yamaha present in both India & Vietnam, Indian two-
wheeler auto component manufacturers have excellent business opportunity in adding more value to their
organization. Current business relationships in India can be leveraged for market entry in Vietnam. By
having a Manufacturing plant at Vietnam, the company can not only target business opportunities in
Vietnam OEM & Aftermarket space, but also in nearby markets of ASEAN. With the Regional
Comprehensive Economic Partnership (RCEP) coming up, Vietnam provides abundant opportunity for
growth in entire Asia.
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4.1 Automotive components
Vietnam’s automotive manufacturing industry is growing rapidly, but the development of supporting
industries providing spares and parts have been slow. This offers an opportunity for Indian auto
components manufacturers, who are already amongst the top exporters in the world. Last year, automobile
components industry exports constituted 4 percent of India’s overall exports and expanding overseas will
help firms in diversification.
Motorcycles Market in Vietnam
Vietnam is the world's fourth largest motorcycles market, assembling around 2 million new motorcycles
each year, with more than 15 million existing vehicles demanding maintenance. This reflects the
enormous market potential in motorcycles components and parts.
According to the survey, 95% of the electric motorcycles in Vietnam are manufactured by Japanese,
mainland China and Taiwan companies, while Vietnam's manufacturers only account for 5% of the
production.
Sales rose for the fourth straight year as 3.39 million new motorbikes were bought in Vietnam last
year.
The number marked an increase of 3.5 percent over the

previous year, and a 25 percent increase from 2014,
according to the Vietnam Association of Motorcycle
Manufacturers (VAMM). It also means that 282,174
motorbikes were sold each month last year, mainly by five
members of VAMM: Honda Vietnam, Piaggio Vietnam,
Vietnam Suzuki Corporation, SYM Vietnam and Yamaha
Motor Vietnam.
Honda remains the most popular motorbike brand in

Vietnam, accounting for 75.9 percent of the market share,
up 4.2 percentage points from 2017, the company said in a
statement.
Motorbikes in Vietnam range from affordable to high-end and luxury products. They include manual
models, scooters and sports motorcycles with prices from tens of millions of dong (VND23,195= $1) to
more than a billion ($43,064).
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The motorbike market in Vietnam is still growing despite previous forecasts that it had reached a
saturation point. High taxes and infrastructure limitations are constraints for cars and there is still a
demand for this type of transport.
"Although the market will not see remarkable changes in the future, it will continue to grow steadily with
3-3.5 million motorbikes sold each year," VAMM said.
Vietnam tops the world in the number of people using motorbikes for daily transportation, according to a
study done by Germany-based Dalia Research in 2017.
It said 79 percent of Vietnamese use motorbikes for commuting, while the global average is just 10
percent globally.
By the end of 2016, there were 45 million registered motorbikes in Vietnam, a country of over 92 million
people, according to the Ministry of Transport.
Vietnamese two-wheeler industry is the fourth largest in the World, dominated by the five main local
producers, Honda, Yamaha, Suzuki, SYM and Piaggio, which hold over 97% of the total market (our
figures include both local produced and imported vehicles).
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2. MARKET ENTRY
5.1. Market Entry:
A. The Forms of Investment Foreign investment projects in Vietnam currently can take the form of any of
the following investment vehicles:
1. The Limited Liability Company (“LLC”);

2. The Joint Stock Company (“JSC”);
3. The Partnership Company (“PC”);
4. The Business Cooperation Contract (“BCC”);
5. Public – Private Partnership (“PPP”) projects.
By considering various factors, we are suggesting Limited Liability company model to enter Vietnam
market.
A brief on LLC model in Vietnam
LLC is established by a single investor or pursuant to a joint venture contract signed by one or more
investors, either Vietnamese investors and one or more foreign investors; or between foreign investors,
individually or institutionally, for the purpose of carrying out business activities in Vietnam
A.1 The LLC (Multiple Member LLC and Single Member LLC) An LLC may take the form of either an
LLC with two or more members (“Multiple Member LLC”) or an LLC with one member (“Single
Member LLC”). An LLC has its own charter and the Board of Members (“BOM”) which is akin to a
GSM of a JSC, and has the right to establish dependent units such as branches or ROs domestically or
abroad. An LLC has the status of a recognized legal entity and a member of an LLC is responsible for the
debts and liabilities of the enterprise to the extent of the amount of capital that the member has contributed
or committed to contribute to the enterprise. An LLC does not issue shares.
Multiple Member LLC
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A Multiple Member LLC is an enterprise that has more than one but no more than fifty members, which
may be organizations, individuals, or a combination of both. a. Rights of a Member A member of a
Multiple Member LLC has the right, among other things, to:
• attend meetings of the BOM;
• cast votes in a number that is proportionate to its capital contribution;
• be distributed shares and profits proportional to its capital contribution;
• be given priority in contributing additional capital. Subject to the right of first refusal (i.e., members
wishing to transfer all or part of their capital must first offer to sell such portion of capital to all other
members proportionately), a member can transfer, dispose of or ask the company to buy back its capital
contribution portion in accordance with the Enterprise Law 2014 or as stipulated in the company charter.
Major Advantages:
1. No restriction on scope of the Business

- Auto components supply to Local market as well as Export market
- As Huge No of Old Two Wheelers available in the market, company can explore after market
Sales also
2. Tax Advantages
In large corporations, the corporation pays federal taxes on its taxable income and all employees also
pay taxes on their incomes. An LLC does not file a separate tax return, which lets you avoid this double
taxation. Instead, profits “pass through” the corporation directly into the hands of LLC members. The
members then file either a profit or loss on their personal taxes. If you run a single-member LLC, you
file taxes as a sole proprietor. If you work as the managing member of the LLC, the government also
permits you to write off all health insurance premiums, up to the limit of your share of the LLCs profits.
3. Payment Advantages
LLC members can opt to receive payments in two main ways. You might write yourself a check
drawing on the funds available to the LLC, called a distribution. A member may also receive
“guaranteed payments,” or payments made on a regular basis for services rendered
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5.2 Indian companies and government funded projects in Vietnam
India has 132 projects with total investments of about US$1.1billion including investments routed through
other countries. Major sectors of investment are energy, mineral exploration, agro-processing, sugar
manufacturing, agrochemicals, IT and auto components.
In the oil and gas sector, ONGC Videsh Limited (OVL) and Essar Oil are already providing oil and gas
exploration services in Vietnam along with Petro Vietnam. In 2013, Tata Power, part of the Tata Group,
was awarded a US$ 2.1 billion thermal power project in Soc Trang Province, which is the largest Indian
investment project in Vietnam till date. Another company under the same group, Tata Coffee, announced
setting up a greenfield instant coffee facility in Vietnam at a cost of US$ 50 million in December 2016.
Other Indian firms include Reliance Industries, Gimpex, J K Tires, and Glenmark Pharmaceuticals Ltd.
Along with the private sector, the government is also pushing for an increase in trade and investment. The
Indian government has recently approved for a Project Development Fund of Rs 500 crore (US$ 77
million) for supporting Indian companies to build production and supply chains in Cambodia, Laos,
Myanmar, and Vietnam. This will benefit India’s industries in terms of business expansion, maintaining
cost competitive supply chains, along with increased integration with global production networks.
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In 2014, the Indian government also offered a US$300 million line of credit to Vietnam as an impetus to
accelerate textile trade and investment between the two countries. The credit is to be disbursed through the
Vietnam Exim Bank, is to be used mainly to set up a textiles and garment industrial park close to the Ho
Chi Minh city as well as to help Indian and Vietnamese companies to forge joint venture
India ranks 27 th amongst all foreign investors in Vietnam with 169 projects and a total investment
capital of US$ 756 million. [iv]
ONGC Videsh, the international arm of the Oil and Natural Gas Corporation (ONGC), India’s
largest oil and gas exploration and production company, has a strong presence in Vietnam. It
invested US$114 million between 2008-09 and 2017-18. [v] Indeed, ONGC Videsh has a long
history of operations in Vietnam, first entering the market in 1988 when it was awarded the
exploration licence for Block 6. In 2006, the company got exploration Blocks 127 and 128 but
Block 127 was relinquished after completing the work programme. [vi] In July 2017, the
Vietnamese government granted a two-year extension to explore oil Block 128. [vii] Currently,
Vietnam accounts for about 12 percent of ONGC Videsh’s production, next only to Russia which
has a share of 56 percent. [viii] In addition to commercial interests, there are strategic interests
behind ONGC Videsh’s presence in Vietnam. Block 128 is located in the contested waters of the
South China Sea and the Vietnamese government welcomes Indian presence in the South China
Sea to counter China’s aggressions. [ix]
Marico Industries is another major Indian investor in Vietnam. It entered the Vietnamese market
in 2010-11 by acquiring an equity stake of 85 percent in International Consumer Products
Corporation, a leading Vietnamese fast-moving consumer goods (FMCG) company. [x] Marico
Southeast Asia Corporation is present in the male grooming segment and food business (under the
brand name Thuan Phat). The annual report of Marico suggests that its business in Vietnam
declined by five percent in 2017-18 mainly due to the underperformance of its male shampoo
business but the food business posted double-digit growth in constant currency terms. [xi] RK
Marbles, India’s largest marble company first entered the Vietnamese market in 2006. Between
2008-09 and 2017-18, the company invested about US$ 50 million in Vietnam’s marble sector.
Since its establishment, RK Marble Vietnam has been a leading producer and exporter of white
and yellow marble in the Yen Bai Province of Vietnam. Two other Indian companies, Wolkem
India and Tufropes India, invested about US$ 9 million each.
Indian firms have also made some progress in Vietnam’s renewable energy market. The TATA
Group, Adani Green Energy, and Shapoorji Pallonji Infrastructure Capital Co. have made
significant investments in the country. In 2017, the TATA Group invested in solar power plants in
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four Vietnamese provinces with a total capacity of 250 MW. [xii] The TATA Group’s most recent
investment in solar power is a 49 MW project worth US$ 54 million in the Binh Phouc province of
Vietnam. [xiii] This plant is scheduled to be completed by June 2019. Similarly, Adani Green Energy
has also expanded its renewable energy business to Vietnam. In 2018, Adani Green Energy
subscribed to 80-percent equity share capital of Adani Phuoc Minh Wind Power Company Limited
(APMWPCL) in Vietnam. [xiv] The APMWPCL is developing a 27.3 MW wind power plant at
Phuoc Minh and Phouc Ninh Commune, in the Ninh Thuan province of Vietnam. According to a
news report by Viet Nam News, India’s Shapoorji Pallonji Infrastructure Capital Co Ltd and
Vietnam’s Electricity Power Trading Company (EPTC) signed a power purchase agreement for the
solar power project SP infra 1 Plant in Ninh Thuận Province. [xv] The total investment capital of the
50MW solar plant is about US$ 71 million.
TATA Steel failure in Vietnam

Big-ticket investments by Indian companies in Vietnam have met with little success. TATA Steel,
the world’s third largest steel manufacturer, is a case in point. TATA Steel entered into a tripartite
venture with Vietnam Steel Corporation and Vietnam Cement Industries to develop a steel plant in
the coastal province of Ha Tinh. The US$ 5-billion facility with a capacity of 4.5 million metric
tonnes per year would have been the largest investment by an Indian company in Vietnam. The
project, however, failed to materialise. The project site initially identified by TATA Steel was
given to Formosa Plastic Group, a company which had no previous experience in steel
manufacturing. [xlvi] China Steel has a five-percent stake in Formosa Steel Corporation. TATA Steel
acquired land in Vung Ang Industrial zone in Ha Tinh province in 2009 but failed to obtain an
investment licence and land clearance for the project. Under Vietnamese investment laws,
companies do not have to pay for site clearance and water supply construction but the provincial
government asked TATA Steel to pay for the same, citing its own budgetary constraints. However,
the provincial government had borne about 70 percent of site clearance costs for Formosa’s steel
plant. The TATA Group asked for equal treatment but was not granted any; it pulled out in
2014. To be sure, TATA Steel’s failure to enter Vietnam is not representative of all Indian
companies in that country, as there have been many other successful ventures so far.
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Table A4: Indian investments in Vietnam from 2008-09 to 2016-17 (in US$ million)
2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-
Indian Company 09 10 11 12 13 14 15 16 17 Total

Biostadt India Ltd. 0.1 0.1
Biotavia Labs Pvt.
Ltd -

Bola Surendra
Kamath and Sons 0.4 2.5 2.9

CCL Products
(India) Ltd. 5.0 2.0 7.0
Decon Telecom
Solutions Pvt. Ltd. -
Drom Marble Pvt.
Ltd. 0.7 0.7

Gimpex Overseas
Pvt. Ltd. 0.1 0.1

K Jitendra Kumar 0.1 0.1
Lion Holdings Pvt.
Ltd. 0.1 0.7 0.8
M/S SDU Travels
Pvt. Ltd. -
Macro Polymers
Pvt. Ltd. 0.2 0.2
Manohar Filaments
Pvt. Ltd. 0.1 0.1 0.2
Marico Industries
Ltd. 54.7 54.7
Metro Telworks
Pvt. Ltd. 0.1 0.1
Metro Wireless
Engineering Pvt
Ltd. 0.1 0.1

N Rangarao and
Sons 1.2 0.1 0.0 0.2 1.6

ONGC Videsh Ltd. 46.7 0.8 3.8 14.7 66.0
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Polaris Software
Lab Ltd. 0.1 0.1

Premco Global Ltd. 0.8 3.0 3.8

R K Marble P Ltd. 1.4 1.1 4.2 16.5 17.0 1.0 4.5 45.6
Rajasthan Barytes
Ltd. 0.2 0.2
Ramco Systems
Ltd. -
Sequent Scientific
Ltd. 2.4 2.4

Snam Abrasives (P)
Ltd. 0.5 1.0 0.4 0.5 0.3 2.6

Spica Elastic Pvt.
Ltd. 1.3 1.0 0.5 2.8
Star Engineers
India Pvt. Ltd. 0.5 0.4 0.9
Sunflower Overseas
Pvt. Ltd. 0.9 0.9
Synergy Property
Development
Services Pvt. Ltd. -
Synthite Industries
Ltd. -

TATA Coffee Ltd. -

Tech Mahindra Ltd. -

Tex Corp Ltd. 1.7 2.8 4.6

Tufropes Pvt. Ltd. 0.2 0.3 0.2 5.0 5.7

Unison Metals Ltd. 0.6 0.1 0.6
Uttara Foods &
Feeds Pvt. Ltd. 4.1 0.5 0.4 0.3 5.3
Vallabh Das Kanji
Ltd. -
Vedic Elements
23

NTS Pvt Ltd 0.2 0.1 0.0 1.3 0.1 1.7
Vikhyat Goods and
Supply Pvt. Ltd. -
Western India
Cashew Company
Pvt. Ltd. -

Wolkem India Ltd. 0.3 7.9 0.9 9.0
Grand Total 50.0 2.7 76.1 3.1 2.4 22.5 20.9 9.4 33.5 220.7
Latest Investments in Vietnam
Competitors Presence
Minda Vietnam
Recognizing the growth of the 2-wheel segment in the ASEAN market, Spark Minda has setup Greenfield
manufacturing facilities in Indonesia & Vietnam. The idea which was conceptualized in October 2004, started
with assembly of locks in Indonesia in October 2005 under the name of PT. Minda Asean Automotive.
Keeping in mind the corporate philosophy of “Near to the customer” another facility was added in April 2009
in Vietnam under the name of Minda Vietnam Automotive Company Limited.
Minda Vietnam Automotive Company Limited
24
Summary
Vietnamese Competitiveness and China+1 Production
Vietnam’s close proximity to China, competitively priced labor and a strong network of trade agreements
have proven critical to its competitiveness as a China+1 destination. By situating manufacturing cost
centers close to traditional hubs in mainland China, investors are able to reduce costs with limited
interruption or delays to currently existing supply chains.
Foreign investors pursuing China+1 also generally benefit from cost reductions on wages, land pricing,
and inputs. Vietnam again stands out in this respect, offering investors a minimum wage 59 percent of that
found in China and 70 percent of that in Thailand. Finally, and perhaps most importantly, Vietnam’s
network of trade agreements is among the best that manufacturers will be able to find in a country at this
point on the value chain.
Vietnam, unlike China which has historically used its low wages and large size to boost export
competitiveness, has a wide network of trade agreements extending to key import markets across the
globe. Among this network are trade agreements with Korea and the European Union, as well as
upcoming agreements with the European Union and, should everything go according to plan, members of
the Trans Pacific Partnership (TPP). As a member of the Association of Southeast Asian Nations
(ASEAN), Vietnam also benefits from the regional bloc’s trade agreements with China, Japan, Australia,
New Zealand, and India. Together these agreements provide a significant advantage over China that more
than make up for the potential downsides.
Foreign investors who invest in the Vietnamese market need to have a clear understanding of the capacity
and limitations of Vietnamese production. As of 2018, Vietnam’s education and infrastructure are better
suited to assembly and relatively low value-add manufacturing than many of the higher value-added
processes becoming popular in mainland China.
Since Auto-Components manufacturing is relatively of low value add manufacturing, it is recommended

to start manufacturing operations in Vietnam.
25
Reference Sites:
https://www.bbc.com/news/world-asia-pacific-16567315
https://www.smithsonianmag.com/travel/vietnam-now-1-38174624/
https://www.worldatlas.com/
https://www.hofstede-insights.com/country/vietnam/
https://www.worldbank.org/en/country/vietnam/overview#1
https://www.pwc.com/vn/en/publications/2019/pwc-vietnam-dbg-2019
https://www.doingbusiness.org/content/dam/doingBusiness/country/v/vietnam
https://www.vietnam-briefing.com/news/setting-foreign-invested-enterprise-vietnam.html/
https://e.vnexpress.net/news/business/data-speaks/motorbikes-still-the-vehicle-of-choice-in-
vietnam-3872250.html
26
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Country Proposal for a Two-Wheeler Auto Components Manufacturer

Economic Miracle Kavipriya M (1803015)

Vietnam, a one-party Communist state, has one of south-east Asia's fastest-

1.2. Vietnam Overview

In the medium-term, Vietnam’s economic outlook is positive, despite signs of cyclical

4.4 % <8 % 7.25 % 8.46 % 5.6 % 6.4 % 7.08 %

Region East Asia & Pacific

City Covered Ho Chi Minh City

Rankings on Doing Business

Starting a Business in Vietnam and comparator economies – Ranking and Score

92.4: Thailand (Rank : 47)

85.1: Vietnam (Rank : 115)

83.9: Regional Average (East Asia & Pacific )

83.3: Malaysia (Rank : 126)

81.2: Indonesia (Rank : 140)

62.7: Lao PDR (Rank : 181)

DB 2020 Enforcing Contracts Score

68.2: Malaysia (Rank : 35)

67.9: Thailand (Rank : 37)

62.1: Vietnam (Rank : 68)

53.0: Regional Average East Asia & Pacific

49.1: Indonesia (Rank : 139)

42.0: Lao PDR (Rank : 161)

Trading across Borders – Ranking and Score

88.5: Malaysia (Rank : 49)

84.6: Thailand (Rank : 62)

78.1: Lao PDR (Rank : 78)

71.6: Regional Average (East Asia & Pacific)

70.8: Vietnam (Rank : 104)

67.5: Indonesia (Rank : 116)

Enforcing Contracts in Vietnam and comparator economies – Ranking and Score

68.2: Malaysia (Rank : 35)

67.9: Thailand (Rank : 37)

62.1: Vietnam (Rank : 68)

53.0: Regional Average (East Asia & Pacific )

49.1: Indonesia (Rank : 139)

42.0: Lao PDR (Rank : 161)

Foreign Direct Investment

After Vietnam attained independence from China in the 10th

1.4. Social Beliefs and Customs in Vietnam

1.5. Power Distance in Vietnam

Vietnam, with a score of 20 is a collectivistic society. This is manifest in a close long-term

1.5.3. UNCERTAINITY AVOIDANCE

1.5.4. LONG TERM ORIENTATION

3.7. Advertising and Promotion

Motorcycles Market in Vietnam

The number marked an increase of 3.5 percent over the

Honda remains the most popular motorbike brand in

5.1. Market Entry:

1. The Limited Liability Company (“LLC”);

A brief on LLC model in Vietnam

Multiple Member LLC

1. No restriction on scope of the Business

TATA Steel failure in Vietnam

Latest Investments in Vietnam

Minda Vietnam Automotive Company Limited

Vietnamese Competitiveness and China+1 Production

Since Auto-Components manufacturing is relatively of low value add manufacturing, it is recommended

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