Seiko Ideas Business News Collection Vol 25

SEIKO IDEAS CORPORATION
VIETNAM Vietnam Business Review
BUSINESS REVIEW
Vol 25, July 12th 2017
Vietnam’s surprising rate cut may spur growth amid credit worries
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Vietnam Business Review
INSIDE THIS ISSUE
HIGHLIGHTS
Where‟s Vietnam in the global value chain?
12 black sheep in MoIT portfolio
Festival tourism market now being tapped
ECONOMY
Vietnam becomes bigger source of earnings for Japanese firms
Hanoi to auction 6,000 ha of land for urban railway
BANKING & FINANCE

Vietnam‟s surprising rate cut may spur growth amid credit worries
Government bonds become darling of foreign investors
INVESTMENT
Investors eye Vietnam‟s renewables in wind and solar energy
Hospitality investment sustains stirring trend
BRANDS
Domestic brands gain better recognition internationally
Large corporations rush to lift foreign ownership ratio limit
Transport firms hurt by controversial rule
MARKET & PRICES

Fever of foreign fashion in HCMC outlets
Big sale campaigns cannot boost sales of new, used cars
HEALTHCARE BUSINESS
Privately run hospitals still cannot make profit
Quadria Capital successfully acquires stake in FV Hospital
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ECONOMY
Vietnam becomes bigger source of earnings for Japanese firms
VOV - Vietnam has surpassed Malaysia to become a bigger source of earnings for Japanese firms, according
to the Bank of Japan (BoJ).
The BoJ statistics, quoted by Japan‟s Kyodo news, showed that Japan's foreign direct investment (FDI) in
Vietnam totalled JPY198.1 billion (US$1.74 billion) last year, up 70% from 2014, on the back of an increase in
the number of Japanese businesses in the country and its high economic growth.
The combined number of registered firms at Japanese business associations in Hanoi and Ho Chi Minh City
has increased by more than 250 since 2014 to nearly 1,500 as rising labor costs in China have prompted them
to open plants in Vietnam.
According to a survey by the Japan External Trade Organisation, nearly two-thirds of Japanese businesses in
the country are profitable.
In contrast, Japan's FDI income from Malaysia dropped about 24% from 2014 to JPY167.5 billion in 2016.
Hanoi to auction 6,000 ha of land for urban railway

VNE - Hanoi plans to auction 6,000 ha of land in order to
build ten urban railway lines from now to 2030.
According to its transport plan to 2030 and vision to 2050,
approved by the Prime Minister, the city will build ten
urban railway lines with a total length of 417.8 km.
Total investment capital is over $40 billion. Demand for
investment capital from 2017 to 2020 is $7.55 billion, 2021
to 2025 $7.6 billion, 2026 to 2030 $3.56 billion, and after
2031 $21.3 billion.
The Hanoi‟s People Committee said investors registering for projects are Vingroup, Xuan Thanh Group, the
Lung Lo 5 Joint Stock Company, Mosmetrotroy (Russia), Tan Hoang Minh Group, Licogi MIK Group, and Lotte
Group (South Korea).
The lines are Line 1 (Ngoc Hoi - Yen Vien - Nhu Quynh), Line 2 (Noi Bai - Thuong Dinh - Buoi), Line 3 (Cat Linh -
Ha Dong - Xuan Mai), Line 4 (Troi- Nhon - Yen So), Line 5 (Me Linh - Sai Dong - Lien Ha), Line 6 (Van Cao - Hoa
Lac), Line 7 (Noi Bai - Ngoc Hoi), Line 8 (Me Linh - Ha Dong), Line 9 (Son Dong - Mai Dich - Duong Xa), and
Line 10 (Son Tay - Hoa Lac - Xuan Mai).
Based on directions from the Prime Minister, the People‟s Committee will focus on directing selected investors
to complete pre-feasibility studies for submission to the government before August 30. Projects will then be
submitted to the National Assembly for approval at the end of this year.
Hanoi has also proposed adding the 6,000 ha of land to the land use planning for 2011-2020, raising VND300
trillion ($13.2 billion) in reciprocal capital.
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BANKING & FINANCE

Vietnam’s surprising rate cut may spur growth amid credit worries
Bloomberg - Vietnam‟s surprise lowering of interest rates for the first time in three years may help to support
economic growth, but raises credit risks in a nation still grappling with a hangover of bad debt.
The central bank reduced the refinance rate by 25 basis points to 6.25% late on Friday and also lowered the
discount rate to 4.25% from 4.5%. The changes come into effect on Monday, the State Bank of Vietnam said
on its website.
“These rate cuts will make it cheaper for businesses and individuals to borrow, so it will help spur loan demand
and bolster consumption,” said Do Ngoc Quynh, head of treasury at Bank for Investment & Development of
Vietnam in Hanoi. “Vietnamese companies still highly rely on bank lending. We just need to be mindful about
how the loans will be used to avoid increasing bad debt.”
The policy easing came a day after the International Monetary Fund said the central bank should remain on
hold, stressing the need to contain rapid credit growth. Vietnam remains vulnerable because of the slow
pace of its banking sector reforms, the IMF said.
The central bank said in its statement that the move was to help boost economic growth and keep inflation
under control. Vietnam is among the fastest-expanding economies in the world, but growth is still below the
government‟s ambitious target of 6.7%. Annual inflation eased to 2.54% in June, the slowest pace in almost a
year.
Vietnam has done much to overhaul its banking system since 2012 after a lending spree and weak controls
led to a surge in bad debt. The central bank in 2013 set up the Vietnam Asset Management Company to buy
banks‟ bad debt. Non-performing loans, at 17% at the time, dropped to 2.6% as of March and the
government aims to keep it under 3%.

While the asset quality of Vietnamese banks has improved, there is a risk some new loans could sour,
according to a Moody‟s Investors Service research note. Bad loans at Vietnam banks were 6.8% of total loans
as of the end of 2016, Moody‟s said.
‘Prudent’ Growth
“The government has spent some time stabilizing the economy and now the macro-economic situation is
stable, favoring easing monetary policies for growth,” Nguyen Ngoc Anh, chief economist and chairman of
the Development and Policies Research Center in Hanoi.
“However, it‟s crucial to be more prudent with fast-lending growth and vigilant about where the money is
going to avoid having bubble markets in property and equities and the quickening of inflation, which we
experienced in the past,” he said. The International Monetary Fund (IMF) reported that its estimate of
impaired loans at Vietnamese banks had decreased to 8.4% of total loans at the end of 2016 from 12.7% in
mid-2015
The central bank‟s target for credit growth this year is 18%. The banking system had about 345 trillion dong
($15.2 billion) of unresolved bad debt as of Dec. 31, 2016, according to the central bank.
Lawmakers last month endorsed rules that would help clear non-performing loans from the banking system.
Banks would be able to sell bad loans and the assets backing them with fewer restrictions than presently
imposed, speeding up the disposal process.
Challenging Target
Even with the rate cuts, the government‟s growth target will be hard to achieve as trade momentum eases,
said Eugenia Victorino, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. ANZ
recently lowered its growth forecast for Vietnam to 6% from 6.4%.
“Even as export growth has remained buoyant, the re-emergence of a narrow trade deficit this year implies a
lower net contribution of trade to overall growth,” Victorino said in a note.
The benchmark VN Index fell 1.2% as of 2:58p.m. in Ho Chi Minh City trading today. The government five-year
bond yield dropped 9 basis points, the most since February, according to data compiled by Bloomberg.
Government bonds become darling of foreign investors

VNS - Recently government bonds have seen strong foreign
buying despite the facts that the dollar is expected to
continue appreciating due to the US‟s plan to raise interest
rates a few more times in the near future and that Viet Nam
does not have incentives to attract foreign investment in its
bonds.
Market observers also said the government bond market
liquidity has improved a great deal thanks to the
investments from abroad.

Foreign investors bought VND11 trillion (US$484.6 million) worth of the bonds in the first five months of the year,
according to the National Financial Supervisory Committee.
Data from VP Bank Securities Company shows that between June 23 and 26 foreign purchases of
government bonds on the secondary market were worth VND61.647 trillion, an increase of 34.8 per cent over
the previous week.
The Sai Gon Securities Company said that in the first half of the year foreigners bought government bonds
worth VND14.9 trillion (US$656.4 million), an increase of VND1.7 trillion ($74.9 million) over the same period last
year.
The chief of a foreign-invested fund management company, who asked not to be named, said the biggest
concern for foreign investors buying government bonds was the depreciation of the dong against the
greenback.
However, the value of the dollar had not changed much though the US central bank has hiked rates several
times.
The dollar appreciated slightly against the dong after the US raised the rate once in mid-June, but soon
declined.
Recently the State Bank of Viet Nam allowed the dong to decline slightly to VND22,725 per dollar.
It was facilitated in this by the downward trend in inflation and the exchange rate since the beginning of this
year, thus creating conditions for the central bank to improve the foreign exchange reserves and to inject
liquidity into the market without resorting to open market operations and not putting pressure on the
exchange rate.
An executive at a major bank in HCM City said that with the many positive aspects in the economy the
dong-dollar exchange rate is likely to remain steady until the year-end unless there are unexpected
extraneous factors.
To take advantage of this opportunity, he said, the Ministry of Finance is drafting a plan with many incentives
to attract foreign funds into the bond market.
If they are offered tax and fee breaks, foreign investors would be happy to enter the bond market, he said.
Foreign banks: coming or going?
Last week the Viet Nam International Bank (VIB) and Commonwealth Bank of Australia (CBA) announced
that the former would buy the latter‟s Ho Chi Minh City branch.
VIB will acquire all the assets and liabilities of the CBA branch, and the transition process will take several
months.
The Australian bank had bought strategic stakes in VIB in 2009 and 2010 and retains a 20 per cent ownership.
It had opened the branch in 2008.
CBA will continue to retain its Ha Noi representative office, which was established in 1994 to “serve as a liaison
with government bodies, financial institutions and corporations in Vietnam.”

Speaking about the sale, Steve Ellis, general manager of Viet Nam Commonwealth Bank, said, “It
demonstrates the confidence Commonwealth Bank has in the Viet Nam International Bank to continue to
provide high-quality service to our customers.”
CBA is not the first bank to want to sell a part of its business after several years of operations in Viet Nam.
Australian-owned ANZ has also agreed in principle to sell its retail business in Viet Nam to South Korea‟s
Shinhan Bank, part of its broader retreat from Asian retail banking.
Its retail business serves 125,000 customers in Viet Nam and includes A$320m (US$240m) in lending assets and
A$800m in deposits.
After Viet Nam became a member of the World Trade Organization, the number of foreign banks investing in
the Vietnamese market increased rapidly, particularly after Viet Nam opened up the banking market to fully-
invested banks in 2007.
According to the State Bank of Viet Nam (SBV), by late 2015 the country had 50 foreign-invested branches
and 50 representative offices of foreign credit institutions.
Late last year the SBV licensed Singapore‟s United Overseas Bank (UOB) to incorporate a bank in Viet Nam.
UOB takes the number of fully foreign-invested banks in Viet Nam to nine, with the others being South Korea‟s
Woori Bank and Shinhan Bank; Malaysia‟s Public Bank Berhad, CIMB, and Hong Leong Bank; HSBC; Standard
Chartered Bank, and ANZ Bank.
Analysts say that Viet Nam, with its more than 90 million population, has always been an attractive market for
foreign investors in the retail and finance and banking sectors.
The other factor that makes the financial sector attractive is the small number of people who use financial
products and services, particularly in rural areas, as yet. This translates into a big opportunity for foreign banks
to exploit as more consumers enter the market.
Viet Nam is a member of the ASEAN Economic Community (AEC), meaning that when they invest in Viet
Nam foreign investors automatically have access to the other member countries of the AEC, a bloc that has
the world‟s third biggest population of 600 million.
Viet Nam has signed free trade agreements with many countries around the world. This has encouraged
more foreign investors to come to Viet Nam to take advantage of the benefits arising from those agreements.
The increase in the number of foreign businesses in Viet Nam has enlarged the market for international-
standard financial services, thus improving the attractiveness of the Vietnamese financial market.
The high interest rates and spreads -- the difference between the borrowing and lending interest rates – in the
country have also been a magnet for foreign lenders.
But then why are some foreign banks like CBA and ANZ headed for the exit?
Experts say this is because the operation of foreign branches and fully-invested foreign banks is very
expensive.
Despite their advantages in terms of finance and technology, foreign banks cannot operate like domestic
lenders because they have to comply with certain regulations.

INVESTMENT
Investors eye Vietnam’s renewables in wind and solar energy
Solidiance - Global investors are beginning to see growth potential in Vietnam‟s renewable energy sector,
particularly in wind and solar electricity, given the government‟s reforms aimed to make Vietnam‟s power
sector more competitive and efficient.
At present, hydro power accounts for the largest share of power generation in Vietnam. However, since it is
approaching maximum utilization, the government is seeking ways to diversify through coal and renewable
energy.
Although Vietnam‟s present level of feed-in tariffs remains a key barrier for renewables, the increasing
domestic awareness of energy-efficient technologies, coupled with the growing global focus on sustainability,
are key driving factors that promote its expansion.
According to Solidiance, an Asia-focused management consulting firm, Vietnam has an opportunity to
become a leader in clean, renewable electricity. The strategy firm released a white paper forecasting the
future of Vietnam‟s power sector, stating that renewable energies will eventually become profitable in
Vietnam despite the current low levels of feed-in tariffs.
In a master plan strategy to promote
renewable energy, the government plans to
increase wind energy capacity from the
current 140 MW to 800 MW by 2020 and 6,000
MW by 2030, while a target has been set to
increase existing or installed solar power
capacity from the current 850 MW to 4,000
MW by 2020 and 12,000 MW by 2030.
Vietnam has also set a target to reduce
greenhouse gas emissions by 8% by 2030 and
has committed to increase this target to 25%
Vietnam’s Feed-In Tariffs by Type of Renewable Energy
with international support.
(Source: Official documents of VN Government, Solidiance analysis)
Along with these ambitious targets, a number
of global companies are already investing on the lucrative market. Recently, the British Embassy of Hanoi
announced a project to help businesses in southern provinces of Vietnam develop rooftop solar systems. The
project, called Supporting Southern Vietnam Solar Photovoltaic Development, or Solar Hub, is supported by
the UK Foreign and Commonwealth Office.
The initial phase of the project will last until March 2017, backed by Vietnam-based investment company
Dragon Capital Group and Energy Conservation Center from Ho Chi Minh City. The project will receive
financial support from the UK government as much as USD 1.7 billion.

Southeast Asian wind energy developer The Blue Circle has recently received an Investment Certificate from
Vietnam for its 40 MW Dam Nai project in Ninh Thuan province, South Vietnam.
With less than 120 MW of wind power installed in the Vietnam so far, the Dam Nai project will significantly
contribute to the ambitious target set by the government. The company intends to fully participate in wind
power expansion in Vietnam.
As electricity prices are expected to continue to increase worldwide by 2023, Vietnam is set for more
investment opportunities in renewable energy. Vietnam is in need of green growth, and the government will
transition its policies to encourage these greener growth trends.
Hospitality investment sustains stirring trend

VIR - Investment activity in popular tourist destinations
continues to strengthen amid the robust demand from
domestic and foreign buyers. Dang Phuong Hang,
managing director of CBRE Vietnam shares her view on
the phenomenon.
Domestic and global investors in the first half of 2017 were
enthusiastic about the local hospitality sector.
Some groups looked to purchase development sites and
properties outright en bloc, while others were more
focused on forming joint ventures with foreign investors.
There continues to be large volumes of overseas capital looking for a home. Asian groups have been
especially active in hotel investment in large cities and resort destinations.
South Korean buyers are seeking three- and four-star hotels in Ho Chi Minh City, while destinations such as
Danang and Hoi An have also seen solid demand for hospitality assets.
Asian developers and companies have been very active in the market in recent quarters, as the high yields
on offer in Vietnam remain quite attractive. The other main driver of investment demand at present is
Vietnamese conglomerates.
Rising demand
The resort and second home markets in Vietnam are beginning to catch up with the rising demand from both
domestic and foreign tourists.
According to statistics from the Vietnam National Administration of Tourism, on average, the number of
domestic and international travellers in Vietnam increased by 16.6 per cent and 11 per cent per annum from
2012 to 2016, respectively.
In 2016, the number of international arrivals to Vietnam reached over 10 million, up 26 per cent on-year.
In the first four months of 2017, the number of international arrivals to Vietnam was recorded at 4.3 million, up
30 per cent from the corresponding period in 2016.

Vietnam continues to see an influx of international hotel management corporations setting up shop in the
country. A strong increase in the number of tourists also boosts the occupancy and average daily rate of
hotels and resorts in popular areas.
In addition, recent developments in the second home market – which includes villas and condotels – have
begun to gain traction.
The first products targeting the second home market were introduced in 2007 in Danang and Nha Trang.
This segment, however, is becoming more active with increasingly larger projects that provide more
diversified products to consumers – driven, in part, by the recovering real estate market.
The supply has increased remarkably, with more than 9,100 condotels and villas launched in 2016 in Danang,
Nha Trang, and Phu Quoc Island, up 48 per cent year-on-year. In these three destinations alone, nearly 10,300
units were sold last year.
Emerging trend
With increased lodging comes the need for management companies, and international hotel management
corporations have been capitalising on opportunities in the hospitality sector.
Last year saw sustained demand from domestic and foreign investors and a steady flow of joint venture and
development deals in and around major cities.
Domestic investors were on the lookout for opportunities across a range of sectors. Most groups are well-
funded, yet some are still interested in forming joint ventures to pursue residential projects.
Japanese and South Korean developers are leading the charge, while Chinese investors are returning to
Vietnam. Hong Kong investors are becoming more active as well, with one group creating a joint venture
with a local partner last year.
Recent quarters have seen a noticeable uptick in enquiries from North American and European groups.
Interest is particularly focused on the office and hospitality sectors.
Interest among foreign and domestic developers in land remains strong in this year‟s second quarter, with
large firms like Lotte, AEON, and CapitaLand completing major land purchases in Hanoi and Ho Chi Minh City.
Major transactions also transpired on Phu Quoc, with Sulyna Hospitality Hotel Restaurant Travel Service Co.
buying a 70 per cent position – equal to $15 million – in the Long Beach Resort Phu Quoc.
Stretching along a pristine beach, Long Beach Resort has 118 rooms set to open during its first phase. It
possesses a unique architectural design that resembles a traditional Vietnamese village, offering a new
standard in exclusive and bespoke indulgence.
Many hotels and resorts were developed a long time ago in famous tourist destinations across the country.
However, the market has become more active recently, with large-scale projects developed by heavy-
hitting players.
In the north, there has been huge investment flows into famous locations such as Halong, Vinh Phuc, and
Sapa. Some recent large-scale projects include Vinpearl Halong Bay Resort or FLC Luxury Sam Son.
In central and southern Vietnam, the supply of lodging has increased significantly in recent years.

For instance, in Nha Trang the supply of rooms in three-star hotels and above increased by around 2,400 units
each year in 2015 and 2016 – translating to a compounded annual growth rate of 26 per cent.
Key development drivers
There are many factors that have contributed to the strong development of the resort and second home
sectors of the property market.
Tourism has been increasing in recent years, improving local incomes and prompting the government and
local authorities to continue activities that appeal to tourists.
According to the General Statistics Office of Vietnam, in 2016, the GDP per capita of Vietnam reached
$2,215 per person, up by 5 per cent compared to 2015 and 8 per cent compared to 2014. This increase in
disposable income has significantly boosted domestic tourism.
Strong infrastructure investment has also played a vital role in tourism development.
According to the Asian Development Bank, Vietnam ranked first among all Southeast Asian countries (as
a%age of GDP) in infrastructure investment – averaging 5.7 per cent of GDP in recent years.
In addition to increased tourism and infrastructure development, firms have begun to focus on creating
unique, mixed-use, and remarkable products. Recent resort developments are usually integrated with many
amenities, such as entertainment and commercial areas, to provide customers with a full-package
experience.
Developers have also placed a higher emphasis on brand equity, relying on and co-operating with
trustworthy international hoteliers with strong brands.
The participation of international hoteliers, such as Accor, IHG, Sol Melia, Starwood, and Marriott, has not only
attracted tourists and buyers, it has also improved the quality of service.
The hospitality market has been expanding to new destinations – such as Quy Nhon, Halong, Sam Son, and
Sapa – with investments by reputable and experienced developers.
Current profit-sharing programmes offered by developers have also factored into the considerations of
buyers.
Market outlook
The demand from both domestic and international tourists is expected to stay strong. Capital is continuing to
flow into popular destinations such as Danang, Nha Trang, Phu Quoc, Sapa, and Halong.
Warburg Pincus‟ 2016 investment of $300 million is an example of the large-scale commitments international
investors are willing to make.
The market is expected to witness further development in the future, with the rising supply of integrated
complexes making the market more competitive. Therefore, developers should be deliberate before they
invest; carefully researching and analysing local master plans and market factors to ensure their product
offerings will be well absorbed.
In addition, maintaining service quality should be a top priority. This is a factor that is rarely seen in hospitality
developments in Vietnam.

BRANDS
Domestic brands gain better recognition internationally
VNN - The appearance of 11 Vietnamese brands in
the list of Asia‟s top 1,000 this year has demonstrated
domestic firms‟ increasing awareness about building
and affirming their own brands.
The Vietnamese brands listed in the annual Asia‟s Top
1,000 Brands survey include Vietjet Air (at 595th
place), Viettel (596th), Petrolimex (616th), Vinamilk
(621st), Hao Hao (636th), Chin-su (668th), Trung
Nguyen (693rd), Vietnam Airlines (716th), Mobifone
(736th), Vietcombank (811st) and P/S (905th).
Amidst the fierce competition and the flood of
foreign goods in Vietnam, local consumers have
11 Vietnamese brands listed in the annual Asia’s Top more chances to compare and select products.
1,000 Brands survey
Therefore, the ranking reflects the successful efforts of
Vietnamese businesses in promoting their brands in both domestic and foreign markets.
However, it is noteworthy that the above mentioned brands have been listed in the rankings for many times,
while many more popular made-in-Vietnam products still fail to make the list.
Bui Huy Son, head of the Trade Promotion Department under the Ministry of Industry and Trade, said building
brands is still a new concept in Vietnam as compared with other economies in Europe or North America.
He added that despite changes in awareness, local firms‟ capacity for brand development remains limited.
The National Brand Programme will continue its support for businesses in producing goods of national
standards, participating in national trade promotion programmes, accessing market information and joining
training courses on brand development and trade promotion skills, he said.
According to Nielsen, Asian brands are getting stronger and can stay abreast of global names like Samsung,
Apple and Nestle.
The Top 1,000 Brands ranking is based on a comprehensive study of consumer brand perception conducted
by Nielsen on behalf of Campaign Asia with 13 years of historical ranking trend, and for 13 Asia Pacific
markets, all combined with insights, analysis and thought leadership on the key factors which build and
sustain a successful brand.
Conducted from March 6-17 this year, the survey explored consumer attitudes in 13 markets of Australia,
China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, the Republic of Korea,
Taiwan and Vietnam.
The study encompasses 17 major categories which are alcohol, financial services, automotive, retail,
restaurants, food, beverage, consumer electronics, computer hardware, computer software, digital

experience, courier services, ecommerce, media and telecommunications, sports, transportation, leisure,
household and personal care and 79 sub-categories.
Large corporations rush to lift foreign ownership ratio limit

VNN - A number of leading corporations have lifted the foreign
ownership ratio limit after the government issued Decree 60.
Large corporations rush to lift foreign ownership ratio limi
Hau Giang Pharmacy (DHG) has announced a decision to consult
shareholders on raising the foreign ownership ratio ceiling to 100%.
The current ceiling at DHG is 49%, while Taisho Pharmaceutical from
Japan, the biggest foreign shareholder, holds a 24.44% stake.
At the annual shareholders‟ meeting last April, Hoang Nguyen Hoc, chair of DHG and deputy CEO of SCIC,
which holds a 43.3% DHG stake, said the lifting of the foreign ownership ratio limit needs to be considered
thoroughly to improve share liquidity, but it mustn‟t affect the company‟s long-term business strategy.
SCIC will divest from DHG and other enterprises which operate in business fields in which the state doesn‟t
need to invest, as requested by the government. However, the divestment won‟t be made for another 2-3
years.
Though businesses have been given autonomy, the process of raising foreign ownership ratios still has been
going slowly because of legal barriers and the fear of losing control.
Domesco (DMC), a medical equipment import/export company, has also decided to lift the foreign
ownership ratio ceiling to 100%.
In order to be able to lift the foreign ownership ratio, both DHG and DMC have to adjust their registered
business fields, because under the current laws FIEs are not allowed to import medicine for domestic sale
Soon after getting approval for lifting the foreign ownership ratio, CRF International belonging to Abbott
raised its ownership ratio in Domesco to 51%.
Besides the two leading pharmaceutical manufacturers, businesses in food, construction and other business
fields are also considering lifting the foreign ownership ratios.
Kido (KDC) has approved a proposal to raise the foreign ownership ratio from 49% to 100%. The company‟s
management board believes that the adjustment will bring great opportunities for development and help
increase the value of existing shareholders.
“We don‟t care much about the balance of ownership between domestic and foreign investors. The most
important thing for us is that cooperation will bring optimum benefits to involved parties,” said Tran Le Nguyen,
Kido‟s CEO, adding that in the immediate time, the company will expand production and follow M&A.
Coteccons‟ shareholders recently approved a plan to raise the foreign ownership ratio ceiling from 49% to
60% to improve share liquidity.
In order to do this, the company has to stop some business fields, including real estate brokerage and hotel
and travel services, or do business through subsidiaries.

According to BuiThao Ly from Phu Hung Securities, though businesses have been given autonomy, the
process of raising foreign ownership ratios still has been going slowly because of legal barriers and the fear of
losing control.
Hau Giang Pharmacy (DHG) has announced a decision to consult shareholders on raising the foreign
The current ceiling at DHG is 49%, while Taisho Pharmaceutical from Japan, the biggest foreign shareholder,
holds a 24.44% stake.
At the annual shareholders‟ meeting last April, Hoang Nguyen Hoc, chair of DHG and deputy CEO of SCIC,
which holds a 43.3% DHG stake, said the lifting of the foreign ownership ratio limit needs to be considered
thoroughly to improve share liquidity, but it mustn‟t affect the company‟s long-term business strategy.
SCIC will divest from DHG and other enterprises which operate in business fields in which the state doesn‟t
need to invest, as requested by the government. However, the divestment won‟t be made for another 2-3
years.
Domesco (DMC), a medical equipment import/export company, has also decided to lift the foreign
In order to be able to lift the foreign ownership ratio, both DHG and DMC have to adjust their registered
business fields, because under the current laws FIEs are not allowed to import medicine for domestic sale.
Soon after getting approval for lifting the foreign ownership ratio, CRF International belonging to Abbott
raised its ownership ratio in Domesco to 51%.
Besides the two leading pharmaceutical manufacturers, businesses in food, construction and other business
fields are also considering lifting the foreign ownership ratios.
Kido (KDC) has approved a proposal to raise the foreign ownership ratio from 49% to 100%. The company‟s
management board believes that the adjustment will bring great opportunities for development and help
increase the value of existing shareholders. “We don‟t care much about the balance of ownership between
domestic and foreign investors. The most important thing for us is that cooperation will bring optimum benefits
to involved parties,” said Tran Le Nguyen, Kido‟s CEO, adding that in the immediate time, the company will
expand production and follow M&A.
Coteccons‟ shareholders recently approved a plan to raise the foreign ownership ratio ceiling from 49% to
60% to improve share liquidity.
In order to do this, the company has to stop some business fields, including real estate brokerage and hotel
and travel services, or do business through subsidiaries.
According to BuiThao Ly from Phu Hung Securities, though businesses have been given autonomy, the
process of raising foreign ownership ratios still has been going slowly because of legal barriers and the fear of
losing control.

Transport firms hurt by controversial rule

VietNamNet Bridge – Transportation companies say there are suffering significant losses because of a new
rule that requires original documents of vehicles to be presented on demand by traffic police.
Individual vehicle owners, especially those who have taken loans against their vehicles, are also worried
about the new rule.
The Traffic Police Department under the Ministry of Public Security recently asked police to impose fines or
seize vehicles if their drivers or owners are unable to present original documents.
Previously, the State Bank of Viet Nam had issued a document (No. 3851) asking credit institutions to allow
their clients to keep the original of their collateral assets when the loan agreements are still active, but this
remains largely on paper.
Most bank clients have to deposit the original documents of their vehicles with the institutions for getting loans.
Nguyen Tuan Quang, a resident of Ba Dinh District in Ha Noi, said he was paying for his four-seat car in
installments, and the bank that loaned him the money keeps the vehicle‟s original documents.
Quang said that traffic police used to accept a copy of his car‟s documents, but recently, many of his friends
have been asked for the original.
Normal practice
Vu Quoc Huy, director of Ba Sao Taxi in Ha Noi, said 11 taxis of his company had been seized by transport
police because the drivers couldn‟t provide the original documents.
“When I asked the bank, they said it is normal, long-standing practice for banks to keep the original
documents. The police, meanwhile, said they were only following the recent rule,” Huy said.
Do Hoang Tuan, representative of another transport company in Quang Ninh Province said his company
suffered huge losses because of these conflicting regulations.
“Eighteen vans of the company are being held by the police, and the bank has said it would take up to
three weeks to return the original documents. We have lost hundreds of millions of dong already,” he said.
A director of the legal department of a joint-stock bank in Ha Noi said the banks‟ branches are also confused
about handling this issue.
“Banks can‟t give out huge loans without taking in the original documents of the collateral asset. We‟re still
waiting for instructions from the State Bank on this matter,” he said.
Nguyen Van Thanh, Chairman of the Viet Nam Transport Association, said he was opposed to the new
regulation.
“Drivers have long been keeping the notarized copies of vehicles‟ documents to present to the police when
needed, why should this change?
“The State Bank and the Ministry of Public Security should quickly come to a consensus on this matter so that
transportation companies don‟t suffer huge losses because of these conflicting regulations,” he said.
Lawyer Tran Cong Truc of Ha Noi said that according to the Law on Notarization, the notarized documents
have the same value as the original ones, so it‟s not right for transport police to fine drivers who are able to
present the notarized documents of their vehicles.

MARKET & PRICES
Fever of foreign fashion in HCMC outlets

SGGP - Shopping malls in Ho Chi Minh City draw attention of
young people as the sales season kicks off; most of them are
white-collar workers who are interested in internationally
famous brand names like Zara.
Fast fashion brand Zara opened its first store in Vietnam in
Vincom Dong Khoi in Ho Chi Minh City. It penetrated into
Vietnam just a short time ago yet it has the volume of visitors
beyond the expectations.
Young people are selecting a clothes of their choice On the first day opening , Zara Vietnam reported a revenue
in Zara store in HCMC
of VND5.5 billion ($241,000) which is a dream for both
internationally well-known and domestic brands.
The shop covers the area of nearly 2,500 square meter in two floors and it is crowded with visitors at any time.
Especially in weekend, customers are queuing a long line from the fitting room to the cashier desk in the
outlet. An assistant of the outlet said usually, it is crowded with visitors; therefore, in sales season, it is quite
normal that consumers must queue to wait for their turns.
Ms. Minh Nguyet in District 2 with 20 items on her hand said that she dropped by the outlet twice yet it was so
crowded in the first time that she could be able to choose the clothes of her choice; hence, she managed to
come the shop in lunch time to select clothes for family members.
Ms. Nguyet added that she is impressed with the prices, noting they are 20-30 percent cheaper than in
Malaysia,Singapore and Thailand. Similarly, Uyen Nhi who has left Australia for Vietnam in summer vacation
said that she intended to see Zara items in Vietnam at first but later she decided to buy five items because of
cheap price.
In addition to Zara, Gap brand name in the center also attracted a large of customers. In the sales season, a
heap of clothes piled up in tables so that customers could easily choose. Though it is discounted 50 percent,
a Gap T-shirt costs from VND250,000 - VND500,000 ($11-$22) while a pair of jeans is worth over VND1 million.
Many people still purchased them.
Popular fashion brands namely Spanish Mango, the US‟s Gap, UK fashion brands Warehouse, Oasis, and Top
Shop all come to the Southeast Asian country a long time ago.
Nevertheless, Spanish fashion retailer Zara are most favorite in Vietnam. It offered a “fever” of foreign fashion
brands amongst Vietnamese youths. Young consumers are not reluctant to spend hours queuing to buy an
item of their choice.
An expert said that Zara is affordable fashion brand for Vietnamese customers in big city like Ho Chi MInh City.
As per a small survey from clients in Zara store, Vietnamese buyers favor Zara brand because the brand has
good designs for youth and it offers more than reasonable prices.

Plus, the brand has marketing policy better than local fashion companies and other foreign brands. The cost
of a Zara brand item ranges from VND180,000 - VND2.2 million which is even cheaper than Vietnamese
brands.
A Zara fashion follower Ha Nhu said that only Zara offers exchange or refund items within 30 days of purchase
with an original receipt including sales items. Moreover, each Zara brand item is displayed in shelves within
two or three week with limited number. When an item is sold out, the company will not produce any more.
Furthermore, Zara launches new collection every two or three weeks, Ms. Nhu said.
Zara Vietnam phenomenon showed that foreign fashion brands considered Vietnam as potential market.
Experts said that great revenue will be incentive for big fashion brands in the world open its store in Vietnam in
upcoming time; for instance, H&M - an internationally famous brand will officially open its store in Vietnam a
few days next.
Big sale campaigns cannot boost sales of new, used cars

VNN - Brand new cars are being sold at hundreds of millions
of dong lower than initial prices, while used cars remain
unsold.
The sales have been occurring six months before big
changes in taxes and policies take effect.
Truong Hai Automobile‟s slashing of selling prices for Mazada
and Kia Peugeot products by up to VND200 million one year
ago. This triggered a new price adjustment campaign among large car distributors.
In mid-May, a representative of Thaco said Mazada price had bottomed out. However, in early June, Thaco
once again announced an additional VND30-40 million cut for Mazda CX5 model.
Hyundai Thanh Cong (HTC) has offered the discount rate of VND50-70 million for SantaFe and VND40-50
million for Elantra in June.
Mitsubishi Vietnam has eased the selling prices by VND50-106 million for Pajero Sport, VND60 million for Triton,
VND50 million for Mirage and VND90 million for Outlander.
European manufacturers also have to slash prices to compete with the ASEAN sourced products. Volkswagen
offered a sharp price decrease of up to VND260 million for SUV Touareg.
The anticipated car import tariff cut to zero percent commencing from January 1, 2018 has prompted car
buyers to stop their purchase plan to wait for prices to go down.
This has put pressure on both manufacturers and distributors. As a result, though the tax rate has not been cut,
car prices have plunged.
As brand new cars see sharp price decreases, used cars are not selling. In the past, those who had VND400-
500 million would look to purchase used cars. But now, with the amount of money, they have many choices
among brand new cars.
Many dealers have to sell cars at a loss to get money and shift to a new type of business.

HEALTHCARE BUSINESS
Privately run hospitals still cannot make profit

VNN - Very few privately run clinics in Vietnam can make a profit, and after several years of operation, many
have shut down.
The 500-bed Phuc An Khang International
Hospital announced closure in late April
after two years of unprofitable operation.
The investor has reported an accumulative
loss of VND60 billion.
According to Phuc An Khang‟s director Mai
Tien Dung, the monthly revenue of the
hospital was VND3 billion, just enough to pay
to workers.
“The pressure from the initial loans used to
build infrastructure might be the major
reason that forced the hospital to close,”
The pressure from the initial loans used to build infrastructure might
be the major reason that forced the hospital to close Dung said.
Within three months, the investor will sell all
machines at the hospital, worth VND200 billion, and other assets to pay debts.
Some years ago, Phu Tho Hospital, quietly left the market after a series of scandals. Thirty creditors accused
the hospital, which borrowed VND120 billion, of repudiating its debt. Unable to collect debts, some creditors
distrained medical equipment and turned the hospital campus into a parking lot.
Vu Anh Hospital, which has been operating at a moderate level and facing big difficulties, is calling for
partners to set up a joint venture to improve the hospital operation. The owner of the hospital was accused of
appropriating assets in mid-2013.
The hospital was expected to make a breakthrough in the high-end medical service market with services like
5-star hotels and qualified well-paid physicians.
Vo Xuan Son, director of EXSON, an international general clinic, said private hospitals meet difficulties
because of the discriminatory treatment between state-owned and private hospitals.
“The service fees at private hospitals are set up based on the input costs which include materials, labor force,
rent and equipment demortization. The sources of income are stable, but the profit margin is low,” he said.
“Meanwhile, state owned medical establishments can save money on premises and corporate income tax,”
he said, adding that the initial investment cost is VND50 billion.
The other problem is the poor corporate governance skills of the hospital managers. Most of them are trained
to become doctors, and do have experience in financial management, investment and branding.

This explains why the medical establishments under the management of large corporates can make profit
while the majority of other privately run hospitals take a loss.
Vinmec, developed by Vingroup, a financially powerful group, for example, has reported impressive growth
rate in revenue and profit. In 2016, the healthcare sector brought VND1.093 trillion in revenue, or 1.86% of the
group‟s total revenue, an increase of 42% over the year before.
Tam Duc has also been making profit since 2006 thanks to big investment capital.
Quadria Capital successfully acquires stake in FV Hospital

VIR - Quadria Capital, Asia‟s leading private healthcare
investor, has successfully completed an investment into
French-Vietnam Hospital.
The investment will be used to facilitate the establishment
of centres of excellence for selected specialties and to
provide access to advanced care and treatment in
Central and South Vietnam via an integrated network
across the region.
This represents Quadria Capital‟s latest investment out of its
third investment vehicle, Quadria Capital Fund L.P., and is
The newfound partnership of Quadria Capital Fund and the fund‟s third investment in Southeast Asia since 2015.
FV Hospital will capitalise on the synergy of the two
companies' strategic aims FV was founded by Dr Jean-Marcel Guillon in 2003 with a
group of French physicians who shared the vision of
bringing world-class healthcare to Vietnam. Located in District 7 of Ho Chi Minh City, FV has evolved into a
full-service, one-stop provider of quality care for the local population in and around Ho Chi Minh City. As the
first JCI accredited hospital in South Vietnam, FV is known for its international standard of care, commitment
to clinical quality, and patient centric service.
Abrar Mir, managing partner and co-founder of Quadria Capital, said, “FV is well positioned to transform into
a leading tertiary care provider in Vietnam, which will help improve access to quality care and treatment in
Vietnam and the neighbouring regions, a mission that is also integral to Quadria‟s investment philosophy. The
Quadria partnership will enable FV to leverage Quadria‟s experience in growing hospitals across the region
as well as other synergistic opportunities via Quadria‟s portfolio and network.”
Guillon added, “We believe Quadria, with is demonstrated track record in building some of the largest
healthcare businesses in Asia, is the right partner for FV to embark on the next phase of its journey. A number
of collaboration opportunities have been identified and we look forward to an exciting partnership with
Quadria.”
Vietnam is one of the fastest growing economies in Southeast Asia with income per capita experiencing
double-digit growth in recent years. Riding on demographic changes, including a rapidly expanding middle
income class and higher incentives of lifestyle, the demand for healthcare has been on the rise.

HIGHLIGHTS
Where’s Vietnam in the global value chain?
VNN - Ten years ago, the risk for Vietnam was that it
might miss the glbal „integration train‟. Today, the
question is where is Vietnam in that train?
On May 25, Vibiz, a website of Yoilo Global, released the
results of its survey, saying that 64% of rice available in
the market is Vietnam‟s but is labeled with foreign
brands.
The survey also found that 53% of consumers like foreign
rice sourced from Thailand, Cambodia and Japan,
The ‘rice sorrow’ can be explained by the theory about the
production value chain. Farmers determine which rice despite the fact that Vietnam is a big rice grower and
varieties to grow, while they cultivate and harvest rice in
traditional ways. that there are 67 rice varieties, but only 21 are given
Vietnamese names.
Vietnam‟s rice doesn‟t bear its true name in foreign markets: importers buy Vietnam‟s rice and then label the
rice with their brands to sell at supermarkets in their markets, or export to third countries.
The „rice sorrow‟ can be explained by the theory about the production value chain. Farmers determine
which rice varieties to grow, while they cultivate and harvest rice in traditional ways.
Harvested rice is sold to merchants, who then sell to export companies. Since merchandise rice is mixed, the
quality is not high and exporters have to lower selling prices to attract buyers.
This means that the phases of the rice production value are implemented separately which don‟t have close
links.
In other words, Vietnam still cannot build up a completed value chain for its rice, though rice is a key export
item.
According to Dao The Anh from MARD, some Vietnamese companies now export rice which bear their own
brands.
Co May and Nep Cai Hoa Vang, for example, have relatively high selling prices. The growers of the rice have
to build up the material growing areas of their own and follow strict requirements in farming and harvesting.
Citing the story of Co May as a „bright spot‟ in Vietnam‟s rice industry, Anh said the company sent staff
abroad to learn about market demand and then place orders with farmers.
“This is a good way for the long term,” Anh said, adding that farmers need support from the State, while
businesses need a reasonable policy which allows them to exploit their advantages.
According to OECD, the added value of the foreign invested economic sector in the manufacturing sector
accounts for 48.8% of Vietnam‟s total export turnover, while the domestic added value content in export still
accounts for 12.7% only.

12 black sheep in MoIT portfolio

VNA - Among the 12 loss-making and poorly run projects under the Ministry of Industry and Trade (MoIT), only
those in the chemical and steel industries have found proper solutions to their challenges and got back on
track to reach production efficiency.
Status of 12 projects (as of 05/07/2017)

Milestones marking steps in settlement plan to deal with the 12 struggling projects
Pursuant to Document No.4171-CV/VPTW issuing the guidelines directed by the Politburo to tackle the
problems and difficulties faced by a number of projects and enterprises under the Ministry of Industry and
Trade.
Festival tourism market now being tapped

VNN - While other Asian countries have national festivals to attract foreign travelers, Vietnam has only a few
that have been marketed well.
Festivals take place throughout the year in different localities, but they are not organized in a professional
way to achieve international stature.
Meanwhile, tourism sites do not pay appropriate attention to festival tourism, though they can see the
number of tourists increases in festival seasons.
Da Nang, with one of the most beautiful beaches on the planet, is a rendezvous for travelers thanks to the Da
Nang International Firework Competition (DIFC).
However, as Huynh Van Hung, director of the Da Nang City Culture & Sports Department, said, since DIFC is a
competition, letting off fireworks is the only activity of the event, while there was no extra activity on the
occasion.
DIFC only lasted two days and is organized once every two years. According to Ngo Quang Vinh, director of
the Da Nang Tourism Department, a survey in 2015 found that after a firework competition, the Han Market‟s
management board reported a twofold increase in revenue.
Da Nang has changed its approach. Having realized the great potential of festival tourism, the city‟s
authorities decided to turn DIFC into DIFF (Da Nang International Firework Festival) this year, which lasts from
April 30 to June 24.
As such, Vietnam, for the first time has a festival lasting throughout the summer.
This is the biggest firework festival in SE Asia with five places for firework performances and a series of
associated events, which all have made Da Nang busy throughout the summer.
Da Nang hopes it would become an attractive destination point for about 2 million travelers in summer
thanks to the „firework city‟ brand.
Among tourism complexes, Sun World Ba Na Hills can best exploit the potential of festivals to attract travelers.
Visitors to the leading resort in Vietnam in any season can enjoy the festive atmosphere.
In spring, Ba Na is brilliant with the colors of hundreds of flowers in Spring Flower Festival.

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VIETNAM Vietnam Business Review

INSIDE THIS ISSUE

BANKING & FINANCE

MARKET & PRICES

Hanoi to auction 6,000 ha of land for urban railway

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BANKING & FINANCE

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Government bonds become darling of foreign investors

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Hospitality investment sustains stirring trend

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Large corporations rush to lift foreign ownership ratio limit

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Transport firms hurt by controversial rule

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MARKET & PRICES

Fever of foreign fashion in HCMC outlets

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Big sale campaigns cannot boost sales of new, used cars

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Privately run hospitals still cannot make profit

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Quadria Capital successfully acquires stake in FV Hospital

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12 black sheep in MoIT portfolio

Status of 12 projects (as of 05/07/2017)

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Festival tourism market now being tapped

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For more information, please contact us:

SEIKO IDEAS - 11th Anniversary

Our services Market Research

Our clients Thinktanks, Universities

Address Floor 5th – A Chau Building

Telephone +84-24-6275-5246 ; +84-24-6273-6989

Email news l ett er@seiko-ideas.com

PIC Nguyen Thi Quynh Tram (Ms.)

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