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Vietnam Business Review

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Vol 51, December 28th 2016

BUSINESS REVIEW VIETNAM

Vietnam sets economic targets for 2017

www.seiko-ideas.com

http://e.vnexpress.net/news/business/vietnam-sets-economic-targets-for-2017-3424320.html



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INSIDE THIS ISSUE

HIGHLIGHTS

Top 10 domestic event in Vietnam 2016

Low localization could sound death knell for auto industry

Vietnam shoe and garment exports see drastic slowdown in 2016

Safe, high-quality agricultural production programme launched

ECONOMY

Vietnam defies Asia slowdown as GDP growth holds above 6%

FINANCIALS

Vietnam’s 2016 credit growth quickens to 18% YoY: Gov’t

Investors bet on Vietnam even as valuations top Southeast Asia

Will “zero dong” banks turn into 100% foreign owned banks?

INVESTMENT

Vietnam pharmacy industry attractive to foreign investors

Vietnam should decide how open it is to investors

ENTERPRISES

Vinamilk surpasses 2016 financial targets thanks to soaring demand

Vingroup rejects rumors of selling Vinmart chain to 7-Eleven

Telco giant FPT to float shares soon

MARKET & PRICES

Asia’s beer war is a battle of acquisitions

Hot cash flow in the real estate market in 2017

LEGAL UPDATES

Vietnam’s new rules lead to record high of business formations

Vietnam likely to approve casino decree by Christmas of early 2017



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ECONOMY

Vietnam defies Asia slowdown

as GDP growth holds above

6%

Reuters - Vietnam’s economy

expanded more than 6% for a

second year, defying a regional

slowdown to remain one of the

world’s best performers as

manufacturing rose.

Key Points

Gross domestic product

increased 6.68% in the fourth

quarter from a year earlier, up from

6.56% in the previous three months,

the General Statistics Office said in

Hanoi Wednesday.

The economy grew 6.21% in

2016, compared with the median

estimate of 6.3% in a Bloomberg

survey

Big Picture

Vietnam ranks among the world’s

fastest-growing economies as its

exports remained resilient to a

global trade slowdown that’s

hurting Singapore and China.

Companies setting up plants in the

country, such as Samsung

Electronics Co., are transforming

the nation into a manufacturing

hub for electronics goods, including

smartphones. The Asian

Development Bank forecast

Vietnam’s economic growth at

6.3% in 2017.

Economist Takeaway

"Vietnam is in a sweet spot right

now," said Frederic Neumann, co-

head of Asian economic research

at HSBC Holdings Plc in Hong Kong.

"Strong growth will persist in the next

several years. It is continuing to gain

market share in exports and even

giving China a run for

competitiveness. Foreign

companies continue to invest in

Vietnam to take advantage of its

highly competitive labor and low

cost. The outlook is bright and it is

one of the standout economies in

Asia."

Other Details

Manufacturing gained 13.61%

in the fourth quarter from a year

earlier, fastest pace this year, Ha

Quang Tuyen, head of GDP

department at the GSO, said at a

briefing on Wednesday

Exports rose 8.6% in 2016,

imports gained 4.6%, according to

GSO

Vietnam posted a trade deficit

of $300 million in December. It had

a trade surplus of $2.68 billion for

2016

Retail sales rose 10.2% in 2016

Disbursed foreign direct

investment climbed 9% to a record

$15.8b this year. Pledged FDI

increased 7.1%

http://www.seiko-ideas.com/



2


FINANCIALS

Vietnam’s 2016 credit growth

quickens to 18% YoY: Gov’t

Reuters - Dec 28 Vietnam's banking

sector has expanded loans this year

by an estimated 18%, slightly faster

than an annual growth of 17.26% in

2015 and in line with the central

bank's target, a senior government

official said on Wednesday.

Nguyen Bich Lam, head of the

government's General Statistics

Office, gave the credit growth

estimate at a news conference,

where he also announced

Vietnam's economic growth this

year at 6.21%, behind the 6.68%

expansion in 2015.

Investors bet on Vietnam even

as valuations top Southeast

Asia

Bloomberg - Vietnam stocks are

pricier than their Southeast Asian

peers for the first time in two years --

and they are about to become

more expensive.

“There is room to grow,” said

Dominic Scriven, Ho Chi Minh City-

based Chairman at Dragon Capital.

“We are looking for 19% net growth

for earnings next year,” as the

economy expands and inflation

remains stable, he said.

The benchmark VN Index is trading

15.9 times earnings, compared with

the MSCI South East Asia Index

which is at 14.7. A 15% gain in the

VN Index has led to its

outperformance versus the MSCI

Frontier Markets Index and the

South East Asia benchmark gauge.

The gauge rose 0.2% at close on

Tuesday.

The market’s “valuation is expected

to continue rising in 2017,” because

of upcoming listings of attractive

companies, said Le Nguyet Anh,

head of research at ACB Securities

JSC. “Meanwhile, for the currently

listed stocks, decent earnings

growth will be the major price

growth momentum.”

The strong premium this year is “due

to its good macroeconomic

performance and political stability,

while the rest of the region went

through political transformations

and tougher economic times,” said

Attila Vajda, managing director at

Project Asia Research and

Consulting Pte in Ho Chi Minh City.

Philippine President Rodrigo Duterte,

elected earlier this year, has

unnerved investors with his frequent

outbursts against the U.S. and

violent war on drugs. Thailand

experienced deadly street clashes

before an army coup in 2014.

Economists predict Vietnam will be

among the world’s fastest-growing

economies in 2016 as it benefits

from a manufacturing industry that

has grown in importance over the

years. Increased foreign-direct

investment helped push the VN

Index to an eight-year high of




3


FINANCIALS

688.89 on Oct. 19. The government

aims for GDP growth of 6.7% next

year, which will be the fastest pace

since 2007. Profit at companies on

the benchmark gauge are

projected to grow 23% in the next

12 months, according to data

compiled by Bloomberg.

Liquidity Issues

The market still faces the “hurdle of

liquidity,” said Andy Ho,

VinaCapital’s Chief Investment

Officer. He recommends the

government lift the foreign

ownership limit in the banking

sector as one way to boost the

market liquidity. Last year, Vietnam

allowed some industries to raise the

foreign ownership limit to 100% from

49%, however, the cap for the

banking sector still remains at 30%.

Vietnam, which would have been

the biggest beneficiary of the Trans-

Pacific Partnership, may stand to

lose the most as President-elect

Trump prepares to quit the pact.

“Since Vietnam’s economy is

export driven and the U.S. is a

significant export market, it is likely

that we need to see how the

incoming Trump administration will

finally deal with trade barriers,” said

Vajda.

The average daily turnover on the

Ho Chi Minh City Stock Exchange -

the main bourse - is just $109 million

this year, compared with $768

million in Singapore, according to

data compiled by Bloomberg.

Government Plans

It’s a “great time” to invest in

Vietnam now as the government

has accelerated the divestment

process in major companies,

VinaCapital’s Ho said.

The Vietnam government’s

planned stake sales of major

companies like Saigon Beer Alcohol

Beverage Corp. and Hanoi Beer

Alcohol Beverage Corp. next year is

seen as “encouraging” for investors,

according to Ho. “There are really

good companies that the

government is now allowing foreign

companies, like institutional

investors like ourselves, to put

money into them,” he said.

State Capital Investment Corp., the

government’s investment arm,

raised about $500 million selling

5.4% of its stake in Vietnam Dairy

Products JSC during the long-

awaited Dec. 12 sale.

Besides divestments, the

government has also pushed

companies to list shares on the

exchange, which has made the

stock market “more interesting,”

according to Vajda. The market will

welcome the future listings of some

major companies, including

Vietnam Airlines Corp. and Vietnam

National Textile and Garment

Group.

Vietnam Airlines said in November

that it would start trading in Unlisted

Public Company Market, or UpCom,

before Dec. 31 and Vinatex, as the

textile group is commonly known,

plans to list 500 million shares on

UpCom on the first week of January.

“Some new listings will attract

enough excitement that the index

can grow moderately, if there are

no external trade shocks due to

protectionist policies from the U.S.,”

said Vajda.

Will “zero dong” banks turn

into 100% foreign owned

banks?

VNN – The Capital Marketing

Working Group has suggested lifting

the foreign ownership ratio limit in

banks in which the state is a big

shareholder, and in privately run

joint stock banks to 35%. As for “zero

dong” banks, the ceiling should be

up to 100%.

Vietnamese Prime Minister Nguyen




4


FINANCIALS

Xuan Phuc at the 2016 Vietnam

Development Forum (VDF) said that

ADB and a private Vietnamese

partner are considering buying a

‘zero dong’ bank, and they will

introduce other partners to help

Vietnam deal with weak banks.

‘Zero dong’ banks are weak banks

which have been taken over by the

State Bank at zero dong and

forced to undergo compulsory

restructuring.

Nguyen Duc Kien, deputy chair of

NA’s Economics Committee, said

on Dan Viet that the PM’s message

is clear that Vietnam may sell zero-

dong banks to foreign partners to

turn them into wholly foreign

owned banks.

Vietnam, instead of seeking foreign

strategic investors to buy a 30%

maximum stake under the law,

would sell the entire banks to turn

them into 100% foreign owned

banks.

This is considered a good solution

and will not violate the laws on

credit institutions, because the law

allows 100% foreign owned banks

to operate in Vietnam.

In 2015, the State Bank bought 3

weak banks at zero dong, namely

Ocean Bank, VNCB and GP Bank.

After the transfer, the business

performance of the three banks

has been improved. The solution

has been praised as a perfect

move which allows to avoid the

adverse influences to other banks in

the system, while depositors’ rights

can be protected.

Kien said that Phuc’s message to

international investors shows the

government’s strong determination

to settle bad debts and make

credit institutions healthier.

VNCB, which was named a Trust

Bank in the past, in 2012 was listed

among nine weak banks put under

the State Bank’s special control.

The bank’s accumulative loss by

that time had reached VND8.765

trillion and the stockholder equity

minus VND5.711 trillion.

The figures had reached VND11.348

trillion and minus VND8.293 trillion,

respectively, by the end of 2013.

As for Ocean Bank, the bad debt of

the bank had reached VND15

trillion by March 31, 2014, or 49.84%

of its outstanding loans, while it had

incurred a loss of VND10.2 trillion, or

249.63% of stockholder equity.

GP Bank had reported

accumulative loss of VND12.28

trillion by April 2, 2015, while its bad

debt ratio had reached a record

high of 45.37%.

It is still unclear which bank ADB is

eyeing.




5


INVESTMENT

Vietnam pharmacy industry

attractive to foreign investors

VNN - Pharmacy firms are making

good profits, with the market

expecting a stable growth rate of

10-15%.

A report shows that about 30

pharmacy firms had listed their

shares on the Hanoi and HCMC

bourses and on UpCom by April

2016 with total capitalization value

of VND14.8 trillion.

Thirteen firms list on two main

bourses, of which 11 have relatively

high state ownership ratios,

between 35% and 51% of charter

capital, such as Hau Giang

Pharmacy, Traphaco, Imexpharm

and Domesco.

Most of the businesses have

reported satisfactory business results,

which explains why many investors

want to bank on the pharmacy

industry.

The average spending on medicine

is around $35-37 per head per

annum in Vietnam, which is much

lower than that in Thailand ($60)

and China ($100).

The Q3 report on pharmacy

released by Virac Research showed

that there are 178 medicine

manufacturers in Vietnam, but they

only make generic medicine with

low value.

Vietnam’s pharmacy industry uses

60,000 tons of medicinal materials

of different kinds, of which 80-90%

are imports. China and India are

the biggest exporters of medicines

to Vietnam.

Vietnamese companies spend 5%

of their revenue to R&D (research

and development), while foreign

companies spend 15%.

Vietnamese pharmacy firms mostly

make food supplement and

generics, while foreign enterprises

make more specialized products.

In order to improve competitiveness,

analysts say that Vietnamese

companies need to invest more in

R&D or cooperate with foreign

pharmacy firms.

With a high economic growth rate

and increasingly high demand for

healthcare services, the market

value is expected to expand in

upcoming years.

In 2013, the total medicine

consumption was worth $3.3 billion.

The figure, as estimated by VIRAC,

reached $4.2 billion in 2015 and is

expected to rise to $8-10 billion by

2020.

VIRAC has also predicted that the

prescription medicine market’s

growth rate would surpass the OTC

(over the counter) market because

of higher demand for specific

medicine.

Commenting about the potential of

the pharmacy industry, Chris Freund,

CEO of Mekong Capital, which

invests in Traphaco, said the market

would see profit of 10-15% per

annum.

Foreign investors, both

manufacturers and financial

investors, have shown serious

interest in Vietnamese pharmacy

firms.

Andy Ho, CEO of VOF, a fund

managed by VinaCapital, praised

the fund’s investment in Hau Giang

Pharmacy, saying that he hopes he

can find other good investment

opportunities in the future.




6


INVESTMENT

Drug distribution is also attractive to

foreign investors. SAM (Saigon Asset

Management) earlier this year

announced the purchase of 15% of

My Chau JSC stake, a company

which owns the My Chau drug store

chain.

Vietnam should decide how

open it is to investors

Bloomberg - Hanoi Beer Alcohol &

Beverage JSC, or Habeco, filed last

week for a listing on the Ho Chi

Minh Stock Exchange as Vietnam

tries to get more companies out of

government hands.

Four days later, state-controlled

Vietnam Dairy Products JSC, known

as Vinamilk, made a secondary

offer to increase foreign ownership.

The deal missed its target and

Singapore's Fraser & Neave Ltd.,

another beverage company,

bought two-thirds of the shares.

Habeco, and many other planned

privatizations in Vietnam, could

easily share Vinamilk's fate. While

the nation is trying to lure

international institutional investors,

restrictions on foreign ownership

that curb liquidity for most stocks is

keeping them at bay. Or worse:

After almost 10 years of pouring

money into Vietnamese shares,

foreigners are leaving.

The irony is that this comes a year

after Hanoi passed Decree 60,

which allows companies to

increase foreign ownership beyond

the 49% cap enshrined in securities

law. The follow-on offering by

Vinamilk was possible because it

was one of a handful of companies

that applied to have the ceiling

lifted. Instead of attracting a throng

of fund managers, however, the

biggest component of the Ho Chi

Minh index got itself a strategic

partner in F&N -- which will

probably keep the shares locked in

a drawer, doing nothing for liquidity.

Behind the reluctance of

companies to lift the cap, and of

foreigners to buy into them, is a

legal dispute on where exactly the

line is drawn. The new rule isn't

applicable to companies in 14

"conditional sectors," and there are

more than 250 activities that fall

within the restricted areas.

Depending on the interpretation,

even Vinamilk's increased

ownership could be challenged.

Wasted Potential

Vietnam saw about $1 billion in

share offerings in each of the past

two years even as the Ho Chi Minh

index rose almost 20% in the period

Aside from limiting foreign interest in

the market, the ceiling is probably

part of the reason Vietnam hasn't

been upgraded to emerging-

market status, from frontier,

by MSCI.

With the likes of Fidelity Investments

limiting their participation in Ho Chi

Minh, companies vying to sell

shares are hostage to retail

investors and multinationals eyeing

a port of entry into Vietnam. In

Habeco's case, giants such as

Heineken NV or Carlsberg A/S

could end up playing an important

part in the listing, keeping the

company's free float small.


http://www.bakermckenzie.co.jp/e/material/dl/supportingyourbusiness/newsletter/corporatema/ClientAlert_150717_RelaxationOfForeignOwnershipVietnam_E.pdf

http://www.antlawyers.vn/library/list-of-investment-sectors-with-conditions-applied-to-foreign-investors.html



7


ENTERPRISES

Vinamilk surpasses 2016

financial targets thanks to

soaring demand

Nikkei - Vietnam Dairy Products,

known as Vinamilk, on Wednesday

announced it has surpassed all

financial goals this year thanks to

increasing consumption of milk in

the country.

According to a document filed at

the Ho Chi Minh City Stock

Exchange, Vinamilk forecasts its

consolidated revenue to have

grown 14.86% on the year to 46.2

trillion dong ($2b), 3.68% higher

than its target. Its pretax profit rose

19.57% to 11.2 trillion, while net profit

expanded 19.77% to 9.31 trillion

dong, exceeding by 11.78% and

12.63%, respectively, its full-year

targets.

"The initial analysis of the company's

market sector reports that

Vietnamese people buy more dairy

products compared to past years,"

a Vinamilk representative told the

Nikkei Asian Review. Details on

each market are expected to be

released later.

Vinamilk has shifted its product line

to meet changing consumer

demand, and this is one of the

main elements that helped the

company achieve the impressive

results.

The Vietnamese government

intends to develop the country's

dairy industry to meet consumer

demand. Per capita consumption

of milk is estimated to rise to 27 liters

by 2020 and 34 liters by 2025 from

around 20 liters currently. The figure

was about 15 liters in 2010.

Spending on dairy accounts for 10%

of total food expenditures in

Vietnam, which has helped the

market grow 15% per year in the

last five years. This is largely thanks

to income growth, estimated at

14.2% per year in the same period,

according to Vietnam Industry

Research and Consultant. The

population growth of 1.2% a year

also offers huge potential for the

dairy industry.

High-end product lines

Marking its 40th anniversary this

year, Vinamilk launched the

country's first-ever premium fresh

organic milk product line which

meets U.S. and European standards.

The organic milk is produced by

cows raised on the open grasslands

of the Central Highland outside

Dalat city. The cows are strictly

guarded to avoid exposure to

genetically modified fodder,

growth hormones, antibiotics,

pesticides and chemical fertilizers.

Fresh organic milk is Vinamilk's first

step on the journey to produce

more high-end product lines that

are nutritious, organic, natural and

healthy, according to Vinamilk

Managing Director Phan Minh Tien.

Earlier this month, Vietnam's State

Capital Investment Corporation

(SCIC) held its first public bidding to

sell 9% of its Vinamilk stake, in

keeping with the divestment of the

biggest state-owned companies.

Singapore-based Fraser & Neave

(F&N) is the only investor registered

to buy a 5.4% stake via its two

subsidiaries, to bringing F&N's stake

in the dairy producer to 16.35%, up

from 10.95%.

The first auction result was far below

market expectations, which

underscored Vietnam's relative

inexperience in the divestment

methods.

SCIC has not confirmed the next

divestment of Vinamilk or other

potential candidates. SCIC

Chairman Nguyen Duc Chi said the

company needs more time to

summarize the feedback from the

market and consultants. The

government, based on these

reports, is expected to prepare


http://asia.nikkei.com/Company/05W9GW-E



8


ENTERPRISES

legal documents in line with

international practices allowing

more flexible mechanisms in selling

the majority stake held by the state.

Vinamilk shares closed at 126,000

dong on Wednesday, 6.3% lower

than the day SCIC held the first

public auction on Dec. 12.

Vingroup rejects rumors of

selling Vinmart chain to 7-

Eleven

BizLIVE - An executive of Vietnam’s

top real estate developer and

retailer Vingroup has refuted rumors

of selling its Vinmart+ chain to

Japanese retail giant 7-Eleven.

Rumors saying that Vingroup would

dispose of its retail chain Vinmart+

to Japan’s 7-Eleven are totally

groundless, a high-ranking

executive of the largest property

developer and retailer in Vietnam

has said.

Vingroup will never sell a

Vietnamese brand name to foreign

investors, Vingroup’s Vice Chairman

Le Khac Hiep confirmed to the Tri

Thuc Tre news site, adding the

group will not unload such a fast-

growing retail chain to any firms

and at any prices.

Inside Retail last week cited

marketplace sources as saying that

convenience-store giant 7-Eleven

planned to enter Vietnam by taking

over the Vinmart+ chain.

Commenting about this information,

Hiep said that 7-Eleven had not

made any contact with Vingroup.

The real estate developer is seeking

to turn retail into its second business

pillar.

Currently, Vingroup is operating

1,000 supermarkets and

convenience-stores under the

Vinmart and Vinmart brand

names.

The group plans to open 70 to 80

Vinmart supermarkets and around

1,500 Vinmart+ convenience stores

next year.

Telco giant FPT to float shares

soon

BizLIVE - FPT Telecom will list its

shares on the UPCoM market soon,

giving another option to investors

seeking profits in the local stock

market.

TV pay service of FPT Telecom.

Photo: fpttelecom.net.vn

FPT Telecom JSC will float its 137.08

million shares coded FOX on the

Unlisted Public Company Market

(UPCoM) soon, giving another

option to investors seeking profits in

the local stock market, which has

been among the best performers in

Asia this year.

The date of debut is not specified,

according to a statement of the

Vietnam Securities Depository.

The telecommunications firm had a

registered capital of 1.25 trillion

dong (nearly $55 million) as of end-

2015. Government-run State

Capital Investment Corporation

(SCIC) was the largest shareholder

with a 50.16% stake and FPT Corp

held 45.64%.

Established in 1997, FPT Telecom

focuses on providing

telecommunications

and Internet services. Its operations

have reached out to Myanmar and

Cambodia.

FPT Telecom earned a net profit of

662 billion dong ($29.16 million) in

the three quarters ending

September 2016 on revenue of 4.92

trillion dong ($216.78 million).


http://bizlive.vn/tags/tap-doan-vingroup.html

http://bizlive.vn/tags/vinmart.html

http://bizlive.vn/tags/fpt.html

http://bizlive.vn/tags/internet.html



9


MARKET & PRICES

Asia’s beer war is a battle of

acquisitions

Nikkei - Major Japanese drinks

manufacturer Asahi Group Holdings

and Anheuser-Busch InBev, the

world's largest brewery, have

agreed for Asahi to acquire InBev's

beer businesses in five European

countries in a deal worth 7.3 billion

euros ($7.6 billion). This marks the

largest purchase ever by a

Japanese company of an overseas

beer business. With the market

across Asia levelling off,

competition is becoming

increasingly fierce and, for many

Asian breweries, future growth is at

stake.

The Dec. 13 deal covers the units of

what was SABMiller, a U.K. brewery

acquired by InBev, in the Czech

Republic, Poland, Hungary,

Slovakia and Romania.

Total annual sales of the five units

came to about 200 billion yen ($1.7

billion) and operating profit $367

million in the fiscal year ended

March 2016. Each enjoys a

domestic market share of more

than 30% and, excluding Slovakia

which ranked second, are the

leading players in local markets.

The high market shares guarantee

stable profits.

In October, Asahi also acquired

Italian brewery Peroni and three

other European beer companies,

which had all been under SAB's

wing, for $2.9 billion at that time.

InBev had put all up for sale in order

to acquire SAB in compliance with

antitrust laws.

According to Kirin Holdings, another

Japanese brewery, 189 million

kiloliters of beer were produced by

the main global players in 2015,

down 1.1% from a year earlier. As

the size of the market shrinks, many

analysts expect InBev's takeover of

SAB to be the last shift in a global

realignment and predict that the

chances are slim of a promising

acquisition target emerging any

time soon.

This is one of the reasons Asahi was

prepared to go up to $7.6 billion to

secure the five countries, having

originally envisaged a figure closer

to $4.3 billion. Asahi stocks plunged

when the acquisition was

announced on Dec. 13 on

concerns that it may erode the

brewery's financial health. Yet, an

Asahi executive was confident, "We

will never have such a chance

again."

In China, the biggest beer market in

the world, production declined

4.3% in 2015, while output in the

whole of Asia, which makes up 34%

of global production, was down

1.3%.

Asahi's archrival Kirin has set its

sights on Asia and Australia. A

senior company official described

the region as "the pillars of our

overseas strategy." Kirin bought a

stake in San Miguel Brewery, an

affiliate of leading Philippine

conglomerate San Miguel, in 2009.

This was followed by the 2015

purchase of Myanmar Brewery for

$560 million.

The company is also considering

transforming Brasil Kirin, a wholly

owned subsidiary it acquired for

$2.56 billion in 2011, potentially into

a joint venture. It is negotiating with

three other breweries, including

Heineken, over partnerships in an


http://asia.nikkei.com/Company/05HWS8-E



10


MARKET & PRICES

effort to get its Brazilian business

back into shape.

San Miguel Brewery, which

commands 90% of the Philippine

market, already has operations in

Hong Kong and Indonesia. San

Miguel had also expressed an

interest in Peroni before Asahi

sealed the deal.

China Resources Beer, the country's

top brewery, is looking both at

home and abroad for growth.

Outside the country, the company

also bid in the auction for the

European businesses won by Asahi

in December. There is speculation it

will move to acquire Beijing Yanjing

Brewery, which has been

performing poorly outside the core

battlefield of Beijing. Having raised

9.5 billion Hong Kong dollars ($1.2

billion) through selling new shares to

existing shareholders in July, China

Resources Beer has a sufficient war

chest. The company plans to use

the funds to terminate a joint

venture contract with SAB and

carry out mergers and acquisitions.

In the meantime, Tsingtao Brewery,

China's second-ranked producer, is

suffering in the face of competition

from foreign brands in the mid-

range and high-end segments,

once an area of strength for the

company. Under the circumstances,

there are rumors that Tsingtao will

move to acquire Chongqing Beer --

currently affiliated with Carlsberg.

In Thailand, Southeast Asia's

second-largest beer market, Boon

Rawd Brewery and Thai

Beverage dominate. Heineken and

other foreign breweries are active

in the high-end segment, but the

two local beer companies control

90% of the market. Thai Beverage is

keen on the idea of a merger

abroad, aiming at becoming a

global player.

The market receiving the greatest

attention today is Vietnam, the

largest beer market in Southeast

Asia and the last great beer frontier.

On Dec. 6, Saigon Beer Alcohol

Beverage, or Sabeco, went public

on the Hochiminh Stock Exchange,

closing the day at 132,000 dong,

20% above the price projected by

the Vietnamese government. The

stock comes in near the top of the

market capitalization ranking at the

exchange.

The Vietnamese government,

which owns about 90% of Sabeco

shares, announced in August it

would sell all of its holdings in the

company, with an auction

scheduled for sometime next spring.

Sabeco has 40% of the domestic

market share. The world's major

breweries have already shown an

interest in bidding. Some expect

the sale of the shares to produce in

the region of $2.56 billion in total.

Asahi and Kirin, as well as InBev and

Heineken, are said to be mulling a

de facto acquisition of Sabeco.

Thai Beverage CEO Thapana

Sirivadhanabhakdi declared

Vietnam is a "priority overseas

market." Boon Rawd is also

interested, and the race for the

Vietnamese brewery is likely to heat

up.

The Vietnamese government also

intends to sell its 82% stake in Hanoi

Beer Alcohol and Beverage, or

Habeco. Minority shareholder

Carlsberg could possibly increase its

stake. Although the shakeup of the

global beer industry sparked by

InBev's takeover of SAB will calm

down soon, the realignment of the

Asian market looks set to last for

some time.


http://asia.nikkei.com/Company/003HQP-E

http://asia.nikkei.com/Company/003K0J-E

http://asia.nikkei.com/Company/060TPX-E

http://asia.nikkei.com/Company/060TPX-E



11


MARKET & PRICES

Hot cash flow in the real estate

market in 2017

VNN - A report of the State Bank’s

HCMC Branch showed that 22% of

overseas remittances goes to the

real estate sector, 72% to

production and business and the

remaining to other fields.

Meanwhile, a large proportion of

FDI capital in 2016 went to real

estate projects, while the same

thing is believed to continue in 2017.

Tran Kim Chung, deputy head of

CIEM, commented that there were

not major hallmarks in the financial

market this year.

The VN Index of the Vietnam’s stock

market at the end of 2016

exceeded the 650 threshold set

since 2009. The total capitalization

value of the stock market has

increased from 32.4% of GDP in

2015 to 40% in 2016. The total

market value of the investment

portfolios held by foreign investors

has increased by 20.7% by the end

of 2016 compared to the end of

2015, reaching $19.55 billion.

The interest rate has decreased

and nearly bottomed out. The

lending is estimated to increase by

18% in the year.

The State Bank released Circular 06

which tightened control over the

credit flow to the real estate

sector.

The state’s revenue from land and

houses has increased by 32.6% over

estimates, of which receipts from

land use increased by 28% and the

tax on agricultural land use rose by

38.7%.

The number of real estate

businesses has increased by 99.1%,

while registered capital has

increased by 242.5%.

According to Chung, the real

estate price in the primary market

has increased by 5-7% compared

to earlier this year, while the price in

the secondary market has

increased by 10-15%.

Transactions in the real estate

market became busy in the second

half of the year. He cited a report

as saying that in the apartment

market segment, the absorption

rate is up to 80%, the highest rate in

four years.

As the market has warmed up, the

scale and value of projects has

increased. The number of medium-

and high-end real estate products

is far higher than low-cost

properties.

Regarding market prospects in 2017,

Chung said the market fervor would

be less intense because of a

decrease in speculation. Banks’

lending to the real estate sector will

also be decreasing.

Su Ngoc Khuong from Savills

Vietnam said the housing market

segment may encounter difficulties,

but other segments such as office

and retail premises will still see

strong rises.

Some real estate developers have

jumped into the low-cost market

segment as they realize that more

the young want to be independent

from their parents.




12


LEGAL UPDATES

Vietnam’s new rules lead to

record high of business

formations

BizLIVE - The application of new

laws has helped boost the number

of business formations in Vietnam to

the all-time high of 110,100 this year.

As many as 110,100 businesses

have entered the market in

Vietnam in the year to December

20, rising 16.2% from a year earlier

and marking a record high,

according to the Ministry of

Planning and Investment.

Their registered capital has

reached a combined 891 trillion

dong ($39.2 billion), soaring 48.1%

year-on-year. However, the newly-

established firms created 1.27

million jobs, down 13.9% year-on-

year.

In addition, nearly 26,700

enterprises have resumed

operations, up 43.1% year-on-year.

These figures indicate not only the

growth of the Vietnamese

corporate sector in recent years,

but also improvements in the local

business environment and thriving

opportunities, said Deputy Minister

of Planning and Investment.

The real estate sector has seen the

sharpest increase in new business

formations, at 83.9% to reach 3,126,

indicating the property market has

been back to the growth track

since 2015.

Ho Chi Minh City and Hanoi remain

the largest homes to new market

entries, with 36,442 and 22,663,

respectively. The new firms in the

two metropolis account for 53.7% of

the total in the country.

The implementation of the Law on

Enterprises has helped cut the

approval time for business

registration to just 2.9 days while the

average time for registration

adjustments has been reduced to

2.05 days.

Vietnam likely to approve

casino decree by Christmas of

early 2017

BizLIVE - The Vietnamese

government may pass the new

gaming decree this Christmas of

early next year.

The Vietnamese government is

expected to approve the new

decree on casino during Christmas

2016 or early 2017, Asian Gaming

Brief cited an expert in the industry

as saying.

The final draft of the casino decree

has been passed by the Ministry of

Justice and Government’s Office. It

is now on the table of the Politburo

and Prime Minister Nguyen Xuan

Phuc for their comments, which are

as always, the most important,

according to law firm Duane Morris

LLP.

International investors are waiting

to see whether Vietnamese

residents are permitted to enter

casinos in Vietnam. This is a big

question that may wait for decision

of the highest level of Vietnam’s

political system.

The law firm said that more likely

that Vietnamese may enter casinos

and gamble but with specific

conditions in 2017.


http://bizlive.vn/tags/thanh-pho-ho-chi-minh.html

http://bizlive.vn/tags/ha-noi.html

http://bizlive.vn/tags/casino.html

http://bizlive.vn/tags/nguyen-xuan-phuc.html

http://bizlive.vn/tags/nguyen-xuan-phuc.html



13


HIGHLIGHTS

Top 10 domestic event in

Vietnam 2016

VNA - The Vietnam News Agency

(VNA) has selected the 10 most

outstanding events of Vietnam in

2016 as follows:

1. The 12th National Party Congress

With the spirit of “Solidarity –

Democracy – Discipline –

Renovation”, the 12th National

Party Congress was successfully

held from January 20-28, 2016. The

congress reviewed 30 years of

reform (Doi Moi) and set out

development orientations of the

nation in the new period. The

congress defined six key tasks in a

bid to enhance the Party building

and rectifying wok and continue

stepping up reform

comprehensively and

synchronously to build Vietnam into

a strong country with prosperous

people, and democratic, fair and

civilised society.

2. The election of deputies to

the 14th National Assembly

and People's Councils at all

levels for the 2016-2021 tenure

The election of deputies to the 14th

National Assembly and People’s

Councils at all levels was organised

publicly, democratically, legally,

safely and economically,

becoming a festival of the entire

people. The success of the election

laid a foundation for strengthening

the organisational and personnel

structure of the State apparatus

and continuing to build a socialist

law-governed State of the people,

by the people and for the people,

with the resolve to build an upright,

tectonic, active and serviceable

government.

3. Overcoming difficulties, the

economy continues to record fairly

high growth

Under the leadership and drastic

direction of the Government, the

determination of the entire political

system and the active participation

of the business community,

Vietnam’s economy has continued

to record fairly high growth despite

difficulties caused by drought,

saline intrusion, maritime

environmental incident in the

central region and negative

impacts from the global economy.

The country has successfully

maintained

macroeconomic stability, curbed

inflation, ensured the economy’s

major balances and accumulated

the highest-ever foreign currency

reserves. Vietnam’s business climate

has seen remarkable improvements

and the private sector has

flourished, while the number of

newly-established enterprises has

increased rapidly.

4. Fight against corruption and

negative phenomena stepped up

In the past year, many serious

economic and corruption cases

went on trial and a series of

violations in personnel work were

brought to light, with a number of

senior officials being disciplined.

The 4th plenary meeting of the 12th

Party Central Committee issued a

Resolution on enhancing the Party

building and rectifying work; and

preventing and pushing back the

degradation in political ideology,

morality and lifestyle as well as the

signs of “self-evolution” and “self-

transformation” within the Party. A

range of specific and drastic

measures were deployed, receiving

the positive response from officials,

party members and the people.

5. Bustling and effective foreign

affairs

Vietnam’s foreign affairs have been

promoted in 2016 with the

successful hosting of the 7th

Ayeyawady – Chao Phraya –

Mekong Economic Cooperation




14


HIGHLIGHTS

Strategy (ACMECS) Summit

(AMECS-7), the 8th Cambodia –

Laos – Myanmar – Vietnam

Cooperation Summit (CLMV-8), and

the World Economic Forum (WEF)

on the Mekong region (WEF

Mekong). The country actively

attended regional and

international forums and arranged

many important bilateral visits.

These activities affirmed Vietnam’s

consistent foreign policy and

determination to promote intensive

and comprehensive international

integration, helping to maintain a

peaceful and stable environment

for national construction and

defence.

6. Maritime environmental incident

in the central region

Wastewater discharged illegally

from Taiwan’s Hung Nghiep

Formosa Ha Tinh Steel

Corporation seriously polluted the

maritime environment of the

central provinces of Thua Thien-Hue,

Ha Tinh, Quang Binh and Quang Tri,

causing severe impacts on

production and daily life of local

people. The Government, relevant

ministries, sectors and localities

worked hard to strictly handle

violations and support affected

residents. Formosa accepted full

responsibility for the incident and

agreed to compensate for the

losses.

7. Heavy consequences caused by

natural disasters

A large-scale cold spell in northern

mountainous provinces, continuous

floods in the central region, drought

in the Central Highlands and saline

intrusion in the Mekong Delta

caused severe impacts on

production and daily life of local

people in 2016. Administrations at

all levels, sectors and the entire

community join hands in supporting

affected people to stable their

production and lives, change

production models and respond to

climate change.

8. Vietnam’s athletes achieve

exploits at Olympics and

Paralympics

In the Rio Olympics 2016 in Brazil,

shooter Hoang Xuan Vinh won the

first-ever Olympics gold medal for

Vietnam after claiming the men’s

10m air pistol title and a silver

medal in the men's 50m air pistol.

At the Paralympics 2016,

weightlifter Le Van Cong won the

first Paralympics gold medal for

Vietnam, breaking the Paralympics

and world records in the men's up-

to-49kg category.

9. Three more Vietnamese heritage

honoured by UNESCO

“The royal literature on Hue royal

architecture” and “Phuc Giang

School Woodblocks” were

recognised as documentary

heritage at the Memory of the

World Committee for Asia and the

Pacific (MOWCAP)’s 7th General

meeting in May 2016.

Meanwhile, the practice related to

the Vietnamese belief in worshiping

Mother Goddesses of the Three

Realms was officially recognised by

UNESCO as intangible cultural

heritage of humanity in December.

10. Vietnam welcomes 10 million

foreign visitors




15


HIGHLIGHTS

In 2016, Vietnam’s tourism sector

welcomed a record number of 10

million foreign tourists, up 25

percent year-on-year, and served

62 million domestic visitors. The

tourism sector’s total revenue

reached 400 trillion VND (17.6 billion

USD) in the year. This marked an

important milestone in Vietnam’s

tourism development process,

towards the target of becoming a

leading tourist destination in the

region and a spearhead economic

industry of the country.

Low localization could sound

death knell for auto industry

VOV – Transnational investor

pledges with the Foreign

Investment Agency have tapered

off in the wake of the demise of the

Trans Pacific Partnership (TPP), said

speakers at the Vietnam Business

Forum.

Most importantly, they said, it

signals that big challenges lie

ahead for the automotive parts

industry and its prospects for growth

and becoming a major-league

player in the supply chain.

Simply put, in-country auto

manufacturers are too heavily

dependent on imports to support

their production and are forced to

purchase intermediary and raw

materials in overseas markets and

ship them to Vietnam.

This adds cost to production and

cuts into the added value and

profits of the manufacturers who

would much prefer a robust local

supply chain produce the needed

items, the speakers noted.

The lack of a well-developed auto

parts segment is the biggest

obstacle holding back growth of

the auto industry, which includes all

those companies and activities

involved in the design,

development, manufacturing,

marketing, and selling of motor

vehicles.

The global auto industry’s principal

products are passenger

automobiles and light trucks as well

as pickups, vans, sport utility

vehicles as well as commercial

vehicles (i.e., delivery trucks and

large transport trucks, often called

semis).

Currently there are roughly 400

small businesses in the auto parts

supply chain, they said, with about

a 50-50 split with half of them

foreign sector businesses and the

other half domestic sector.




16


HIGHLIGHTS

A very limited few of them utilize

advanced technologies and most

produce unsophisticated easy to

mass produce basic parts such as

mirrors, electric components and a

few plastic parts.

In addition, there are a few

manufacturers that produce

batteries for motor vehicles (which

technically aren’t part of the auto

industry), the speakers said.

In 2015 the country’s auto industry,

working at less than full capacity,

assembled about one-half million

autos, most of which were nine-

passenger vehicles. The local

supply chain met 7-10% of the

demand for parts with the balance

having been imported from

overseas.

The bottom line, the speakers

underscored, is that without

significant investment (tens of

billions of dollars) in the auto parts

segment to develop the supply

chain, the auto industry cannot

compete with manufacturers in

neighbouring countries Thailand

and Indonesia.

Previously, the government had

protected the country’s auto

industry by imposing high tariffs on

imported vehicles. However, with

the coming into force of the ASEAN

Economic Community (AEC) in

2015 and the elimination of those

tariffs— the industry is struggling to

survive.

In 2018 the protective import tariffs

on vehicles into Vietnam will be

completely rolled back.

It is estimated that at that time the

costs of production in Vietnam will

be 20% more than in Thailand and

Indonesia due to the lack of a

supply chain and the added cost

of importing versus manufacturing

intermediary parts in-country.

This situation, if it were to occur, said

the speakers, could sound the

death knell for the country’s auto

industry.

Vietnam shoe and garment

exports see drastic slowdown

in 2016

VIR - Vietnam’s export of garment

and shoes seems poised to record

significantly lower growth this year.

The numbers for the whole year of

2016 are not available yet, but

according to the General

Department of Vietnam Customs,

the total export of garment and

textile products was $22.58 billion in

the year to December 15, up 4.8

per cent on-year. This is the lowest

growth in 10 years.

Vu Duc Giang, chairman of the

Vietnam Textile and Garment

Association, said at a recent

conference reviewing the annual

performance of the sector that the

year saw the biggest ever shifting of

orders from Vietnam to other

countries.

He attributed the slow growth to

fluctuating material prices. Also,

foreign direct investment in the field

saw remarkably slower growth this

year than in recent years.

Shoe export showed a similarly grim

picture. Vietnam exported $12.3

billion worth of shoes in the period.

The growth rate was 8.1 per cent,

lower than the 16.3 per cent of 2015

and the 22.9 per cent of 2014.

Talking to local media, Phan Thi

Thanh Xuan, general secretary of

the Vietnam Leather, Footwear and

Handbag Association attributed

the less-than-desirable results to

political instabilities, especially

Britain’s exit from the European




17


HIGHLIGHTS

Union, which caused demand in

Europe to decrease, resulting in

falling orders from importers.

The US is among the biggest

importers of Vietnamese garment

and shoe products. Even before

Vietnam, together with 11 countries,

signed the Trans-Pacific Partnership

Agreement (TPP) in February, many

garment and shoe manufacturers

as well as material producers have

come to set up shop or expanded

investment in Vietnam, citing the

deal as one of the biggest reasons.

Now that President-elect Trump has

said that the US would withdraw

from the TPP, which he called “a

potential disaster,” and Japan,

another member country, has said

the TPP would be meaningless

without the involvement of the US,

the prospects of the deal are

grimmer than ever.

Xuan said that the country’s shoe

sector still has a lot going for them

with or without the TPP.

According to Xuan, as the EU-

Vietnam Free Trade Agreement will

become effective in 2018, 2017 will

be the year where importers,

customers, and investors prepare

for better growth in the next period.

“Moreover, there are other free

trade agreements, such as the one

with the Eurasian Economic Union

(EAEU). Vietnamese shoe exports to

this market are still very modest,”

she said.

Representatives of VITAS also said

that the garment sector, which

exported 40 per cent of its products

to the US, is banking on EU and the

EAEU market in the coming period.

Besides the association highlighted

Myanmar as a potential market in

the ASEAN for Vietnamese garment

and textile companies, as the US

lifted the embargo on Myanmar in

October and allowed the country

to enjoy preferential tariffs.

Safe, high-quality agricultural

production programme

launched

VNA - A programme designed to

encourage stronger cooperation

between farmers, cooperatives,

and enterprises to develop safe

and transparent agricultural supply

chains was launched in Ho Chi

Minh City on December 27.

Through the programme, the

Ministry of Agriculture and Rural

Development (MARD) hopes to

bring together producers and

consumers to jointly develop a

clean agriculture with safe, high-

quality and highly competitive

products.

Deputy Minister of Agriculture and

Rural Development Tran Thanh

Nam said boosting the linkage

between production and

consumption will help businesses

get easier access to farming

households, thereby forming safe

agricultural product supply chains.

On this occasion, MARD also

coordinated with relevant agencies

to organise a workshop on the

situation and solutions to develop

production and consumption

models for safe and high-quality

farm produce.

A fair introducing safe products of

agricultural cooperatives was also

held at Co.opmart Foodcosa.


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