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Vietnam Business Review

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Vol 37, October 04th 2017

BUSINESS REVIEW VIETNAM

Vietnam’s Jan-Sep FDI attraction rises 34% to $25.5 billion, beating 2016 tally

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INSIDE THIS ISSUE

HIGHLIGHTS

Consumer credit: VND1 trillion in 2019

Vietnam feels impact of 4.0 industrial revolution

ECONOMY

Vietnam manufacturing PMI uplifts in September

Vietnam's top 10 key export products in January - August

BANKING & SECURITIES

KB Securities to acquire 99.4% of Maritime Securities

LienVietPostBank denies rumour of merger with Sacombank

40 foreign investors join race for IDICO shares

INVESTMENT

Vietnam‟s Jan-Sep FDI attractionrises 34% to $25.5 billion, beating 2016 tally

FDI into real estate exceeds $51 billion

Vietnam attracts foreign investment, but technology transfer remains low

ENTERPRISES

Vinfast launches first 20 designs for sedan and SUV models

Mobile World hitting the brakes?

MARKET & PRICES

Bridges projects boost land prices in Hanoi's eastern area

Hanoi office rental fees remain stable: CBRE



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ECONOMY

Vietnam manufacturing PMI uplifts in September

VNN - The Vietnam Manufacturing Purchasing Managers‟ Index (PMI) rose in September, with faster rises in

output, new orders and employment on the back of stronger customer demand.

This was revealed on October 2 by the latest survey from Nikkei‟s IHS Markit.

The composite indicator of manufacturing performance stood at 53.3 in September, up from 51.8 in August.

The reading signalled a solid monthly strengthening of business conditions, with the rate of improvement the

most marked since April. The health of the sector has now strengthened in 22 consecutive months.

“The anecdotal evidence has highlighted an improvement in customer demand over the month. This resulted

in a sharp and accelerated increase in new business, the most marked in five months. The rate of expansion

in new export orders also quickened in September,” the Nikkei‟s IHS Markit reported.

The manufacturing output increased for the 11th successive month, with the latest rise the most marked since

April. All three broad sectors saw a production increase, led by consumer goods firms.

Higher new orders contributed to capacity pressures, as signalled by a further rise in backlogs of work. Some

panellists also mentioned that staff shortages contributed to the build-up of outstanding business.

Firms responded to greater workloads by increasing their staffing levels. Moreover, the rate of job creation

quickened to a six-month high, according to the report.

Manufacturers also used inventories to help fulfill new orders in September. As a result, the stocks of finished

goods decreased for the third month running, and to the greatest extent since July 2016.

[GSO: Vietnam‟s GDP expands 6.41 pct in nine months]

“A marked acceleration in the rate of input cost inflation was recorded, linked to higher prices for raw

materials, including those sourced from China. The increase in input costs was the strongest since May 2011.



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Rising input prices led firms to increase their output charges in September for the first time in five months. That

said, the rate of inflation was modest amid reports of competitive pressures,” the report showed.

Higher new orders, and a subsequent rise in production requirements, encouraged firms to increase their

purchasing activity at the end of the third quarter. The rate of expansion was solid, and the fastest since April.

Stocks of purchases also rose, partly reflective of efforts to build inventory reserves, it added.

Suppliers‟ delivery times continued to lengthen, albeit to the least extent in the current eight-month sequence

of longer lead times.

Finally, manufacturers remained optimistic that the output would increase over the coming year, with positive

sentiment linked to predictions of a new growth order and business expansion plans.

"New orders rose markedly, feeding through to faster expansion of output, employment and purchasing

activity. Manufacturers are, therefore, well placed to record further growth during the final quarter," said

Andrew Harker, associate director at IHS Markit.

"A cautionary note, though, is signalled by the re-emergence of inflationary pressures. Cost inflation was the

strongest in over six years amid pressure on the supply of raw materials," he added.

Vietnam's top 10 key export products in January - August



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BANKING & SECURITIES

KB Securities to acquire 99.4% of Maritime Securities

VNE - South Korea‟s KB Securities is moving to acquire a

99.4% holding in Vietnamese brokerage Maritime

Securities Incorporation (MSI) for $33.16 million,

according to news from KB Securities.

The two have signed an agreement that will see KB

purchase the holding in the Maritime Bank subsidiary.

The transaction is expected to be finalized in late

October.

KB Securities will expand MSI‟s business activities after

the deal comes to pass and will help it cooperate with

members of the KB Financial Group, such as KB Kookmin Bank.

In January, MSI withdrew plans to list on the Hanoi Stock Exchange (HNX). At its annual shareholders‟ meeting

for 2017, it also approved expanding its foreign ownership limit to 100% and allowing domestic and foreign

partners to buy more than 25% from existing shareholders without going public.

MSI‟s total assets stand at VND674 billion ($29.65 million), including investments in Maritime Bank with a book

value of VND93 billion ($4.09 million). In the first half of this year, after-tax profit was VND16.54 billion ($727,828),

down 6% year-on-year, according to its financial report.

MSI is currently a medium-sized securities company in Vietnam. In 2016, it accounted for a 3.5% brokerage

market share on HNX and 1.7% on the Ho Chi Minh Stock Exchange (HSX).

There are many active South Korean securities companies on Vietnam‟s stock market, including KIS Vietnam,

Mirae Asset Vietnam, Shinhan Vietnam, and Maybank KimEng.

LienVietPostBank denies rumour of merger with Sacombank

LienVietPostBank‟s general director, Pham Doan Son, has denied rumours about the bank merging with

Sacombank.

Rumours about the merger have been afloat since LienVietPostBank‟s former chairman, Duong Cong Minh,

became Sacombank‟s chairman and Him Lam Co‟s divestment from LienVietPostBank.

Minh last week also registered to buy an additional 18 million shares of Sacombank, expecting to raise his

stake at the bank to 3.15 per cent.

Son affirmed that there will be no merger, adding that LienVietPostBank‟s business performance is currently

very good and will be even better in the next few years, so that it does not need to merge with anyone.

According to Sơn, LienVietPostBank has gradually become strong with more than 200 bank transaction

offices and more than 1,000 post offices, which have eased the bank in capital mobilisation and lending.

The bank‟s mobilised capital and lending through the post offices last year reached more than VNĐ40 billion

(US$1.76 million) and VND14 trillion, respectively.



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It also makes retirement salary payments through the post offices.

By September 30, the bank‟s capital adequacy ratio (CAR) was good, at 11 per cent, as against the central

bank‟s 9 per cent regulation.

The bank also nearly meets the 2017 pre-tax profit plan of VND1.5 trillion as it gained a pre-tax profit of

VND1.45 trillion in the first three quarters.

LienVietPostBank will be listed on UPCoM this Thursday at an initial price of VND14,800 per share.

40 foreign investors join race for IDICO shares

VNS - Forty foreign institutional investors have joined the

race for shares of the Vietnam Urban and Industrial Zone

Development Investment Corporation (IDICO) at the firm‟s

initial public offering (IPO).

IDICO will auction more than 55.3 million shares or 18.44 per

cent of the firm‟s charter capital at the IPO for the starting

price of VND18,000 (80 US cents) per share. The IPO is

scheduled for October 5.

The number of shares that the 40 foreign institutional

investors have registered to buy at the IPO is more than 89 million, 1.6 times the number of shares offered by

IDICO, according to the HCM Stock Exchange.

Beside the 40 foreign institutional investors, nine foreign individuals, 25 Vietnamese institutional investors and

582 domestic individual investors, will also participate in the IPO, raising the number of investors to 656.

The total number of shares registered by the investors is more than 269.2 million, five times the number of

shares offered by IDICO.

IDICO would receive at least VND1 trillion ($44.4 million) from the auction if the company succeeds in selling

all the shares offered at the IPO.

Under the equitisation plan for IDICO, the company would have VND3 trillion in its post-equitisation charter

capital, equal to 300 million shares.

The 300 million shares include 55.3 million shares that will be offered at the IPO, 108 million shares or 36 per

cent of charter capital will be held by the government, 135 million shares or 45 per cent will be possessed by

the strategic investor, and the remainder will be sold to the firm‟s employees.



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INVESTMENT

Vietnam’s Jan-Sep FDI attractionrises 34% to $25.5 billion, beating 2016 tally

BizLIVE - Foreign investment inflows in Vietnam in the first nine months of this year already surpassed the

amount for the whole 2016.

Committed foreign direct investment (FDI) in Vietnam reached $25.5 billion between January and September,

up 34.3% from a year earlier and higher than a total of $24.4 billion in the whole 2016, according to statistics

of the Foreign Investment Agency under the Ministry of Planning and Investment.

Of the sum, fresh FDI approvals increased 30.4% year-on-year to $14.6 billion while investors of 878 projects

added $6.8 billion, up 28.3%.

In addition, overseas players spent $4.2 billion to contribute capital and/or acquire stakes in companies in

Vietnam, the agency said.

Manufacturing was the most attractive sector when luring $12.64 billion, accounting for 49.6% of total foreign

investment inflows. Electricity came second with $5.37 billion, thanks to large-scale thermal power projects.

Among 108 countries and territories investing in Vietnam in the nine-month period, South Korea ranked first

with $6.31 billion invested, making up 24.7% of the total investment. Japan and Singapore were the runners-

up with $5.91 billion and $4.14 billion, respectively.

Ho Chi Minh City has emerged as the top destination for foreign investment when attracting $3.74 billion,

followed by Thanh Hoa with $3.15 billion.

The agency noted that actual FDI in the country increased 13.4% in the first nine months of this year to $12.5

billion.

FDI into real estate exceeds $51 billion

VNA - Accumulated foreign direct investment (FDI) in the real estate sector reached 51.1 billion USD as of the

end of September, accounting for 16.5% of the total FDI in Vietnam, according to the Foreign Investment

Agency under the Ministry of Planning and Investment.

The sector recorded 3,500 newly-established firms per year, accounting for 3.7% of the total newly-established

firms, according to the Jones Lang LaSalle (JLL) Vietnam.

Chief Executive Officer and Director of Indochina Capital Peter R.Ryder acknowledged that Vietnam has

created much more favourable conditions for foreign investors, particularly the partnership with local firms.

JLL General Director Stephan Wyatt said foreign investors have showed interest in industrial parks, especially

when the Government of Vietnam offers numerous incentives for developing those facilities.

Director General of the United Overseas Bank – Ho Chi Minh City said Vietnam has the opportunity to make a

jump in FDI in property sector.

One of the factors assuring foreign investors in property market is the stability in many aspects, including a

positive GDP growth rate.

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



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Vietnam attracts foreign investment, but technology transfer remains low

VNN - One of the major purposes of Vietnam attracting foreign direct investment (FDI) in the last 30 years is to

receive technology to be transferred by foreign investors.

However, according to the 2016 World Economic Forum, the efficiency of technology transfer from foreign

invested enterprises (FIEs) in Vietnam is surprisingly low. Vietnam ranked 57th in the world in 2009, while it

ranked 103rd in 2014, falling by 46 grades after five years, much lower than other regional countries, including

Malaysia (13th) Thailand (36th), Indonesia (39th) and Cambodia (44th).

The analysis of other criteria also gives unsatisfactory results.

In 2015, of five business fields which made up 49 percent of the added value of the whole industry, three

were low technology fields, including the processing industry, textiles & garments, and footwear. The other

two fields, mining and steel manufacturing, had medium technology.

The industry which made up 12.2 percent in added value was

electronics, computer and optical products. Though it is considered

„hi-tech industry‟, the works implemented in Vietnam are simply

assembling.

The labor productivity in Vietnam industries increased very slightly, just

2.4 percent per annum in 2006-2015, or 3.9 percent lower than the

country‟s GDP growth rate.

Analysts, when comparing the number of FDI projects and technology transfer contracts, found there were

only 600 technology transfer contracts out of 14,000 FDI projects, or 4.28 percent.

Regarding the quality of transferred technology, a report from MPI showed that more than 80 percent of FIEs

use medium level technology, 14 percent low technology and only 5-6 percent use high technology.

Analysts commented that the policies and business environment do not stimulate technology transfer.

High tech; 5%

Medium tech;

15%

Low tech; 70%

Local value; 10%

The rate of technology transfer of FDI projects in Vietnam

One of the major purposes of

Vietnam attracting foreign direct

investment (FDI) in the last 30 years is

to receive technology to be

transferred by foreign investors.



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ENTERPRISES

Vinfast launches first 20 designs for sedan and SUV models

VIR - Vinfast has introduced 20 sedan and SUV automobile designs and officially launched a public contest to

select the most popular models in Vietnam.

The 20 models designed specifically for Vinfast come from four well-known automobile design studios, namely

Pininfarina, Zagato, Torino, and Ital Design, who created shapes for Alfa Romeo, Aston Martin, Audi, Bentley,

BMW, Cadillac, Ferrari, Jaguar, Lamborghini, Mercedes-Benz, Porsche, and Rolls-Royce, among others.

They have presented Vinfast with an impressive collection.

Despite having different styles, these 20 models meet Vinfast three overriding criteria: they are all luxurious,

fashionable, and modern, matching the world‟s high-end automobile models.

Along with a meticulous selection of product designers, Vinfast also organises a vote among domestic

customers to pick the winning models to build.

This is the first time that the Vietnamese people have had an opportunity to have a say in which automobiles

will enter the market.

Accordingly, on October 2-16, customers can access the website www.binhchonmauxe.vinfast.vn to join the

vote between two luxury sedan and SUV models.

Along with selecting the most popular models, customers will also be able to win attractive prizes. Notably,

the winner, who manages to pick the two most popular Sedan and SUV models, will be awarded a prize of

VND500 million. Furthermore, customers can join numerous minigames on the Vinfast Fanpage.

The following are some designs available for vote:

http://image.english.vov.vn/w490/uploaded/tmt2b47lhgly8uzveukg/2017_10_04/Vin_2_QODM.jpg

http://image.english.vov.vn/w490/uploaded/tmt2b47lhgly8uzveukg/2017_10_04/Vin_3_1_MNAQ.jpg

http://image.english.vov.vn/w490/uploaded/tmt2b47lhgly8uzveukg/2017_10_04/Vin_4_GTTV.jpg

http://image.english.vov.vn/w490/uploaded/tmt2b47lhgly8uzveukg/2017_10_04/Vin_5_KRIT.jpg

http://www.binhchonmauxe.vinfast.vn/



















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VIR - When it is impossible to break through market saturation and escape the downward spiral of stagnant

growth, founders of local retail businesses often decide to sell their enterprises to find other opportunities. Is

this also true for Mobile World Group?

Tran Anh takeover

Over the weekend, new information has been revealed on the M&A deal between Tran Anh Digital World

JSC (TAG) and Mobile World Investment Corporation (MWG), providing a glimpse into the staff reorganisation

process.

Specifically, the Board of Directors of Tran Anh has signed the decision to appoint Vu Dang Linh as chief

financial officer from October 1, 2017 to September 30, 2018 or until another decision is made. Linh has been

the CFO of Mobile World since 2013.

Accordingly, Linh was authorised to sign loan contracts on behalf of Tran Anh as well as manage revenues

and expenditures, except for loan contracts which are required to be signed by Tran Anh‟s representatives.

At the same time, Linh will carry out other management activities as Tran Anh‟s CFO and account holder.

Apart from assigning Vu Dang Linh to control the firm‟s corporate finances, TAG also appointed Vo Ha Trung

Tin as its new deputy general director. Tin will be in charge of signing transaction deals and agreements

between Tran Anh and third parties to support the business and operations of Tran Anh‟s system.

Ha Trung Tin is also one of the senior leaders of Mobile World and is currently director of the Dien may XANH

chain in the northern region.

It is considered Mobile World‟s first step in taking over this business after Tran Anh‟s shareholders approved

selling the company to Mobile World.

According to Tran Kinh Doanh, general director of Mobile World, the deal is entering its final stage. Details of

the acquisition will be announced by the two sides in this October.

Rumours of Mobile World “selling itself”

The intention of Mobile World to buy Tran Anh to reinforce its market position, as well as to grab higher market

share for the Dien may Xanh chain in the north is not surprising for investors and retailers.

Instead, this is even good news for both parties. The systems of Tran Anh and Dien may Xanh will complement

one another for quick shortcuts to gain market share. Accordingly, the two sides will serve two different

customer groups. Specifically, Dien may Xanh stores will serve as mini-supermarkets, while Tran Anh stores will

be operated in the form of electronic hypermarkets.

However, as part of the recent information that startled many, businesses in the Vietnamese retail and

distribution sector have speculated that, along with the implementation of some M&A deals with partners in

the electronics and pharmaceutical industries, Mobile World is about to “sell itself” to foreign partners. The

strong media moves in the past were meant to serve the sale.

Moreover, rumours also said that all Mobile World founders had decided to retire early and leave the playing

field for the next generation.



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“A host of domestic and foreign brands must rely on M&A deals to save themselves. This has shown, in part, in

the increasingly competitive market. More importantly, this has depressed the winning spirit of many

entrepreneurs,” said a director of a retail chain in Hanoi.


Mobile World’s estimated revenue and after-tax profit from 2012 to date (Unit: million USD)

Mobile World‟s chain of mobile phone stores is showing signs of saturation. Although these stores still

contribute the largest portion of Mobile World‟s revenue, the overall growth rate of the chain is slowing down.

The rumour is rational to some extent, as the latest report on the retail market of Savills Vietnam reveals that

the big foreign retailers‟ appetite for M&A deals is constantly increasing.

It is not that Vietnamese businesses do not want to continue to develop and expand scales sustainably. Yet,

greater scales means greater possibility to spiral out of control.

This seems to be true as Mobile World is finding ways to produce growth in an increasingly saturated

technology and mobile phone retail market. This year, Mobile World sets a target of nearly $3 billion in

revenue and aims to reach $10 billion by 2020. The mission is not easy, especially as Mobile World‟ key store

chains are decelerating.



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Since late 2016, Mobile World‟s pace of expansion reduced to 10-20 stores per month, instead of opening

“two stores every day” as it did before. In the past few months only a handful of stores opened. Therefore,

Mobile World‟s revenue keeps hovering at VND2.7 trillion a month ($118.94 million). They can hardly surpass

the VND3 trillion-mark ($132.16), only in the months around the Tet holiday, when the consumption demand is

the highest.

According to the analysis of Ho Chi Minh City Securities Company (HSC), the mobile phone chain of Mobile

World has shown signs of saturation. Its market share remained unchanged at 42 per cent, while it used to rise

by 1-2 per cent in each quarter.

The reason, according to HSC, is that the company has had most of the prime locations with good customer

flows across Vietnam. The store-opening rate is higher than the general growth rate of the whole market,

which forces Mobile World‟s stores to compete with each other, leading to the unchanged market share.

Regarding Dien may Xanh outlets, Mobile World has managed to follow the planned pace of expansion and

the average revenue growth per store is also close to the expected 12 per cent target compared to the

same period last year.

However, the driving force for growth mainly comes from chain development in tier-2 cities and regaining

market share from small retailers. Meanwhile, in some important markets in the north, the company is

struggling with strong competition from rival chains. As a result, the Dien may Xanh chain appears to be a

catalyst for the company‟s growth. .

In just the first eight months of this year, Mobile World opened 414 new stores across the country. Of these,

only 90 are Thegioididong.com stores, besides 219 Dien may Xanh stores and 105 stores of the Bach hoa Xanh

chain.

As of the end of August 2017, Mobile World had 1,669 stores. The Thegioididong.com chain had 1,041, Dien

may Xanh 475, and Bach hoa Xanh 153.

In addition, after Mobile World asked shareholders to raise the budget for M&A deals to VND2.5 trillion

($110.13 million) this year, five times higher than the previously approved figure. This amount seems to go for

two goals.

In addition to the acquisition of Tran Anh, Mobile World is looking for M&A opportunities with pharmaceutical

businesses. This field still has abundant room to be exploited and developed. Particularly, the targets for M&A

deals in this area have been clearly identified and if these deals go smoothly, Mobile World can upgrade its

chain of pharmacies to 500-800 stores.

However, Doanh said that there is no such thing as Mobile World selling itself. “We are more likely to buy

others,” Doanh said.

At this point, the question of who can afford to acquire Mobile World is still open and they are still on the way

to become a “giant” in the Vietnamese retail market.



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MARKET & PRICES

Bridges projects boost land prices in Hanoi's eastern area

Dtinews - Land prices in the eastern area of Hanoi

have sharply increased following the news of four

planned bridges.

After the VND38trn (USD1.72bn) investment plan to

build four bridges to cross the Red River and Duong

River was announced, land prices in Hanoi's east

have increased.

The bridges are expected to better connect Hanoi

and ease congestion during rush hours. Tu Lien and

Tran Hung Dao bridges are estimated to be

completed in 2019 and Duong 2 and Giang Bien

bridges are set to be completed in 2021.

According to the locals in Long Bien District, a square metre of land in their areas cost around VND12m

(USD528) to VND20m last year.

But the land prices have been on the rise because many infrastructure projects are being planned or

completed.

Many people came and asked to buy plots of land every day in Giang Bien and Quan Tinh wards in the past

three months.

In some areas, a square metre of land in Dong Anh District is sold up to VND40m (USD1,760).

The most expensive plots of land are in Dong Hoi Commune and Dong Ngan Ward because Tu Lien Bridge

has been planned there.

Lands in urban areas with good infrastructure, proper water and electricity are generally sold for VND40m to

VND50m per square.

Three other bridges including Duong 2, Giang Bien and Tran Hung Dao bridges are all located in Long Bien

and Gia Lam District.

Large plots of land on wide streets in Duc Giang, Thuong Thanh and Viet Hung are also mostly sold out.

Land lots under 40 square metres are sold at over VND30m (USD1,300) a square metre.

The representative from Commercial Real Estate Services warned against land speculation because investors

may face loss if the lands are not included in the planning.

Buyers are also advised to be cautious of fake price hikes.

Hanoi office rental fees remain stable: CBRE

VIR - The market segment for offices and retail space for lease in Hanoi has seen stable rental prices for grade

A and B office buildings in the third quarter of the year, according to the CB Richard Ellis Vietnam, Co., Ltd

(CBRE) - the world‟s largest commercial real estate services and investment terms.

Land prices in the eastern area of Hanoi have sharply increased



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The market segment for offices and retail

space for lease in Hanoi has seen stable

rental prices for grade A and B office

buildings in the third quarter of the year.

The rental price of A-class offices was 24.1

USD per square metre per month

(excluding taxes and service fees),

representing a year-on-year increase of

8.6 percent due to limited supply.

Meanwhile, that of grade B buildings was

13.7 USD per square metre per month, up

1.4 percent from the same time last year.

Notably, there was no new project in the

third quarter. The CBRE said that the total supply of office for rent was around 1.2 million squares metres as of

the third quarter, including 66 percent of B-class offices.

Occupancy of both grade A and B offices in the period was high, at 89 percent and 84 percent, up 0.1

percentage point and 1.4 percentage points, respectively, from the previous quarter.

Net absorption during July-September was 13,000 square metres. Most of the demand for offices came from

finance, banking, production and real estate sectors that want to branch out business or change offices.

In addition, demands for new working space of both domestic and foreign business have been on the rise.

As new A-class offices will not be rolled out into market until the end of 2018, rosy signs are expected for

existing buildings in the coming time.

Troy Griffths, Deputy Managing Director of Savills Vietnam, said that office rental fees in Vietnam are rather

modest as compared with other regional countries. However, the costs are forecast to scale up in medium

term as office occupancy is nearly full, making it difficult for businessmen to find space.



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HIGHLIGHTS

Consumer credit: VND1 trillion in 2019

SGDT/Seiko Ideas - Consumer credit has accelerated dramatically over the past 10 years, projected to

expand to VND$1 trillion by 2019. The rapid growth poses challenges to authorities in looking for solutions to

avoid consumer credit crisis.

Rapid growth rate

According to the Department of Monetary Policy under the State Bank of Vietnam, the share of consumption

per GDP in Vietnam has increased rapidly from 52.5% in 2005 to 77.7% in 2009.

In the period 2010-2016, due to declining economic growth, the share of consumption per capita has fallen

to the bottom in 2012, but the rate has started to rise from 2013, reaching 78.34% in 2016. This rate is much

higher than that of developed countries such as Singapore (37%), UK (65%), Germany (54%) and Japan (59%).

Strong consumer demand, coupled with relatively stable economic growth, boost the expectation of future

income growth, leading to stimulate demand for consumer credit. As a result, people are willing to borrow for

current consumption and repay by their future income. Statistics of the State Bank show that average growth

rate of consumer credit from 2010 to now is 20% per year.

By the end of 2016, consumer loans reached VND646 trillion (about US $ 28 billion), accounting for 11.7% of

total loans of the economy. In the first 6 months of 2017, the size of the consumer credit market reached

about VND744 trillion, accounting for 12.4% of total loans of the whole economy.

Currently, the population of Vietnam is about 95 million people, of which 60-65% are in their working age,

equivalent to approximately 60 million people. More than 30 million people in working age who earn an

average of less than VND 10 million per month have demand for consumer loans. In the past 10 years, the

consumer finance sector has only served about one third of customers in need.

Therefore, the potential and opportunities for growth of consumer finance in Vietnam is still very high and

forecast that the growth rate will continue to reach double digits every year for at least next 5 years. A recent

forecast suggests that the size of Vietnam's credit market will reach VND1 billion in 2019 with an average

annual growth rate of 29% per year.

Disguise in consumer credit in Vietnam

Consumption loans are mainly used for loans in developed countries, accounting for 30% of credit debt. But

in Vietnam, consumer loans are mainly used by finance companies (CTTC) with the ratio of 30-35% of total

outstanding loans (lower commercial banks). Consumer loans have four important products, but in Vietnam

only home loans and repairs make up a high proportion of nearly 50% outstanding credit debt; car loans in

Europe accounted for 31%, and Vietnam only about 10%; Two products are credit cards and student loans

are not yet popular in Vietnam, while other products in other countries are highly developed.

Consumer credit are mainly used in developed countries, accounting for 30% of credit debt. But in Vietnam,

consumer credit are mainly used by finance companies (CTTC) with the ratio of 30-35% of total loans (lower in

commercial banks). Consumer loans have 04 important products, but in Vietnam only home loans and



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repairs make up a high proportion of nearly 50% outstanding credit debt; car loans in Europe accounting for

31%, and Vietnam only about 10%. Credit cards and student loans are not yet popular in Vietnam while they

are very popular in other developed countries.

Economist Le Xuan Nghia warns that Vietnam's GDP growth rate is too fast and very high. Consumption over

GDP which is now higher than Europe and the US is abnormal. This shows that despite the good growth of

consumption, there also need macro-safety and long-term safety for the economy.

Significantly, the majority of consumer loans in Vietnam focus on buying houses and buying cars, and now

there are more disposable loans from real estate corporations. These corporations let their employees to file

loans to buy their own property products.

Thus, they create virtual demand and that figure is included in the consumer credit but does not generate

economic growth, does not create liquidity for the real estate sector. This form of disguise also began to

appear in the automobile business and household goods. Therefore, failure to properly monitor micro-

organisms will lead to future credit crunch, leading to insolvency as happened to the people's credit funds in

the past.

No protection of customer interests

By the end of 2016, the State Bank has issued Circular No. 39/2016 and Circular 43/2016 to regulate consumer

lending, but the circulars trend to protect credit institutions. Under competitive pressure, credit institutions are

expanding their consumer lending, including many low-income consumer loans, unclear legal awareness,

unpredictable risks in consumer loans.

Most countries have strict legal systems, focusing on protecting customers in credit activities. For example, the

US is applying 8 laws directly related to the protection of customer interests involved in credit operations;

Financial institutions implementing credit transfer must disclose information related to products, terms of

contracts, interest rates, fees, etc to customers.

Looking back at the credit card crisis in Korea in 2003, Vietnam's credit market over the years has shown

similar signs. In 1997, Korea fell into the Asian financial crisis and in 1999 started rising from the bottom up. By

the year 2000, commercial banks had surplus credit, but the lending activities of banks have not developed

strongly, then divert to lending through credit card.

While lending through credit card has increased sharply, the management system has not kept up with the

rapid growth rate, resulting in the fact that so many borrowers are too feeble. In 2003, many customers were

unable to pay their debts through credit cards, which led to the crisis, negatively affect the growth of Korea.

This shows that credit institutions need to be cautious in lending, paying attention to protect their customers

and protect themselves, thereby ensuring more sustainable consumer lending.

Vietnam feels impact of 4.0 industrial revolution

VNN - A large company in Hanoi has sacked 80 percent of workers, replacing them with robots.

Duc Giang Chemical & Detergent Powder JSC is a leading chemical manufacturer. A detergent factory of

Duc Giang, it once employed 100 workers, but now runs with 10-15 workers.



16


Three months ago, Oxford University released a report on robots taking over human jobs. One month ago, a

factory in Binh Duong province laid off 90 percent of its workers because the majority of work can be

undertaken by robots.

The workers in the 340 IZs in Vietnam are increasingly worried about their jobs.

Huyen said at a workshop about the 4.0 industrial revolution held in mid-August that the risk of replacing

humans with robots is real in Vietnam.

He went on to say that the „4.0 industrial revolution‟ is understood as automation at the highest possible level

in production. Vietnamese enterprises have been aware that this is a growing trend in the world and have

begun making preparations.

In Duc Giang, robots are now present in many links of the production chain. The concept of running a factory

with just several workers is now more widely known.

Huyen said that Vietnam is capable of catching up with the 4.0 industrial revolution‟s pace, because

Vietnamese engineers “now are very sensitive to new things, eager to learn and can quickly adapt to new

circumstances”.

With the presence of robots, a new generation of workers will appear. “I think in the future, our company will

have a few hundred workers with an automated office,” he said.

“Around 300 out of every 1,600 workers have lost jobs,” Huyen said. “Where will the workers go after they quit?”

In theory, the workers can apply at enterprises with weaker financial capability which cannot buy robots and

need workers in their production chains. However, the enterprises are mostly small and do not have high

worker demand.

“It is necessary to retrain workers. If we can do it the right way, difficulties will still exist, but we will not be

confused about what to do,” said Tran Dinh Thien, head of the Vietnam Economics Institute.

A recent survey found that Vietnamese businesses believe the country should focus on business fields in

which it has strong advantages in the 4.0 industrial revolution – IT (89.9 percent), tourism (45.7 percent),

agriculture (44.9 percent), finance & banking (47 percent) and logistics (28.3 percent)



17


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