Industries

Stuck in Traffic: Opportunities for Urban Infrastructure Development in Ho Chi Minh City

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By Mike Vinkenborg

As Ho Chi Minh City battles growing traffic congestion, municipal authorities are considering a range of measures to improve transportation in the bustling city of over eight million. The city is currently debating altering work hours to spread out traffic during peak hours and trimming sidewalks to create more space for vehicles, while also building several new overpasses. These are just a few of the many proposed measures to tackle the gridlock issue that is becoming increasingly problematic.

These are all short-term solutions that fail to tackle the root of the problem, however. Every day, an estimated of 1,000 new motorbikes and 180 new cars are registered in Ho Chi Minh City. In total, 8.5 million motorbikes and 627,000 cars are currently registered in the city, the latter indicating a 500 percent increase compared with the year 2000. And as Vietnam is set to cut tariffs on ASEAN car imports in 2019, thereby reducing car prices by 42 percent, these numbers are poised to increase even more in the future. As a result, cars on major roads didn’t exceed an average of eight kilometers per hour during afternoon rush hours as of 2010, and the situation has not improved since then.

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Industry Spotlight: Vietnam’s Renewable Energy Market

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By Mike Vinkenborg

Due to rapid industrialization, energy consumption growth levels have been double that of Vietnam’s already high GDP growth levels, growing on average with approximately 12 percent per year from 2006 to 2015. As a result, almost all Vietnamese receive electricity at home, and the last rural villages are expected to be powered up by 2020.

On 18 March 2016, the government revised the 7th Power Development Plan for 2011 to 2030 and placed a stronger emphasis on renewable energy and the liberalization of the market. Fossil fuels and coal, recently overtook hydropower’s throne by becoming the main supplier of Vietnam’s energy consumption and were scheduled to grow strongly in the 2011 version. In the revised 2016 version, however, the 2030 target for coal production has been cut by approximately 30 percent from 76 gigawatt-hours (GW) to 55GW. Contrary, renewable energy – generated by solar technology in particular – will play a much larger role in 2030 compared to the 2011 estimate.

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Industry Spotlight: Vietnam’s Beverage Market

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By Marquise Clarke

BeverageWith a rapidly expanding middle class and massive tariff reductions from free trade agreements (FTAs) expected to come into effect in the coming years, Vietnam is poised to experience significant growth in its beverage industry. By 2020, Vietnam is projected to consume 4.5 billion liters of beer, 350 million liters of alcohol and spirits, and 8.8 billion liters of other beverages per year. Growth in the beverage sector is underpinned by the rising living standards of Vietnamese families, and the industry is generally underpenetrated in comparison to the country’s Asia-Pacific peers. Indeed, on a per capita basis, spending on packaged foods and beverages in Vietnam is still relatively low compared to its emerging market counterparts, demonstrating the significant growth potential of the market.

According to Euromonitor, per capita expenditure on food and non-alcoholic beverages is projected to have reached US$276 in 2016. Future growth is expected to be driven by the continuing change in urban consumer lifestyle as they place a higher importance on convenience, safety, and health. In addition, rising consumption of branded fast-moving consumer goods (FMCG) products in rural Vietnam will drive market growth as rural consumers gradually gain better access to products backed by higher levels of disposable income.

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Vietnam Releases Draft Circular on Auto Imports

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By: Dezan Shira & Associates

Vietnam’s Ministry of Trade and Investment has released text from a draft circular which proposes to regulate the import of cars to Vietnam. Coming on the heels of regulatory repeal during the summer aimed at cutting down on barriers to trade and improving conditions for local business, new regulations are being crafted with the hope of toeing the line between safety and competitiveness.

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Podcast: The Case for Manufacturing in Vietnam

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By Dezan Shira & Associates

Vietnam is currently experiencing huge growth in manufacturing. In this podcast, Dustin Daugherty, Associate at Dezan Shira and Associates in Ho Chi Minh City, outlines the advantages of the Vietnamese market over its competition. During the discussion, you will learn about the current state of manufacturing in Vietnam, restrictions on investment within the sector, and setup procedures for those seeking to establish within the country. 

 

 

 

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e-Commerce in Asia – New Publication from Dezan Shira & Associates

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e-Commerce in Asia Thought Leadership Reporte-Commerce in Asia, the latest publication from Dezan Shira & Associates, is out now and available for complimentary download through the Asia Briefing Publication Store.

In this report:

  • Step-by-Step Guide to Establishing an e-Commerce Presence in Asia
  • China, Vietnam, and India e-Commerce Market Summaries
  • Investing in China, Vietnam, and India’s e-Commerce Markets

As the digital revolution transforms shopping habits worldwide, emerging markets in Asia stand out as enormous opportunities for foreign investment. Rising internet penetration, a growing consumer base, and rapidly developing logistics infrastructure contribute to burgeoning e-commerce activity in China, Vietnam, and India.

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The Case for Vietnamese Manufacturing

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Manufacturing-in-Vietnam-to-sell-to-ASEAN-and-ChinaBy: Dezan Shira & Associates 
Editor: Constance Holman

With slowing economic growth and rising labor costs encroaching on the profitability of traditional Chinese manufacturing operations, Vietnam has a emerged as a destination of choice for its low costs, receptive governance, and increasing integration with key trading partners. Conjoined, these factors have and will continue to grow Vietnam as a hotbed of manufacturing and position the communist nation as an ideal location for China-plus one oriented production.

In light of recent Free Trade Agreements, notably the Trans-Pacific Partnership and FTA with European Union, Vietnam is well positioned to allow investors to utilize its cheap workforce and close proximity to existing Asian based supply chains.

In recent years, Vietnamese growth has reached record heights, recording a 7.01 percent rate of growth in the fourth quarter of 2015 from a year earlier, according to data released by the General Statistics Office. Driving these gains has been a strong uptake in Foreign Direct Investment (FDI), which surged to a record of US$ 14.5 billion in 2015. According to Nguyen Tan Dung, Prime Minister of Vietnam, these “figures indicate that Vietnam has become a destination of choice for foreign investors”.

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LG to Invest US $1.5 Billion in Vietnamese Electronics Production

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LG LogoBy: Aysha Nesbitt

On ­­­­May 6, LG Display Group, a subsidiary of South Korea’s LG Electronics, pledged US $1.5 billion to establish a screen factory in Hai Phong. Launching next year, the factory will produce high-tech digital displays using LG’s organic light emitting diodes. This investment comes just a year after LG  opened a US $1.5 billion factory in Hai Phong and follows similar investments from the likes of Samsung and Nokia.

Over the past four years, Vietnam’s electronics sector has grown by 78 percent, becoming the country’s number one export in 2013. With pro-foreign investment policies and a competitive labor force, Vietnamese electronics production has also quickly surpassed regional rivals such as Thailand and the Philippines and is expected to grow at a modest five percent over the next two years, positioning Vietnam to surpass Singapore as the region’s fifth largest electronics exporter.

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Industry Spotlight: Vietnam’s Growing Appetite for Education

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Education VietnamBy: Dezan Shira & Associates
Editor: George Llewellyn-Jones

In 2016, prevailing societal values and strong economic tailwinds combine to create promising opportunities in Vietnam’s education sector. For those capable of navigating the bureaucratic hurdles of the Vietnamese Market, timing has never been better to establish operations.

Historically, education has been championed as part of Vietnam’s Confucian value system. Not only has this created a strong demand for education related services, it has also propelled the sector to the top of the government’s agenda, with education development listed among the top seven foreign investment promotion categories within the country. In addition to historical reverence, the skilling of workers is also seen by officials as the ticket to increasing national competitiveness and bolstering investment.

As increased trade, steady government policies, and strong economic growth continue, increasing disposable incomes are now enabling families to afford private tutoring outside of the unsatisfactory teaching quality in schools. As 42.1 percent of the population are aged between 0-24 years, the window of opportunity for foreign investors cannot be overstated.

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Industry Spotlight: Emerging Opportunities in Vietnamese Healthcare

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Vietnam Health CareBy Dezan Shira & Associates

With a rising consumer class threatening to overwhelm health services throughout the country, investment in Vietnamese healthcare presents exciting opportunities in a sector previously closed to foreign investment. For those considering investments of this nature, a clear understanding of where advantages lie and how to tap into them remains an integral component of establishing successful operations throughout the country.  

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