Vietnam HI-tech industry and retail services are booming

Now that Vietnam is part of the World Trade Organisation many Taiwanese companies, like their Japanese counterparts, are looking to move some of their manufacturing plants in China to the northern provinces of Ha Tay, Vinh Phuc, Bac Ninh, Hai Duong, and Thai Binh.

Compal Electronics Inc, the world’s second-largest laptop contract manufacturer, (customers include Dell, Compaq, HP, Fujitsu-Siemens) and is also a large manufacturer of mobile phones have been considering a US$2- 2.5 Billion investment in the northern province of Vinh Phuc since early last year.Component makers Hon Hai Precision Industry Co, (Foxconn with US$26 BN annual sales) is looking for more cost-effective manufacturing sites outside China.

Compal annual revenues reached US 7.025 billion dollarsin 2005 with a worldwide workforce over 20,000. They forecast last month that its shipments of notebook computers would increase to 20 million units this year from 14.5 million last year. It manufactures 24 million units a year at its factories in Kunshan, China. Q1 2007 sales showed a 63% increase on 2006.

Investment in fields like semiconductors and information and communications technology look to invest in Northern provinces because northern Viet Nam is near southern China, which will enable them to link up with their plants there and facilitate supply." Compal have just invested in the Chinese company (NanJiang) Top-Com for the Manufacture, sales and after-sales service of LCD and back light module and related optoelectronic products for Digital Camera,PDA, Cell Phone and LCD Displays.

The Netherlands-headquartered Hoya Vision Care, an arm of the Japanese Hoya Corporation, is to establish the world’s biggest eyeglass lens facility in the south of Vietnam. They already have 45 per cent market share in Japan and 14 per cent of the global market, making it the top lense supplier in Japan and number three in the world.

Hoya Vision Care operates two factories in Thailand and one in China, which produce a combined output of 50 million lenses per year, they also have one in Hungary.
“Vietnam’s investment policies are more attractive than Thailand’s while the nation’s infrastructure facilities including power supply and transport routes are better than in China,” says their company newsletter.

Hoya already operate Hoya Glass Disk Vietnam , which was established in November 2004 in Hanoi’s Thang Long Industrial Park. The company’s US$230 million facility, produces glass disks for hard disk drives, and has 2,750 employees and intends employing 5,500.

Lower wages and tax breaks promised by the Vietnamese government provide an incentive but it also gives companies a route to the Russian market Viet Nam’s exports to Russia were worth $413.2 million last year, and imports $455.7 million.
Viet Nam's economy is growing at a breakneck speed which is expected to continue at the rate of 8/9% a year.

Energy demand, as elsewhere is becoming a limiting factor as demand frows at around 15-17 % this year and 20 % next year.

In prospect is a closer relationship with Chinese power plants through the development of power sharing - this isn't seen as a difficult task and will nvolve bilateral agreements on power purchase.

This rapid economic growth is also attracting inward ivestment from retailers, the German Metro Cash & Carry Group, the first major retailer to enter Viet Nam, now has a network of 8 supermarkets and current sales of US$500 per year, which are claimed to be growing at 45 %.

US consulting firm AT Kearney has just released its annual ranking of retail investment attractiveness among 30 emerging markets, they now rate Vietnam third just behind leaders India and Russia.Vietnam is said to be opening the country’s service market in a phased way in line with its commitment to gain a membership in the World Trade Organization (WTO).

France’s, Groupe Bourbon, opened in Vietnam in 1998 operating three hyper-markets in Hanoi, Dong Nai and Ho Chi Minh City, and Germany’s Metro Cash&Carry, which opened in 2001 with a $120 million investment licence to open eight wholesale Cash&Carry centres in Hanoi, Haiphong, Danang, Can Tho and Ho Chi Minh City.

From 2004 retail restrictions began to dissapear, with foreign companies able to take a 30 per cent share in local operations. This encouraged French-owned Casino and the Hong Kong Dairy Farm chain to invest in the country.

In October 2005 the market was liberated further to allow Western retailers to own a 49 per cent share in Vietnamese businesses. And by 2008 US companies will be allowed to wholly-own distribution centres, in a deal that may be widened to include other Western companies.

It has been rumoured that Tesco is interested in entering the market, and many media sources earlier this month suggested the same is true of Wal-Mart. South Korea’s leading retailer, Lotte Shopping, is also looking to open a chain of wholesale and retail super-stores in Ho Chi Minh City in a major US$15 Mn investment.

Lotte has recently filed an application for an investment licence at the Ministry of Planning and Investment (MPI), plans a $15-million investment in the initial stage of development. The following stages will see Lotte Shopping’s investment value in the country rise roughly 30-fold in the next 12 years.

Lotte Shopping is one of the retail operations of the Lotte Group, which is recognised as the eighth largest business group in Korea in terms of assets. Lotte Shopping is currently operating Korea’s largest chain of department stores. The chain includes 19 Lotte stores with an average floor space of 1,100 sq.m and a total annual revenue of almost $6 billion. The Lotte group has already made investments in Vietnam through the fast-food chain Lotteria.

Vietnam is opening the country’s service market in a phased way in line with its commitment to gain a membership in the World Trade Organization (WTO).

Parkson, with 36 stores in Malaysia and 40 others in China, and which gains an average annual sales revenue of $1.32 billion, has also planned 10 retail stores in major cities like Hanoi, Ho Chi Minh City, Danang, Can Tho, Hue and Vung Tau with total investment capital of US$70 million. China’s Shenghui Group is also exploring ways to enter Vietnam.

With average annual growth of 20 per cent in retail sales, Vietnam is proving to be very attractive to foreign retailing businesses.

“We choose Vietnam to transfer our high-value added lenses bases and laboratories globally here for the country’s attractive business environment and a good supply of well-educated workers." said Gerald Bottero, president and CEO of Hoya Vision Care ... which is a remark that people in the UK seeking inward investment might consider carefully.