SEIKO IDEAS CORPORATION

VIETNAM Vietnam Business Review

BUSINESS REVIEW
Vol 24, July 05th 2017

Vietnam rejoins club of 6%-GDP-growth nations as exports surge

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INSIDE THIS ISSUE

HIGHLIGHTS
Vietnam rides on Samsung's coattails
No motorbikes in inner Hanoi by 2030
Real estate M&As expected to reach record high in 2017

ECONOMY
Debt-saddled Vietnam turns to private-sector funding
Vietnam rejoins club of 6%-GDP-growth bations as exports surge

BANKING & FINANCE

Retail sale segment - delicious cake for domestic, foreign banks
Commonwealth Bank of Australia sells HCM City branch to VIB
Sacombank appoints new general director

INVESTMENT
Finance Ministry rejects LG Display’s plan to increase investment capital
Wind power investors still waiting for electricity price increase

ENTERPRISES
Vinatex invests in technology to expand market share
SOEs to divest from banks on positive market outlook

MARKET & PRICES

Pesticide product market dominated by foreign manufacturers
Local fashion brands face fierce competition with foreign rivals

RETAILS
Takashimaya's Vietnam department store seeing signs of success
Central Group opens B2S stationery store in Ho Chi Minh City
Convenience store boom fuels concern over market saturation

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ECONOMY
Debt-saddled Vietnam turns to private-sector funding
Nikkei - Facing a self-imposed debt ceiling,
the Vietnamese government has struggled
to meet payment obligations for
infrastructure projects, setting off a frantic
search for willing financiers in the private
sector.
The government in particular has high
expectations for Japanese investments. Yet
many Japanese companies are less than
enthusiastic, given murky rules covering
government and state-owned entities here.
Reform is imperative for Vietnam to attract
necessary funds.
Delayed payments
In early May, Kunio Umeda, Japan's ambassador here, asked Prime Minister Nguyen Xuan Phuc to swiftly
make delayed payments for a Ho Chi Minh City metro railway being built by Sumitomo, Shimizu and others, a
highly unusual request.
The project, set to cover the 19.7km distance between central Ho Chi Minh City and Suoi Tien, marks the first
urban rail network in Vietnam, and is slated to begin operations in 2020.
The key national project is backed by Japan's Official Development Assistance program. Yet the funding
problem became acute around September 2016, causing delays in construction.
The central government has provided only about 30% of the roughly 2 trillion dong ($87.9 million) needed for
2016, according to the Ho Chi Minh City People's Committee. Heavy government debt is behind the funding
trouble. The balance of public debt stood at 64.7% of GDP at the end of 2016 -- among the highest in
Southeast Asia, comparable to Laos, and dangerously close to the 65% limit that the government has self-
imposed.
Vietnam has actively tapped development assistance programs since the 1990s to build airports, bridges and
other infrastructure. And loans taken out to cover the deficit equaled 5.4% of the GDP in 2016. Finance
Minister Dinh Tien Dung lamented that the government has been unable to reduce spending when revenues
shrink.
New avenues
Vietnam is looking at such arrangements as the public-private partnership and the so-called build, operate
and transfer plan. Planning and Investment Minister Nguyen Chi Dung has encouraged foreign companies,
particularly Japanese, to step in.

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He has suggested as the first PPP project a 1,800km railway to connect Hanoi and Ho Chi Minh City. The
massive north-south railway project would cost at least 1.5 trillion yen ($13.3 billion). If realized, it would
transform not only in Vietnam but the whole Indochina Peninsula.
Yet concerns persist about the possibility of construction delays, pervasive bribery and the lack of guarantees
that the dong could be exchanged to the dollar.
Vietnam is working on regulatory changes to better accommodate foreign companies, according to Dung.
Key is to create a framework that benefits Japanese businesses.
Meanwhile, Vietnamese companies are taking the initiative to address the situation. Real estate giant
Vingroup signed a memorandum of understanding with the Hanoi government on Sunday to invest $5 billion
in the capital's local rail system.
Details of the project have yet to be set, but this would be Vietnam's first urban transit network to be funded
by the private sector. Vingroup will obtain interests in various related properties, including commercial
buildings and area developments.
Vietnam's infrastructure is underdeveloped, and many major projects are underway -- including the Hanoi-Ho
Chi Minh City high-speed railway and the Long Thanh Airport in the south. In November, a nuclear power
plant project was canceled, largely because of a high construction cost estimated at $27 billion.
For Vietnam to get past its debt problems, it must reform the lack of transparency in state-owned companies
that has resulted in a culture of graft, and allow foreign companies to operate freely. Vietnam is yet to deliver
on the promises spelled out in the 1986 doi moi (economic reform) policy.

Vietnam rejoins club of 6%-GDP-growth bations as exports surge

Bloomberg - Vietnam’s economy recovered this quarter with a surge in exports allowing it to rejoin a small
group of nations posting growth rates of more than 6%.
Key Takeaways
Vietnam’s government is taking steps to boost growth after Samsung Electronics Co.’s production cuts hurt
the economy in the first quarter, underscoring the nation’s dependence on exports. Prime Minister Nguyen
Xuan Phuc in May said officials were preparing strategies to boost electronics and agriculture, while
improving the business climate to lure more investment.
While the World Bank forecasts expansion will exceed 6% this year until 2019, rising trade protectionism poses
a risk and shallow policy buffers are a concern to some extent, it said this month. The nation is also vulnerable
to environmental disasters, such as the crippling drought last year that hurt agriculture and fanned inflation.
In Asia, economies growing more than 6% a year include China, India and the Philippines.

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Economist View
―Growth rates of around 6% over the next two years is possible,‖ said Eugenia Victorino, an economist at
Australia & New Zealand Banking Group Ltd. in Singapore. ―The key to a resilient growth model is
diversification in export markets and product mix.‖
Other Details
Manufacturing rose 12.1% in the second quarter from a year earlier, as Samsung boosted production of the
Galaxy Note 8
Exports increased more than 20% every month this quarter
Vietnam posted a trade deficit of $200 million in June. In the first half of the year, it had a trade deficit of $2.7
billion
Consumer prices rose 2.54% in June from year earlier. The government aims to cap average price gains at 4%
this year.

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BANKING & FINANCE

Retail sale segment - delicious cake for domestic, foreign banks
VNA - Both foreign and domestic banks are racing to
develop retail sale strategies in Vietnam, the 93-million-
people country-a fertile land for banking retail business.
HSBC leads foreign banks in retail sales revenue. Foreign
and domestic banks are developing retail sale
strategies.
Vietnam’s two largest foreign banks, HSBC and
Standard Chartered Bank, have seen robust retail sales.
Standard Chartered Bank officials said that the bank
plans to recruit more in the retail sale cluster.
Meanwhile, with a profound understanding of the domestic market, HSBC leads foreign banks in retail sales
revenue.
Shinhan Bank, from the Republic of Korea (RoK), also wants a slice of Vietnam’s retail sector. Recently, the
bank purchased the retail business of the Australia and New Zealand Banking Group (ANZ). Last year, the
bank outstripped domestic banks by earning more 1 trillion VND (43.9 million USD) from retail services.
Two other foreign banks have been on the lookout for retail businesses from other banks in the country.
Another bank from the RoK, Woorie, is making a beeline to branch out retail products in the country this year.
Meanwhile, retail is a core strategy of domestic banks. Large names like BIDV, VietinBank and Vietcombank
are also developing in the retail sale sector.
VIB has announced the completion of its acquirement of a foreign bank’s branch in Ho Chi Minh City.
The VIB leader declined to reveal the name of the branch, but added the bank pursues its plan of purchasing
the retail business of other banks in 2017.

Commonwealth Bank of Australia sells HCM City branch to VIB

VNS - The Vietnam International Bank (VIB) and
Commonwealth Bank of Australia (CBA)
announced on Monday that CBA’s HCM City
branch would be sold to VIB.
The sale was approved by the State Bank of Viet
Nam last week, the two sides said.
They however refused to disclose the value of the
transaction.
VIB has a network of 160 branches and more than
400 ATMs across Viet Nam.
CBA said its HCM City branch has around 20,000 customers.

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―This decision signifies our commitment to the Vietnamese market as we strengthen our partnership with VIB,‖
Steve Ellis, general manager of CBA in Viet Nam, said.
―It demonstrates the confidence CBA has in VIB to continue to provide high-quality service to our customers.‖
CBA said it would retain the representative office in Hanoi, which it had opened in 1995, to liaise with
Government agencies, financial institutions and corporations.
Han Ngoc Vu, chief executive officer, VIB, said: ―We value our partnership with CBA and have always looked
to strengthen our partnership to bring the capabilities of CBA’s HCM City branch together with VIB’s.‖
He added that the two banks will be working closely with customers in the coming weeks to ensure a smooth
transition of their banking relationship to VIB.
The two banks expect the sale to be completed in the third quarter of this year.
CBA had opened the branch in 2008.
It has a 20 per cent share in VIB, which it had bought in 2009-10.

Sacombank appoints new general director

Sai Gon Thuong Tin Commercial Joint Stock Bank
(Sacombank) has appointed Nguyen Duc Thach Diem
as the new general director of the bank, starting July 3.
Nguyen Duc Thach Diem, the new general director of
Sacombank, starting July 3.
Prior to this, Diem was Sacombank’s deputy general
director.
Diem will replace Phan Huy Khang, who quit the
position of the bank’s general director from July 3 for
personal reasons.
Diem will take over this position for five years; however,
this appointment still needs to be approved by the State Bank.
Until approval is granted, Diem will be acting general director of Sacombank and the disclosure officer of the
bank from July 3.
Diem has 17 years of experiences in the fields of economics, finance and banking.
She was appointed deputy general director of Sacombank in April 2014 and was in charge of debt
settlement operations of the bank.
At the end of 2016, she held a 0.004 per cent stake in the bank.

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INVESTMENT
Finance Ministry rejects LG Display’s plan to increase investment capital
VNN – The Ministry of Finance’s (MOF) move to
reject LG Display’s plan to increase investment
capital by $90 million to $1.59 billion shows state
agencies’ concern about possible financial
imbalance if foreign-invested enterprises rely heavily
on loans.
In the document replying to the Hai Phong City
Economic Zone Management Board, MOF flatly
rejected the plan to increase investment capital by
VND2 trillion, or $90 million, requested by LG Display Hai Phong, a subsidiary of LG Electronics from South
Korea.
LG Display wants to increase capital to build 13 buildings to accommodate 10,000-12,000 workers from now
to 2020.
According to MOF, the documents submitted by LG Display to ask for permission did not explain where the
capital would come from.
LG Display’s documents showed that the company’s contributed capital to the project remains unchanged,
at $100 million. Thus the proposed investment capital increase would come from borrowing.
If the investment capital is raised to $1.59 billion, the capital contribution from LG Display would account for
only 6.29% of total investment capital.
MOF believes that if the additional capital is from loans, this would
The Ministry of Finance’s (MOF) move
lead to unhealthy financial capability which cannot ensure the
to reject LG Display’s plan to increase
stability of production.
investment capital by $90 million to
The ministry also asked the Hai Phong Economic Zone Management
$1.59 billion shows state agencies’
Board to tell the investor to consider adjusting the contributed capital
concern about possible financial
proportion so as to ensure healthier financial capability.
imbalance if foreign-invested
LG Display Vietnam Hai Phong project, with initially registered capital
enterprises rely heavily on loans.
of $1.5 billion, makes OLED screens for mobile devices with the
capacity of 7-8 million products a month, and 90,000-100,000 OLED TV screen products.
An analyst said that MOF is persisting even though LG is among the most powerful conglomerates in South
Korea in electronics manufacturing sector and its total investment capital in Hai Phong City has reached $3
billion.
The risk that MOF worries about is that if LG Display Hai Phong falls into financial imbalance which may lead to
insolvency, the local economy and tens of thousands of workers will be affected.

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The analyst said that one year ago, the Government Office conveyed PM’s instruction requesting relevant
ministries to report about the foreign invested economic sector’s capital structure (the ratio of contributed
capital to total investment capital). This was an assessment of the risks of foreign invested enterprises’ reliance
on loans.
In related news, the Republic of Korea was the largest among 91 countries and territories investing in Vietnam
in the first five months of 2017, with total foreign direct investment (FDI) of 4.41 billion USD, 36.4% of total FDI in
the period.

Wind power investors still waiting for electricity price increase

VNN - The plan to have 1,000 MW of wind power by 2025 will
depend on the government’s policies and electricity prices.
General Electric (GE), Mainstream Renewable Power and Phu
Cuong Group are joining forces to run the Phu Cuong wind power
farm with the capacity of 800 MW in Soc Trang province.
The three-party agreement worth up to $2 billion was signed in
early June 2017 and witnessed by PM Nguyen Xuan Phuc and US
Secretary of Commerce Wilbur Ross during Phuc’s visit to the US.
A WB report says that Vietnam has the greatest potential for wind power development in the region. Its wind
reserves are estimated to be 513,360 MW, six times higher than the total electricity output, by 2020.
The report also shows that 8.6% of Vietnam’s mainland has favorable conditions for installing large turbines.
The figures are 0.2% for Cambodia, 2.9% of Laos and 0.2% for Thailand.
According to MOIT, 50 wind power projects have been registered in Vietnam, but only four, with the total
capacity of 159.2 MW, have become operational.
These include the Bac Lieu Wind Power Plant developed by Cong Ly Construction, Trade & Tourism, the 30
MW Tuy Phong Wind Power Plant in Binh Thuan province developed by REVN, 6 MW Phu Quy Wind Power
Plant and the 24 MW Phu Lac Plant.
In the last 20 years of investment in Vietnam, GE has been making turbine components to sell in the global
market. The factory in Normura IZ in Hai Phong City is believed to be one of the most effective of the group.
The main product of this plant is 60 Hz wind turbine generator and other wind power equipment for export to
the North American market with the capacity of 1,000 - 1,500 generators per year. It produces 50 Hz
generators for the Vietnamese market.
Investors still waiting
Analysts say investors hope PPAs (power purchase agreement), contracts between electricity generators
(sellers) and those which purchase electricity, will be signed soon. They expect to have clear information
about FIT, and when the government will buy electricity. The plan to raise the wind power purchase price was
submitted by MOIT to the Prime Minister in November 2016 as confirmed by Pham Trong Thuc from MOIT.
However, investors are still waiting for the new wind power prices to be approved.

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ENTERPRISES

Vinatex invests in technology to expand market share

VNA - The Vietnam National Textile and Garment
Group (Vinatex) must innovate its technologies as
soon as possible in order to increase its market
share, said Le Tien Truong, the group’s General
Director, at its share-holders’ meeting held in Hanoi
on June 29.
Vinatex will focus resources on investing in
technology during the 2017-2020 period.
Therefore, during the 2017-2020 period, Vinatex will
focus resources on investing in technology, Truong
affirmed.
According to him, the world economy is likely to
grow by 2-3 percent this year, while the world demand for garment and textiles may recover slightly, at about
0.5 percent.
In addition, the US may adjust up import taxes on commodities from China, including garment and textiles,
which can be a positive sign for Vietnam’s garment and textile export by expanding its market share in the US.
However, the Vietnamese garment sector is facing fierce competition in attracting orders as domestic
businesses are unable to provide package services and face difficulties in meeting importers’ shipping
requirements.
The country’s major competitors such as China, India, Bangladesh, and Indonesia continue attracting a lot of
orders thanks to their preferential policies on tax and exchange rate, while the European Union-Vietnam free
trade agreement (EVFTA) and Trans-Pacific Partnership (TPP), which are hoped to help with Vietnam’s exports,
have yet to become effective in 2017.
Other problems for the sector include rising input costs and falling selling prices, plus the lack of high-quality
human resources who can operate modern machines, especially in weaving and dyeing phases.
Therefore, the Vinatex will exert efforts to increase management capacity and administration in a modern
and professional manner, while continuing to expand markets in East Europe, and optimise advantages
offered by valid FTAs.
In 2016, Vietnam’s apparel industry saw lower than expected results, with 28.3 billion USD in exports, up 5.7
percent year on year. Vinatex earned over 2.5 billion USD, an increase of 5 percent over 2015, with a pre-tax
profit of over 41 trillion VND on a 5 percent year on year increase.
In 2017, Vietnam’s textile-garment sector aims for a growth rate of 7-8 percent, and 30 billion USD in export
earnings.

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SOEs to divest from banks on positive market outlook

VOV - Many State-owned enterprises (SOEs)
are seeking to divest from commercial banks
this year, as forecasts for the local stock
remain positive.
Both The Vietnam Posts and
Telecommunications Group (VNPT) and
Vietnam Bank for Agriculture and Rural
Development (Agribank) plans to auction
their holdings in Maritime Bank and Ocean
Bank (OCB) in March.
VNPT has registered to offload its entire holding of 71.6 million shares in Maritime Bank at the starting price of
11,900 VND (0.52 USD) per share, equivalent to 6.09 percent of the bank’s capital, in an auction scheduled
for March 10.
The move is in line with the direction of Deputy Prime Minister Vuong Dinh Hue to urge the telecommunication
group to divest from its listed member companies.
On a smaller sale, Agribank will sell 390,665 shares in Ocean Bank during an auction in mid-March. The starting
price is set at 10,200 VND per share.
Mobifone, one of the three largest mobile network operators in Vietnam, also plans to divest from Southeast
Asia Commercial Bank (SeABank) and Tien Phong Bank (TPBank) this year, after the failure in 2016.
In April last year, Mobifone put up its entire holding of 33.4 million shares of SeABank, equivalent to 6.12
percent of the bank’s capital, for sale at the initial price of 9,600 VND per share, but no investors registered to
buy.
The same month, it also registered to sell 14.28 million shares, or 2.57 percent of TPBank’s capital, and
successfully sold 61 percent of this amount. Before the sale, the mobile network company held 4.76 percent
of TPBank’s capital.
According to VP Bank Securities Company (VPS), banks could be among top best performers on the
securities market this year, driven by the intense restructuring process in the financial system, as well as the
Government’s support policy of easing foreign ownership limits in commercial banks.
In addition, many small banks have plans of debuting shares on the stock market this year, and this would
facilitate divestment from these banks.
―The VN-Index could climb to 780 points this year, on the average price-earnings (P/E) ratio of 17,‖ VPS wrote
in a report.
The benchmark VN-Index gained 14.8 percent in 2016, ending the year at 664.87 points. It has gained 7.2
percent this year.
In the third quarter of last year when the stock market had perked up, dairy firm Vinamilk (VNM) successfully
sold over 2 million shares in An Binh Bank (ABBank).

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MARKET & PRICES

Pesticide product market dominated by foreign manufacturers

VNN - The domestic pesticide market is worth up
to $1 billion, but profits all go to foreign
companies as 90% of products are imports.
According to the agriculture ministry (MARD), the
import turnover of pesticide and materials in May
2017 reached $98 million, while the figure was
$400 million in the first five months of the year, an
increase of 41% compared with the same period
last year.
The imports are mostly from China which
account for 53% of total value of the products.
Vietnam also imported pesticides from Thailand,
South Korea, Germany and India.
The import volume increased sharply in 2012-2013, when Vietnam imported 55,000-112,000 tons. In 2016,
Vietnam imported 100,000 tons.
According to Hoang Trung, head of the Plant Protection Agency, Vietnam has spent $500 million each year
in the last five years to import materials and pesticide products from China.
Of these, herbicides accounted for 48% (19,000 tons), insecticides 32% (16,400 tons), and growth regulators
about 900 tons.
Trung said 99% of pesticides and 100% of chemical-made products used in Vietnam are imports. The other
one%, made in Vietnam, are biological and herb-made products.
There are about 1,700 pesticide active ingredients with 4,080 commercial products.
However, a survey of the Plant Protection Agency found that about 2,000 commercial products are still used,
20% of which are biological and herb-made products.
Analysts have said there is no other country in the world which uses as many pesticide products as Vietnam.
There are 200 pesticide enterprises, nearly 100 pesticide processing factories and 30,000 sales agents.
However, Vietnam still cannot create a foundation for the pesticide production industry, though the industry
has great potential.
Experts say plant protection products will be the major tool for agricultural production worldwide for many
more years.
Of the 100,000 tons of products imported every year, 40% are re-processed and packed for re-export. It is
estimated that 40,000 tons are used in fields in Vietnam.
Enterprises complained that there are many barriers that hinder their investment and production.

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According to Le Thi Khanh Hoa, foreign affairs director of Syngenta Vietnam, the barriers are the high
investment cost, bad state management which cannot prevent counterfeit products, and the lack of a
policy to encourage investment.
Hoa said it takes 10-12 years to conduct research and development for one product, while the total cost for
one research project is $260 million. Product developers have to conduct 25,000 tests in laboratories and the
field.
Meanwhile, counterfeit products can be found everywhere in the market, which not only affect farmers’
health and harms the cultivation process, but also causes big losses to pesticide manufacturers.

Local fashion brands face fierce competition with foreign rivals

VNA - The influx of foreign fast fashion brands into
Vietnam is threatening local retailers’ market
share, forcing the firms to move to keep their
foothold in the market, Dau tu (Vietnam
Investment Review) newspaper reported.
Le Thi Quynh Trang, General Director of the
Multimedia JSC – which runs many fashion
programmes in Vietnam, said the country is
becoming more popular in the global fashion
industry as most fashion brands, from high-end to
fast fashion ones like Chanel, Giovanni, Salvatore

Ferragamo, Versace, Burberry, Topshop, Mango A Zara store in HCM City

and Zara, have come to Vietnam. H&M and
Uniqlo also plan to enter this market.
―Vietnamese consumers’ demand is now ripe for them to make inroads into Vietnam,‖ she said.
H&M is scheduled to open its first outlet in Ho Chi Minh City in the next few days. The Swedish brand said
Vietnam is one of its five key future markets.
There are nearly 200 foreign fashion brands in Vietnam, accounting for more than 60 percent of the market
share. Mid-end brands like Giordano and Bossini and high-end ones such as Mango, Dolce & Gabbana,
Topshop, Gap, Banana Republic and Tommy Hilfiger post the strongest sales.
Competition pressure
Foci, a domestic brand that debuted in 1999 and gained a strong foothold in the affordable segment, folded
in 2014.
Ngo Thi Bau, General Director of Nguyen Tam Textile & Garment Company – Foci’s owner – switched to
opening a Japanese-style restaurant chain in HCM City. She said aside from high ground rent, Foci had to
give up due to falling sales caused by cheap clothing from China and counterfeits.

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The Viet Fashion Joint Stock Company, which owns Ninomaxx and N&M brands, has been making strategic
steps to develop. It has 62 retail outlets across the country at present and plans to increase store numbers
soon.
However, some insiders said Ninomaxx may lose its status to foreign rivals. They said in addition to cost-related
problems, Vietnamese firms struggled as they were unable to grasp the latest fashion trends or change their
promotion methods.
Zara earned 5.5 billion VND (nearly 242,000 USD) on the opening day of its outlet at Vincom Dong Khoi
shopping mall in HCM City on September 8, 2016. That reflects Vietnamese consumers’ interest in foreign fast
fashion, which pressures domestic brands to make changes, according to Dau tu newspaper.
The force to change
Among Vietnamese brands, Canifa has emerged as an affordable fashion brand with the leading growth
rate and store number in the country. The presence of Zara, H&M and Uniqlo has forced Canifa to change,
especially with their target markets similar.
Canifa has raised the number of its outlets to 96, many of which are based in major shopping malls or ideal
locations in big provinces and cities. An advantage of this firm is that its factories are in Vietnam, helping cut
time from design, production to sale.
Nguyen Van Thoi, Chairman of TNG Investment and Trading Joint Stock Company, said the entrance into
Vietnam by H&M, Zara and Uniqlo is a chance for Vietnamese brands to develop their designs but also a big
challenge.
TNG used to manufacture apparel ordered by Walmart, Zara, Levi’s, GAP, CK and Puma. However, it
decided to abandon this and specialise in selling TNG-branded products. TNG outlets are expected to
increase to about 100 this year, he said.
The decisive factor is keeping up with consumers’ taste, thus Vietnamese firms need professional designers.
TNG has partly satisfied the market’s demand and gained a market share, he noted.
Thoi said TNG products are sold at competitive prices and will outpace foreign brands in this regard.

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RETAILS
Takashimaya's Vietnam department store seeing signs of success

The large work of art at the entrance of the Takashimaya Ho Chi Minh store has become a popular spot for
group photos.
Nikkei - Almost a year since its debut in Vietnam, department store operator Takashimaya has yet to turn
profit, but it is seeing a few buds of success with its high-end shopping experience at its local outlet.
On a day in mid-June, families and other groups kept stopping by the front entrance of Takashimaya Ho Chi
Minh, the first Japanese department store in Vietnam, which will celebrate the anniversary of its debut on July
30.
Their aim was to take group photos in front of a decorative artwork on an aquarium theme, featuring fish and
corals.
Local operator Takashimaya Vietnam initially banned photo-taking at the spot, where the art is replaced four
to five times a year to feature different themes. But after realizing the display never ceases to attract people,
it gave up on the ban and decided to take advantage of the unexpected visitor magnet.
That way, the company can benefit from the free advertising through social media as people post the
photos they take, which will now include the Takashimaya logo strategically displayed at the spot.

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Imported services
Takashimaya Ho Chi Minh has imported the same features found at its Japanese locations. These include the
rule requiring staff to bow at a specified angle when they greet customers, as well as the intricate wrapping
of purchases in large sheets of paper, rather than simply put in a shopping bag. They also include wide aisles
on the shopping floors that ensure a comfortable shopping experience.
Takashimaya Ho Chi Minh, the third overseas department store for the Osaka-based retailer following one
each in Singapore and China, has three shopping floors above ground and two basement floors, with floor
area totaling about 15,000 sq. meters. It is housed in the Saigon Center, a commercial facility which
accommodates over 140 specialty outlets on five aboveground and two basement floors.
Takashimaya Ho Chi Minh reflects the tried and proven strategy the company adopted for Takashimaya
Singapore, which industry insiders regard as a successful model of a Japanese department store operating in
Southeast Asia.
The Singapore outlet, which opened in 1993, established a stable double-revenue structure comprising
merchandise sales and rental revenues by combining the department store with a shopping center that rents
spaces to retail shops.
Takashimaya Ho Chi Minh is also starting to show signs of success. Visitor numbers for the entire facility, for
example, have exceeded the company's initial target, at about 30,000 a day.
The popularity of some high-priced products also seems to indicate the department store may be beginning
to carve out a niche of its own. In the food section on the second basement floor, 16-piece sushi packs fly off
the selves. These cost 129,000 dong ($5.67) per pack in a country where a pack of sandwiches costs around
10,000 dong. Another relative luxury item that has proved popular is custom-made shoes in the men's fashion
section on the third floor, available for about 4 million dong a pair.
Other popular items include strollers and scooters.
There are of course issues that need addressing. Sales of bags and clothes for working women on the first
basement floor and the aboveground second floor have yet to reach their targets.
Another issue is concentrated purchases. A Takashimaya Ho Chi Minh insider said Vietnamese shoppers tend
to flock to famous fashion brands and many have yet to develop individualized tastes that would inspire
them to buy products from wider brands and coordinate them to their liking.
Takashimaya Vietnam head Hideyuki Yamamoto, however, said he has no immediate plans to drastically
change the strategy so far.
"We're making small changes on the sales floor but we've chosen to leave the overall framework alone," even
where changes may seem necessary, he said. He believes Vietnamese customers will eventually start to
"catch up" with merchandise and services at departments as incomes rise to a certain level.
While it waits for this to happen, the outlet will seek to expand the regular customer base by signing up
customers to its membership reward program, which totals about 22,000, and boosting sales by trying to
present products in attractive ways, Yamamoto said.

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Vietnam Business Review

Central Group opens B2S stationery store in Ho Chi Minh City

Nikkei - With its first Vietnamese outlet of B2S now open in
Ho Chi Minh City, Central plans more than 30 in the
Southeast Asian nation.
HO CHI MINH CITY -- Thailand's Central Group has
launched its first B2S stationery and office supplies store in
Vietnam with an eye toward the burgeoning education
and business sectors.
Nguyen Thi Thuc Vy, director of B2S Vietnam, told reporters
over the weekend that her company is targeting nine
universities and four industrial parks nearby in Ho Chi Minh
City and plans another 30 outlets across the country over Thai retailer plans another 30 locations for Vietnam

the next five years.

The 900-sq.-meter outlet has some 6,000 items for sale, including office furniture, computers, printers, stationery,
cards and entertainment materials. About 80% of the goods are imported.
Vietnam's stationery market is valued at some 4 trillion dong ($175 million) annually and has seen average
growth of about 10% a year since 2014. This has been helped by a large, young population; increasing
demand for educational services and products; and consumers more inclined to pay for quality, according
to Viet Capital Securities.
Ho Chi Minh City already has more than 1,500 family-owned stationery stores. Some of the larger ones are
incorporated into bookstores, but not as comprehensive one-stop shops like B2S. Based on 60 stores in its
home market, the Thai model also offers innovations like online service and free delivery.
Central Group entered the country of 93 million in 2011 and has seen rapid expansion targeting the emerging
middle-class market through acquisitions, franchises and joint ventures. It paid 1 billion euros in 2016 for Big C
supermarket operations in Vietnam to France's Casino Group. Central plans to double the Big C chain from
34 outlets and to develop 13 larger commercial complexes by 2021.
Central also acquired 49% of local electronics retail chain Nguyen Kim as well as all of e-commerce platform
Zalora Vietnam. And it acquired the Lan Chi Mart chain, a pioneer of modern retailing in rural areas, with 11
stores.

Convenience store boom fuels concern over market saturation

VOV - The rising number of single-person households in conjunction with rising incomes in the larger
metropolitan areas of Vietnam is helping to fuel a boom in neighbourhood convenience stores.

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Vietnam Business Review

This, said Le Viet Nga of the Ministry of Industry and

Trade, is one of the few bright spots in the sluggish
domestic sector of the economy at a recent
economic forum in the capital city of Hanoi.
Ms Nga, who heads up the Domestic Market
Department of the Ministry, said most convenience
stores are franchises, which offer tremendous
benefits for local entrepreneurs to operate a
business.
The number of convenience stores and minimarts,
she said, has jumped by double digit figures over the past five years, to an estimated 1,800 this year,
according to official Ministry statistics.
Ms Nga said analysts point to the rising number of single-person households and higher family incomes in the
larger metropolitan areas such as Hanoi, Danang and Ho Chi Minh City as the main driving force for the
changing consumer preferences.
The transition of primarily younger generations away from the smaller country villages to urban areas to take
manufacturing jobs is projected to continue for the foreseeable future, she noted.
As is, the upward path of disposable incomes as Vietnamese society transitions away from primarily a rural
agricultural to a more modern urbanized manufacturing society continues.
She also pointed out some dubious statistics that purportedly show that in China there is one convenience
store for every 21,000 people, while the figure is 1,800 in the Republic of Korea and 69,000 in Vietnam.
Somehow, she rationalizes that means there is immense potential for the convenience store segment to grow.
But other experts disagree saying that logic is a little like comparing apples to oranges— and argue the
segment in cities like HCM City is nearing saturation, lacks earnings potential and a major shakeout is already
in the works.
Market saturation
We cannot continue to put our money into a saturated and unprofitable convenience store market such as
Vietnam, said Koji Takayanagi, president of FamilyMart, the second largest convenience store chain in Japan.
FamilyMart first started establishing stores in Vietnam in 2010 and had at one time the opening of 300 stores
on its development schedule, which it planned to operate in collaboration with local distributor Phu Thai
Group.
But that deal fell through the cracks in 2013, with Phu Thai Group taking over 42 FamilyMart stores and turning
them into Bs Mart in collaboration with Thailand Beri Jucker Plc.
FamilyMart made a comeback in July 2013 and now operates 130 stores in Ho Chi Minh City, the nearby
resort town of Vung Tau and in Binh Duong Province, and had expected to expand to 150 by year’s end.

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Vietnam Business Review

HIGHLIGHTS

Vietnam rides on Samsung's coattails

A Samsung Electronics plant in northern Vietnam. © Reuters

Nikkei - Vietnam's economic growth picked up in the three months through June thanks largely to a recovery
in Samsung Electronics' exports.
The Southeast Asian nation's real gross domestic product climbed 6.2% on the year for the quarter, according
to government figures released Thursday. This puts growth back above 6%, after a dip to 5.1% in the January-
March period.
Much of this recovery is attributable to a single company: Samsung, which makes smartphones and ordinary
mobile phones at enormous factories at various locations in Vietnam. Fallout from the widespread recalls of
the fire-prone Galaxy Note 7 phones depressed exports through March. This left a mark on Vietnam's
economy, since the company accounts for roughly 20% of the country's total exports by value. But business
bounced back starting in April as new models were launched.
Samsung is not the only South Korean business driving the growth of the Vietnamese economy. LG
Electronics, the Lotte group and others are expanding their own footprints here. South Korea has been the
top source of foreign direct investment in this country three years running, starting in 2014. While reliable flows
of funding are necessary for economic growth, many are concerned Vietnam is too dependent on South
Korea for its continued success.
Meanwhile, even as foreign companies invest heavily in their own Vietnamese facilities, infrastructure
investment lags. Funding for construction of Ho Chi Minh City's first metro line, for example, ran short at the
end of last year, after the central government released only around 30% of the money it had promised. The
resulting delays could cause the line to miss the 2020 target for operation start.

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 SEIKO IDEAS CORPORATION 19
Vietnam Business Review

The contractors building the line include Japan's Sumitomo and Shimizu. The Japanese government in May
asked Vietnamese Prime Minister Nguyen Xuan Phuc to step in and remedy the situation. But Vietnam's shaky
finances can hardly support more infrastructure spending. Rampant borrowing over the years in the form of
official development aid loans from Japan and others put the country's debt-to-GDP ratio at 64.7% in
December, perilously close to the government-set cap of 65%.
While forays by South Korean companies have fueled GDP growth thus far, Vietnam's manufacturing sector
as a whole is too weak to enable the country to compete with leading Southeast Asian economies. Failing to
develop railroads, highways and other infrastructure in a timely manner could keep other potential investors
at bay, putting the brakes on further expansion.

No motorbikes in inner Hanoi by 2030

VNA - The Hanoi People’s Council has
voted overwhelmingly to limit the use of
personal vehicles in the inner city by 2030
to ease traffic jams.
―Some 70% of traffic accidents are
related to motorbikes, which proves that
motorbike drivers are those at the highest
risk of road accidents,‖ said deputy
Nguyen Tien Minh.
Vu Van Vien, Director of the city’s
Department of Transport, said the
department would take into
consideration all the opinions voiced by
members of the People’s Council to Motorbikes are set to be banned in the inner districts of Hanoi
improve the proposal. by the end of 2030

The proposal sets out three phases. During

the first phase (2017-18), the city will review all personal vehicles and put them under a coordinated
management plan. The second phase (2017-20) will focus on developing multimodal public transportation to
serve the demands of 50-55% of citizens in the inner city by 2030.
The use of motorbikes in some areas of the city will be gradually limited in the third phase (2017-30), and
banned in the inner districts by the end of 2030.
Some 84% of residents in the inner city agreed to limiting the number of personal vehicles, according to results
of a survey jointly conducted by the municipal People’s Committee and the city’s police among 15,300
households across 30 districts last month.
An overwhelming 90.3% of the survey’s respondents agreed to the proposal of banning motorbikes and
limiting the use of personal vehicles, provided that public transport is able to pick up the slack.

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Vietnam Business Review

Real estate M&As expected to reach record high in 2017

VNN - According to the Foreign Investment Agency (FIA), foreign
investors have poured capital into 19 of 21 business fields so far this
year, of which real estate ranks second with investment capital of
$53 billion.
Analysts said foreign investors are interested in the sector because
of the expected GDP growth rate of 6.3-6.5 percent in 2017 and
new policies which make it easier for foreign investors to buy a stake in domestic enterprises.
Savills Vietnam said foreign investors continue to be present in the Vietnamese market in 2017 through M&A
deals.
Leading Japanese real estate groups such as Haseko, Fujita and Mitsubishi are looking for real estate projects
in Vietnam.
Mitsubishi, known for its projects in the fields of energy, chemicals, food and finance, has decided to join
forces with Vietnam’s Bitexco to develop housing projects in Hanoi with total investment capital of hundreds
of millions of dollars.
Stephen Wyatt, CEO of Jones Lang Lasalle (JLL), also thinks the M&A in the real estate sector will increase
sharply in 2017 and reach a record high.
JLL noted that billions of dollars are awaiting opportunities to be funneled into the Vietnamese real estate
market. Though investors eye all market segments, the capital will mostly flow to apartment, office, hotel and
middle-class industrial zones.
In March 2017, Keppel Land acquired a 16 percent stake in Saigon Center, a high-end complex of offices &
shopping malls in HCMC from Sowatco in a deal worth VND845.9 billion.
Meanwhile, Hongkong Land has become the strategic partner of CII in developing the housing projects on
land allocated to CII in the Thu Thiem new urban area.
More recently, Kajima, one of Japan’s four biggest contractors, has joined hands with Indochina Capital,
investor in many real estate projects in Vietnam, to set up a 50/50 joint venture to implement the plan on
investing $1 billion within 10 years in Vietnam.
In the immediate time, the joint venture will focus on housing, hotel and resort projects in Hanoi, HCMC and
Da Nang.
Keisuke Koshijima, Kajima’s overseas market development director, said compared with other regional
markets, Vietnam is the key market for Kajima.
A report from CBRE shows that the foreign investor who took over 70 percent of the ownership of the A&B
office building in the central area of HCMC was an investor from Japan.
Explaining the attractiveness of the Vietnam real estate market, Duong Thuy Dung from CEo said that barriers
for foreign investors have been removed and the performance of other regional markets is not as good as
Vietnam’s.

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Vietnam Business Review

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