Viet Kieu - the Gem of Vietnam

There are approximately 3 million Vietnamese living overseas. They are often referred to as Việt Kiều, which means Vietnamese sojourner (a temporary visitor.)

Almost half of all overseas Vietnamese are currently living in the United States. They are viewed as an important bridge for the US-Vietnam relationship. Viet Kieu all over the world have successfully integrated into society and are depended upon by many foreign companies to help set up operations in Vietnam as well as to bridge the cultural gap.

The government of Vietnam has long recognized the important role of Viet Kieu in the development of Vietnam and its economic growth. Viet Kieu are looked upon to provide the much needed expertise in fields such as finance, technology, and science. They often act as Vietnam goodwill ambassadors and serve as catalysts bringing changes to Vietnam economic environment.

Currently, half of the 80 million people in Vietnam are under the age of 25 and businesses are desperately seeking qualified managers to fill middle and senior management positions. Candidates for these executive positions are typically in the age bracket of 35 to 60. Viet Kieu are capable and can fill this need by providing business leadership and training to the younger generations. Many Viet Kieu have already been appointed to key management positions in large foreign companies doing business in Vietnam. Others, with the help of local relatives, have successfully set up and are leading small to medium sized companies.

Viet Kieu are also important to Vietnam in terms of remittance. Money flowing into Vietnam from overseas Vietnamese is playing an increasingly larger role in its economy (approximately 5% of GDP), contributing to economic growth and to the livelihoods of needy Vietnamese--although not to the poorest of the poor. This year, Vietnam expects to receive $US6bil worth of overseas remittance.

Vietnam has publicly announced their strong support for overseas Vietnamese returning to Vietnam to work or to do business. A few new measures have been put in place to encourage the return of Viet Kieu such as the recent visa exemption and changes in real estate ownership. Currently, there is even a survey being sent to overseas Vietnamese soliciting their input on what can be done to support their returns. By the way, if you are interested in being part of this survey, you can contact vinvp@tphcm.gov.vn or hieutv@tphcm.gov.vn.

I have gathered a short list of some notable Viet Kieu.

Dinh Duc Huu - In 1990, founded American Technologies in Oak Ridge-Tennessee (ATI-US). In 1996, was recognized by President Bill Clinton as one of the top minority businessmen. Returned to Vietnam in 1997 and established American Technology-Vietnam (ATI-Vietnam). The ATI Group now operates businesses in tourism, seafood, information technology, and oil exploration & production.

Nguyen Duy Binh - Studied business administration in the US in 1969. Fled Vietnam after the war in 1975 and started working for FedEx after settling in the US. Was instrumental in setting up FedEx's Vietnam operations in 1994. Currently serving as Country Manager for Vietnam, Laos, and Cambodia.

Don Lam - Came to Canada at the age of 11 as one of the Vietnamese boat people. Returned in 1994 as partner for Coopers & Lybrand accounting firm (now PricewaterhouseCoopers). Left PricewaterhouseCoopers in 2003 and founded VinaCapital, a corporate finance and M&A firm. Started VinaCapital with a single US$10 million fund in 2003 and built it into an investment house currently managing more than US$1.8 billion.

Do Duc Cuong - Returned in 2003. Dr. Cuong was a banking expert in the US. He now works as an advisor to many Vietnamese banks and provides consulting services for various industries such as transportation, telecommunications, garment, and insurance.

Hoang Kieu - Came to California in 1975. Worked at Abbott Laboratories as head of an R&D department responsible for researching plasma. In 1987, formed the Shanghai RASS Blood Products Company in China. In 2005, received by President Bush when he won the annual award given to successful businessmen. He is currently the Director General of Rare Antibody Antigen Supply Inc. (RAAS), which has a network spreading throughout the US and China. He is known for his charitable work in Viet Nam in recent years.

Than Trong Phuc - Grew up from the age of 13 in California, studied electrical and computer engineering at the University of California at Davis, and joined Intel in 1986. He was appointed Country Manager in 2000 and currently overseeing over $1 billion of Intel investment in Vietnam.

David Thai - Attended the University of Washington in Seattle and founder of the successful Highlands Coffee chain in Vietnam, which opened its first store in 2002. Returned in 1996 and was the first Viet Kieu to register a private Vietnamese company. His company later became Viet Thai International Joint Stock Company (VTI) and currently operates Highlands Coffee stores as well as a network of Nike outlets.

Copyright © 2007 Doing Business In Vietnam.com

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Happy Thanksgiving!!

I know Vietnam doesn't celebrate Thanksgiving but in the U.S. it's a big holiday, especially for the retail industry.

The day after Thanksgiving, also known as Black Friday to retailers, is the biggest shopping day in the United States. Sales registered on this day are considered an important economic indicator. With the housing woes, higher energy costs, and the subprime mortgage fiasco, Wallstreet is nervously wishing for a prosperous holiday season. If the numbers turned out to be weak, the U.S. economy may take a nosedive.

This Friday, some retailers will open their doors at 12:01 a.m. while others lure consumers in between 4am-6am. All aim to catch the early bird shoppers. Every year, I love watching news footage of people pushing and shoving to grab the few "doorbuster" items. I must admit I never quite get the madness.

Thanksgiving is one of my favorite holidays but it's definitely not about the shopping or the food. Simply put, it's my annual reminder of how truely truely blessed I am.

To all American expats living in Vietnam, I wish you a happy turkey day!!

Doing Business in Vietnam - The WTO Benefits

Being a member of the World Trade Organization (WTO) has been quite rewarding for Vietnam in its first year. The membership has helped Vietnam accomplished a few notable achievements so far this year.

Below is my short list of what Vietnam has accomplished since its admission to the WTO:

1. A Record Foreign Direct Investment (FDI) - FDI estimated to reach USD$13 billion this year. The WTO membership has brought in a higher number of foreign investors and Vietnam now ranks 6th in the world in terms of the most attractive FDI destination by the United Nations.
2. A Record Foreign Indirect Investment (FII) - FII estimated to reach USD$5.5 billion this year as foreign equity funds are pumping money into Vietnam securities market. Read more about FDI and FII from this post.
3. An Increase in Exports - a 20% increase in export reaching USD$39 billion YTD and estimated to reach USD$48 billion for 2007.
4. Access to Cheaper Loans - Vietnam now has access to loans from the World Bank's International Bank for Reconstruction and Development, which is one of the cheapest loans out there.
5. Equal Treatment for Vietnam Products - Vietnam's products now enjoy equal treatment in member country markets, which leads to the increase in price of export products as well as the increase quality.
6. Increased in Consumer Spending - Consumer spending has increased due to the wider selections of products brought in by foreign companies.
7. A HOT Real Estate Market - The real estate sector has seen rapid development and investment from foreign investors. However this has caused real estate prices to skyrocket and the government will need to act to avoid a crash landing. You can read more about it from my previous post.
8. The MOST Attractive Manufacturing Destination - Vietnam now ranks as the number one manufacturing destination (beating out China ) by the PricewaterhouseCoopers EM20 Index.

Belonging to the WTO has definitely brought Vietnam many benefits. However, it also brought along challenges. Vietnam now has to increase the quality of its exports--it must play by a higher set of standards. The Vietnamese government has to improve the legal and accounting environments as well as streamlining administrative procedures. Vietnam companies now face more foreign competition and most firms in Vietnam have little experience and expertise to compete on a global scale.

Overall, I think the benefits far outweigh all the challenges. The challenges brought along with the WTO membership, to me, are actually good for Vietnam. Facing and solving these challenges will make Vietnam more prepared to compete in the international markets.

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source: Doing Business in Vietnam

Doing Business in Vietnam and The Real Estate Market Bubble

The Vietnam real estate market is overheating but who has been buying up the properties? Surprisingly (or not), an estimated 60% of the purchasers who bought houses actually don't need a home but are buying and selling to make profit.

These purchasers are what we called speculators. So, what is driving the speculators to this market?

1. Recently, Pricewaterhouse chose HCM City to be in the top 10 real estate markets in the world with the greatest potential. (Yes, that's top 10 in the WORLD). No wonder the speculators are rushing in, wouldn't you? Other areas such as Hanoi, Da Nang, Binh Duong, and Vung Tau have also seen development going through the roof--pardon the pun.

2. The government is allowing Viet Kieu and foreigners to buy houses (although they can't own land yet.)

3. Demand for homes keeps going up and up. Despite the torrid pace of development, the supply remains modest compares to the demand. But remember, the high "demand" is actually not from buyers looking for a home to live in but rather from speculators who buy and sell for profit. This is what we call flipping, which is partly responsible for the current housing slump in the United States.

4. Real estate analysts keep touting the market with estimates like 50% growth for 2008.

Speculators are definitely hard at work buying and selling and driving up real estate prices. It is a shame that those who actually need to purchase a home can't afford one in this market. It's ironic that Vietnam, which has one of the lowest income per capita in the world and yet its house prices are among the highest in the world.

The government of Vietnam is actually considering steps to force prices down such as revoking licences to projects which investors are leaving land idle or taxing speculators.

Despite the rosy forecast by analysts, it is going to be very difficult to keep the charade going for much longer. The 50% growth rate is just simply not realistic or sustainable for the next 2-3 years. We have already seen what happened to the real estate market in the United States and it's just a matter of time before Vietnam will face the same fate.

Copyright © 2007 Doing Business In Vietnam.com

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New Requirements for Brokerage Auditors

As of October 24, the government has a new set of criteria for companies which audit stock brokerages.

According to the new Decision No. 89/2007/QD-BTC, an accredited auditor must satisfy the following requirements:

• For domestic auditing firms - a minimum charter capital or equity of $2B VND (approximately $125,000 USD) ;
• For foreign-invested auditing firms - a minimum charter capital of $300,000 USD.
• Must have at least 7 practicing auditors;
• Must have been in the auditing practice in Vietnam for at least three years prior to registering to audit securities companies;
• Must have at least 30 audit clients per year over the past 2 years.

Doing Business in Vietnam - A Look at FDI and FII

Let's talk a little bit about foreign direct investment (FDI) and foreign indirect investment (FII) to Vietnam. A lot of attention has been paid to FDI but not much has been mentioned about FII until recently.

First of all, what is the different between the FDI and FII?

With FDI, the foreign money goes directly into activities such as purchasing physical assets, merger and acquisition, and international franchising. The relationship between the domestic partner and the foreign investor is usually long term and the foreign partner does have some control over the management of the business.

On the other hand, FII injects capital into the financial market by purchasing shares in a company or acquiring the shares through an initial public offering (IPO).

FII provides companies in Vietnam access to new sources of capital. The companies sell their shares to foreign institutional or individual investors. At the moment, the majority of the FII capital is coming from overseas private equity funds (a pool of money from small investors) and not from the individual investors.

The 2007 forcast for FII is at US$5.5B, which is smaller than that of FDI at US$13B. However, the potential for FII is much greater than for FDI. At the moment, some experts are saying that only 0.05% of the total available capital by foreign private equity funds has been invested in Vietnam. As large IPOs enter the market, I am expecting FII to catch up with or surpass FDI in the next 3-5 years.

Currently, an estimated of US$4-5B worth of FII is waiting to be pumped into Vietnam. Part of that money will be used to purchase IPO shares of big banks and corporations such as Vietcombank, BIDV, MHB, and Incombank.

Copyright © 2007 Doing Business In Vietnam.com
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US Secretary of Commerce in Vietnam to Expand Trade Ties

U.S. Commerce Secretary Carlos M. Gutierrez is in Vietnam for the next 3 days meeting with government officials and business leaders trying to expand trade ties between the two countries and to remove hurdles so U.S. businesses can get into the action a little faster.

The U.S. currently ranks only 6th on the list of top foreign investors in Vietnam behind Asian countries such as South Korea, Japan, Singapore, Hong Kong and Taiwan. In the next few years, I am expecting the U.S. to move quickly toward the top of the list.

U.S. institutional investors and business are very eager to invest in Vietnam and they have good reasons to do so. Recently, Vietnam made it into the list of top 10 most attractive FDI destinations. The list was released by The United Nations Conference on Trade and Development (UNCTAD) for 2007-2009. Vietnam ranked 50 on the same list just 3 years ago.

Top 10 most Attractive FDI Destinations in 2007-2009
1. China
2. India
3. United States
4. Russia
5. Brazil
6. Vietnam
7. United Kingdom
8. Australia
9. Mexico
10. Poland and Germany

And in July of this year, The PricewaterhouseCoopers EM20 Index, ranks Vietnam as the most attractive destination for manufacturing companies. Now that's pretty exciting for Vietnam.

Top 10 Most Attractive Manufacturing Destinations
1. Vietnam
2. China
3. Poland
4. Chile
5. Malaysia
6. Thailand
7. India
8. South Africa
9. Hungary
10. Saudi Arabia

One of the biggest complaints from foreign investors is the process of getting into Vietnam. The current pace is moving way too slow for most American businesses. I guess this is not that bad of a complaint for Vietnam. Currently, there are approximately 500 investment projects by U.S. companies in Vietnam with a total capital of $5B USD and American businesses can't wait to pump a lot more dough into this emerging economy.

Secretary Gutierrez was joined by 22 American businesses: 3M Company, Abaxis Inc., ALCOA Inc., Altec, Inc., AmericanTours International, Baxter International Inc., Carus Corporation, Century Aluminum Company, Cummins Inc., Eaton Corporation, GANNON International, Gerber Scientific, Inc., Marriott International, Inc., Northwest, Airlines Corporation, Oshkosh Truck Corporation, Rockwell Automation, Terex Corporation, The AES Corporation, The Dow Chemical Company, The Ford Motor Company, The Timken Company, VeriSign, Inc.

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Vietnam Encourages Unprocessed Seafood Imports by Reducing Tariffs

While seafood processing capacity increased by 20 percent last year, catches in 2006 were up only by 7.6 percent.

The supply shortage has caused a majority of seafood processing factories to operate at just 30 or 50 percent of their capacity.

So, Vietnam is working to reduce tariffs rates to encourage unprocessed seafood imports in order to increase export revenues.

Vietnam is home to 470 seafood processing enterprises, earning over 3 billion USD in export revenues in the first 10 months of 2007 or a 10.8 percent year on year increase.

Investigation ordered for property developers in HCM City

The Ministry of Construction ordered an investigation on property developers in HCM City to ensure they comply with the Housing Law and the Law on Realty Business.

The ministry suspects some housing developers have violated the Housing Law by accepting advances to hold properties for purchase.

To protect buyers and prevent market instability, the current Housing Law states investors can only raise capital for housing developments or sell them once their plans have been approved and foundations built.

Yet several developers have been recently reported to be accepting advances on purchase contracts before foundations have been completed.

Investment funds are booming in Vietnam

The Vietnam stock market is in its early stage, commodities trading are limited, the debt market is not in place, and derivatives are not available, which means the potential for investment funds is HUGE.

Vietnam is expected to see a boom in investment funds as the country's stock market has become increasingly attractive to investors, experts said at the "Funds World Vietnam 2007" conference beginning here on Wednesday.

An estimate of 20 new country funds had been set up with 3-4bil USD and ready to invest in Vietnam. Many new funds will target initial public offerings as well as listed shares.

Several existing funds are reaching their full size targets as well. Some 46 estimated country funds are believed to operate in Vietnam with assets between $7-8bil USD.

Vietnam's economic boom is proving costly for the working class

Vietnam's booming market is proving costly for the working class, which face big rises in the price of basic products.

The price of food rose 13.94% in October 2007. The cost of rice and other grains alone increased by 15.98%.

Compared to the same period last year, consumer prices rose 9.34% in October after an 8.8% increase in September, according to the general statistics office (GSO).

Vietnam is trying to keep the inflation rate below the growth in gross domestic product, which grew by 8.16% in the first nine months of the year.

Economists say pressure was increased by the huge inflow of foreign direct investment and the increasing use of credit, which was up 25% last year and 35% by middle of this year.

The working class are hardest hit by high inflation. Therefore, Vietnam has to keep it under control since the working class is a major contribution factor to Vietnam economic growth.

World Bank declares Vietnam Creditworthy

The World Bank has today declared that Vietnam’s development progress and increasing creditworthiness had made it eligible to access the International Bank for Reconstruction and Development. This is great news for Vietnam.

The International Bank for Reconstruction and Development is a branch of the World Bank to assist middle-income and creditworthy developing countries by promoting sustainable development through loans, guarantees, risk management products, and analytical and advisory services.

Loans through the International Bank for Reconstruction and Development is one of the cheapest types of loans on international financial market that developing countries can access.

US to be leading investor in Viet Nam in two years

According to the US-ASEAN Business Council President Matthew P. Daley, the US will become the largest foreign investor in Viet Nam in just one or two years if the Vietnamese Government speeds up investment climate reforms.

Viet Nam and the US have enjoyed a surge in investment and commerce in recent years.

The 2007 two-way trade turnover is estimated at 13 billion USD while the US investment has surpassed the 5 billion USD, making it the sixth largest investor in Viet Nam.

Portfolio Managers Main Concerns

Poor infrastructure and high real estate prices are the biggest worries of portfolio managers when they consider injecting money in Vietnam.

The infrastructure system, including roads, water and electricity items, were overused, and had become a barrier to national economic development. Traffic jams are becoming a big problem and has dampened the investment environment. This problem is now a top priority for the government.

According to the leaders of some investment funds, in 2006 Vietnam received $4.8bil worth of overseas remittance. However, the huge sum of capital has not been used to serve national economic development, but kept in the hands of people who make investment in land speculation. As a result, real estate prices have been skyrocketing.