Day Eight

Tuesday 25 Sept '07

Itinerary:

1. Pharmed & Healthcare Vietnam 2007

2. Vietnam Singapore Industrial Park (VSIP)

Pharmed & Healthcare Vietnam 2007

It was held at the HCMC International Exhibition and Convention Centre. When we arrived, there was a dance troupe performing at the entrance, I think it was for the opening ceremony. It was exactly the same as the Chinese Lion Dance performances, complete with drums and acrobatic stunts.

This is the 7th year that the "Pharmed & Healthcare Vietnam" exhibition is being held. The opening ceremony talk covered areas such as law of health, investing in services and guidelines of business operations in healthcare. The purpose of this event is to:

• Establish continued relations with the healthcare providers over the coming years
• Protect the policies and parties in healthcare
• Address bird flu and epidemic concerns
• Create opportunities for companies to launch their products, gain experience, expand their foreign markets and take advantage of business opportunities and expansion of the healthcare market in Vietnam

More than 200 exhibitors from over 20 countries participated in this event (e.g. China, Taiwan, Pakistan, Blangadesh, Italy, Poland, france, USA, Canada, Singapore). The products exhibited include a wide variety of medical, laboratory, pharmaceutical equipment and other relevant products.

Touring the exhibition hall

The Singapore company, Eagle Brand was one of the exhibitors. Eagle Brand has been exporting Eagle balm and plaster to Vietnam for over 40 years. Eagle Brand products have adopted the hologram packaging due to the surfacing of counterfeits in the market, which is one of the biggest challenges.

There was also DELST Diagnostic which has been in Vietnam for a year. It was established 60 years ago in the Netherlands. The company produces products in the Netherlands and exports them to Vietnam. Products are aimed at curing tuberculosis, and the advantage of DELST systems is that reports can be received via SMS. DELST has different pricing strategies for different countries, and in Vietnam, one machine costs around EUR100,000. As tuberculosis is common in Vietnam, there is market potential for DELST products.

Business Opportunities:

The fact that such a large scale exhibition is taking place in Vietnam, proves that there are business opportunities in Vietnam's pharmaceutical and healthcare arena. As mentioned by the speaker, the purpose of the exhibition is to:

• Create opportunities for companies to launch their products
• Gain experience
• Expand their foreign markets
• Take advantage of business opportunities and expansion of the healthcare market in Vietnam

Therefore, "Pharmed & Healthcare Vietnam" is actually a stepping stone for businesses and investors to opportunities in Vietnam's healthcare industry. By participating in the exhibition, products gain more recognition, making it easier to enter the Vietnam market.

From the exhibition, I also learnt that tuberculosis (TB) is rampant in Vietnam. This is probably due to the lack of proper healthcare services. Before I went for this trip, I went to get my flu jab and my doctor was rather concerned that I was heading to Vietnam. One of his patients who had recently returned from Vietnam was diagnosed with dengue fever. The under-developed healthcare sector in Vietnam is possibly the reason why the country has been vulnerable to epidemics and diseases such as the bird flu, dengue fever and TB. Thus the healthcare sector presents several opportunities.

Vietnam Singapore Industrial Park (VISP)

Collaboration between Singapore and Vietnam

VSIP was launched in January 1996 and was initiated by the Prime Minister of Vietnam and Singapore. 51% ownership belongs to Singapore while the remaining 49% goes to Vietnam.

Miniature model of the entire park

Currently, VSIP has more than 230 investors from over 20 countries. Tenant companies products are also displayed in glass boxes at the reception area. Tenants come mainly from Japan (22%), Singapore (16%), Taiwan, America and Europe. Companies come from sectors such as services, consumer, electrical, automotive, pharmacy, precision, food and supporting industries.

VSIP selects its tenants and has gives priority to famous companies such as GS Battery and Kinh Do (produces snacks). VSIP is rated as the top industrial park in Vietnam but VSIP 1 has been fully occupied since 2 years ago. From 0 workers in 1996 when VSIP first started, the industrial park has created employment for 45,000 people. Thus, interested tenants have to wait for the completion of VSIP 2.

The industrial park is located in Binh Duong which is easily accessible via major highways. Binh Duong offers competitive labour and operating costs, and is close to HCMC's infrastructure and logistics (20km away). Due to demand, VSIP is developing VSIP 2 at a nearby site (60km away). VSIP 2 spans 1,000 hectares, which is double of VSIP 1, and will be ready by 2008.

Why investors choose Vietnam?

• Stable socio-political environment
• Safe business environment
• Competitive labour costs
• WTO membership
• Attractive tax incentives

Some features of VSIP:

• Efficient road system
• Good drainage
• Power plant 15MPA
• Reliable water supply
• Reliable telecommunications
• Near to HCMC and major seaports

Besides, VSIP also provides custom built factories so that companies may start operations within a shorter period of time. There is also an on-site management board to issue permits, dedicated customer service to assist and guide investors, on-site customs office for clearance of goods and a technical school to produce skilled workers (VSIP companies have priority to recruit).

Business Opportunities:

VSIP is an ideal location to set-up a factory in Vietnam. The industrial park provides tenants with reliable infrastructure and most procedures can be completed on-site (e.g. permit approvals). VSIP garners strong support from the government and is exempted from declaring goods at the port. The goods are declared at VSIP's private customs instead. Moreover, there are also villas for executives and dormitories for workers, complete with amenities and recreation.

Most importantly, VSIP offers investors the chance to test the market with their ready built factories (minimum 3 years lease). As such, even if a venture is unsuccessful, losses are greatly reduced. Besides, in VSIP, there is no special treatment for local companies thus all companies enjoy a level playing field.

The development of VSIP 2 also offers new opportunities for investors. One of the target industries of VSIP 2 is logistics and warehousing. The first logistics hub of Vietnam will be situated in VSIP 2.

Group Photo

Casarredo

Casarredo is a Singapore company established in 1988. Due to the rising cost of operating in Singapore, Casarredo shifted to Johor in 1992. The Vietnam factory was developed more than 2 years ago, and currently employs 270 workers. By situating in Vietnam, Casarredo is closer to China, whereby the RMB exchange rate is going up. By locating nearer to potential customers, there is a higher tendency of securing them as customers. Besides, VSIP is not far from the airport/seaport.

The main target market is Europe (30%), others include Australia, Japan, Scandinavia, UK and America. Casarredo does not sell their products locally due to the export licence they hold. In Vietnam, if a company exports 100% of its products, it will get to enjoy 4 years free tax. On top of that, the company only has to pay 50% tax 7 years later.

The downside of locating in Vietnam is transportation. Casarredo uses freight forwarders to bring goods to the port. However, as it is not a main port, there is a need to transit at Singapore. As a result, the lead time may be longer, and customers receive goods later.

Business Opportunities:

This company visit gives a better picture of the benefits of being 100% export-oriented (briefly mentioned under TOTO). Those who have learnt some accounting should know that tax erodes a company's profits. I did a little research and found out that Vietnam's corporate tax rate is 28.0%. By being 100% export-oriented, a company gets to save 4 years of tax, which is a great amount of savings. Moreover, by opening an export-oriented factory in Vietnam, a company not only gets to enjoy tax incentives but also cost-effective labour. In addition, he also spoke of the increasing number of supporting industries, which makes it easier to source for raw materials in Vietnam.

Besides, it was also mentioned that Casarredo obtained its licence quite easily as VSIP extended help. With all the infrastructure and facilitation of procedures, VSIP offers favorable business opportunities.