Learning Points

Business opportunities in Vietnam

From the IBSM trip to Vietnam, I have learnt much about the country, not only in terms of culture, history, the people, but also about the business opportunities available in Vietnam. The business environment in Vietnam is actually very favourable for investors, especially for industries with government support (e.g. technology, infrastructure).

Vietnam, being one of the upcoming economies, has vast investment potential. The country still has much to develop, in terms of infrastructure, education, supporting industries, etc. It is at times like this, where opportunities are abound, waiting to be discovered. It would be harder to exploit business opportunities in more developed countries such as Singapore.

Moreover, it is a good location for entrepreneurs to give a shot a starting a business. The start-up costs are relatively lower, labour is abundant and cost-effective, cheaper raw materials, etc. Besides, as mentioned by Casarredo's host manager, there is an increasing number of supporting industries in Vietnam making it easier to source for materials. The business environment is improving at a significant pace, thus raising the attractiveness of business opportunities available in the country.

Over the trip, these are some of the business opportunities that I have come to know:

Infrastructure
Due to the under-developed infrastructure and the huge amounts of funds required to develop it, the government is strongly encouraging investments in infrastructure by offering various incentives. Many sectors which were previously state-owned, have now been liberalized to attract investment.

Power
The unreliable power supply in Vietnam is due to an excess in demand over supply. The nation's current power generating capacity is largely insufficient, as a result, the government is privatizing the sector. With the privatization of the power sector, which was previously state-owned, investors can participate in the energy market.

Roads

During the bus rides, I observed that a large part of roads was not paved. There was once when the bus was trying to make a U-turn on a soil road, the whole bus was tilted to the left and was stuck in the soil. In the end, the bus had to reverse all the way back.

Water
The water from the tap is unsafe for drinking unlike in Singapore. This presents opportunities for water purification companies like Hyflux. In the case of APB, they have their own water purification system due to the importance of water quality. If Vietnam’s water supply is clean, APB can save on the need for a personal water purification system. Investors can thus examine this aspect.

Logistics
The logistics industry is relatively new in Vietnam and is made up of several small scale companies. As a result, these companies are unable to handle large projects. Therefore, it would be a good opportunity for established logistics firm to enter the Vietnam logistics market.

Industrial Parks
The industrial parks provide ready-built infrastructure, reducing the start-up costs and time of new factories. Moreover, they usually offer excellent infrastructure and convenient distances from major airports/seaports.

Exporters
The HCMC export centre, wholesale centres, and night markets offer goods at cheap prices. Foreign sellers may source their goods in Vietnam for sale in their home countries at a high mark-up. On the other hand, Vietnam is a favourable location for factories of manufacturing companies as the government offers attractive tax benefits for 100% export-oriented companies.

Education
The Vietnamese value education deeply due to their belief in Confucius. Education providers such as KinderWorld and SaigonTech are prospering in Vietnam. Besides, with the huge population of 8.4 million people, education providers need not worry about the lack of demand.

Automobile
Motorcycles can be considered as an essential in Vietnam. Each family in Vietnam has at least one motorcycle, which gives us a rough idea of how huge the motorcycle market is. Besides, Honda mentioned that there's a rising demand for MUVs (6 seater cars) in Vietnam.

Manufacturing

As mentioned by Mr Pang of CT&D group, as most of the production in Vietnam is on a small-scale basis, there is a lack of quality control. The country is unable to engage in mass production due to the absence of huge storage facilities. Thus there are opportunities for investors to invest in large-scale production as well as warehousing.

Logistics

Trucks are used as the main mode of inland transportation by companies in Vietnam (TOTO, Honda, Yamaha, Hatay Brewery). Thus, the trucking business is a viable one. However, companies intending to enter this market should weigh the pros and cons due to urban congestion.

Beer

As the Vietnamese enjoy beer, beer consumption in Vietnam is high. Although beer is sold cheaply in Vietnam (as cheap as 20/30cents a can), the huge population in Vietnam makes up for it. (Meaning if you sell at a mark-up, you can sell less to earn a certain amount of profits. On the other hand, if you sell at low prices, you have to sell more to earn the same amount of profits, which the Vietnamese market is able to offer.)