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Changing of the Guard

To our readers:

I’m pleased to inform you that, as of today, my friend and long-time colleague Vinh Ho has acquired majority ownership of Vietnomics LLC.  Vietnomics is an investment consultancy focusing on international public equities and specializing in Southeast Asian markets.  Vinh is now president and chief executive officer of Vietnomics.  I will continue to serve Vinh as founder and president emeritus of the consulting business I founded in 2008.

Under Vinh’s leadership, Vietnomics intends to provide investment advice.  Vietnomics will provide clients with a quarterly report on the performance of their investment funds we help them manage.

We are open to a limited number of new clients.

Best Regards,

Jeff Browne

 

 

 

 

 

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Vietnam’s Journey From Collectivism to Capitalism

The following essay appeared in today’s Milwaukee Journal Sentinel, the largest newspaper serving readers in Wisconsin USA:

Vietnam’s Golden Opportunity

A ready move from collectivism to capitalism

I got in a little hometown jam, so they put a rifle in my hands, sent me off to Vietnam, to go and kill the yellow man. —American singer Bruce Springsteen

 You think yellow, I say gold; it’s the color of my real skin. –-Vietnamese singer Pham Quyen Anh

By Jeff Browne

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Third graders show off their English skills to the first Western visitor at their school in remote north-central Vietnam.

When President Barack Obama took a moment in his first inaugural address to honor our war veterans, he cited four battles – Concord, Gettysburg, Normandy and Khe Sanh.

Khe Sanh?  That’s a village in central Vietnam where the Marines repelled a furious assault early in 1968.  The victory cost thousands of lives and obliterated the countryside.  You might say we Americans won the battle there but lost the war.

Or did we?  If our purpose was to stop communism, you have to wonder.

In Khe Sanh, coffee plants have risen from the ashes.  And today, amazingly, Vietnam is the world’s second largest exporter of coffee, thanks to hundreds of thousands of determined farmers.

Thirty years ago Vietnam was starving.  Today it is feeding the world – as a leading exporter of cashews, whitefish, tapioca, pepper, fruit and rice.

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A battery factory near Ho Chi Minh City owned by Pinaco Corp. supplies most of Asia’s major car manufacturers. Pinaco trades for just over $1 a share in the Vietnam stock market.

Vietnam makes shoes for Nike, chips for Intel, cameras for Cannon, motorcycles for Honda, and smart phones for Samsung.  Vietnamese are customers of Briggs & Stratton motors, Harley Davidson motorcycles, Manpower staffing services, General Electric medical devices, and Kohler sinks.

Vietnamese consumers shop at Gap, Banana Republic, and Coach.  They drink Pepsi, Coke, Miller beer, and Starbucks coffee — and within a month after McDonald’s opened this spring, the Vietnamese had ordered 61,980 Big Macs.

McDonald’s is an emblem of the triumph of capitalism over communism.  The franchise owner is a Vietnamese American named Henry Nguyen, of Chicago.  He is married to the CEO of an investment bank, and the daughter of Prime Minister Nguyen Tan Dung, who oversees the Communist Party’s determined, and sometimes crude, efforts to stay in control.  Vietnam’s pre-eminent corporate power couple and its communist government are family.

In some ways, Vietnam’s youthful, ingenious entrepreneurs overshadow corporate royalty.  Consider Flappy Bird.  A few months ago this maddening game was the most downloaded smart phone game worldwide, the creation of a software engineer named Dong Nguyen who lives with his parents in Hanoi, the capital of Vietnam.

Flappy Bird was bringing in $50,000 a day in ad revenue, but Dong withdrew it from the market because he had grown weary of the notoriety.  Dong wanted to get his life back.

Vietnam is full of Dong Nguyens — hundreds of thousands of modest, brainy entrepreneurs transforming their country.

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The 68-story Bitexco Financial Tower in Ho Chi Minh City is shaped like a lotus plant; the lotus is Vietnam’s national flower.

That’s what Google software engineer Neil Fraser discovered on a recent visit.  He found Vietnamese 11th graders could pass Google’s notoriously difficult interview test –and 3rd graders knew how to use Microsoft Word — in English.  Over the next generation, these kids will showcase their potential.

A recent report noted Vietnam’s transition from collectivism to capitalism produced 170 people worth more than $30 million.   What’s interesting is who reported it: the official newspaper of the Communist Party, which apparently deems capitalism as important as ideology in a country with bold global aspirations.

Vietnam is an entrepreneurial frontier.  It’s the 13th most populous nation – larger than every country in Europe except Russia.  Theoretically, Vietnam has the potential to be the Japan of the 21st Century, which would make an investment in Vietnam grow 10,000%.  So far this year, Vietnam’s stock market is up about 20%.

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A fish processing facility in My Tho in the Mekong Delta owned by the $178 million Hung Vuong Corp. exports whitefish wqorldwide and trades in trhe Vietnam stock market for $1.40 per share, up 150% in two years.

Even so, while global investors see gold, many Americans still see yellow — the color of peril, caution, cowardice.  In Vietnam culture, yellow and gold are the same, the color of power, prosperity, success.

Vietnam is a golden opportunity.  The promise arises from a confident, forward-looking and optimistic culture — a curious blend of Buddhist, Confucian, Christian, and communist values.  That cultural complexity is embodied in a young man named Huan.

I encountered Huan one afternoon in Hanoi.  As I was sitting on a park bench, he approached me to practice his English.  I invited him to sit down, and we talked.

His story was familiar.  Huan grew up on a rice farm in the rural north of Vietnam, and he studied hard to earn admission to a university in Hanoi.  Sometimes he walked to the old quarter to get an odd job at a shop or a restaurant to earn money for food and incidentals.

As we were talking, a frail, elderly woman limped up to us and held out her hand.  I barely noticed her, but Huan gave her his complete attention.  He asked a question in Vietnamese, and then pulled out his wallet and gave the woman its contents, a single note of Vietnamese currency worth about a dollar.

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These rural south-central children appear to be gesturing “V for Vistory,” but actually they’re saying hi — the Vietnamese word for two is hai.

As she moved on, I asked him why he gave her his only money, and he said:  “Because she needs it more than I do.”

He realized I was puzzled, and added: “In Vietnam, we have great respect for old people, poor people, the less fortunate.”

A few minutes later, as we parted ways, I handed Huan about $3 for dinner.

He seemed confused, and he said:  “I cannot accept that.”

I said, “Why not?  You need it more than I do.”

He replied, “My father taught me never to accept money that I did not earn.”

Then Huan walked into the streets of Hanoi with attributes many Vietnamese possess in abundance: pride, confidence and an empty wallet.

Culturally, Vietnamese also seem to have a short memory.  Not long ago, I joined an educator from Ho Chi Minh City on a tour of Wisconsin’s Capitol building.  After visiting the legislature, we walked outside on the deck at the top of the rotunda.

There, we faced three flags blowing in the wind: American, Wisconsin and POW/MIA flags.  He had never seen the black flag, so I explained it was a reminder that some Americans who fought in Vietnam are still missing.

“In Vietnam,” he said, “we do not dwell on the past.”

And he added, wryly:  “I just learned the Wisconsin motto.”

Forward.

Jeff Browne is president of Vietnomics LLC, an investment consultancy, and co-founder of templehillsonline.com, a social enterprise helping Vietnamese farmers develop specialty coffee.

The premier of A Bridge to Vietnam, a documentary featuring the Wisconsin-Vietnam connection, will be broadcast at 7:30 p.m., Friday, Oct. 3, on MPTV Channel 10.1    

Here is the article as it appeared in the Milwaukee Journal Sentinel on Sunday, Sept. 28, 2014

 

Vietnam To be SE Asia’s Biggest Exporter to US

The American Chamber of Commerce says Vietnam is poised to overtake Malaysia and Thailand next year and become Southeast Asia’s largest exporter to the American market.

For 2014, bilateral trade between Vietnam and the US is projected to reach $34 billion, with Vietnam’s exports exceeding $28 billion, including nearly $10 billion in textiles and garments.  By 2020, Vietnam’s exports to the US are likely to reach $51 billion, including $15 billion in garments.  And those figures to not count the potential impact of the Trans-Pacific Partnership yet to be implemented.

In addition to Vietnam, Southeast Asian (ASEAN) countries include Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Myanmar, Cambodia, and Laos.

Vietnam’s latest report shows a global trade surplus for 2014 exceeding $2 billion through August, with $97 billion in export value and $95 billion in imports.  The largest export market was the US, with nearly $19 billion in export value, up 23% from last year.

Vietnam is among global leaders in export of seafood, vegetables, coffee, tea, pepper, rice, cassava, rubber, textiles, shoes, ceramics, and garments.  The list is expected to grow over the next few years.

Ignoring the Emergence of Risky Vietnam

The Wall Street Journal, which purports to inform investors about the global markets, continues to ignore the world’s 13th most populous country.  The newspaper reports today that “the riskiest stocks in the riskiest markets” are among the biggest winners in Asia this year, but the report pretends one of the world’s best performing markets doesn’t exist: Vietnam.

The Journal highlights Thailand, Philippines, and Malaysia, whose benchmark stock indices are up 22%, 24%, and minus 1%, respectively.  Those markets have reported small cap gains of 36%, 28%, and 7%, while the small cap increase in India is 54%.

In those markets, investors are said to be optimistic more gains will come as strong company fundamentals continue to attract capital.  The story also highlights political and economic developments in those countries.

Typical of the Journal, however, the newspaper doesn’t inform its readers that the Vietnam has two centers for trading public equities, one in Hanoi and one in Ho Chi Minh City (Saigon).  The benchmark VN Index, based on a sample of stocks in the Saigon market, as of Sept. 23, has increased 21% so far in 2014.

Investors who pay attention to Vietnam are aware of stabilizing economic and political developments that are likely to portend further gains, especially in the long run.

From the perspective of New York City, Vietnam may be a relatively high-risk investment — as is a bet on small cap public equities in Malaysia, Philippines, Thailand, India, and Indonesia.  But there’s a difference between a risky investment opportunity and a nonexistent one.

 

Vietnam’s Central Role in ASEAN Emerging Clout

McKinsey just published an essay arguing ASEAN’s and its 10 member nations needs to get its act together if the region is going to have the geopolitical and economic clout it deserves.  That’s a big challenge because ASEAN is a diverse assortment of nations with vastly differing cultures, histories, forms of government, religions, and economies.

Simon Tay, of the Singapore Institute of International Affairs, says a united voice would give ASEAN a bigger global role as it speaks with one voice.  Particularly pressing are border disputes, especially in the South China Sea, East Sea, or West Philippine Sea, as various countries within ASEAN refer to one of the most strategically important shipping channels in the world.

Although ASEAN has had some success mobilizing regional support for free-trade agreements, the organization is divided on questions of human-rights violations, World Trade Organization negotiations, and climate change.

Tay contends a common voice for ASEAN would give the region more economic clout by positioning the ASEAN in the center of links with  India, China and the US.  ASEAN also has an opportunity to create a military alliance similar to NATO.

For ASEAN to reach its potential, Tay says, its members need to (1) appreciate the difference between consensus and unanimity (which is untenable), (2) frame its agenda in regional terms, (3) be flexible enough to modify its goals and positions as circumstances evolve.

Although Tay does not mention Vietnam’s role in ASEAN,  it’s obvious that Vietnam and American companies are positioned to provide leadership to help ASEAN reach its goals.  Vietnam is 3rd most populous among the ASEAN nations (behind Indonesia and the Philippines).  And Ho Chi Minh City is positioned at the geographical center of this vast region of 600 million people.

An example of US corporate presence that can boost the region’s economy is General Electric.  GE now defines itself as an infrastructure company that this year alone has sold ASEAN nations $5 billion worth of aviation, power, water, gas, and transportation products and services.  That’s just a beginning.

A Parallel Between Vietnam and Ukraine

One of the consequences of today’s crisis in Eastern Europe is the escalation of anxieties elsewhere in the world.  The situation in Ukraine has reverberated at least two ways in faraway Vietnam: (1) disrupting economic stability, and (2) raising the spectre of armed conflict in Southeast Asia.    

Vietnam’s stock market, world’s best performing in the first part of 2014, has been in a nosedive since the Ukraine crisis.  That’s partly because of conflicting views within Vietnam’s ruling party about economic health of the country; but it also reflects concern about both fragile export markets in Europe and the reliability of Russia as a long-time economic and diplomatic ally.  

Meanwhile,  people who have been watching developments in the South China Sea are wondering if Vietnam is on a path to become China’s Ukraine.  That’s not surprising considering the centuries of Chinese aggression toward its southern neighbor.

The latest Chinese assertiveness is its construction of an oil and gas exploration rig near the Vietnamese coast in South China (or East) Sea territory claimed by both nations.  State-owned PetroVietnam asked China National Offshore Oil Corp. to remove the rig — situated 120 miles East of the Vietnamese coast and within what Vietnam considers its exclusive economic zone.  China responded by repeatedly ramming Vietnamese military boats.

Until now, conflict between China and Vietnam in the sea has been limited mostly to verbal sparring over who owns the Paracel and Spratly Islands, and  Chinese harassment of Vietnamese fishing fleets.

The latest dispute highlights the increasing potential for military aggression in Vietnam’s East Sea, as Southeast Asia worries about parallels between Eastern Europe and its own region of 600 million people.

Conquering Health-Conscious Vietnam

Vietnam is quietly emerging as a center of health-conscious consumption — with surging marketing and manufacture of so-called functional foods: products intended to provide both nutritional and health benefits.

Local media report 1,800 functional food makers and distributors — including American companies Amway, NuSkin, Unicity and Herbalife — are selling 10,000 products in Vietnam, and business is booming.

Herbalife says the Vietnamese market contributed significantly to its $4.8 billion in global sales last year.  Unicity reports its success in Vietnam is above expectations.  NuSkin reported 30% growth last year in Vietnam and projects 33% this year by conquering the central Danang market.

Amway’s second factory in Vietnam is expected to produce 24,000 products valued at $200 million starting early next year.  The company began cultivating the Vietnam market in 2008 and last year generated $90 million in revenue, a one-year increase of 14%.

Vietnam is a lucrative and growing market for functional food because its consumers tend to be educated, health conscious, and concerned about obesity, cardiovascular health and physical beauty.  The Vietnam Supplement Food Association reports 56% of Hanoi residents and 48% in Ho Chi Minh City use functional food.

Even more important to American companies, the ASEAN free trade agreement that takes effect next year will facilitate the export of products they make in Vietnam to Southeast Asia’s 600 million consumers.