Tag Archives: Vietnam business

The Americanization of Vietnam’s Food

McDonald’s has been in business for one month in Vietnam, and it’s already clear the culinary culture of this leading producer of rice and seafood has changed forever.  Just one restaurant served 400,000 customers in the month after the grand opening on Feb. 8.

So far, the Saigon McDonald’s served 61,980 Big Macs for $2.84 apiece, well above the daily income of a typical Vietnamese rice farming family.

This is just the beginning.  McDonald’s is the latest chain to join the fast-food reformation of Vietnam’s diet, but it should have no problem surpassing Burger King, Domino’s Pizza, Popeye’s Louisiana Kitchen,  KFC, Subway, and others.

In part, that’s because the owner of the McDonald’s franchise has the political clout to get things done; he’s the prime minister’s son-in-law who, like McDonald’s itself, is a Chicago native.

McDonald’s Vietnam owner Henry Nguyen spent two summers as a teenager working at McDonald’s in Chicago before moving to Ho Chi Minh City a decade ago and ultimately impressing McDonald’s as “the ideal mix of business acumen, proven record, passion, and ability.”

Similarly, Vietnam’s hunger for American products and culture makes it an ideal market for McDonald’s — as it is for American soft drink, alcohol, tobacco, and other brands that are contending with legions of skeptical consumers at home.

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The Race to Satisfy Vietnam’s Hi Tech Hunger

Vietnam’s science ministry reports four technology exchanges accounted for 5,482 service and equipment transactions worth $129 million last year — 34% more than a previous year, and far exceeding expectations.

In Haiphong alone, 40,000 people exchanged scientific views and searched for  technologies.  The Danang exchange has recorded 5,321 domestic businesses and 153 foreign companies registering 7,754 technology transactions over the past five years. 

These are signs that Vietnam is serious about being a global technology leader and consumer.   The government projects a 15% annual increase in technological product and service sales through 2020 as exchange projects expand countrywide and universities grow the country’s tech expertise.  

 These developments have generated a growing awareness among global technology leaders about Vietnam’s potential.  This week’s examples:

  • On Thursday the Vietnamese and Finnish governments signed a $14 million agreement to implement the second phase of their joint innovation partnership to enhance the capacity of Vietnam’s information technology system and increase activities in scientific research and technology development.
  • On Friday Microsoft formally agreed to a long-term partnership with Vietnam to focus on four technologies (1) IT infrastructure, (2) cyber security, (3) cloud apps development and (4) IT human resources.

The race is on to capitalize on hi tech hunger in a promising frontier market of nearly 100 million people.  

Dreaming in Vietnam on $1 a Day

Vietnam’s statistics office and the World Bank shed new light on income in the country — and quantify the  rural-urban gap.  They say the typical city dweller earns $142 a month compared to $76 for rural residents.  Average earnings for Vietnam’s poorest citizens are estimated to be $24 per month, a 39% increase over the highly inflationary period between 2010 and 2013.

This helps explain two things: (1) why the world’s multi-national manufacturers are flocking to Vietnam to source their products, and (2) why entrepreneurial dreams are flourishing in the world’s 13th most populous country.

Vietnam has a young, educated, eager — and, most important, plugged-in — workforce accustomed to wages far behind its peers in China and elsewhere in Southeast Asia.  Even citizens who earn $1 a day tend to be literate and have someone in the family who is connected to the Internet.

And despite urban migration that is spurring explosive growth in Hanoi, Saigon and other cities, Vietnam’s population remains mostly rural and the employment mostly agriculture.  In this sector, $1 dollar a day remains the standard wage — and a job offer from a Japanese or German widget-maker looks like an attractive stepping stone to the entrepreneurial dreamland that is the World Wide Web.

 

 

Saigon Galloping in Vietnam’s Year of the Horse

This is shaping up to be a break-out year for Ho Chi Minh City (Saigon), Vietnam’s business and financial center, and its most populous city — 9 million headed toward 14 million by 2025.

Sales and services revenue is up 12% this year and approaching $5 billion. February exports are up 15% to $1.8 billion.  Agricultural production is up 6%. The city hosted nearly 400,000 tourists in February, a 10% increase, and licensed 2,700 new businesses accounting for 25,000 new jobs.

And all of this precedes the conclusion of Trans-Pacific Partnership (TPP) negotiations that are expected to boost trade further between HCM City and the US, Australia, Malaysia, and Singapore, among others.

Perhaps the strongest sign of robust economic conditions in HCM City is the rise in foreign direct investment (FDI).  The city says it granted 12% more investment licenses so far this year than at this time last year (46) — with an aggregate of $164 million capital, up 267%.

This suggests the year of the horse will be powerful for the former Saigon — and as goes Saigon so goes all of Vietnam.

Will Vietnam Become China’s Las Vegas?

China reports nearly 100 million of its people traveled last year to foreign countries, where they spent $100 billion.  That’s a 17% increase — and another sign of opportunity for one of China’s most convenient and accessible tourism destinations: Vietnam.   

Moreover, China’s rapidly growing middle class is just beginning to impact the world’s tourism industry.  The average Chinese now spends $75 a year to travel abroad, only about one-fourth the average for Americans and well under 10% of the per capita foreign travel expense for Germans, Canadians and Australians. 

In 2014, Vietnam was the destination for just 2% of China’s foreign travelers, but that was 35% more than in 2013.  And the increase in traffic from China to Vietnam for investment purposes is far bigger — with Chinese foreign investment in Vietnam up six-fold last year to $2.3 billion.

Partly because of the coming inundation or tourist from China, some of those investors believe 2014 is the right time to commit to restaurants, hotels, entertainment services, and … casinos.

This may be the year Vietnam overcomes its historic reluctance to bring Las Vegas to provinces up and down the coast.  Among the sites were Casino projects are underway or nearing approval are Lang Son and Quang Ninh Provinces on the China border; Danang and Quang Nam Provinces on the central coast;  Phu Yen Province on the south central coast; Phu Quoc Island in the Gulf of Thailand; and Vung Tau near Saigon.

All of them will be awaiting the influx of Chinese travelers who are expected to be the world’s dominant casino consumers by the start of the next decade.

The Cost of Living with Big Macs in Vietnam

Now that McDonalds opened its first restaurant in Vietnam this month, it will take a while to measure the effect on Vietnamese consumers — hungry for all things American but leery of the potential health consequences.  But the fast food giant already has made a significant contribution to anyone considering living in or visiting Vietnam — thanks to Big Macs.

The entry of the company’s trademark oversized hamburgers on the streets of Saigon has immediately made Vietnam a member of The Economist’s Big Mac Index.  The index is an elegant (though obviously imprecise) measurement of purchasing power in countries where McDonalds sells Big Macs.

So now we know that the Big Mac sells for the equivalent of $2.84 in Ho Chi Minh City, considerably less than the $4.62 price in the US.  By comparison, the extremes in Big Mac pricing are $7.80 in Norway and $1.54 in India.  The Economist arrives at those numbers by dividing the price charged at McDonald’s by the official exchange rate of the country; In Vietnam, consumers pay 60,000 Vietnamese dong for a Big Mac, and the Economist used 21,090 as the exchange rate.

What’s interesting about this is that the index indicates the actual cost of living in Vietnam — as opposed to the implied cost you get from the official exchange rate.  In this case, it suggests Vietnam is much cheaper than you’d expect.  In fact, if a Big Mac (and presumably everything else) cost as much in Vietnam as in the US, we’d be getting 12,975 VND for our dollar rather than the 21,090 the bank offers.

Purchasing Power Parity is a relatively good way of understanding the true cost of living in a foreign country, but it is tends to be subject to the biases of whoever calculates it.  The Big Mac Index is a convenient way to demonstrate that Vietnam is an inexpensive place to live — at least until McDonald’s raises its prices there.

What Flappy Bird Tells Us about Vietnam

If you don’t think Vietnam has arrived yet as a player in the global economy, consider the case of Flappy Bird.  The sensational smart phone app dominated downloads of games on android and iTunes until its creator yanked it from the Internet last weekend.

The Flappy Bird inventor is a Vietnamese software engineer named Dong Nguyen, who lives with his parents in Hanoi.  He withdrew the app — even though it was bringing in up to $50,000 a day in ad revenue — because he was tired of the notoriety that was ruining his tranquil life.

A few years ago, millions of people in Vietnam didn’t have electricity, land lines, computers or access to the Internet — much less smart phones, and nobody in the Western world could have imagined a 29-year-old Vietnamese geek inventing a silly game that would consume hundreds of millions of hours that could otherwise have been spent on something more productive.  Yet that is exactly what has happened since Dong released Flappy Bird to the global economy last May.

Dong’s critics — and there are many of them — question whether he withdrew the game from the market as a publicity stunt to get people to focus on his next act.  He says the game disappeared because it is too addictive and because the international attention caused him too much grief.

A broader explanation might be cultural:  Vietnam has changed so dramatically and so fast that sometimes its ways of life cannot catch up with technology and market realities.  One of the cultural attributes of traditional Vietnam is a tendency not to bring attention to oneself — to be unassuming, modest, shy.  Could that be part of the reason Dong wants to get his life back?

The lesson for Western investors is they are well advised to learn the difference between cultural modesty and lack of initiative.  Vietnam is full of Dong Nguyens — millions of brainy entrepreneurs prepared to transform their own country and, in the process, infuse the world with Flappy Birds.