Tag Archives: Vietnam transportation

The Opportunity in Vietnam’s Spat with China

Last week’s anti-China riots in Vietnam spooked investors, rattled the stock exchanges, threatened foreign business deals, and ignited conversation about whether that the political and economic risks in that region outweigh the potential rewards.  But where some see the unraveling of peaceful co-existence in Southeast Asia, others see a golden opportunity.

Are businesses and investors over-reacting?  Consider some of the more encouraging news coming out of Vietnam this month:

  • Samsung is going ahead with expansion of manufacturing in the northern provinces of Thai Nguyen and Bac Ninh.  As a result, about 50% of its smart phones made globally will be made in Vietnam.  Already, Samsung’s factory in Bac Ninh was one of its largest worldwide, and the company accounted for $24 billion in exports from Vietnam.  The Thai Nguyen factory opened in March will employ 16,000 workers and produce eight million units per month.
  • The Saigon port welcomed the largest ship ever docked there,  a 54,000 ton vessel able to navigate the river safely thanks to a mammoth dredging project that will allow ships of this size to save $500,000 a year in transit costs.  The port projects moving 120-150 million tons by 2025.

  • The investment ministry unveiled a proposed law that will cut red tape and streamline foreign investment by eliminating certificates for many projects, simplifying procedures, ending favorable treatment of domestic investors, and improving transparency.

  • Foreign investors have been snapping up stocks that domestic investors are rushing to sell in an over-reaction to last week’s riots.  Foreigners are taking advantage of sharp drop in the VN Index, which peaked at 610 points earlier this year and fell below 530 before climbing back to 544 today.

  • McKinsey released a study concluding that ASEAN, composed of Vietnam and nine other countries, will be the world’s 4th largest economy in 2050.

Business is getting done in Vietnam.  Opportunities abound.  The ugly events of last week are not likely to lead to war in the South China Sea.   More likely, they will turn out to have been an exchange of moves in a chess game of diplomacy that will help clarify the figurative boundaries between two of the world’s fastest growing economies.

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The New American Invasion Into Vietnam

Twenty Thirteen is shaping up to be the year the USA overwhelms Vietnamese culture as McDonalds, Starbucks, and (probably) Harley Davidson join already established soft drink, pizza, and fried chicken conglomerates in an onslaught of American consumerism.

The invasion is just beginning.  Vietnamese consumers are wholeheartedly embracing US products, but this isn’t welcome news to those who think about the well-being of Vietnam’s environment and its nearly 100 million people.

Before Starbucks opened its first outlet in Saigon this spring, the makers of Coke, Pizza Hut, and Pepsi announced major expansion plans.  This summer McDonalds joined the crowd after years of speculation that its entry into Vietnam was not a matter of if but rather when and where; resentful speculation included the rumor that Hanoi’s immensely popular Bobby Chinn restaurant had to move and ultimately close because McDonald’s muscled the owner out of his prime real estate.

This fall US-based Harley Davidson is said to be recruiting staff for its first official showroom in Ho Chi Minh City after “unofficial’ dealers have been importing and selling the motorcycles for up to $40,000 apiece (including 100% import tax) for years.

Starbucks plans hundreds of cafes.  McDonalds can have as many as it wants because the company selected the prime minister’s son-in-law to run its Vietnam operations.  Harley Davidson is already popular in one of the world’s biggest two-wheel cultures even though the company doesn’t officially operate there.

The American companies are latecomers to the Vietnam market, and they will find enormous success there, as Kentucky Fried Chicken and Coca Cola have before them.

But skeptics will raise the question of just how good (or bad) the news is for Vietnam and its consumers.  Vietnamese health researchers already have linked the country’s rising incidence of childhood obesity to American soft drinks.  How good can American fast food be for a population accustomed to fresh produce, seafood and chicken soup made from chickens that were alive yesterday morning?  And what will be the impact of ear-shattering, bulky, macho, born-to-be-wild American motorcycles on a quiet culture that thrives on bicycles and modest motorbikes?

The last American invasion of the Vietnam countryside escalated exactly 50 years ago and did a lot of damage.  Will history judge the 2013 invasion as harshly?

 

 

 

10 Dark Hours For Vietnam’s Infrastructure

Garment factories, fish processing facilities, traffic signals and everything else that runs on electricity in 22 Vietnamese provinces shut down this week for half a day when a crane operator accidentally knocked down a tree — and cut the power supply for a third of the country.

Accidents happen, but this one heightened investors’ anxieties about Vietnam.  As global manufacturers rush to Vietnam as an otherwise stable, lower-cost alternative to almost every other country in Asia, some of them wonder if Vietnam can keep with the surging demands on its transportation and energy infrastructure.

The country has been rapidly modernizing roads, seaports, airports, and energy supply — including oil refineries, hydroelectric facilities, and planning for two nuclear power plants — much to the chagrin of environmentalists concerned this is happening at the expense of Vietnam’s health and culture.  They may have considered the brief delay in economic expansion a breath of fresh air.

For a few hours, restaurants served tourists by candlelight.  Water supplies began to dry up.  Factories shut down.  Traffic jammed, especially near nonfunctional traffic lights.

When a tree falls in a developing country, the sound you hear is usually called progress. But when this particular tree fell on the nation’s main high voltage transmission line, the air conditioners stopped.  And the sound the government heard was sweaty criticism of the state-owned electricity company.

Sorting Out Vietnam’s Transportation Priorities

Vietnam has put on hold its controversial $56 billion high speed rail pipe dream that wold have transported passengers, but not cargo, between its two largest cities.  The country has higher priorities than getting people from Hanoi to Saigon faster by train.

Trains move cargo efficiently, but in Vietnam they are grossly underutilized.  Alhough government data show a 60% increase in cargo by train since 1995, that compares to a 627% increase by truck, 785% by ship and 522% by air.

Surely that’s partly because the Vietnam has a rudimentary railroad system — just a single track between Hanoi and Ho Chi Minh City, for example.  That’s why manufacturers and supplies are accustomed to using other options; since 1995, railway market share dropped from 3% to less than 1%.

The World Bank says rail is the most economical means of transporting goods between 300 and 3,000 miles whereas trucking is preferred for shorter distances and air or sea for longer distances.

Transportation infrastructure is essential to Vietnam’s economic future.  Cargo currently moves at about 30 miles an hour on Vietnam’s rails.  Doubling or tripling that cargo speed will boost the economy.

Investors should be encouraged seeing Vietnam sort out its priorities.  People can travel by airplane.

Today’s Vietnam in Pictures

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After travel this fall through 25 provinces in Vietnam — from the Mekong Delta to the Chinese border — I’ve compiled a 5-minute slide show.  Our trip was to evaluate the investment climate in this promising frontier market, and to grow our coffee brand (www.templehillsonline.com).

The photos will give you a feel for Vietnam today.

Click here for the photos. For captions, click “show info” at the top right.

Sincerely,

Jeff Browne — 262-641-0737 (o); 262-271-7330 (c)

jbrowne@vietnomics.com http://www.vietnomics.com

The address for the slides: http://www.flickr.com/photos/vietnomics/sets/72157632231224520/show/

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Vietnomics LLC, through partnerships in the US and in Vietnam, is a global sourcing consultancy that links US and VN investors and companies. Our advisors provide cultural training and services regarding sourcing, marketing, investing, government relations, factory evaluation, social investment and legal solutions. We provide quarterly updates and frequent blog posts (vietnomics.wordpress.com) about opportunities in Vietnam.

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The Top Ten Beaches in Vietnam (Part 2)

Last week the Vietnomics blog posted Vietnam’s top three shoreline areas that appear to be good places to invest for the long-term — including top_site_international_businessbeaches that have yet to get much notice from by foreign visitors.  They are Phan Rang, Quy Nhon, and Phu Quoc Island.

Here are the remaining seven of Vietnam’s top 10 beaches, ranked in order starting with the most attractive investment opportunity:

4. Ha Tinh.  Out of sight and out of mind, the North Central province of Ha Tinh knows its strengths and emphasizes agribusiness and industry, not tourism — and why not?  The province is quietly reaching its potential for exports of rice, nuts, fruit, vegetables, livestock, rubber, wood and seafood — and beneath some of this agribusiness lies $60 billion of iron ore soon to be mined; it has infrastructure, including an emerging port, to transport exports from Thailand, Laos and Vietnam; and Ha Tinh will soon be one of Asia’s biggest steel producers.   One of Vietnam’s poorest provinces, Ha Tinh is catching up — with economic growth of 10% and 11% the past two years and a competitiveness ranking of 7th out of the 63 provinces.  The province has nearly 100 miles of shoreline and four seasons to enjoy some fine, unspoiled beaches — and a mountain range in the north to block storms from the East.  It rains a lot and can be cold, as is the case with other refreshing alternatives from southern heat — such as San Francisco and Seattle.  Below are Ha Tinh City and beach.

Ha Tinh CityHa Tinh City and beach

5. Da Nang.  International travelers usually go to one of two resort cities (Hoi An or Hue) that flank the largest and most dynamic city in central Vietnam but tend to skip Da Nang itself.  That’s like touring the US and bypassing Chicago.  Near downtown Da Nang is where you find one of Vietnam’s best beaches:  China Beach (below), the legendary site chosen for the movie Apocalypse Now and a former American television series of that name.  Most of the 19-mile strip of sand from Da Nang to Hoi An is now developed with high-end resorts, but there’s still room for investment on Da Nang’s end of the beach.

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6. Nha Trang.  A well-established and popular resort city for domestic vacationers, Nha Trang remains relatively unknown to foreigners.  That is changing fast and the pace of development is accelerating in this picturesque region of islands and sand.

7. Mui Ne.  Not long ago considered one of Vietnam’s best kept secrets, this beach, one of the most beautiful in Vietnam, is now on the beaten path of tourists and well-developed with a wide range of resort options and, coupled with neighboring Phan Thiet, is also becoming a mecca for golfers.Mui Ne

8. Hoi An.  Probably Vietnam’s most popular seacoast destination for international travelers, Hoi An has a balanced combination of great beaches, a historic and beautiful village, and high-end resorts.  It will always be an attractive investment opportunity, but much of the region is developed already.  The photo below is from the pool at one of Asia’s finest resorts, the American-owned Nam Hai.

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9. Vung Tau.  For years the resort city of choice for Saigon weekenders, Vung Tau is well established and highly developed.  It’s not as nice a beach as you can find elsewhere in Vietnam, though, partly because the province is also a major energy producer for Vietnam, with sailboats competing with oil barges.  Even so, Vung Tau is a good investment destination because Vietnam’s first major casino complex is soon to open nearby — the MGM/Asian Coast Development Ho Tram project that includes 504 rooms, convention facilities, shopping and a Las Vegas style  casino to open early next year.

Vung Tau

10. Ha Long.   Vietnam’s most famous tourist attraction because of its spectacular rock formations that jut out of the sea, Ha Long is a highly developed region teeming with tourists from neighboring China and has nice views but not a great beach, too many people and too much pollution.  Investment opportunities here are as likely to be related to environmental remediation as economic development.  Foreigners continue to invest there, though, and Ha Long’s province recently added foreign-invested projects worth $412 million to its portfolio of 93 projects worth $4.2 billion, with American companies leading the charge.  Below is a view of Ha Long Bay from the nearby island resort that co-hosted the Miss Universe pageant five years ago.

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The Top Ten Beaches in Vietnam

After traveling through Vietnam four times in the past four years, I have identified the best beaches in the country.  My criteria have little to do with the quality of the beaches themselves, or their appeal to tourists; instead, my focus has been return on investment.

The best investment opportunities are often shoreline regions that have yet to be noticed by foreign visitors, much less converted into resorts.  Therefore, about half of the beaches on my list are places most Westerners have never heard of — but probably will soon.

Here are the first three of Vietnam’s 10 top beaches for investors looking for long-term returns, ranked in order starting with the most attractive opportunity (the rest of the list in future posts):

  1. Phan Rang.  Some guide books don’t acknowledge its existence, which is part of what makes Phan Rang a great opportunity.  It’s a middle-sized city with the best weather in Vietnam, miles of high-quality undeveloped beach, development and marketing plans created by some of the world’s most respected consultants, two national parks, a spectacular seacoast highway in the works that rivals California’s Big Sur, ancient Cham art and craft villages, and a national commitment to become a high-tech clean energy center in partnership with Russia and Japan.
     
    Hauling in the fish net, and sunset, in Phan Rang
  2. Quy Nhon. A well-managed small city on the South Central Coast, Quy Nhon has a great beach, a wall of mountains protecting it from typhoons, a grand plan, and the road infrastructure already in place to accommodate an 8-square mile new city that will include a modern industrial park, eco-resorts and beach-front residential developments. Already the busy port of choice for exporters from the mountainous regions of Vietnam, Cambodia and Laos, Quy Nhon’s place in the national economy is growing.

    A resort in Quy Nhon

    University students in a Quy Nhon park

     

  3. Phu Quoc.  Domestic and foreign developers have eyed the Island of Phu Quoc for years as the next Macau, and finally the infrastructure is starting to fall into place — such as a new airport — to make some of the dreams come true.  Situated in the Gulf of Thailand in easy proximity to most of Southeast Asia, Phu Quoc is destined to grow in popularity for international tourists even if  a casino never opens there.

    Footprints on Phu Quoc’s long beach