Vietnamese people changing their consumption habits: research

16:59' 13/07/2007 (GMT+7)

VietNamNet Bridge – There will be big changes in the shopping and consumption habits of Vietnamese people, according to research conducted by the Trade Research Institute. The institute has forecast that the final consumption fund (referring to the amount of money consumers put aside for consumption) in comparison with Vietnam’s GDP may reach VND840-860bil ($50bil) in three years. In the last few years, Vietnam has ranked third in the world in terms of consumption ratio. Vietnamese people have been spending more money to satisfy their demands, while middle-class consumers have appeared. Nguyen Van Nam, Head of the Trade Research Institute, talks more about that. What will the big changes in the consumption habits of Vietnamese people be like in the next three years? There will be big changes in the consumption habits of Vietnamese people. They will require not only good food and fine clothing, but also choose the kinds of food that are good for health. A recent survey announced by TNS Market Research showed that 62% of Vietnamese people do not eat at home every day. The consumption style will also be different: more spending and less saving in young families. Will traditional Vietnamese products like fish sauce, seasoning powder, instant noodles, vegetable oil, green tea and coffee be affected by the new consumption habits? All Vietnamese people use these products everyday as a long-standing habit, no matter if they eat at home or restaurants. All the tastes and habits of Vietnamese consumers will stay the same. However, the requirements of new consumers will be stricter as they will demand safer and cleaner products. This will bring more opportunities to Vietnamese enterprises, while also be a big challenge for them. Let me take the case of the soy sauce with the high level of 3-MPCD as an example. Since the information about the toxic substance was released consumers have ‘boycotted’ the unsafe product, a move that shows that consumers now have behaviour different from what they did before. What should you do to control the quality of goods? Someone may fear that the opening of the distribution market to foreigners will kill the domestic distribution network. However, they should realise that many bad-quality products, including China-sourced ones, can be seen everywhere on the domestic market due to many reasons. One of the reasons is the bad domestic distribution network. Vietnamese producers should understand that only good-quality products can be sold, while distributors should distribute good-quality products only. Why do you say that the bad distribution network is the reason behind the bad-quality imports? Local distributors now sell everything they can, both the good and bad products. Meanwhile, if foreign distributors can operate on the market, they will standardise sale items: i.e. only good and safe products will be put on sale. Bad-quality products will have no room in their distribution chains. I also have to say that the backward distribution network will not help encourage production, and cannot meet the demand of modern consumers. Thailand once had the same fear as Vietnam when it opened its retail market. However, the result of the market opening was very good: the quality of its products has become better and its export turnover is 10-fold higher than Vietnam’s. (Source: Viet Nam Net)

Mergers & Acquisition: many problems remain

16:44' 13/07/2007 (GMT+7)

Vinamilk has joined hands with Campina to develop together VietNamNet Bridge – There were 18 mergers and acquitisition (M&A) cases in Vietnam in 2005 totalling US$61 million. The figure rose to 32 M&A in 2006, with a total value of $245 million. M&A to quickly develop M&A is a very important form of foreign direct investment (FDI). For Vietnam, M&A activities have been performed but it is still a new form of business. Thus, research and seeking solutions for promoting M&A will contribute to create a new and important FDI attraction channel in Vietnam in the coming time, said Nguyen Thi Bich Van, Deputy Head of the Foreign Investment Agency under the Ministry of Planning and Investment. In the past ten years, these activities have developed robustly and created a fever in many developed and developing countries. FDI performed in the form of M&A accounts for 57%-80% of the total FDI in the world. According to PricewaterhouseCoopers, there were 18 M&A in Vietnam in 2005 with a total value of 61 million. The figure was nearly double in 2006, 32, valued at $245 million. “This year and in the next few years, M&A operations will develop quickly in Vietnam, especially in the fields of banking, financial services, consumer goods, textile-garment products and retailing,” said Bui Van Tuynh, General Director of the Dai Viet Securities Joint Stock Company (DVSC). According to some economic experts, the trend of forming multi-area groups or cross investment in the form of becoming strategic shareholders is one way of economic concentration and this will facilitate M&A activities. Problems… According to Mr. Bui Van Tuynh, some companies conducted M&A some years ago, but this was not true M&A because those cases were done under the recommendation of management agencies. It was not until the Foreign Investment Law 2005 took effect that M&A was really able to assume its true nature. Many transactions have been conducted successfully, for example the affairs between Campina milk group of the Netherlands and the Vietnam Dairy Products JS Company, Japan’s Daii insurance group and Bao Minh CMG. However, along with the development of M&A, the ineffectiveness of the Investment Law 2005, Enterprise Law 2005, the Securities Law 2006 and the differences in those laws have hindered M&A operations. Many problems associated with M&A have been mentioned and Vietnamese companies have asked the government to consider dealing with those problems soon to promote M&A. “According to international experience, M&A is an important factor for economic development, helping local firms access technology, management, skills on market and exports. So we need a clear, sufficient legal corridor as the foundation for M&A activities, to restrict economic concentration and unhealthy competition,” said Mr. Tuynh. (Source: Viet Nam Net)