Stagnant markets make Vietnam soar

The United States, one of the world’s biggest markets, is showing signs of more than mere sluggishness. Peppered news of organisational restructures is prompting investors to pump more into Vietnam. Christel Lee reports.

The United States’ economy reportedly grew in the third quarter last year, based on Bureau of Economic Analysis’ data. However, the ‘good news’ was soon enough dissected to nothing more than governmental spending and deliberate restocking of inventories instead of authentic economic growth.


That left investors with money to burn to reevaluate the mileage in the continent and look further afield. China has earned itself a notorious reputation of questionable quality and short-lived durability of their products, notwithstanding their famous reasonable prices. Japan though stands tall with their quality and is constantly negotiating the challenging markets with their homegrown boys to sustain their position.


Money mind


The steady depreciation of the dollar over the years has placed Vietnam in an extremely advantageous position. An economist from the State Bank of Vietnam (SBV) was quoted as saying, “The exchange rate between the Vietnam dong and foreign currencies in general, especially the U.S. dollar, is very stable. The positive impact of the current exchange rate is a remarkable success in monetary policy operating since early 2012.”


According to the General Statistics Office of Vietnam (GSO), the US dollar appreciated 6.31%, 10.07%, 9.68%, and 2.2% against the Vietnam dong in 2008, 2009, 2010, and 2011, respectively. But the dollar depreciated around 0.88% against the dong in the first 10 months of 2012 – appreciating specifically in only the first five months.


Many forecasts point out that with current events, and although the foreign exchange market was more volatile in the last two months of 2012, the dong is not expected to depreciate.

Third world rising


Vietnam reportedly enjoyed a hike in exports last year, with the dong appreciating around 0.9% against the US dollar during the period. The government website stated in just over 10 months, total export revenue exceeded that of 2010 ($93.9 billion compared to $72.2 billion) and is close to the record levels of 2011 ($93.9 billion against $96.9 billion).

If in the remaining two months of last year, the export revenue of each month reached the rate of October at over $10 billion, the whole year’s export revenue may just have exceeded $114.4 billion. The site added performance of local exporters was better than expected.

In 40 major export items, the earnings of eight groups, mostly raw materials and ores, saw a reduction, while the remaining 32 groups witnessed significant rises. They include mobile phones and accessories, cameras, camcorders and accessories, computers, electronic products and components, plastic materials, glass and glass products, wires and cables, and vehicles and spare parts.


New world orders


The latest incoming money tidal wave was from global investment firm KKR (Kohlberg Kravis Roberts), with a net total investment of $359 million to date – to the country’s largest food company, Masan. The first $159 million came in 2011.


Masan manufactures instant foods such as noodles, cereals and coffees, and the company is estimated to command 90% of the local market. Regional head of Southeast Asia from Masan, Ming Lu, said: “Doubling our investment in less than two years demonstrates our strong conviction in Vietnam's growth story.” The investment firm also has stakes in Del Monte foods, Korea's Oriental Brewery and China Modern Dairy.


Another FMCG product with a global presence, Starbucks, is due to open its first store this year in Ho Chi Minh City. This world-famous coffee company is also making the move due to stagnant growth in United States, prompting the shift of focus to Asia Pacific.


Starbucks reportedly said previously it plans to have 1000 stores in China, another thousand in Japan and 500 in Korea. Last October, the company opened its first shop in India in collaboration with Tata Global Beverages.

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