Tourism in Vietnam: The Past and Future

By: Mark Gwyther

American presidents usually give a “State of the Union” speech to the legislature around this time, discussing the past year and what their goals for the future are. While I don’t have orange skin, here is my address about the state of tourism in Vietnam and a few predictions for 2017.

travel in vietnam

Looking Back at the Monkey

Chinese and Koreans All Around...

By any measurement, last year was an excellent year for tourism in Vietnam. Out of 29 countries, only Cambodia showed a drop in international visitors to Vietnam. In fact, the number of inbound foreigners increased by nearly 50 percent in the last four years.

Those of you in Saigon reading this English-language newspaper and working in the hospitality or tourism industry may be surprised or sceptical about the numbers. That is because Vietnam has been experiencing a tremendous shift in markets. Nearly 70 percent of this growth has come from China and South Korea alone, the two largest and fastest-growing inbound markets in 2016.

This shift accelerated in 2016 at a staggering rate. Between 2012 and 2016, the number of international arrivals to Vietnam grew by 3,165,000 people. Of that increase in visitors, 2,230,000 came from China and South Korea.

The reason for the increase is pretty simple: China and South Korea have large populations with a rising average income which is creating a larger middle class. People typically begin travelling internationally when their family income reaches about $1,500 per month. The first trip is usually to a country nearby with a familiar culture. Vietnam is a close, warm-weather destination with a familiar Asian culture.

 

growth in arrivals

 

… and Also More Westerners

You might think all this growth is great, but not really relevant to your business if you rely on American, European and Australian tourists. Sorry, those markets haven’t grown significantly. That is why on 1 July 2015, Vietnam’s government waived visa fees for five European countries for a 15-day visit.

So, did it work? Apparently it did.

Granting a few months for word to spread, from November 2015 through the end of 2016 each month saw a significant improvement over the same month the year before.

However, while the chart may look fantastic, the actual increase in 2016 for these five countries averaged about 9,700 more tourists per month. Even if the fee exemption was expanded to North America and Oceania, a similar jump in tourists would result in only an average monthly increase of about 25,000 visitors this year. China and South Korea combined to grow an average of 119,000 visitors per month in 2016 and this coming year will see an even larger increase.

Just how much larger, you ask?

foreign visitors

Looking to the Rooster

Here are a few predictions for 2017:

  1. The new electronic visa system will grow eligible markets by over 50 percent.

At this time, it is not clear who will be eligible, but this may have a greater positive effect on tourism than waiving the visa fee. It seems more likely that the current system of travellers sending their passport to a Vietnamese consulate is a greater barrier than the visa fee.

  1. The number of Russians travelling to Vietnam will double in the second half of 2017.

The number of Russian travellers to Vietnam increased by 28 percent this year from last year, though the number is only up 19 percent over a two-year period. However, with U.S. sanctions likely to be lifted, the Russian currency will rise in value. Political problems in Egypt and Turkey make Vietnam a safe choice for chasing the sun.

  1. The number of Chinese tourists will grow faster than in 2016.

Chinese citizens embarked on an estimated 60 million outbound trips last year, yet only

2.6 million were to its southern neighbour. Despite China already being far and away Vietnam’s largest market, there is plenty of room to grow.

  1. Total number of international visitors to Vietnam will surpass 13 million.

See #1, #2, and #3 above.

  1. A domestic Vietjet flight will leave Ho Chi Minh City on time.

Just joking!

Let’s not get too crazy with these predictions.


Fashion Frenzy: Retailers in Vietnam

By: Keely Burkey

Everywhere you look in HCMC’s District 1, there’s a new store opening. Remember when Zara, the Spanish fashion retailer, set up shop in Vincom Shopping Mall last September? If you dared to visit the store during its opening week, you probably spent more time in a queue than trying on clothes. Inside Retail Asia wrote that Zara “unofficially” made more than $246,000 in its first day, much more than anticipated.

zara crowded

It’s no wonder that many more mid-priced and mass-market retailers are following in Zara’s wake. It’s been reported that Mango, GAP, Topshop, H&M and Uniqlo are all getting ready to make their own marks on HCMC in 2017. While this is welcome news for Saigon’s legions of fashionistas, it also spells big changes for clothing retail.

The Land of Silk and Money

There are several reasons for this sudden popularity.

First of all, the middle class is growing, and it’s growing fast. Consulting firm PwC’s 2015-16 Outlook for the Retail and Consumer Products Sector in Asia found that the proportion of households earning more than $10,000 per year will rise from 2 percent in 2014 to around 20 percent in 2018. That’s a pretty big jump, and a significant one when you think about the demographics at play.

Vietnam has a young population, and it’s the young professionals who are the major target for these fast fashion brands. Deloitte Singapore’s Retail in Vietnam report stated that in 2014, 70 percent of consumers were between 15 and 64 years old. Meanwhile, almost 60 percent of Vietnam’s population is under 35 years old.

The sheer number of millennials is catching the eye of foreign retailers. And when you factor in where most of millennials are making money – namely Ho Chi Minh City and Hanoi – it’s no surprise that the vast majority of foreign retailers are playing it safe and catering exclusively to these urban areas.

family vietnam

Given these factors, a pyramid of consumers has emerged, as outlined in the Understanding Market Trends and Consumers in Vietnam report published by Singapore-based brand growth and communication company Louken Group.

At the top, you have the premium, niche market: people who buy products for social status and have a generous disposable income. Many of them do their shopping abroad, making it a difficult clientele to curate domestically.

The second tier is the mid-market: middle income consumers who want quality products with a pleasing design sold at an affordable price. This is the market Zara has tapped into with such success.

At the bottom are the mass market customers. They want fast fashion that is cheap and can be bought often. This is most of the Vietnamese population because, come on, who can resist a good deal?

And what company can resist demographics with so much potential? It doesn’t hurt that recent international agreements have made it easier for foreign companies to do business here, especially the World Trade Organisation (WTO) agreement Vietnam signed in 2007.

Before 2008, international companies were only allowed 49 percent of capital in joint ventures. But as of 2009, fully foreign-owned companies could operate in the Vietnamese market independently. And since January 2015, foreign retailers can set up businesses with 100 percent foreign capital. No more need to franchise or partner with a domestic company. Hence, the fashion flood.

Domestic Concerns

With the growing middle class and prime market conditions, it would seem to be a perfect time for Vietnamese retailers to get in on some of the action as well. Even better is the fact that most Vietnamese consumers want domestic products.

sales growth vietnam

In the Louken Group’s report, 71 percent of Vietnamese consumers surveyed believe that local products are of high quality, and 80 percent prefer domestically produced garments. Jackpot, right?

Not necessarily. As Carey Zesiger, manager of business development for the international fashion distribution company Havang told us, “Increasingly in recent years, we’ve had cases where our brands are producing in factories in Vietnam, and since the label says ‘Made in Vietnam’, you would think it would be easy [to acquire them], and it should be low-tax or no tax. That’s not always the case.

“Depending on the situation, depending on the paperwork, depending on the licensing of the factory and their tax status, there have been cases where we’ve had to export products that are made in Vietnam to Singapore, re-import them and pay full duty for a product that’s made in Vietnam.”

This complicated system seems to be a by-product of the country’s focus on developing its export economy, sometimes at the expense of its own businesses and consumers. And while there is a movement for the Vietnamese textile and garment sector to develop business in the domestic market, in particular for textile brands like Nha Be, Viet Tien, Hanosimex and Duc Giang, the export-heavy regulations and international free trade agreements are leaving the door wide open for foreign retailers.

The Future

Will we see Ho Chi Minh City reach the retail dimensions of powerhouse cities like Singapore or Hong Kong?

Zesiger has his doubts: “Singapore and Hong Kong are dependent to a large extent on tourism. They are hubs for tourists, travellers, people in transit, business, and so a lot of retail activity there is driven by inbound tourism.” Vietnam, and particularly Ho Chi Minh City, is quite different.

“Let’s face it,” Zesiger continues, “Vietnam is not going to be a destination for people to come and do their duty-free shopping, because the duties are high and the selection is not so broad.”

Instead, Zesinger sees retail growth to be long-term and based on developing the domestic market. That means supporting and helping the middle class to grow. Right now, with a GDP per capita of just $1,325, there’s a lot of room for growth.

Company to Watch: AEON Company Limited

With so many different companies emerging onto the market, it’s difficult to keep them all straight. Here’s one company that’s been working particularly hard to crack the Vietnamese demographic. Keep an eye on AEON; you might be seeing the name even more in the future.

eaon vietnam

Who?

AEON Company Limited is a retailing group from Japan. Reportedly founded in 1758, AEON has one of the longest histories in retail development in Asia. An international operation with 16,498 companies spread across Asia, AEON has turned an eye towards Vietnam.

What?

As the largest retail company in Japan, AEON deals in retail of all forms, with a special focus on mall supermarkets. So far, AEON has opened four shopping malls in Vietnam (two in Hanoi and two in the Ho Chi Minh City area) and 54 supermarkets throughout the country. AEON’s shoppers are middle class, and the company thrives on offering consumers solid brands at carefully controlled prices.

When?

AEON Vietnam first began in 2009 as a representative office and acquired a business licence from the People’s Committee of Ho Chi Minh City in 2011, when it began constructing the AEON Shopping Center in Tan Phu Celadon. By 2020, AEON hopes to own 20 outlets in Vietnam (10 near HCMC and 10 near Hanoi).

Why?

Vietnam’s rising middle class and younger population are attractive to foreign investors. This is especially true for Japanese companies, which have been struggling domestically due to increased international competition, a cost-conscious and ageing population, and a declining birth rate.

Where?

While most retailers have traditionally built in either Ho Chi Minh City or Hanoi, AEON is one of the first to build a major foreign-invested shopping mall in an outlying province – Binh Duong, about two hours north of Saigon. Though it has had offers to build in medium-sized cities like Danang, Nagahisa Oyama, the head of AEON’s Vietnam unit, has stated that it’s too soon for provincial developments.


4 Key Steps for Leaders to Adopt a “Coaching Culture” with LCL

By: Stuart Miller

Whether you are a budding entrepreneur, team leader, HR manager, or a member of senior management, located in Vietnam or elsewhere, it is certain that you have considered the importance of leadership coaching and growth within your business. However, personal and team growth is not just about change for the sake of it. To positively affect your work environment, change must be based on meaningful understanding of people’s strengths and weaknesses, while exposing those people to the right kind of expertise and knowledge to allow them to flourish. These ideas run through the centre of “Coaching Culture- an ethos that any business can adopt thanks to the expertise of LCL (Leaders Create Leaders), based in Ho Chi Minh City.

Leaders Create Leaders

1. Understand Coaching Culture through Leaders Create Leaders in Vietnam

So what is a “coaching culture”? It exists when there is a positive and collaborative atmosphere throughout the workplace, where communication of learning is free to flow between peers, as well as up and down the company’s internal hierarchy. A business can also be said to have established a coaching culture when employees are encouraged to take on challenges, learn positively from mistakes, and seek to maximise their full potential.

Have you experienced a workplace where your team is actually operating as just a group of individuals, often pointing in different directions? You will likely recognise the unproductive atmosphere that can be felt when people work in the same physical space but are not really working together. Do you have team members who are willing and able but can’t quite seem to unlock their potential or are afraid to take on responsibility? These issues tend to occur when an effective coaching culture hasn’t been created at the heart of a business.

Leaders Create Leaders

Enter LCL - Leaders Create Leaders - a group of dynamic and experienced coaches, based in Vietnam’s bustling Saigon, who are ideally equipped to help you and your team thrive and reach your business’ full potential through the creation of a powerful, positive and productive coaching culture. LCL clients include Diageo, Mercedes Benz, Pfizer, Nestle, Abbott, Park Hyatt, ILA, VietnamWorks, and many other industry-leading companies of all sizes who have benefitted from LCL’s leadership coaching expertise.

Leaders Create Leaders is a “community of powerhouse leaders with a passion to challenge, stretch and grow other leaders”. LCL is led by Warren Eng, an innovative Singaporean with 15 years’ experience in Vietnam and a burning passion for coaching and leadership. Warren brings a highly effective skill set developed through a variety of management positions within local and international companies, as well as his portfolio of coaching and facilitating for businesses from SMEs to MNCs.

Warren founded LCL focused on a mission to assist entrepreneurs, managers and directors in creating a workplace coaching culture that empowers employees, rather than managers merely instructing them, and that encourages positive transformation and the embracing of responsibility and tough challenges.

2. Embark on a Growth Journey for Leaders in Business with LCL’s Leadership Coaching Program in Saigon

At the heart of this mission and LCL’s offerings is their Leadership Coaching Program, starting with a 3-day workshop in thriving Saigon, which shares key methods and mindsets that allow you, as an attendee, to bring out the best in yourself first, and then others, as you become the most compelling leader that you can be.

LCL understands that establishing a truly beneficial coaching culture for you and your business takes time and persistence. Crucially then, the program is not just a one-off course, but is the start of a long-term “Growth Journey” which includes one-year membership and access to the essential Leaders Create Leaders Business Network. The LCL Business Network is a platform that brings together influential and successful entrepreneurs and managers who are enthusiastic about sharing leadership knowledge and team-building techniques to help each other and their businesses to grow meaningfully.

Leaders Create Leaders

LCL’s Leadership Coaching Program, currently offered in English, takes place over three days in the high class Caravelle Saigon hotel and is comprised of five “core Leadership Coaching skill sets” that focus on developing an excellent coaching culture for you and your business:

1) Coach & Be Coached

Understand the need to be receptive of coaching in order to be an effective coach for your team and build up to a highly potent transformation of coach-team relationships and work culture. Consider the key concepts of coaching and learn how to create a beneficial comfort zone for your team/client to challenge themselves.

2) The ACC Framework

ACC is Awareness, Clarity & Choice - you will become familiar with a system developed by the International Coach Federation (ICF) to establish the best possible environment for productive and successful coaching. Using ACC will allow you to enable yourself, your team and clients to open up new ways of looking at challenges. You will also learn to control the pace of discussions to make them more effective. The three features of ACC will then become the focus for the subsequent segments.

3) Awareness

Ignorance is not bliss; learn to embrace your mirror image to better understand yourself and turn mere potential into true action and results. Realise that uncovering the process of self-awareness will then allow you to enable your team and clients to do the same.

4) Clarity

This part of the Leadership Coaching Program will allow you to precisely comprehend your own motivations and goals, as well as what motivates others (and different types of people), and leverage that understanding to maximise your ability to coach and develop both yourself and your team.

5) Choice

Here you can learn to expand and step outside of your comfort zone through recognising that “change is inevitable, growth is optional”. Since change will always occur, you cannot thrive until you develop the belief that change is the vehicle for new opportunities and prospects. An essential part of the program, you will discover how to utilise conscious choice to empower yourself and others to take responsibility for the change you want to see.

3. Discover the Long-Term Benefits of LCL’s Leadership Coaching Program

The effectiveness of LCL’s Leadership Coaching Program continues long after participating in the 3-day workshop. When the three days is completed, you will be assigned “homework” tasks which are a fantastic opportunity to cement the coaching knowledge and skills learned in the program.

Leaders Create Leaders

During the two months that follow the main course, you will have an exciting chance to coach another workshop member for a total of three hours spread over five sessions. In addition, you will also receive coaching by a peer for a similar duration, so you can observe and be part of the techniques from the 3-day workshop. This two-way peer coaching is an enjoyable way to put your newly learned skill sets into real-life practice to ensure that these truly effective habits and mindsets become second nature. Once completed, you will receive the well-earned LCL Leadership Coach certification as you continue on the path of affecting real growth and improvement in your team, clients, and yourself.

Since a beneficial coaching culture depends heavily on being able to improve communication and the quality of conversations within a business, LCL puts you in a position where you can spend time with and learn from innovative peers and leaders to pick up invaluable techniques to use in your own work environment.

Through your one-year membership of LCL’s Business Network, another major benefit of the Leadership Coaching Program, you will have ongoing access to monthly networking sessions with some of the most forward-thinking leaders and entrepreneurs in Vietnam and beyond. These sessions include peer coaching to further enhance your leadership experience, and joining fruitful debates on subjects that affect your business and can help further your company’s coaching culture. In addition, you can reach out to other members of the network to arrange further meetings with other dynamic managers to really get the most out of working with Leaders Create Leaders.

4. Register for LCL’s Leadership Coaching Program: 22nd March - 24th March 2019

The next LCL Leadership Coaching Program will take place at the 5-star Caravelle Saigon hotel from Friday 22nd March to Sunday 24th March 2019. Places on LCL’s programs are highly sought after and limited, so register as soon as possible to guarantee your spot.

Register by 8th March 2019 and you will qualify for the Early Bird course fee of USD1,000. Registrants after this date will pay the standard fee of USD1,200. Groups of three leaders registering together on the program will pay just USD800 each.

Remember that your investment includes:

- 3-day intensive leadership coaching workshop with five essential modules delivered by LCL’s exceptional team of coaches

- Six tea breaks and three buffet lunches at the exclusive Caravelle Saigon during the workshop

- Post-workshop “homework” to put your new coaching culture knowledge into practice

- 1-year membership of the LCL Business Network of inspiring leaders

- Monthly Think Tank Sharing meetings with the LCL Business Network

- Potentially unlimited peer coaching opportunities with other forward-thinking leaders from the LCL Business Network

If you are ready to create an exceptional coaching culture in your workplace in which you and your team can thrive, then the LCL Leadership Coaching Program in Saigon is a must. Register today and embrace the true potential of your business leadership.

Video source: Leaders Create Leaders

Image source: Leaders Create Leaders


How to Obtain a Work Permit in Vietnam

By: Sivaraj Pragasm

What are the qualifications for obtaining a work permit in Vietnam?

If you’re an expat living in Vietnam and want to qualify for a work permit, you have to satisfy the following conditions:

- You’re capable of performing civil acts as prescribed by law;

- Your health is suitable for your job;

- You’re not a criminal or liable to criminal prosecution according to Vietnamese law and your home country’s law;

- Your past employment is approved in writing by a legitimate authority, proving you have three years experience in your chosen field of employment;

- Be a manager, executive officer, expert or technician. If you provide medical examinations, medical treatment or work in educational and vocational training, you must meet the particular conditions for these services as prescribed by Vietnamese law.

work permit

What are the definitions according to the latest Decree 11/2016/ND-CP (Dated 03 February 2016)?

- A “Foreign Expert” is defined as someone recognised as an expert by a foreign organization or with a Bachelor’s degree (or higher) and at least three (03) years of work experience in their field. The proof of this must be presented in writing by a foreign organization.

- A “Foreign Executive, Operation Director/Manager” is defined as a chief or deputy of an organization and Operation Director/Manager is a department head responsible for the department’s operation.

- A “Foreign Technician” is defined as someone who has had technical training or other specialised training for at least one (01) year, and at least three (03) years of work experience in their field.

What paperwork will you need to apply for a work permit in Vietnam?

- A written request for a work permit made by the employer in accordance with the regulations of the Ministry of Labour - Invalids and Social Affairs;

- A health certificate issued in your country or in Vietnam as prescribed by the Ministry of Health (in most of cases, expats obtain a health check certificate in Ho Chi Minh City);

- A written certification that you’re not a criminal or liable to criminal prosecution according to Vietnamese law and the foreign country’s law, made within the previous six months from the day on which the application is submitted. A criminal record from your home country is required, even if you have not lived there for years. If you have lived in Vietnam for more than six months, you will need to apply for a local criminal record as well;

- A written certification that you are a manager, executive officer, expert or technician. Or, a written certification of your qualification, such as: written certification issued by a competent authority of the foreign country if you are an artist in the traditional sense of the word (painting, singing, acting etc); documents proving experience as a foreign football player; a pilot certificate issued by a competent authority to foreign pilots; a licence for airplane maintenance issued by a competent authority if you maintain airplanes;

- A written approval for the employment of foreign workers given by the Department of Labour - Invalids and Social Affairs;

- Three passport colour photos, 4x6cm, taken within the previous 12 months from the day on which the application is submitted;

- A copy of your passport or an equivalent paper, which is still valid;

- An assignment letter (for internal transferees) or labour contract (for local hires);

- Additional documents may be required depending on the form of employment/assignment.

work permit

Where can you go for a health check in Vietnam?

Authorised Hospitals in Saigon:

- 115 People’s Hospital at 527 Su Van Hanh, W. 12, D10

- Van Hanh General Hospital at 781/B1-B3-B5 Le Hong Phong (extension), W.12, D10

- Thong Nhat Hospital at 1 Ly Thuong Kiet, W.7, Tan Binh District.

- Cho Ray Hospital at 201B Nguyen Chi Thanh, W.12, D5

- SOS International General Clinic under branch of International SOS Vietnam Co., Ltd. at 167A Nam Ky Khoi Nghia, W.7, D3

- FV Hospital under Far East Medical Vietnam Co., Ltd. at 6 Nguyen Luong Bang, South Saigon (Phu My Hung), D7

- Trung Vuong Hospital at 266 Ly Thuong Kiet, W.14, D10

- Thu Duc District Hospital at # 29, Quarter 5, Phu Chau St., Tam Phu W., Thu Duc District.

- An Sinh General Hospital at 10 Tran Huy Lieu, W. 12, Phu Nhuan District.

- Phuoc An General Hospital – Branch No. 3 at 95A Phan Dang Luu, W.7, Phu Nhuan District.

Authorised Hospitals in Hanoi:

- Bach Mai Hospital at 78 Giai Phong St., Phuong Mai W., Dong Da District.

- Xanh Pon (Saint Paul) General Hospital: 12 Chu Van An, Dien Bien W., Ba Dinh District.

- E Hospital at 87 Tran Cung, Nghia Tan W., Cau Giay District.

- L’Hôpital Français de Hanoi at 1 Phuong Mai W., Dong Da District.

- International SOS General Clinic – OSCAT Vietnam Joint Venture at 51 Xuan Dieu, Tay Ho District.

In the event that foreign workers are issued medical certificates by foreign hospitals, such certificates are subject to translation into Vietnamese and consular authentication.

What documents will you need to apply for a criminal record certificate in Vietnam?

- A completed application form (form 03/2013/TT-LLTP – which you can get at the Department of Justice);

- A copy of your passport and a copy of your residential certificate in Vietnam (your landlord should have this). These documents must be legalised and the original copies must also be submitted for comparison;

- In case you ask for a third person to help you to apply for the criminal record certificate, he/she will need a completed application form 04/2013/TT-LLTP; your written proxy, certified by the People’s Committee of communes where you or your proxy are residing (if you are in Vietnam); or by competent authorities of the country where you are residing. The proxy must be legalised. If this third person is one of your parents, spouse or children, the proxy document is not required, but the relationship between you and this person must be proved. Lastly, you will need a copy of his/her passport.

Where and how can you apply for a criminal record certificate in Vietnam?

You take all the above-mentioned documents to the Department of Justice in Ho Chi Minh City at 141-143 Pasteur, D3 or 1B Tran Phu, Van Quan, Ha Dong in Hanoi. There, you can fill out the form 03/TT-LLTP if you haven’t already done so. Once you have completed this, get your ticket and wait with everyone else until you are called to Station No. 1. The clerk will take a look at your documents to see that they are in order. If they are, you will pay a processing fee of VND400,000.

work permit

It will then take from 10-15 working days to process the record and you will be contacted by text or email to pick up your record (if not, simply go back to the Department of Justice after 15 days).

When should you ask for a work permit in Vietnam?

Your employer must apply for a work permit at least 15 days before your potential employment.

What is the length of validity of a work permit in Vietnam?

A work permit is valid for a maximum of three years. Also, if you leave the job for any reason, the work permit will no longer be valid.

What governmental agents do you have to visit for a work permit in Vietnam?

- To apply for a criminal record in Ho Chi Minh City:

Department of Justice in Ho Chi Minh City

141-143 Pasteur, D3;

+84 28 3829 0230

- To apply for a criminal record in Hanoi:

Department of Justice in Hanoi

1B Tran Phu, Van Quan, Ha Dong

+84 243 3546 151

- To apply for a work permit in Ho Chi Minh City:

Department of Labour - Invalids and Social Affairs

159 Pasteur, D3;

+84 28 3829 1302

- To apply for a work permit in Hanoi:

Department of Labour - Invalids and Social Affairs

75 Nguyen Chi Thanh, Lang Ha, Dong Da

+84 243 8358 868

 


IT in Vietnam: Students Desperately Needed!

By: Keely Burkey

Vietnam is embracing technology with open arms, and the Vietnamese government has big plans to make information and communication technology (ICT) a major business sector in the years ahead.

So far, the plans have been working: the Ministry of Information and Communications (MoIC) reports that in 2016 the ICT industry generated a total of VND 1.337 trillion (US$59.9 billion), a 9.36 percent increase from 2015.

Maxfield Brown, Editorial and Research Associate from FDI advisor Dezan Shira & Associates, says, “A lot of factors are coalescing in Vietnam at the moment to create a lot of potential, including Vietnam’s young labour force, increasing education and relatively low [labour] costs compared to other outsourcing destinations, for example China or India.”

IT in Vietnam

However, one little problem is standing in the way of Vietnam becoming a leader in IT development and outsourcing: an ample workforce. As of December 2016, the MoIC calculated that ICT companies in Vietnam employed 600,000, with around 300,000 in the hardware industry and 300,000 in software and digital content. The projected numbers for the future are a bit more grim.

A Struggling Future, A Struggling Past

It’s estimated that companies will seek to employ an additional 400,000 workers between 2016 and 2020. However, the output of of Vietnam’s 290 universities and colleges, along with their 150 IT schools nationwide, are only capable of producing around 250,000 workers at the current rate.

This is bad news for a country on the brink of a strong technological grounding that’s expected to help catapult Vietnam’s GDP to 20th in the world by 2050. Some foreign direct investors from South Korea and elsewhere have been cited as passing on investing in Vietnam’s ICT sector due to the country’s current infrastructure and lack of skilled workers suitable for middle management positions.

Getting recruits for ICT companies in Vietnam has never been easy. Just ask Karl Theisen, Associate Director of the Arizona State University Fulton School of Engineering and one of the original pioneers of ICT work in Vietnam. “Vietnam really took off in ’95 and ’96,” he says. “Back then, it was mainly foreign companies who went to Vietnam to set up a branch. They would have branches all throughout Southeast Asia: Bangkok, Singapore, Hong Kong…”

And even then, the ICT companies would be responsible for providing a rigorous training for new employees – all college graduates – to learn the IT solutions the company provided. While the need to train new hires was undoubtedly an extra expense that companies needed to factor in, this way of doing business wasn’t all bad. Theisen cited one particular HCMC-based company that quickly caught on to the typical Vietnamese worker’s aptitude for learning and strong work ethic.

IT in VietnamPhoto by ReutersKham

“[One company] would use the Vietnamese worker as an added service value. It would provide technicians the way a Western IT company would, and while the Vietnamese technicians were just as capable as a technician from the US or Germany, they would cost a lot less,” he explains. “So some companies did very well doing that.”

Today, the climate has changed completely, and not just in terms of size. Theisen observes that

“fifteen years ago, your target customer base was foreign companies, ones that have a heavy foreign investment [in Vietnam]. But now you see that domestic companies have grown to the point where they’re real strong target customers to these types of IT solutions.”

Working Through Recruitment

It would make sense that with this expanding market, the number of ICT students and worker recruits would rise with the businesses. However, this just hasn’t been the case. The first problem? For students, the numbers just don’t add up.

In Vietnam, there’s traditionally been a tug of war between business degrees and degrees in the STEM fields, and MBAs usually win. “People want to get a business degree, because then they can go into these different businesses and do different things,” Theisen says. “Whereas the software engineering degree, in terms of a degree, was actually a little bit more expensive as a degree program, and your job prospects were limited.”

Another disadvantage of a career in IT follows graduates into the workplace. Taking a job in an IT company will almost certainly mean a lower salary than workers in other business careers. A 2016 piece by Vietnam.net, for example, listed the monthly wage of the director of a large software park as just VND 24 million (around $1,050).

IT in Vietnam low salary

This was the challenge that faced Karl Theisen when he headed RMIT’s Center of Industry Engagement in 2002: how to make students (and their parents) interested in a field that offered less security than an MBA.

For Theisen, that meant completely changing the way IT was taught in Vietnam. One of the major problems he saw was a disconnect between what companies wanted out of graduates and what universities were producing. Often, although students would have a good grasp of technical skills, they would have trouble finding work because they lacked soft skills like working effectively in teams and speaking up during meetings.

Theisen worked directly with IT companies by setting up internship programmes and informational lectures, encouraging students not only to learn the specifics of the job, but also to practise skills they would be using in their day-to-day work. And this paid off: Theisen immediately saw numbers grow – in student recruitments as well as graduate job placements.

A Brighter Future?

Unfortunately not all tertiary education in Vietnam can provide IT education on the same level as the well-resourced RMIT. However, changes are occurring, and fast. For one thing, VnExpress.net recently found that 81 percent of IT companies will implement company-wide raises of 6 percent to 20 percent in 2017.

As a recent report from Dezan Shira pointed out, the Ministry of Industry and Trade sees a clear connection between education and business – definitely one of the reasons for the recently approved changes to Hanoi’s Hoa Lac High-Tech Park.

In 2016, the park has been approved for an expansion aided by $3 billion in registered capital gathered from 78 domestic and foreign projects. And one of the major additions happens to be the development of Hanoi National University and other training institutions. But will these changes be enough to make up for the 150,000 workers Vietnam needs to match industry demand? Only time will tell.

Staggering Statistics in HCMC

– There are currently around 1,000 ICT companies in Vietnam; 85 percent are located in HCMC.

– 70,000 engineers work in HCMC’s IT sector, an increase of 47 percent since 2015.

– Around 30,000 students graduate every year from around 40 IT programs in HCMC and the Mekong Delta region.

– Vietnam is currently ranked the 10th among countries producing the most engineering graduates.

– In 2016, 100,390 students were enrolled in IT programs in HCMC and the Mekong Delta region.

Source: #iAMHCMC February/March ’17

 


Vietnam’s Stock Market: Tips to Help You Win

By: Keely Burkey

Since HOSE (Ho Chi Minh City Stock Exchange) was created in 2007 (an upgrade of the Ho Chi Minh City Securities Trading Centre, created in 2000), Vietnam’s stock market has experienced many changes and developments.

Today HOSE is one of three stock markets in Vietnam, operating alongside Hanoi’s exchange (HNX) and the Unlisted Public Company Market (UPCoM), a smaller exchange within HNX aimed at companies that don’t have the capital or liquidity to go public on HOSE or HNX.

At last count, around 700 companies were listed on the HOSE and HNX markets put together. And while the number of companies is somewhat evenly split between the two exchanges, the market capital certainly isn’t.

Trading capital on HOSE typically drifts somewhere between $50 and $55 billion at a given time, while HNX stays somewhere around $6 billion. Barry Weisblatt, Research and Analysis Director at Viet Capital Securities Company (VCSC), thinks the difference has to do with reputation: “Institutional investors look at HCMC as the economic hub.”

So how are recent business developments affecting HOSE today? 

HOSE in Vietnam, Stock market in Vietnam

Credit: Kevinzcallaghan

More Choices, More Money

In 2016, all three stock exchanges worked with a total of around $70 billion. When taken in context, this is actually pretty minimal. It’ll take a lot of work and development to get HOSE up to the standard of global players like the Stock Exchange of Thailand, which aims to trade $702 billion by 2020, but both investors and Vietnam’s government are taking steps to grow HOSE.

The first and most important step? Adding more heavy hitters to the exchange. Not only will more blue chip stocks add capital to the market, bigger names will also help attract well-heeled investors, foreign as well as domestic.

And this is exactly what has been happening. We’re currently seeing big companies going public – and public companies selling massive amounts of shares – like Novaland (with an initial public offering, or IPO, listed in November 2016), Vietjet (planning to list in the first quarter of 2017) and Vinamilk (another 5.4 percent of the company was sold in December 2016).

Weisblatt says this is a major step forward, both for HOSE and Vietnam’s economy in general, and a lot of it has to do with bringing new blood into the investment scene. He says that potential investors “love the story in Vietnam – the economy is doing great; there’s the emerging middle class; all the foreign investment; the trade agreements.”

But they’ve also wondered, “What can we invest in?” Right now around 80 to 85 percent of investors in HOSE have been local, but Weisblatt is seeing strong interest from new foreign investors.

stock market in hcmc

Sweeping Decrees

Plus, the government has recently made a change that might affect the market more than we know. It’s called Decree No. 60, and it’s getting brokers pretty excited.

Before Decree No. 60, foreign ownership of all publicly listed companies was limited to 49 percent for most stocks and 30 percent for banks. With Decree No. 60, however, companies can now apply to increase their foreign ownership cap to 100 percent.

So far only about 12 companies have increased their limits, but Weisblatt is hoping that more will follow suit. He is optimistic and believes that a whopping $100 billion will be listed by December 2017 – a $30 billion increase from 2016. What will make up this substantial growth? At least part of it will come from foreign investors.

stock market in hcmc

Credit: Vietnambreakingnews

Frontier Blues

Right now, Vietnam is classified as a Frontier Market by the Morgan Stanley MSCI, a yearly grading system that analyses the growth and effectiveness of global markets.

Many institutional investors are prohibited from investing in Frontier Markets, so the Vietnamese government, as well as brokers, are working hard to move Vietnam to the Emerging Market classification, which would improve its prestige and reputation and attract more globally managed money.

Size and liquidity are factors, sure, but these aren’t the only things Morgan Stanley looks at. HOSE will also need more access to foreigners (Decree No. 60 should help with this) and increased transparency in general.

These developments are all very doable, Weisblatt says, although it may take a few years. Just as important is what going public is doing for Vietnam’s businesses in general. Shareholders are now demanding higher levels of profitability, efficiency and transparency. With these changes, it looks like shareholders will get their wish.

 


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