Our Chairman to participate in CITYSCAPE DUBAI

Our Chairman, in his capacity as Chairman of TCK Group (www.tckgroup.org), has been invited to participate in the Roundtable discussion at CITYSCAPE DUBAI (5-8 October 2009) titled " Vietnam, Indonesia & Cambodia: Too early or too late? "

Wearing two 'hats', he will be looking for opportunities for both companies and looking forward to meeting new clients. This will be an opportunity to let people understand the opportunities in this emerging market.

If you are from Dubai or the area and would like to meet with our Chairman, please feel free to contact him (karl.john@aucojv.com), so that he can set aside some time outside of the conference.

Despite the doom and gloom, the Vietnam story is not all that bad. Transitioning from a command and control economy to a market-orientated economy has its benefits! Before the free market has been achieved, the Government is still able to have some influence.

To quote Don Lam, CEO of Vinacapital (see post below), "In terms of the macroeconomics, Vietnam saw the financial crisis take hold much earlier than elsewhere. In early 2008, the Vietnam economy was hit with inflation and together with a slight devaluation in the Vietnam Dong, the economy slowed, so the liquidity crunch started in Vietnam around the first quarter of 2008. The Government then initiated policies which reduced inflation and stabilised the economy, so Vietnam was back on track around July 2008 – but the world crisis hit with the Lehman bankruptcy in October. So although Vietnam started to go into the crisis earlier, we got out earlier, which meant by late 2008 and January 2009, Vietnam was already on the way to recovery. This is one of the reasons why in the first quarter of 2009, the Vietnam economy was actually growing about 3.1 percent annualised."

Vietnam is one of the safest countries that I have lived in. Political stability is one of the main risk factors that investors take into consideration, when evaluating an investment.

Demographics is another factor that investors take into consideration, two-thirds of Vietnam’s population are under the age of 35. As Don says, this is Vietnam’s baby boom. This is due to history and the American War, as it commonly referred to here.

Vietnam has a lot going for it, to take full advantage of all that Vietnam has to offer, it is crucial to make use of local intelligence.

Vietnam: Opportunities for investment

Despite the doom and gloom, the 'Vietnam story' makes for interesting and encouraging reading. This interview was published at http://www.cityscapeintelligence.com/page/328008.

Don Lam, CEO of Vinacapital, is someone who knows Vietnam well. I thought it would make a change for someone else to speak to the opportunities for investment in Vietnam.

Vietnam Opportunities for investment
05 May 2009

Interview with Don Lam, VinaCapital

How has Vietnam been affect by the global financial downturn?

In terms of the macroeconomics, Vietnam saw the financial crisis take hold much earlier than elsewhere. In early 2008, the Vietnam economy was hit with inflation and together with a slight devaluation in the Vietnam Dong, the economy slowed, so the liquidity crunch started in Vietnam around the first quarter of 2008. The Government then initiated policies which reduced inflation and stabilised the economy, so Vietnam was back on track around July 2008 – but the world crisis hit with the Lehman bankruptcy in October. So although Vietnam started to go into the crisis earlier, we got out earlier, which meant by late 2008 and January 2009, Vietnam was already on the way to recovery. This is one of the reasons why in the first quarter of 2009, the Vietnam economy was actually growing about 3.1 percent annualised. We are expecting about 5 to 5.5 percent growth for 2009 and it is one of the few countries in Asia which has recorded a growth rate for 2009 so far – we are second only to China at the moment in terms of the growth rate for 2009. So although 2008 was a tough year for Vietnam 2009, looking forward it looks like a very positive year as we will recover much quicker than the rest of South East Asia.

From the real estate perspective, 2008 prices in Vietnam dropped, depending on area and depending on the type of asset, between 30–50 percent. On top of that, in 2008 there was a liquidity crunch in Vietnam so you could not borrow money to build anything and even if you could, interest rates in 2008 were at about 20 percent. Finally, construction costs increased by 100 percent, so as a developer 2008 was a tough year. Construction activity and development slowed significantly in 2008, so entering 2009 there was a huge supply and demand gap. There is not enough supply coming on the market but the demand is still significant, as even with the slowdown last year the economy still grew 6.3 percent. With economic growth, people have housing needs but there is no supply because no one wants to build. So 2009 I think offers a significant opportunity. One reason is that interest rates have gone back down to 9–10 percent, half the levels they were previously, and construction materials have dropped back to about half the levels they were in 2008. So you have a lower financing cost, you have a lower material cost, real estate land has dropped again by, in some cases, 30 or 40 percent. This is now a perfect opportunity for development to take place.

Are banks lending again?

Yes and interest rates have dropped so there is significant liquidity in the market. In fact, foreign banks are not lending in Vietnam but local banks are flush with liquidity because the government decided in early 2009 to stimulate the economy by pumping a lot of money into the system. The actual stimulus programme is about US$6bn, that sounds small but what they do have is something called the subsidised interest rate. In certain sectors, the Government will subsidise a 4 percent interest rate so that means people can borrow at 4 percent per annum. As a result, with the low interest rate and the banks lending, companies have borrowed a lot of money over the last three months.

Is the real estate sector driven by domestic demand or foreign investors?

It is purely domestic driven, you just have to look at the demographics – about two thirds of Vietnamese are under the age of 30. So because we have such a young population, a lot of them are in the stage of early marriage when they are moving into new family housing. Similar to Europe and the US after World War II, you have a baby boom and so this segment of the population continues to have high demand for basic housing. That is why 2008 was a bad year in terms of people not building. Some of the low end and mid level housing prices increased even though the land had dropped in value, as there was no supply.

Are developers moving away from high end to more affordable housing?

This is exactly the case in Vietnam because before the credit crisis, a lot of developers in Vietnam really focused on the high end product, such as serviced apartments, five star hotels and resorts. Now in early 2009 because we are mostly focusing on the domestic sector and the mass market, a lot developers are now focusing on the mid level mass housing market. The other reason for that is that now it has become more profitable to focus on the mid market because the land costs have dropped, financing costs have dropped and construction material costs have dropped therefore you are able to cater for the mass market and still make a fairly decent profit margin.

Is there investment into infrastructure development?

Yes and I think that is more true in Vietnam than in most places because we are behind in infrastructure and a lot of investment is needed. In addition, the Government stimulus programme has given the 4 percent interest rate subsidy to infrastructure projects. The Government actually sponsors infrastructure as a way to stimulate the economy, just like in China. One way to stimulate the economy is to build the infrastructure you have wanted to do but haven’t had over the last few years because you worried about the inflationary effect. So infrastructure is picking up significantly in Vietnam because of the stimulus package and because of the slow down. The infrastructure being developed is mostly roads and ports at the moment. The energy sector is being developed, but energy needs a lot more money.

Is the government looking to establish Public Private Partnerships?

They are looking at it. They have been looking at ways to learn from the UK in particular and they have a number of delegations going to the UK learning about PPP. I think it will be a while before this is implemented, mainly because we need to have proper legislation in place before you can do that.

What improvements do you think need to be made in the regulatory environment?

I think the current regulatory environment is very good, that’s why in Vietnam we attract significant foreign direct investment because the regulations are very open. But PPP is a new space so they need time to develop the legislation. But the overall foreign direct investment legislation is very good and last year Vietnam attracted US$60bn of foreign direct investment commitments.

What challenges do you see for Vietnam over the next 12 months?

I think one of the biggest challenges and one of the biggest worries is that because of the stimulus programme and with money being pumped into the system, inflation will come back. When inflation comes back, one of the first things it will do is squeeze out liquidity again to slow down inflation. The second worry we have is because of lot of lending is taking place over the last six months or so, there may be some bad debt entering the system much sooner and that with the weak financial system we have in Vietnam may have an impact overall.

Are you concerned about diminishing levels of foreign direct investment?

I think FDI will continue to come in, although at a slower pace – which is fine. The domestic demand will cover the shortfall in foreign direct investment. Keep in mind also that a significant part of the Vietnam economy is relying on the domestic sector but also agricultural commodities for export such as coffee, rice, and sea food exports. For example over the first quarter of this year, Vietnam was one of only three countries that had a positive growth of exports to the US, mainly because our products have competitive prices. But because of the economic growth they are starting to have a shortage of workers in rural areas, so with the slowdown in the industrial area, people are actually moving back to the countryside. The difference between China and Vietnam is that when the city worker moves back to the countryside in China they are unemployed, but when the Vietnamese worker from the factory moves back to the countryside, they have a job right away. There is actually a shortage at the moment of workers for agricultural cash crops as an export commodity.

If you look at Vietnam within South East Asia, economic growth here will likely lead the region and will continue to attract investment because of the political stability. Political stability in Vietnam is the key driver of foreign direct investment and that is why we are not so concerned about jobs and the level of FDI for 2009 because we know it will come back – political stability is one of the key things foreign investors are looking for.

Are there any challenges for foreign investors that need to be resolved?

Yes, I think what is true in most of the emerging markets is the problem of bureaucracy, red tape, corruption, and any of the emerging markets have the same issue. Foreign investors just have to be smart about it and at least have a proper local partner in place so that they can navigate around these issues. Anywhere in South East Asia is exactly the same. To find a local partner in Vietnam, typically people go through their traditional banker, accountant or lawyers who make a recommendation for them. In real estate it is simple because there are not that many major players so you can check around on reputation.

Doom or Boom in Vietnam in 2009?

I came across this interesting report on consumer behaviour in Vietnam. It's current and informative, which is a rare treat in Vietnam!

Produced by the Nielsen Company and quoted from their website:
Doom or Boom in Vietnam in 2009?
What will the global economic tsunami wash upon Vietnam’s shores? Whilst much of the world is in economic and financial turmoil, country after country being swallowed by the economic tsunami, Vietnam appears relatively calm. The calm before the storm, perhaps?

There is much speculation over whether Vietnam will ride out the storm or be swept up in the global economic and financial tsunami. Some of Vietnam’s poorest are feeling the effects already.

According to Nielsen Vietnam's Omnibus, household income is increasing and while the rich are getting richer, there is an emerging middle class.

The average claimed monthly household income today has is US$300 and household incomes over 4million VND have grown from 20% in 2002 to over 80% in 2008, representing a huge increase in disposable income. So, how are consumers reacting to the global economic crisis?

Happy Reunification Day

Victory Day (Ngày Chiến thắng), Reunification Day (Ngày Thống nhất), or Liberation Day (Ngày Giải phóng) is a public holiday in Vietnam that marks the occasion when the Viet Cong and North Vietnamese troops captured Saigon (now known as Ho Chi Minh City) on April 30th 1975 .

This signalled the end of the Vietnam War or sometimes called the American War, known in Vietnamese as Chiến tranh Việt Nam (Vietnam War) or Kháng chiến chống Mỹ ("Resistance War Against America"). It was the start of the transition period towards reunification, which occurred July 2, 1976.

Vietnam to produce affordable electric-powered scooter

As reported on CNN
By Dean Irvine


Much has been made of the electric car driving to the rescue of ailing automobile manufacturers and saving the planet at the same time. But what if that eco-savior came on two wheels instead of four?

Lean, green electric machine: KLD is hoping to kickstart the electric scooter industry with its new engine.

A high price tag, a limited range, sluggish performance and the tendency not to work when they get wet, have meant that electric scooters are a rare sight on the roads.

However, KLD Energy Technologies, an electric engine company based in Texas, believes that its new electric motor can overcome all these problems and kick-start the sector. It's teaming up with Vietnamese motorbike manufacturer Sufat to produce an affordable electric-powered scooter that has a performance just as good as a normal petrol-powered bike.

"We chose Vietnam [to launch the bike] because there are 22 million scooters in a country of 85 million people. That's a lot of people riding scooters in a contained area and the pollution is a concern. All governments in southeast Asia are looking for solutions [to pollution problems], but so far there hasn't been one. We believe that we've found that solution," Christian Okonsky, founder of KLD Energy Technologies told CNN.

Rather than looking at making batteries more efficient, KLD has improved the performance of the engine itself. The company has built an engine using nano-crystalline composite materials, which it believes is 10 times more efficient than traditional iron core motors, giving an output of 2500 hertz.

Together with a computerized motor control, the KLD engine is compatible with any type of battery. Top speed of the KLD scooter is about 55 mph, which is almost double that of many electric scooters and delivers twice as much torque, accelerating from 0 to 50 mph in ten seconds. The engine also doesn't require a transmission.

The range on a full charge depends on the type of battery used, although in tests KLD says that its motor system extends the distance a battery can go before a charge is required by 40 percent.

Cost-efficiency of components and years of technological development have created the engine KLD has the sole license to produce.

"The nano-crystalline material was developed 20 years ago, but it was incredibly expensive and people couldn't figure out how to use it in a motor. Even 10 years ago a computer, to run this kind of high frequency engine, would have been more like the size of a desk top computer. The magnets we use today that cost 20 cents 10 years ago would have cost $4 to $5," said Okonsky.

Vectrix Electrics is another company that has been developing electric scooters, so far selling only in North America and Europe. While the performance of its scooters is comparable to KLD's, their models sell at a much higher price tag around $11,000. Earlier this month Vectrix reported financial difficulties and has been forced to make staff cuts.

Okonsky, however, remains positive that the KLD scooter engine will be successful and that there is a market for electric-powered scooters. By the end of the year KLD is aiming for 2,000 scooters a month to be produced by Sufat with its electric engine. The projected retail price is around $1500, only slightly more than Sufat's existing bikes that sell in Vietnam for between $800 and $1250.

"Among two-wheelers a scooter is the best for electric drive," auto industry analyst John Wormald of Autopolis told CNN.

"A motorcycle is too performance-driven, so it's not really suitable, but a scooter would be. For many electric bikes with very limited battery capacity, the power is just an assist and the battery can be heavy which isn't great, if you're cycling."

Yet the market for electric bikes -- the pedal variety with a battery pack -- has been booming, particularly in China. According to the China Bicycle Association, sales of electric bikes in China stood at 58,000 in 1998, compared with the 20 million recorded just a decade later in 2008. Video Watch the report on electric bikes ».

However, rather than replacing cars, the majority of electric bikes are affordable substitutions for bicycles, as Chinese cities continue to grow and daily commutes get longer. Their impact in reducing pollution then is open to question, as car sales in the country continue to rise.

Ultimately the real eco-credentials of electric vehicles depends on how the electricity is generated, but for helping to relieve vehicle exhaust-filled streets, especially in Asia's two-wheel dominated city centers, electric mopeds could go a long way.

As the idea of electric vehicles as viable substitutions for petrol-powered ones becomes more widely accepted, Okonsky's bigger challenge will be convincing skeptics that the old problems of electric scooters have been overcome.
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"I'm always asked, 'What happens if I go through a puddle, will it still work?' The answer is yes," Okonsky said.

In fact, Okonsky says that they've tested their engine underwater and it still works. Expect a video of the trial on KLD's Web site soon

Vietnam's PM keeps cool in region's hottest seat

South China Morning Post
April 25, 2009 Saturday

By Greg Torode, Chief Asia Correspondent

As prime minister of Vietnam, Nguyen Tan Dung occupies one of the hottest seats in regional politics.

His country may be far from a democracy, but Mr Dung (pronounced Dzung) still must deal with some tough constituencies.

First, there are the Politburo and the two other leaders who sit at the top of the ruling troika, Communist Party General Secretary Nong Duc Manh and President Nguyen Minh Triet. And in the shadows are the often conservative party elders - old-guard revolutionaries - who still hold considerable influence across Vietnam's collective leadership.

More visible is the public. Vietnam's young and fast-growing population that is eager not just for continued economic growth, but for reforms and improved social conditions - whether greater freedoms or improved health and education systems. As the highest-profile of all Vietnam's leaders, Mr Dung is the lightning rod, the one who must keep them happy.

Then there is a far smaller grouping - the sometimes embattled band of foreign investors determined to make the most of Southeast Asia's second-biggest population and newest tiger economy.

Three years into his five-year term, Mr Dung, 59, has had to deal with all those domestic groupings as well as managing foreign policy - a complex effort to build ties with all major powers while ensuring Hanoi is beholden to no one.

Mr Dung had foreign investors and Beijing on his mind as he visited Hong Kong and Macau this week - the first official visit by a senior leader from modern Vietnam.

He sought to ease any fears from foreign investors that the international financial crisis would spark a further slowdown in Vietnam's reform process or lead to further coddling of inefficient state-owned enterprises. And by promoting ties with Hong Kong, he made clear he believed he was helping ties with China, Vietnam's giant neighbour and former enemy, and its most sensitive relationship.

"The potential for co-operation between Vietnam and Hong Kong is enormous," he told the South China Morning Post before his arrival.

"The two sides need to make greater efforts to tap and unleash this potential," he added, saying it could only strengthen Sino-Vietnamese ties in general.

And, according to sources on both sides, Mr Dung left Hong Kong after a long and relaxed banquet with Chief Executive Donald Tsang Yam-kuen at Government House satisfied there was a new momentum to the official relationship. For many involved in the private sector, it is about time, given an official relationship that has lagged more than 20 years of expanding trade, investment, tourism and social ties.

Smiling and apparently at ease, Mr Dung dealt with three business forums, insisting that Vietnam was "holding up" better than many in the region.

He anticipated growth in gross domestic product for this year dropping as low as 5 per cent - hardly enough to absorb Vietnam's growing ranks of young workers - but that recovery was close.

"Vietnam will meet its commitments to foreign investors," he said at one session, hooked up to major financial capitals, answering questions in Vietnamese. "Vietnam is a friendly and reliable partner."

If he seemed relaxed, on tour, it is tempting to think it could be because life is tougher at home. In late 2007, months before the global crisis was apparent, his government was grappling with double-digit inflation and asset bubbles as foreign currency flooded in.

With party conservatives worried about rising social discontent, he tightened liquidity - rattling alike, at times, foreign investors and the chiefs of freewheeling state-owned enterprises. Unpopular as he may have been at times, either by luck or good management, the tough action meant that Vietnam was better placed to cope than it might have been as international markets tumbled.

Amid the pressures, he has faced a lot of internal elements nipping at his heels.

"Foreign investors have come to see him quite favourably," a veteran foreign banker in Ho Chi Minh City said. "There was concern that he wouldn't be able to handle the economy or do enough to rein in the worst parts of the bureaucracy, but he has shown commitment and a willingness to listen."

On the streets of Hanoi and Ho Chi Minh City, it still may not be enough for many. Mr Dung took office amid unusually high hopes after a decade of being touted as a fast-rising star in the leadership.

The youngest prime minister in modern Vietnam, Mr Dung injected a touch of dynamism to the ranks of grey apparatchiks - even if, as a former Interior Ministry official and teenage guerilla fighter, he had enough polish on his party credentials. He had a law degree and had also headed the State Bank.

Initially, there were online, meet-the-public sessions and he appeared eager to cut a dash on the regional and international scene, playing golf and sporting sharp suits.

"I'm not sure he has ever really met our expectations," said Binh, a 28-year-old Hanoi broker. "There was a great deal of hope when he took office that he would be something really new - maybe the job and the system are just too difficult. It is hard to see him charting a new course at this point."

Amid the domestic pressure, some have also questioned the activities of his children – a frequent problem for Vietnamese leaders. His daughter, Nguyen Tan Phong, has a master’s degree in business administration from Geneva University and has managed Swiss investments in Vietnam – a pursuit that could have proved trickier had she represented a less neutral country. She is also married to a Vietnamese-American.

For the moment, however, there is little doubt Mr Dung is secure in his job - even if his precise legacy is still a work in progress. He repeatedly told his audiences that he hoped to see signs of recovery in the next three quarters of the year. After a tough three years, Mr Dung has his own reasons to hope his economic advisers are correct