How to Manage Risk?

Method

Depending on the size and characteristics of the enterprise that they may establish a risk management department consists of experienced professionals, or at least they should use the risk management services of professional consulting and law firms with extensive experiences in this field. The risk managementdepartments have to perform many tasks but should focus on three main functions: risk identification, risk analysis and risk response.

First, we need to identify the risks. It is the process of gathering information, data and analysis of factors that may impact negatively on the achievement of goals, including the inside and outside, macro and micro factors. We can use analysis tools such as brainstorming, interviewing, root-cause analysis, checklist, SWOT analysis… along with other tools that are used in the strategic planning process. Enterprises need to create and regularly update the information and data system to serve for the analysis.

The next process is risk analysis, in which we need to analyze to assess risk that has been identified at the main aspects: the root causes of risk, risk probability and condition to occur, scope and displaced persons entitled to, impact of the risks, factors that change the level of impact…

Finally is the process of responding to risks. More specifically, it is the process of choosing the way to respond to risk, which may include measures to: (i) risk aversion (abandon risky activities); (ii) risk prevention (eliminate the root causes of risk); (iii) reduce the likelihood of risk; (iv) eliminate the negative impacts; (v) reduce the negative impact; (vi) risk sharing; (vii) risk transferring (buy insurance, use derivative instruments); (viii) take risks and preparing resources to overcome the consequences.

Principles

Risk management must ensure the main principles: (1) create value (cost of risk management has to lower than benefit that it brings); (2) is an integral part of the business activities; (3) attached to the decision making (all important decisions have to consider risk management); (4) to be systematic and follow a throughout process (5) are regularly evaluated and improved.

It can be said, at the present, only the financial institutions and the banks are interested in risk management activities (although not enough) while most other companies have not focused on this activity. Towards the sustainable development, enterprises cannot just “take risks” in the passive and desperate ways, they should be towards to manage risk in proactively and wisely ways.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Risks in Business Activities of Enterprise: The Arising Causes

Risk is something that nobody expected but we have to accept to live together with it. Identifying risks and creating solutions to prevent it and also minimize losses when it happens are what businesses should do. That is positive solution instead of accepting risks.

So what “risk” is? There are many definitions of risk, in which there are two main points. First, risks are unexpected events. Second, when risk occurs, it causes losses to people and society. The business operations of enterprises are very diverse. In theory, such operations are always come with risk. Instead of statistic the risks (very difficult), we should approach the issue from the step of identification the causes of risk. It will help businesses to have better prevention against the risk. Here are some common causes of risks that businesses often encounter.

There are 8 main causes of risk. First, that is the natural environment, such as storm, flood, drought, earthquake, volcano, tsunami, sea level rising and the earth “hot” up… These risks often have some common characteristics: the ability to forecast and predict is low, happen suddenly, cause damages on a massive scale, not just for one region, one industry, one community but for the whole economy, a number of countries or the whole world. The prediction and forecast of these natural disasters are difficult but they active as a rule. Hence, enterprises can proactively prevent or choose appropriate solutions.

The second risk is the risks from social environment, social structure and population. That is the change of value, standard, human behavior, the scale of values in society and the social characteristics… They are source of risk for commercial operations and investment activities of enterprises. However, a society that encourages nurturing the creative values and the inspiration investment would certainly the good protective shield for businesses.

Thirdly, there are risks come from the environment where the cultural background is low… A society where there is low literacy, lack of cultural norms, morality is not enhanced then how well the law will be enforce? Once the laws are not enforced effectively, a thousand risks may occur. There will be a stunning political rights, the rising of kinds of crimes such as theft, looting, rioting, economic fraud underground, reneged contract, counterfeiting, piracy, inciting religion, ethnicity and hatred… As a result, the kind of snatching, fraud and deceptive business will dominate.

Fourth are the risks from political environment, where lack of institutions to protect the freedom, democracy, property rights of people in general and businesses in particular. Political environment includes the stability in politics, security and safety for enterprises and people. A country that usually has national policy changes, coups, wars, riots, ethnic and religious conflicts, intervention in markets that lack of standards, policies were dominated by the interest groups, discrimination, corruption… are causing serious risks to businesses, causing them to lack of business confidence, lose investment momentum and can harm the economy and society.

Fifth are the risks come from economic environment. A strong economy is an economy that has high resistance with the ability to resolve the crisis in the best way in the direction of transparency, low cost, high sustainability. An economic environment where there are often crisis, inflation, erratic pricing, instable supply and demand, exchange rate changes frequently, shortage of goods and services, uncontrollable monopoly, fair competition is only on paper… along with the lack of technocratic skills shall be considered to be major risks for enterprises. Furthermore, on the other hand, the challenges come from an economy with high competitiveness, the drastic changes of technical science and information technology would also be the risk for enterprises that lack of the ability to adapt to changes.

Sixth are the risks that resulting from the regulatory environment that lack of transparency in three fields of legislative, executive and judicial. This is also the danger of healthy businesses. A system of legal documents should be issued with the effective participation of the business community, according to the criteria of sustainable, friendly, fair and easy to apply. An effective law enforcement system should be operated under the motto support, promote and facilitate business. A system of reliable justice, respect for justice and ensuring effective law enforcement with a society that respect for ethic and law would be an ideal environment to encourage investment and development of business. Conversely, a businessenvironment where the law is inconsistent, contradictory, overlapping, change suddenly and shady, law enforcement lacks transparency, openness and efficiency, the application of the law lacks fairness, property ownership right and the right to protect the contract are not only abused but also the cost is too high… are sources of risk, causing severe damage to the business.

Seventh is the risk coming from business partners. They can be investors, joint ventures, cooperation or customers of the business. Have you ever questioning that where do they come from and are they reliable in terms of skills, experience, financial strength, legal and corporate governance. When establishing a relationship in business, both parties should understand and trust each other before coming to the steps of negotiating, signing and implementing contracts. Regarding business contract, it should be made very carefully because each paragraph stalking the risks that businesses need to take into consideration such as terms, payment, tax, limitation of liability, termination of the contract ahead of time and contract dispute resolution…Hence, the contract should be made carefully by a professional unit.

Eighth is the risk coming from the enterprise itself such as business attitudes towards risk, mistakes in business strategy and enterprise management, the weakness of the managers and employees, lack of ethics and business culture, lack of motivation, lack of internal unity…The most important thing is to regularly inspect and test the control systems of corporate is effective or not. Corporate governance is the whole system of rules and regulations. Good corporate governance will help the strategic decisions of the enterprise to be issued in the most enlightened and effective way, along with the best elimination of risk. Good corporate governance ensures utilizing all resources of business.

Before conducting business operations, businesses have to conduct risk analysis from at least 8 reasons above, then who dares to ensure that doing business is easy.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Correct Understanding of Risk Management

The concept of risk is not strange to businesses in particular and those who do business in general. “Doing businesses is taking the risk” became a popular saying of the business people, whether they are owners of large or small businesses.

Although business has to face with risk every day and every hour but risk management is relatively new concept, not many businesses have understanding about it. Therefore, the risk management activities of the business are often being conducted in a half-hearted way. Not many businesses, including large enterprises, have proper risk management departments in their organizational structure. Hence, the uncertainties and crises are usually occurs, causing negative effects and sometimes become disaster for the business.

There are always potential risks in any business environment, whether that environment is developed with clear and transparency rules, or that environment is primitive environment with many confusing and complicated. If the business environment is primitive with inexperienced entrepreneurs, there will be more risks. Risk can be derived from many factors in which the subjective factors may cause risk to occur more with more severe consequences, or vice versa, enterprise can stop the risk or significantly reduce its impact. This depends on the risk management capacity of organizations and businesses.

Risk management is the process of analyzing the environment (inside, outside) to identify, analyze, evaluate, classify, ranking and implementing appropriate solutions to respond to risks to eliminate or minimize the negative impacts that may have. In many cases, risk management includes identifying opportunities within the risk, in order to exploit, take advantage of them and bring benefits to compensate for the damages caused by the risk.

Risk management is different from risk control and risk handling. Risk control is the response activities for the risks that have been identified. Risk handling is dealing with risks and crisis after it has actually occurred. Risk management is the systematic activities, maintaining at every level and assigning to a specialized department.

Properly understand the nature and importance of risk management, business will definitely not hesitate in setting up a professional risk management system. An effective risk management system helps businesses to identify risks early (which are very diverse, extensive and constantly changing), evaluate the possibility to occur and the degree of harm to have effective response measures. Unfortunately, the subjectivity is still the characteristic of many businesses in the risky business environment.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Risk Management in Enterprise

Risk and manage risk

Conceptually, risk is any uncertainty that may be harmful to the ability to successfully implement the business objectives of the enterprise. Businesses can identify potential risks to manage them. Fully understood, risk management is a process of a comprehensive review of the business operations to identify potential risks that may impact adversely to the operational aspects of the business. Based on that, the response solutions will be given corresponding to each risk. We can also understand that the risk management process is a process that is organized in a formal way and ongoing to determine, control and report the risks that can affect the achievement of the business objectives of the enterprise.

Requirements for operational risk management

To ensure that risk management activities are carried out as planned, the implementation must ensure the following requirements:

• Raising awareness about the risks as well as the ability to cope with risks appropriately throughout the enterprise;

• Formalize the process of risk management;

• Develop unified risk management processes in the enterprise;

• Transparency risks;

• Including risk management process as part of the internal control system;

In fact, well organized and efficient risk management activities will contribute to add value to the enterprise, specifically:

• Help improving operational efficiency and create competitive advantage;

• Contribute to the allocation and efficient use of corporate resources;

• Minimize errors in all aspects of business operations…

Recently, with the powerful impact of high inflation rate and economic recession caused by the global financial crisis to enterprises, people are concerning more about risk management activities. Many experts believe that well organized and effective operated risk management system will help businesses withstand and overcome fluctuations.

However, how to organize a complete risk management system is the fact that not many businesses are well understood. The worrying thing is many businesses supposing that with the use of insurance services, their businesses are making adequate risk management. That is completely incorrect.

Risk management policies and implementation

To establish risk management systems, enterprises should start from the development of risk management policy. This policy will define the approaching and managing of risk. In addition, risk management policies will clearly defined responsibilities for risk management throughout the enterprise to Board of Directors; The subordinate units; Departments; Risk management department (if any); the internal audit department – internal control. The implementation of risk management activities should be tied to business strategy, annual budget plan and the business cycle in the enterprise.

Risk Management Process

Basically, risk management processes typically include basic steps such as: confirmation of the business objectives, identify risks, description and classification of risk, assessment and risk ratings, response planning development, reporting an update on implementation, monitoring the process of implementation, review and improvement of risk management processes. Details of some of the main steps in the risk management process are as follows:

Confirmation of business objectives

Risk management activities are organized and implemented towards ensuring the successful implementation of the enterprise objectives. Therefore, at the begining the risk management process, the first task that business leaders need to do is confirming the operational goals of the business. This will be the base to ensure that risk management activities are held in the right direction.

Identify Risks

There are many methods to identify risk. Each method has different advantages and disadvantages. However, the following methods are considered using to determine the risk:

• Organize risk assessment workshop;
• Organize “Brain Attack” meeting;
• Questionnaire;
• Audit and inspection;
• Based on industry norms;
• Situation analysis

In fact, the method of determining risk that are used most in organizations is organizing risk assessment workshop. Attending the workshop are the Board of Directors and leaders of all departments. Members at the workshop will exchange information to give a list of business risks. In many cases, the result of the risk identification process is a long list of potential risks. However, this should not be too worried, the implementation of the next steps of the risk management process will help identify clearly the risks that are really the great risk to enterprises.

Description and classification of risk

After identifying potential risks, the next step is to describe briefly but specifically about the origin, cause, consequence and impact of each risks to the enterprise.

Next, we will implement the risk classification. There are many different types of potential risks for enterprises. They can originate inside or outside the enterprise. Based on the nature of the risk, they are many way to classify risk. However, the most common way is to classify risk into 4 groups as follows:

• Financial risk: interest rate, exchange rate, credit source, cash flow and ability to pay…;
• Strategic risk: competition, customer changes, industry changes, risks for research and development activities, intellectual property…;
• Operational risk: the leaders, corporate culture, violation of management rules, financial control, information systems…;
• Dangerous risk: environmental risks, supplier, natural disaster, risks for assets, contracts, products and services…

The classification of risks as above will help enterprises to manage risk in a systematic way.

Assessment and risk rating

Enterprise resources are limited while the number of the risks is great. So, the next step is to organize, evaluate and ranking risks according to priority level of response. Enterprises will analyze, evaluate each risk according to two criteria: the possibility of risk and the extent of the risks affecting the business if happened. The risk that the businesses need to prioritize response and prevent is the risk with high likelihood and degree of influence.

Develop response plans

Develop response plans is an important stage in the process of risk management. At this stage, enterprise should given the preventive measures and specific control should be taken to prevent and minimize damage if the risk occurs. There are 3 contents that must be determined for each specific risk when developing response plans:

1.      Measures that should be implemented to prevent risks;

2.      The completion deadline for those measures;

3.      The person that responsible for managing that risk.

Monitoring the implementation of measures

In the process of implementation of response measures, businesses need to build a system of reporting regularly to ensure strict control of the implementation process. Enterprises also need to ensure that all shortcomings in the implementation of risk control measures must be timely reporting to leaders.

At the same time, business leaders must also build a culture of risk management to every staffs in the enterprise. It is high time that the corporate governance should seriously view the role of risk management activities, consider setting up and maintaining a risk management system in business. Practical experience shows that, once the risks are forecasted, enterprises can fully develop and deploy effective response plans for sustainable development.

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Risk Management Necessity in Vietnam?

As Vietnam further integrates into the world business, more investors are eyeing Vietnam for investment. As part of investment due diligence, risk management are always well considered before foreign investors decide to do business with Vietnam partners.

In any parts of the world inluding Vietnam, risk is an inevitable factor in business operation activities; higher return is always accompanied by higher risks. Coping and managing risk is an integral part of any business in order to make profit and create value to shareholders in import export transaction, investment, or merger and acquisition activities in Vietnam.

However, in our daily consulting practice, we have seen a number of businesses whom do not manage risk effectively and furthermore not fully understand about the risks that they are facing.

Typical risks in developing countries like Vietnam are political risks, policy risks, regulations risks, credit risks, bribery and corruptions, and organized crimes.

On daily transaction in trading, according to Vietnam Ministry of Industry and Trade, there are situations a number of corporate scams between Vietnam and foreign enterprises are reported. In particular, foreign companies sell goods or provide services to partners in Vietnam and in return the Vietnam partner fail to pay.

On a larger scale in FDI through business formation or M&A origination and execution, businesses that do not improve the risk management process will have to face with a lot of different types of risks: serious financial losses, adversely affecting cash flows and the value of shares, decreasing prestige with customers, employees and investors.

Many business leaders often put heavy emphasis on the business activity, profit, and revenues instead of concentrating more on risk management especially understading business partners through corporate intelligence investigation, background studying, adverse media search through professional consultants in Vietnam whom understand languages, cultures, legal environment and busieness practices. Further searches could help foreign investors to understand the company itself, owners, shareholders, members of board of directors of partner companies whom make daily decisions of the business.

In the period that global crisis has been predicted that almost bottom out and start to show signs of recovery, although the recovery process can occur with different speed and characteristics depending on sector and location of the business, the fully preparation of business in all aspects including process and risk management strategy could helps business not falling into the passive and also have more possibilities to take advantage of growth opportunities after the recession.

Recently in Vietnam with the impact of high inflation rate and economic recession caused by the global financial crisis, enterprises are increasingly concern about risk management activities. Many experts believe that an effective and well organized risk management system will help businesses withstand and overcome fluctuations.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Coastal Shipping in Vietnam

1.Coastal shipping competition

According Maritime Bureau, in 2015, although business activities of coastal shipping enterprise still had some difficulty, the total output reached 118.7 million tons, increasing 9.5% compared to 2014.

A Deputy Director of Vietnam Maritime Bureau, Mr Bui Thien Thu said that domestic shipping had taken charge of 100% of the domestic demand of coastal shipping. The domestic container ships has increased to 39 ships, a total increase of freight load is 200% from 2013 to 2015. The coastal shipping routes has transported 6.1 million tons of cargo including coal, slag, stone, rock, metal, fertilizers, cement, ore, fuel oil …

In 2015, output of goods in Vietnam’s seaport system continues an impressive growth, estimated at 427.3 million tons, rising 14.6%, in which the container reached 12 million TEUs, rising 15.5% compared to 2014.

According to Deputy Director of Bureau Bui Thien Thu, cargo volumes through Vietnam’s seaport system in 2015 in accordance with the approved plan in Decision No. 1037 of the Prime Minister in 2014 was 410 million tons. Thus, the volume outperformed 4.1% in 2015 compared with the initial plan.

However, the goods have been misallocated between different domestic seaports. To resolve this situation, there is a need to improve connectivity transport infrastructure and supporting services to relocate goods in different seaports, while speeding up the relocation of the port on the Saigon River and Ba Son shipyard.

During the year, Vietnam Maritime Bureau has completed the review and adjustment of detailed planning of port group 1, 2, 3, 4 and 6, thus managing the system more effectively. The Ministry of Transportation approved this plan.

By 2016, the total output of goods through the port system is estimated to reach 470 million tons (increasing 10% compared to 2015), in which each container is expected to reach 13.3 million, increasing 11% TEUs.

2.Vietnam Government published policy on Coastal Shipping, particular container services

In late May 3/2013, the Ministry of Transport has issued Document No. 128 / TB – BGTVT decision to terminate the operation of foreign fleets in terms of container shipping service in domestic routes, consisting of 20 units with a total tonnage of 500,000 DWT.

The foreign ship owners are not able to disapprove this decision since prioritising domestic fleets is compatible with the Law of the customs, as well as commitments to the world Trade Organization (WTO) on the protection of the members.

From 2013 to 2015, the fleets of Vietnam were given good opportunity to win back market share in terms of the domestic container shipping, which used to belong to the foreign shipping companies (with an estimated value of 1,000 billion / year). There are various container shipping companies gaining loyal leads which ground stable roots for domestic fleets.

Also Vietnam Maritime Bureau in collaboration with Ministry of Transport, Vinalines, Vietnam Ship Owners Association and Vietnamese ship owners operating on domestic routes ensure the limitation of congestion at seaport.

Average freight rates of Vietnamese fleet are offering customer around 5.2 million / 20-foot container for the north – south journey. This price is equivalent to the unit price of the foreign shipping company in 2012.

There have been more Vietnamese fleet being able to operate on domestic routes such as Hai Phong and Cai Lan to HCMC, Ba Ria – Vung Tau and vice again.

3.Vietnam regulations establishing who can and who cannot provide coastal shipping services, particular containers.

To ensure sufficient capacity to meet the demand for domestic container market, in addition to 30 domestic container shipping companies, Vietnam Maritime Bureau has also allowed 8 foreign fleets owned by Vietnamese enterprises to operate on domestic routes.

The biggest difficulty for domestic container shipping companies is that market has not completely recovered. Currently the container shipping companies from the South to the North reach approximately 80% of capacity, while the reverse route only reaches 50% capacity.

In long term, this policy has enabled the Vietnamese fleet to gradually recover from difficult period when all the domestic container shipping belonged to foreign companies.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Game on Mobile Phone Industry in Vietnam

About 3-4 years ago, the world’s game industry is undergoing a very big transformation, witnessing the rise of mobile gaming which outperformed the traditional platforms such as PC or console. In Vietnam, the gaming industry also falls in line with the world trend, many new companies or even large organization had developed mobile game.

In 2015, internet users in Vietnam reached 45 million, accounting for 48.4% of the total population of 93 million. The smartphone users reached 24 million, accounting for 25.8% of the total population, of which 9.3 million of mobile gamers and players loaded fee rate was 45%, reaching ARPPU index (average revenue average per player) is $ 27.71 (619.000 VND).

Until the end of 2015, the number of smartphone devices in Vietnam has reached $37 million, accounting for 52% the total number of mobile devices in the country. It can be seen from the General Statistic Office that from 2012 to 2015, 10 million devices have entered Vietnam’s market each year. Besides, Vietnam’s market has not come to saturation, so the potential growth for mobile gaming devices will continue to stay strong for at least 5-10 more years.

In terms of proportion of smartphone users based on age, the largest groups is from the age of 16-34 years old which accounted for 80% in 2015. In this group, the users from 16 – 24 years old take up to 45%. Besides, it can be noticed a remarkable rise of user groups of the age of 16-24 since this percentage rose from 20% in 2013 to 45% in 2015, indicating a huge change of demand of smartphone and purchasing power of smartphone.

If classifying users according to operating system, Android is still the most popular operating system in Vietnam in 2015 which accounted for 60% of users, followed by the 25% of iOS and Windows phone has the smallest market share of 15%. However, Windows phone showed significant change in 2015 when compared to 2014 (4%).  It indicates the development of a new market alongside iOS and Android. This is a unique point in the Vietnam mobile gaming market compared to other countries.

In terms classification depending on by device users and gender, smartphone devices still dominated completely with 90.3%, while tablet only accounted for 9.7%. In terms of gender, the rate does not differ hugely with 58% male and 42% female.

Smartphone game market value in Vietnam in 2015 reach $ 116 million (2,592 billion VND), the growth rate was 39.75% compared with 83 million dollars (1,854 billion VND) in 2014.

In terms of marketing channel for mobile gamers, social network such as Facebook channel remains an ideal place to promote game which accounted for 45%, followed by the local ad network (Admicro, Nova Ads …) accounting 30%, while Google and PR normally accounts for respectively 15% and 10%. Thus, both domestic companies that wish to penetrate the market will be highly recommended to use the ad unit local to achieve optimum efficiency.

In a paid form of payment, Vietnamese users can mainly use the phone (85%) to pay for the mobile gaming, followed by domestic bank card (10%) and Visa / MasterCard (5%). Thus, the mobile game usually have good links with the network provider of mobile phones in Vietnam. It is due to the fact that the users have not had the habit of using cards.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Textile Industry in Vietnam

Vietnam textile industry for many years has always been one of the major export sectors of Vietnam. With the development in technology, the number of skilled worker is growing along with many preferential policies from the Government, the textile industry has obtained encouraging results, creating the value of goods, ensuring domestic demand and export.

1.Overview of the industry

According to the General Department of Customs, in 2014, the value of exports textiles reached 20.91 billion dollars, increasing 16.6% compared to 2013. The value of textile exported was the second largest export industry in Vietnam.

Vietnam’s textile industry has a high production capacity: 4,424 enterprises (as of 31/12/2013) with 2.5 million workers, growth rate of 14% annually. There are 1.2% of enterprises reaching $100 million export revenue, 3.25% of them reaching 50 million and 30% reaching over $1 million. There been several textile products including 8000 tons of cotton fiber, yarn 900 thousand tons, 1.5 billion m2 fabric. Localization ratio of the whole industry was 50% in 2014.

Export capacity of the textile industry is also very impressive. Particularly in 2014, the export value reached 20.91 billion US dollars, accounting for nearly 14% of total turnover exporting ones in the country­­ – No. 1 export industry of Vietnam until 2012, No. 2 in 2013 onwards (after the mobile phone). Vietnam is the 4^th largest exporting country, accounting for 4.92% of global textile exports in 2014, after China, Bangladesh, Italy.

Vietnam’s textile sector has yet to master generating raw material. The high-quality raw material required depends heavily on importing (around 60-70%). Mainly imported raw materials are from China, Taiwan and Korea. Vietnam’s textile industry has currently imported 90% of raw cotton, 100% synthetic fibre and 80% cotton fabric.

According to research by the Ministry of Labour, every $1 billion of Vietnam textile export created extra 250,000 jobs. Currently, Vietnam has a population of over 90 million people which 49% of the population of working age worked in the textile industry. Moreover, the labour cost in Vietnam is relatively low compared to many countries in the region. The advantage of the lower labour cost will resulted in lower production cost, thus being price competitive. However, in this sector, there is a shortage of skilled labour leading to difficulties to develop the industry.

2.Opportunities for textile industry

TPP is a great opportunity for many industries including textile. According to economic experts, TPP will have a huge influence in the global textile industry. TPP opens investment opportunities (FDI) into developing materials and supporting industries. When joining the TPP, textile tax rate reduced to 0% which indicates a huge profits for Vietnam’s textile sector.

Besides, FTAs (The free trade agreements) also opens up further export opportunities for Vietnam’s textile industry to the market European Union, Korea, Asian Economic Union – Europe …  Vietnam will benefit from free tariff agreement from EU. Besides, the Vietnamese enterprises will be supported in terms of access to high technology from other countries, thus enhancing value of products.

3.Challenges

Other than opportunities, the textile industry will be facing many challenges. The domestic textile enterprises are mainly operating in small and medium scale with low capital investment and financial resources, limited technology, equipment and innovation capabilities. This lead to inability to achieve economic efficiency and compete with other countries. After all trade agreements take effect, Vietnam’s textile industry must meet strict rules and requirements such as origination of raw material (fabric). Meanwhile, most of raw materials (fabrics) was imported from other countries such as China (not a member of TPP). Therefore, if Vietnamese enterprises do not use raw materials from Vietnam or other countries in the TPP, it will be difficult for them to enjoy free tariff when exporting to the US and other countries in the TPP. Therefore, Vietnamese enterprises are highly recommended to learn about TPP and other free trade agreements. Besides, Vietnamese enterprises should prepare for qualified workforce, equipment and new technologies and intellectual property. The state and agencies functions have created specific guidance on the provisions of the tax, customs to help Vietnamese enterprises to utilise export opportunities with the advantages of tariff.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Private Hospital Projects Attract Foreign Investment

After many domestic investors failed to investin the construction of private hospital, from 2014 until now, especially in the first months of 2016, there were many foreign investors interested in this area.

Recently, a US delegation composed of more than 40 representatives from US leading hospitals, pharmaceutical companies, medical equipment companies, research institutions and medical training institutions came to offer Ho Chi Minh City (HCMC) leaders, as well as with the 175 Military Hospital to join hands and develop the private health sector under the health socialization policy of HCMC till 2020.

According to the chairman and founder of the worldwide health service network company, they want to invest in Vietnam medical sector. If so, in addition to investment in infrastructure and equipment in the public – private cooperation model, investors also need to invest in manpower training and hospital management model to operate more efficiently.

According to the Director of the HCMC Health Department, the city is having a lot of large projects that need the cooperation of both domestic and foreign investors such as the Health Complex in Tan Kien, Binh Chanh District, with many projects such as the City Children’s Hospital, Hospital of Otolaryngology campus 2, Hematology and Blood Transfusion Hospital, Oncology Hospital, Pham Ngoc Thach University of Medical campus 2…

The Government of Vietnam is conducting the socialization schedule  in the medical field. In fact, the total health expenditures of 93 million people in Vietnam now accounts for 5.8% of GDP, the highest in ASEAN, which is said to become the magnet for investors in this market.

In 2016, many foreign investors such as Bumrungrad Hospital Corporation (Thailand) and Lippo Group (Indonesia) have expressed their intention to develop hospital chain in Vietnam. This is considered a good time to invest in Vietnam health sector.

In a recent meeting with leaders of Vietnam Government, Temasek Corporation (Singapore) said that in the coming time, this corporation wish to promote investment activities in Vietnam, in which they will mainly invest in health sector by building private hospitals.

Earlier, in January 2014, Shangrila Corporation of Malaysia has invested to build Thanh Do Hospital in Binh Tan district, HCMC. The hospital has 320 beds, 21 clinical and subclinical specialties such as obstetrics and gynecology, pediatrics, surgery, cardiology, otolaryngology, ophthalmology, urology, cancer, hepatobiliary, digestion… Until June 2015, the hospital has announced to change their name and logo into City International Hospital (CIH).

At the beginning of 2016, the investors in the health sector continues to surprise when VOF Investment Fund (managed by VinaCapital) announced to takeover 75% stake in Thai Hoa International Hospital in Dong Thap province. The amount of money that VOF invested here is about 10 million USD.

According VOF, in the coming time, the Fund will continue to seek investment opportunities in the healthcare sector, including investment opportunities in equitized public hospitals if they feel attractive enough.

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