Vietnamese firms outgrow local market, bet on foreign lands

By Ngan Anh, Thanh Nien News

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The Hoang Anh Gia Lai Myanmar Center in Yangon. Photo credit: HAGL The Hoang Anh Gia Lai Myanmar Center in Yangon. Photo credit: HAGL


Vietnamese dairy firm TH has recently announced US$2.7 billion of investment into cow farms, a milk plant and distribution channels in Russia.
Chairwoman Thai Huong said the market has great potential because Russia is facing a dairy shortage due to sanctions imposed by the EU for its military intervention in Ukraine.
The company is expected to have a herd of 350,000 cows and build a plant with an annual capacity of 1.8 million tons of milk. Its made-in-Russia products are set to hit the market from the middle of 2017.
TH is one of many fast growing Vietnamese firms that have sought new opportunities abroad after the local market becomes increasingly crowded.  
Military-run Viettel said it will launch mobile services in Myanmar after winning the fourth telecom license from the government.
The Hanoi-based company will own a 49 percent stake in the venture, with the rest going to 11 local firms and a company owned by the defense ministry, Myanmar media reported, citing a government statement. 
Viettel has been eyeing Myanmar’s underdeveloped mobile market for years. It will be the third foreign player after Norway’s Telenor and Qatar’s Ooredoo were granted licenses and began operating there in 2014.
Late last year, the Vietnamese operator launched mobile and Internet services in Tanzania after investing $736 million in East Africa's second-biggest economy, following expansion efforts in Mozambique, Burundi and Cameroon.
“Expanding overseas is necessary to ensure stable growth," a representative of Viettel said.
"The local market is like a tight shirt and, even with a population of more than 93 million, it will stop getting bigger at some point,” he said.
The firm is seeking to enter Congo and Colombia soon. Since its first overseas venture in 2006, Viettel has opened its operations in 10 countries in Asia, Latin America and Africa, serving 265 million customers.
Its revenue in 2015 was VND222.7 trillion ($9.93 billion), up 13 percent from 2014. Of the number, over VND30 trillion came from overseas markets.
Since the first overseas operation was reported in 1989, Vietnamese firms have invested $20.4 billion abroad, according to the Foreign Investment Agency under the Ministry of Planning and Investment.
Mining tops the list of industries they have invested in, accounting for 34 percent, followed by agricultural processing. Laos has attracted the largest investment of more than $4.2 billion.
Do Nhat Hoang, head of the Foreign Investment Agency, said this trend of overseas expansion is contributing to Vietnam's integration into the global economy. 
He said several firms have been successful with their ventures abroad.
In addition to traditional, neighboring markets, including Laos, Cambodia, Myanmar, local enterprises have expanded their reach to Europe, Africa, the US, and New Zealand.
Vietnamese top IT company FPT has identified the US as an important market, according to a Nikkei Asian Review report. 
FPT hopes to have some mergers and acquisitions worth $50-100 million in the US, where its revenue growth was estimated at about 45 percent in 2015, said chairman Truong Gia Binh. The projected growth rate is higher than that of Japan, currently FPT's biggest overseas market, above Cambodia, Laos and Myanmar. 
M&As will be the key strategy for FPT to accelerate growth, he said, adding that it plans to invest about $50 million in one or two M&As to capture new markets and build up expertise every year.
Dairy giant Vinamilk is also looking abroad, pouring $30 million into three plants the US, New Zealand and Cambodia and $3 million in a subsidiary in Poland, aiming to eventually use it as a gateway to the EU and benefit from a new free trade agreement between the bloc and Vietnam. 
The trend of expanding overseas will continue in the coming time, especially in the context of stiffer competition at home, said economist Nguyen Mai.
Early this month, Vietnamese real estate conglomerate Hoang Anh Gia Lai Group started work on the second stage of a major project in Myanmar estimated to cost US$230 million.
The group announced at a groundbreaking ceremony that it would build five 28-story towers with more than 1,134 apartments and offices in the second stage.
Mobile World Investment Corporation, Vietnam’s biggest mobile-phone retailer, is eying Laos, Cambodia and Myanmar for the next three years.
The firm has planned to spend tens of millions of US dollars in Myanmar alone next year.
But experts say it is not always easy for firms to operate abroad because of legal, cultural and political differences.
An undated file photo shows Vietnam tech giant FPT's office in Myanmar.
Some projects have been delayed due to changes in the business environment or difficulties in capital and human resources, according to the Foreign Investment Agency.
Some sectors like telecommunications require large outlays, while it takes a long time to earn profits. Viettel could only reap profits from Cambodia after five years, and from Laos and Haiti after three ears.
The shortage of skilled and experienced employees is also an issue that Vietnamese enterprises face in new markets, said a representative from the FPT.
The company, in 2014, had to spend $47 billion on training. To have enough IT engineers with strong language skills to work in Japan, FPT sent 5,000 employees to the country for training.
Mai said the Ministry of Foreign Affairs should update information about foreign markets and legal regulations, helping enterprises operate more effectively abroad.

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