Vietnam Market Watch: Lottery Mergers, Surging FDI, and The State of E-Commerce

February 10, 2016 Posted by Vietnam Briefing Reading Time: 4 minutes

Vietnam-market-watch

Foreign Investor Gets Approval to Enter Lottery Market

Malaysia’s Berjaya Corp became the first foreign investor to enter the country’s lottery market after it won a contract with a local company. The Department of Planning and Investment approved the 18 year contract with the country’s online computerized lottery operator, Vietlott. The investment is estimated to be around US $210 million. The first game, a lotto jackpot, is expected to be launched by mid-2016 in Ho Chi Minh City. Around 10,000 terminals are expected to be launched across Vietnam in the next five years.

Vietnam’s lottery sales amounted to US $3 billion in 2015, with only state-run companies being allowed to operate lottery businesses. The sector, however, opened up with Berjaya Corp outbidding five other competitors in 2014 to enter the lottery business.

FDI Continues to Boost Vietnam’s Economy

Foreign investment is expected to stay strong in Vietnam in the near to medium term. Manufacturing and the construction sectors are projected to help the economy grow by up to 6.9 percent. Vietnam’s growth is expected to be the second highest in Asia after India. According to recent survey data, 36 percent of businesses have chosen Vietnam as a manufacturing hub. Business owners stated that wages are expected to cost 19 percent less than in other ASEAN countries. In addition, Hong Kong, South Korean and Taiwan have plans to increase foreign investment into Vietnam in the next decade.

FDI hit US $1.33 billion in January of 2016, a large improvement over its position even a year prior. Underscoring this increase, authorities granted new investment licenses to 127 projects. Hanoi was the most attractive destination with 14 newly-licensed projects, followed by Dong Nai province and Ho Chi Minh City. 26 other cities and provinces across the country also received foreign investment.

E-Commerce Shows Great Potential But Challenges Remain

The e-commerce market has a huge potential in the country and is valued at US $5 billion. However at least two e-commerce companies, Deca and Beyey.com withdrew from the market citing high operational costs. Market sources say that 67 percent of internet users shop online, though only a small proportion of that reported percentage do so regularly; the majority of the population shops at conveniences stores rather than online. Most e-commerce companies are raising funds knowing they will be making losses in the near-term. While foreign-invested companies account for a majority of the market they still have not made a profit. There are also big disparities in e-commerce development between cities and rural areas.

Nevertheless, e-commerce showed rapid growth in 2015 in all sectors but especially in information technology and telecommunication. Mobile platforms contributed to the development of e-commerce with companies having mobile apps and mobile versions of their websites to reach customers.

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Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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