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Vietnam

Vietnam is Masan Group’s primary area of focus as Southeast Asia’s fastest growing economy. Real GDP has grown at a compound annual growth rate ("CAGR”) of 7.8% between 2005 and 2012. While Vietnam’s growth has been supported by low labor costs and productivity gains as a result of the Doi Moi ("renovation”) reforms which opened up the markets, we believe Vietnam’s true value lies in its domestic consumption potential and untapped natural resources.

The Middle Class Story

Vietnam’s demographic advantages support strong continued growth in domestic consumption:

  • Large and Young Population - Vietnam’s demographics and rising income levels support strong continued growth in domestic consumption. With 56% of the country’s 89 million residents under the age of 30, the country’s expanding workforce is expected to drive consumer spending over the next 10 to 15 years.
  • Rapidly Rising Income Levels - Based on real GDP per capita and adjusted for purchasing power parity, income levels have increased six-fold in the past 20 years, from US$560 in 1988 to approximately US$3,354 today, leading to a doubling in the size of the middle class over the past 5 years.
  • The Middle Class is Driving Growth - This rising affluence accounts for the expansion in financial services and in basic sectors such as food and beverage, which will continue to account for more than 50% of total consumption.

Underdeveloped Resources Potential

Mineral resources, agriculture and energy together constitute a significant percentage of Vietnam’s GDP with further growth anticipated in all three areas.

  • Mineral Resources - Vietnam is richly endowed with mineral wealth, holding some of the world’s largest reserves in bauxite (7 percent of world’s reserves), tungsten (expected to have 7 percent of world’s production by 2013) and significant deposits of rare earths, titanium and iron ore. Other mineral resources include copper, gold, nickel, zinc, tin, lead, chromite and manganese. Vietnam’s mineral resources potential remains largely untapped as many areas remain unexplored.
  • Agribusiness - Agriculture, forestry and fisheries constitutes 24 percent of Vietnam’s 2012 GDP. The country is a major player in the rice, coffee, rubber and cashew trades and exported US$6.1 billion of seafood products in 2012. Rising domestic consumption, new export markets and institutional support from government and trade groups will drive the sector’s growth.
  • Oil & Gas - Vietnam ranks third in Southeast Asia for petroleum resources. The sector has produced almost one billion barrels of crude oil and 300 billion cubic feet of natural gas over the past several decades. Oil and gas are anticipated in almost 50 fields and prospects, with reserves of approximately 4.5 billion barrels of oil and 23 trillion cubic feet of gas.

Vietnam’s economic growth will drive development and opportunities in many adjacent and related sectors, including power, infrastructure, logistics and a more dynamic financial services industry to allocate capital more efficiently to drive growth.

Vietnam’s Constraints Drive our Business Model

Vietnam has recently experienced macroeconomic challenges, including high inflation and currency depreciation as it focused on GDP growth. Also, the private sector, while growing strongly, remains fragmented as demonstrated by turnover and market share. Private sector companies are further challenged by constrained availability of long-term capital, lack of professional expertise and competition from larger multinationals.

Masan Group manages these risks and addresses Vietnam’s private sector constraints by building scale and leading operating platforms to weather financial cycles, consolidation and growing market share.

Source: Spire Consulting, McKinsey, GSO, PetroVietnam
RESEARCH REPORT