Two large black banners bearing the words “H&M Xin Chao” (Hello H&M) stand at the main gate of Vincom Mega Mall Royal City in Hanoi, catching the attention of passers-by despite the opening ceremony for the Swedish fashion brand’s outlet taking place last month.
More than 2,000 people, mostly young, lined up at the time to receive promotional items and buy products. The image was similar to the launch of H&M’s outlet in Ho Chi Minh City in September, revealing the interest Vietnamese people have in the fashion brand.
H&M was founded in Sweden in 1947 and is listed on the Nasdaq Stockholm. The H&M Group has more than 4,300 stores in 66 countries and territories, including franchises.
“H&M considers Vietnam a potential market and this is the best time to make it the 68th market of the global H&M family,” said Mr. Fredrik Famm, H&M Managing Director of Southeast Asia.
From Ericsson to H&M
A decade or so ago, Ericsson or Sony Ericsson mobile phones and household appliances and Electrolux washing machines were familiar Swedish names in Vietnam. Nowadays, such brands have been overshadowed by the growing presence of brands such as Apple, Oppo, Samsung, and Toshiba.
This is not to say that Swedish investment in Vietnam has been declining, but rather that it’s found its way into new fields, such as consumption and furniture, which Swedish Ambassador to Vietnam, H.E. Pereric Högberg, called the “second Swedish investment wave”.
Swedish furniture giant IKEA recently announced it is planning to penetrate into Southeast Asian and South America, including Vietnam, with an ambition of dominating the world’s furniture market. The two regions are on the Swedish company’s radar following entries into India and Latvia this year.
In Southeast Asia, the group plans to set up shop in Vietnam and the Philippines, expanding on its existing store networks in Thailand, Singapore, and Malaysia. Vietnam will be the destination IKEA aims for in its development plans in the near future, according to CEO Mr. Torbjorn Loof.
Under its plan, IKEA will open its first stores in these markets within the next five years. This year it hopes to open 22 new stores, with 25 to open every year after. Despite having no outlets in Vietnam, IKEA products are still of interest to Vietnamese families, as they arrive via “portable channels”, such as in luggage.
Many Vietnamese enterprises are also outsourcing partners of the company. Sweden’s wooden products industry sees Vietnam’s wood processing industry as having potential, given its eco-friendly, competitively-priced, and sustainable materials.
Ambassador Högberg said that Sweden’s sustainable forest management has maintained a balance between economic wood production and respect for wildlife, outdoor recreation, employment, and local interests.
“I’m impressed by Vietnam’s fast-growing wood processing industry, and there is large potential for Swedish wood suppliers to supply high quality and sustainable raw materials to Vietnamese manufacturers,” he added.
Another special case is Tetra Pak, the world’s leading food processing and packaging solutions company. Many Vietnamese people use Tetra Pak products every day, whether they know it or not.
The company provides packaging for Vietnamese dairy companies such as Vinamilk, TH True Milk, and Vinasoy soya milk. It also accounts for about 98 per cent of the market for canned milk packaging, according to unofficial figures.
Tetra Pak held a breaking ground ceremony on October 4 for its new, state-of-the-art regional packaging material factory at the Vietnam-Singapore Industrial Park (VSIP) II-A in southern Binh Duong province.
“This facility, our fourth packaging material factory in the region, is a strategic addition to our existing production footprint, enabling us to meet the rapidly growing demand for dairy and beverage packaging in Vietnam as well as the Asia-Pacific region,” said Mr. Chris Kenneally, President of Tetra Pak South Asia, East Asia & Oceania.
The arrival and expansion of H&M and Tetra Pak takes place in the context of a new wave of investment from Sweden coming to Vietnam. Swedish capital has been flowing into Vietnam for over 40 years, but mainly in the industry and tourism sectors, with about 30 per cent and 60 per cent, respectively.
“It is time for Sweden to strengthen its business in Vietnam,” said Ambassador Högberg. “The Swedish Government and myself have been particularly impressed by the development of the Vietnamese economy since ‘doi moi’, particularly in terms of sustained economic growth.”
Swedish investment in Vietnam, 2012 – NOV. 2017
Source: Foreign Investment Agency
Though Ericsson has been absent from Vietnam’s mobile phone market for some time, it remains a major partner of many of Vietnam’s technology giants. Ericsson and the Authority of Radio Frequency Management (ARFM) recently completed the first demonstration of 5G in Vietnam. The milestone is part of Ericsson’s ongoing commitment to Vietnam, as the largest supplier of mobile broadband technology in the country, to constantly introduce the latest innovations and support the government’s vision for the fourth industrial revolution (Industry 4.0). Telecoms operator the Vietnam Posts and Telecommunications Group (VNPT) has also chosen Ericsson as a strategic partner to modernize its charging and business support system.
The modernization would enable service convergence and advanced charging capabilities and improve the user experience for VNPT’s 40 million pre-paid and post-paid subscribers. The new system will reduce operational costs and lay the foundation for the operator’s transformation to a digital enterprise.
Mr. Denis Brunetti, President for Vietnam and Myanmar at Ericsson, said that Vietnam’s information and communications technology (ICT) vision will see the wide-scale introduction of 5G technology around the country, offering the capability to deliver high-speed, low-latency mobile broadband services, including live 4K video streaming directly to mobile handsets.
“It will also enable the rollout of advanced citizen services, from improved access to healthcare around the country to smart transport systems, including driverless cars, and new innovations in various industries, such as financial services, energy, and public safety,” he added.
“The investment reflects Tetra Pak’s commitment to contributing to Vietnam’s socioeconomic growth,” Mr. Robert Graves, Managing Director of Tetra Pak Vietnam, said of the recent breaking of ground at its new Binh Duong factory, while also noting that with Vietnam being one of the region’s manufacturing powerhouses, the new factory will help strengthen the country’s capacity to become part of global supply chains and will have a positive impact on related industries.
Though Swedish investments in Vietnam are on the rise, there are certain elements that are considered to affect investment flows. Macroeconomic matters at home are just one, as interest rates are set at -0.5 per cent.
The economy is booming, with growth at 3.2 per cent last year and averaging 2.8 per cent since 2009. The situation also presents risks, however, as real estate prices in Sweden rose 8 per cent in 2016 and 10.5 per cent in 2015, according to The Economist.
Ambassador Högberg arrived in Vietnam during the second wave of investment from Sweden. “It is interesting to have two needs appear at the same time,” he said. “Swedish companies have many products to sell in Asia, while Vietnam has an interesting market and it is time to improve its production capacity. Vietnam’s manufacturing industry cannot continue with its simple products and that it is also an opportunity for Swedish companies with high technology.”
As at November 2017, Sweden had 55 projects and total investment capital of $100.7 million in Vietnam, according to the latest report from the Foreign Investment Agency at the Ministry of Planning and Investment. Sweden has had a long relationship with Vietnam, and in 1969 was the first Western country to establish diplomatic relations.
The core of the relationship for a long time was development cooperation but it has now moved to a commercial relationship. Trade turnover between the two countries is expected to reach $1.5 billion this year.
Swedish exports mostly consist of engineering products, particularly machinery and equipment, and medical and pharmaceutical products. The relatively modest exports to Vietnam indicate that there is great potential for growth, especially when the free trade agreement under negotiation between the EU and Vietnam is implemented.
About half of imports from Vietnam are appliances for telecommunications, due to large manufacturers like Samsung basing production in the country. Sweden also imports clothes, shoes, and food from Vietnam, according to Business Swedish in Vietnam.
VN Economic Times