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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia


Introduction 1 Household spending of Lao population 2 Business opportunity for retail-wholesale and products for hotels and restaurants (HORECA) in Laos 3 Business opportunity of construction materials in Laos 4 Laos and Eco-Tourism 5 Market for medical products and other related products in China 6 Opportunity of retail-wholesale business in Guangzhou (souvenir and gift products) 7 Business opportunity of Thai business in China: textile and garment Industry 8 Guangzhou Trade Fair and the opportunity for Thai food products 9 Business opportunity for furniture industry in the south of China 10 Yide Lu, the wholesale market in China’s Guangzhou 11 Consumer behavior and consumer attitude towards Thai products in Vietnam 12 Market for Thai ready-to-eat products in Vietnam 13 Opportunities for Business related to motorcycles in Vietnam 14 Business opportunity in the Cambodian retail market for Thai entrepreneurs 15 Businesses related to tourism are of a promising future in Cambodia 16 Business opportunity for gas stations in Cambodia Thanks


contents Page 7 11 19 27 35 41 49 57 67 73 79 87 95 101 107 115 123 130


introduction Researchers went to area for study in-depth the Mekong countries, including Laos, Vietnam, southern China and Cambodia by the plan to the data collected from March 2012 - May 2012 to study the situation, trade, investment and production. For Competitive of Thailand products. And researchers have chosen to keep it as close to the main city of trade and investment. This research able to point out the real situation of the opportunities and barriers in the GMS countries.

Figure 1.1 Image showing the research areas to study.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

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Table 1.1 shows the plans for the Mekong countries.

Country

Place

Laos Vientiane China Guangzhou and Shenzhen Vietnam Ho Chi Minh City Cambodia Phnom Penh

Data Collection period 18 – 21 March 2012 26 April to 2 May 2012 15 – 18 May 2012 27 – 30 May 2012

Number of Researchers 3 10 3 3

The study area is used to explore observations and interviews with those involved (Key Information), including a survey of market conditions. A study at the Guangzhou Trade Fair. Touching the lives of people in each country. And interviews with experts on trade and investment. Then, the results of the survey were analyzed and synthesized. Analysis of the products related to Thailand in 16 foreign articles which reflect analysis of the market for a variety of business. Demonstrate the competitiveness of goods and services in Thailand. Opportunities for trade and investment, as well as researchers to provide feedback regarding their investment in research. The operators will have enough information to make trading decisions. And reduce the risks that may arise after the investment analyses are summarized below.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Table 1.2 The Market Analysis for potential areas of ASEAN countries, especially Thailand, Laos, Vietnam and southern China and Cambodia. Country

Laos

China

Vietnam

Cambodia

Market Analysis Topic 1. Household spending of Lao population 2. Business opportunity for retail-wholesale and products for hotels and restaurants (HORECA) in Laos 3. Business opportunity of construction materials in Laos 4. Laos and Eco-Tourism 5. Market for medical products and other related products in China 6. Opportunity of retail-wholesale business in Guangzhou (souvenir and gift products) 7. Business opportunity of Thai business in China: textile and garment Industry 8. Guangzhou Trade Fair and the opportunity for Thai food products 9. Business opportunity for furniture industry in the south of China 10. Yide Lu, the wholesale market in China’s Guangzhou 11. Consumer behavior and consumer attitude towards Thai products in Vietnam 12. Market for Thai ready-to-eat products in Vietnam 13. Opportunities for Business related to motorcycles in Vietnam 14. Business opportunity in the Cambodian retail market for Thai entrepreneurs 15. Businesses related to tourism are of a promising future in Cambodia 16. Business opportunity for gas stations in Cambodia

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Household spending of Lao population

Supakorn Sirisoontorn April 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

During a survey of the lifestyle of local residents in Vientiane, such traits of the urban lifestyle as eating out and shopping for fashionable clothes are visible. This may be partly due to the influence of the Thai media e.g. television, radio and printed matters that can be easily accessed by Lao people. Knowledge on the Lao consumption spending in various sectors is interesting and thus provides some directions to the business opportunity in this country.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Source : World Bank (CEIC Database)

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

The size of retail-wholesale market in Laos is moderately growing. As recently as 2010, it was 44,000 million baht. Even though there is no big shopping center in Vientiane these days, there are some projects under construction. For example, the Regal Mega Mall project, located in the north of the city and operated by Regal Global Investment Development (a capital group from China and Singapore), is expected to open in 2013. Around mid 2010, Big C Supercenter Public Company Limited was also granted an investment license from Planning and Investment Ministry of Laos for a 5-million project near the Morning Market Shopping Center with 30-year rental contract. Considering the demographic data collected by the World Bank, approximately, 40% of Lao people live in big cities. As of 2007, these people have the consumption behavior in six main groups: food, transport and communication, clothing, medical care, rereation and accommodation as follows: Sector

Percentage

Kip /Month/Family Baht /Month/Family

Food Transport and Communication Accommodation Recreation Clothing Medical Care

30

887,000

3,420

20

582,300

2,245

17 7 2 2

507,000 193,600 59,000 54,000

1,956 746 227 208

Source: World Bank


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

It is surprising to learn that household spending on transport and communication is higher that spent on accommodation. This is in accordance with the rate of mobile phone users in Laos which has increased twice. In 2005, the ratio of mobile phone to 100 people three-time surged from 2004. In 2010, among every 100 people, there were 64.5 mobile phone users at (65%). As for the internet usage rate, even with a continuous growth trend, it remains small in relative to the number of population. In 2010, among every 100 people, there were only 7 with internet access. This may be largely due to the high fee of internet service provision: 7 MB of broadband internet costs at 268 USD monthly or 8,000 baht. This could be triggered by the fact the internet network in Laos made a big leap from cable LAN to wireless mobiles.

Source : World Bank (CEIC Database)

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Based on the above information, the mobile phone market in Laos can grow even further. This can be seen in the case of Lao Telecommunication Limited (with 49% share held by Shin Corp) has provided a 3G mobile phone service since 2006. In 2010, Planet Computer has started a 4G internet service with WiMAX technology. As a result, mobile phone shops, mobile phone repair shops and mobile phone devices altogether enjoy the benefits of such a growing market. In addition to the telecommunication market, food or restaurant sectors are also attractive, as seen from the household spending on meals outside home at 30% or 3,400 baht monthly per household. If this figure means eating out, it is congruent with the Lao consumption behavior that spends more for recreational purposes. In the case of buying ready-to-eat food, it means that Lao people tend to develop an urban lifestyle with less cooking at home. Apparently, a shift to the communication technology and high speed internet has made the lifestyle of Lao people, especially those in city areas, more urbanized and thus business sectors involved in such a modern lifestyle need to adjust accordingly. These business sectors including shopping centers, restaurants, and franchises, and contents or applications development for mobile phones that can respond to the changing lifestyle are promising while there are not so many investors in those markets these days. If investors can see an opportunity in the Lao transition to more international trends, they can find how to work out their business in Laos.

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Business opportunity for retail-wholesale and products for hotels and restaurants (HORECA) in Laos

Supakorn Sirisoontorn May 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

An interesting finding on the lifestyle of Lao people in Vientiane is the high cost of living, in comparison to that of Thailand. To elaborate, Pho (noodle) can indicate an index of living cost: a bowl of Pho is priced from 60 to 100 baht while incomes of Lao people are relatively small. For example, the salary of a government officer at operational level is 1,500 baht per month. Such a high price of Pho is mainly due to the fact that some of ingredients are imported from Thailand. This is why the Lao working population often brings their own lunch to the workplace, rather than eating out at restaurants or shopping malls. In Vientiane these days, there remain fresh markets and small retail shops with no big-sized malls for consumer goods or hypermarkets. At the interview with Thai entrepreneurs who operate restaurants in Vientiane, it was revealed that several cooking materials, apart from fresh food, are not available at local shops; yet such materials can be ordered from and delivered by retailers/ wholesalers in Nongkhai province. It is no surprise that the food prices in Vientiane are high due to the inclusion of transportation fees.

Source : World Bank (CEIC Database)


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

In 2010, the size of retailwholesale market in Lao is approximately 44,000 million baht with an increasingly growing potential.This was largely driven by a continuous growth in tourism and service sectors. According to Thai Trade Center in Vientiane, business sectors with investment potential include hotels, development of tourist attractions, spas, restaurants, and franchises. In particular, hotel and tourism industries are strongly promoted by the government.

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

In 2010, Laos generated income from tourism alone at the amount of 9 billion baht, a double growth within the five-year period. This could be derived not only from the strong promotion by the Lao government, but also from ample resources, both naturally and culturally, in many regions that have become tourist destinations for travelers around the world. Fortunately, as a result of the booming tourism and restaurant sectors, the demand for goods, especially food products, has risen to serve the growing supply in these sectors. This offers a good opportunity for both retail-wholesale traders and suppliers for hotels, resorts and restaurants (Hotel/ Restaurant/ CafĂŠ Supply, HORECA).


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Source : Lao National Tourism Administration

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

The number of hotels in key tourist cities such as Vientiane and Luang Phrabang are incessantly rising, with an average annual growth of 50% within the five-year (2005-2009) period. This high growth of hotel business, together with over 400 resorts and guesthouses and more than 200 restaurants, have crated a demand for goods imported from Thailand, especially readyto-eat and processed food products, to serve the tourists. However, there are key factors, which are worth consideration, for entrepreneurs who want to start retail-wholesale business in Laos: costs and prices. If they can develop an advantage in price over local entrepreneurs or those from nearby Thai provinces such as NongKhai and Udon Thani, they can attract customers, especially those from business operators in various industries, who are keen in purchasing with big sized entrepreneurs in order to reduce costs and transportation fees. They can also obtain household consumers who also want to pay less so as to help save their living costs.


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Business opportunity of construction materials in Laos

Supakorn Sirisoontorn May 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

A number of development projects in several sectors are ongoing in Laos. For example, numerous power generating dams, run by the government, are aimed at becoming the ‘Asian battery’. Industrial estates and investment promoted zones lead to a wide range of construction and infrastructure projects in support of these developments. However, it is interesting to note that construction materials shops are rarely seen. This could be caused by the fact that construction contractors import construction materials and products from Thailand to use for construction projects in Laos. As a result, prices of construction materials, plus transportation fees and taxes, are high.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Source: World Bank (CEIC Database, as of 10 April 2012)

In 2010, the GDP of construction sector in Laos surged to 11 billion baht, with an increasingly growing trend. This was a response to the growth of real estate sector of the same year at 6.296 million baht. Even though these figures seem moderate in comparison to those of Thailand, it is noteworthy that the developments of Laos are limited within capital cities and there remain several other regions that have not yet to be explored such as routes in support of East-West Economic Corridor, GMS and AEC which attract more developments and investments to the country. These factors make more room for a further growth in the Lao construction sector. As for the real estate market, especially accommodation sector, in Laos, there was no residential or condominium projects operated by private firms previously because no legal mechanisms have been in use to support such projects. Up until the present, some government housing projects are available and some residential projects, developed by Lao private firms, are owned by local residents. As the government land department is not established yet, all land-related transactions are done through court proceedings.

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Left: Billboard of a paint product in Vientiane

Right: Nongkai Visij Shop: selling construction materials and providing delivery service to Laos (Current branches at Vientiane and Savannakhet) Source: nvs4u.com


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

With the booming real estate and construction sectors, come along business opportunities of construction materials. This business type, at the moment, remains in the form of small-sized shops with no variety of products to offer. Such shops are scattered in many areas. Among these is Suwannee Construction, which shares 60% of the market. The rest of the market is shared by medium-and small-sized shops. Suwannee Construction is planning to expand their shop to the size of Thailand’s Home Pro, with most of the products imported from Thailand and China. There are some other construction materials entrepreneurs in Nongkhai province, which provide both sales and delivery service to Laos. Further, there are five local cement producing factories in Laos including Vangvien Cement, Krating Cement, Singh Cement, Mangkorn Cement, and Changkam Cement. According to the Thai Trade Center in Vientiane, as of 2010, Laos produced cement at the volume of 1.8 million tons per year. In summary, the growth in the Lao economy, construction and real estate sectors in particular, offers a good opportunity for Thai entrepreneurs to start a construction material business in the country. Based on a study of Lao consumers’ attitude toward the origin of consumer products, conducted by Mr. Saran Amatyakul, Lao people was reportedly to see Thai products as quality goods (better than those produced locally and made in China). This is reinforced by the fact that they have access to advertisements

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

from Thailand, creating a popularity of Thai goods in the country. However, in operating such a business, the most important competitive strategy should be based on pricing. This is because the existing entrepreneurs set the product prices relatively high, with a few competitors in the market. In addition, product stock and quota should be seriously planned as the entrepreneurs sometimes could be faced with problems from being unable to import products at the amount needed by local customers. With these considerations in mind, the entrepreneurs are likely to gain a competitive edge over competitors.


4 Laos and Eco-Tourism

Supakorn Sirisoontorn May 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

It is well-recognized that Laos is blessed with natural resources while being able to well conserve local cultures and arts. This can attract tourists around the world to visit Laos in hopes of both natural and artistic appreciation. In terms of investment, the Lao government, in cooperation with Asian Development Bank, studied and planned on domestic tourism development with the purposes of making Laos heaven of sustainable tourism or eco-tourism.

Source: World Bank

Since 2007, Laos has been a destination for over 1 million tourists worldwide each year. This figure has incessantly increasing as a result of the booming eco-tourism in both natural and artistic destinations, for instance, Vientiane, Luang Phrabang, Wang Wieng, and Luangnamtha. As of 2010, Laos generated over USD 380 million or 12,000 million baht from tourism sector. During the five-year duration from 2006-2010, foreign investments in hotel and tourism sectors have flown to the country, totaling over 5,200 million baht and being


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

spent on building over 10 hotels each year in many areas. Thai entrepreneurs are also venturing into such a lucrative sector. For example, Khun Vimol Kijbumrung initiated a project known as ‘Uttayan Bajiang Ecological Resort’ (Pasuam Waterfalls) in Champasak in 1999. This eco-tourism attraction was developed amid nature and villages of 11 mountain tribes. It has become famous and received supports from the Lao government. Photos of Uttayan Bajiang Ecological Resort

Source: Facebook of Uttayan Bajiang Ecological Resort

Source: World Bank (Converted from US Dollar to Thai Baht)

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

In 2010, Laos’ income from tourism reached 12,000 million baht, almost a triple growth from 2005. Tourists from Asia made up 90 percent of the total travelers in Laos (World Bank; 2010). Entrepreneurs who are interested to operate a tourist business in Laos, especially eco-tourism, will be granted special tax privileges, following designated zones below. Zone

Investment Period

Tax Privilege

Zone 1 Rural areas Few infrastructures

0-7 years From the 8th year

0% (stamp duty exemption) 10%

Zone 2 0-5 years Areas with some economic From the 6th to 8th year infrastructures From the 8th year Zone 3 Urban areas with infrastructures

0% (stamp duty exemption) 7.5% 15%

0-2 years 0% (stamp duty exemption) From the 3rd to 4th year 10% From the 4th year 20%

Source: Office of Commercial Affairs, Royal Thai Embassy, Vientiane

Drawn from the above information, we can see that the Lao government is attempting to promote tourist developments in rural areas so that necessary infrastructures will be available. Jobs and income are generated for the rural or tribes. For the better living condition of Lao people in a sustainable way, the Lao government, in cooperation with Asian Development Bank (ADB), conducted a study and developed tourist frameworks focusing on eco-tourism. Therefore, eco-tourism sector in Laos is of a promising future.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

The conservation of both natural resources and cultural heritage, plus the eco-tourism trend, makes the tourism in Laos attractive for tourists while creating the opportunity for interested investors.

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5

Market for medical products and other related products in China

Chaloemchai Trisuwannawat June 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Medical products and other related products include, for example, metal or plastic appliances that are used to support physical movements of patients after an accident, or for the convenience of patients such as a wheelchair. Such appliances, in China, are mostly for domestic sales in response to the high demand in the country. As China is the world’s most populous country, the demand for these medical products is also high as a result of sickness and injuries in such a populous country. Innovations of medical appliances for the rehabilitation of patients are thus necessary. Even though medical products and other related products in China are mostly targeted to domestic market, some are exported overseas. For those exported overseas, there are often products that already have a good marketing performance and also products for use in combination with other products. Drawn on the export-import data of International Trade Centre (www.trademap. org [11/05/2012]), medical products and other related products in China have been exported to other markets worldwide. Between 2009 and 2010, the export volume was worth as high as USD 38,914 million and USD 52,110 million. The top three export products in this category included LCD monitors, electrical stimulators (Figure 1) and optical glass fibers for light guides as shown in Table 1 and Figure 2. Figure 1 medical product and other related products (electrical stimulator)

Source: www.cooben.com [12/05/2012]


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

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Table 1 Export volume of medical-related products (top ten products) (unit : USD)

LCD monitor

Volume Export 2009 20,335

Volume Export 2010 27,853

2

Electrical simulator

2,712

3,293

3

Optical glass fibers for light guide

1,972

2,756

4

Automatic control appliance

1,515

2,139

5

glasses (eyeglasses, windshield glasses)

1,279

1,793

6

Lens, prism, glass

1,346

1,745

7

Muscle treatment or other bodily parts

1,194

1,413

8

Status checker (weight watcher)

710

1,029

9

Components of X-Ray machine

790

967

10

Electrical wave indicator

568

948

Rank

Product

1

Source: International Trade Centre


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Figure 2: Export volume of medical related products (top three products) (unit : Million USD)

Source: International Trade Centre


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

There are several considerations for Thai entrepreneurs who want to compete in the market of medical products and other related products in China. First, Thailand still needs to rely on medical products and other related products from other countries, with China as the third-ranked trading counterpart, after Japan and USA, respectively. The import volume of such products from China reached USD 454 million. Thailand’s high reliance on import of these products suggest high costs of production. As a result, the medical products exported to China cannot compete in pricing with Chinese products because Thai producers have higher production costs such as raw materials and labor. Second, the Thai government’s policy in support of exporting medical-related products to China or other countries is not created yet. This is because the government focuses on the promotion of exporting products in such other industries as automobile and electronics

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

in response to their policy on making Thailand the center of car manufacturer in Asia. Therefore, it seems difficult for Thai entrepreneurs to enter the Chinese market of medical products. In spite of such challenges, it is noteworthy that the Chinese market welcomes medical products made in Thailand because Thai craftsmanship is trustworthy and the products have good quality with modern designs, supplemented with cutting-edge technologies in the production process. Thai products are thus well-accepted in the Chinese market. This means that Thai entrepreneurs may present their products to customers with a focus on quality, trustworthiness, and production technologies to create a competitive advantage, rather than a pricing strategy,


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

because they cannot compete in the price war. Medical related products with a market potential in China include tools made of rubber woodล e.g. rubber gloves and supporting sticks, as Thailand, the world center of rubber wood, has expertise in making products developed from rubber wood. In addition, Thai entrepreneurs should focus on research and development in order to differentiate their products from those made in China to gain higher acceptance and extend their export bases in other cities in China. However, if Thai entrepreneurs cannot win Chinese ones over the price war, they should turn to a new strategy by importing medical products and other related products from China for marketing and distribution in Thailand because such Chinese products can be sold at cheap price; yet they should also consider risks derived from custom duties and transportation fees from importation. On the other hand, if Thai entrepreneurs wish to export their products to China, they should focus on the quality and attempt to distinguish the products from those made in China as it seems impossible to compete in pricing.

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Opportunity of retail-wholesale business in Guangzhou

(souvenir and gift products)

Sutteeya Nopwinyuwong June 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Guangzhou, known as Chinese trading city, has a great number of wholesale markets. The city also hosts an internationally recognized fair for China’s import-export products called Canton Fair, which provides both exhibition areas and business negotiation rooms for all wholesalers. For the exhibition areas, there is a variety of product zones: souvenirs, gifts; accessories; watches; hats and bags; home decorations; clothes; electronic appliances; and electric devices. Fashion has changed over time. Gift products are amongst the fashion products that are always in demand of beauty caring or trendy consumers. Based on our survey at Canton Fair, we found that if we import souvenir and gift products from China, we can get the better price, compared to those made in Thailand, making such products a good investment for Thai businesspeople.

Figure 1 Guangzhou Shopping Mall area


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Figure 2 Product sample of gift shop

Canton Fair does not offer only a variety of products, but also provides the opportunity to meet with international businesspeople and buyers. The product placement is categorized according to types of industry. Innovative products and those with new designs often gain a special interest such as a variety of umbrellas, pillows, watches, fabric bags, and accessories. In fact, products of each booth are more or less similar; the difference is a volume and negotiated price. Such products are mostly manufactured in Yi Wu. Yi Wu is part of Zhejiang province, China’s biggest wholesale city, and known as the world supermarket. The city is renowned for manufacturing and wholesale for miscellaneous products of various types at very cheap prices. The trading amount of Yi Wu has been among China’s top ranks for several consecutive years. Products made in Yi Wu, exported worldwide, reach over

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

1,000 containers each day. Besides, the city also hosts an international trade fair annually, making a trading volume of CNY 2,807 million (www.thai.cri.cn). This city has become the world’s biggest market for circulating consumer goods and also China’s key export hub. At the interview with many shop owners, products of the same type are mostly made in the same city. This is confirmed by Thaibizchina that Zhejiang’s way of doing business is to start from manufacturing a single type of product and stick to that product while continuing with product development so each district produces the same type of products, yet creating a product differentiation in terms of quality, color and design. It is, noteworthy, that those who want to buy products from this city have to buy in big volume from


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

hundreds of dozens or thousands of pieces to containers. In any purchasing transaction, representatives of many nationalities including Thailand are available to support for transporting back to their own countries. It is generally known that Chinese products are cheap, especially toys, gifts, watches, pens and other souvenir products. Such cheap products, in many people’s views, have a low quality. However, Chinese products are of several grades. According to our local guide, quality and expensive products, mostly manufactured in standard factories, are exported to America and Europe. The second-graded or low-quality products, on the other hand, are produced in non-standard plants and imported by middlemen in Asia, including Thailand, at very cheap price.Hence, Thai entrepreneurs may adjust their strategy by importing Chinese

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

products at prices cheaper than those paid by their competitors. Chinese products are much cheaper than those from the wholesale shops in Patunam, Bobei, or Sampeng markets, which may have difficulties in rising costs. Locally made products are getting expensive due to the increasingly high costs of labor, raw materials, and petrol. Some of Thai entrepreneurs turn to Chinese products that are cheaper, of good design, and also stay up-to-date with the current trend. For example, an iPhone case from China is sold at 150 baht per piece, depending on the design. If bought in bulk, this item can be priced on a wholesale basis, which can be sold to customers in Thailand from 300 baht onward. Even with transport fees included, Thai entrepreneurs still gain a 100% profit. It is thus the good opportunity for Thai businesspeople to import these Chinese products for sales in Thailand, without any middleman from Sampeng or Bobei markets. In so doing, they can get the products at cheap price, even with some extra costs from transport, tax, and also limitations on buying in bulk. In spite of these costs included, the total price is still acceptable for Thai entrepreneurs.


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Business opportunity of Thai business in China: textile and garment industry

Nattaya Srihanam June 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

During 26 April – 2 May 2012, the author joined a study trip to China Import and Export Fair, held for the 111th time, at Guangzhou, Guangdong province, People’s Republic of China. Over 10,000 shops participated in the fair, among which textile and garment business is of a growing potential and seems to offer a good opportunity for Thai business people/entrepreneurs. According to a report produced by Textile Intelligence Unit, Thailand Textile Institute, from 2006 to 2009, China has been the world’s first-ranked manufacturer of garment and textile, as shown in Figure 1 and Figure 2. Figure 1 world ranking in exporting garment Worldleaders leaders in exporting World exportinggarment garment

Source: http://www.thaitextile.org/th/textile_intel/ (Accessed on 20 May 2012)


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Figure 2 world ranking in exporting textile World leaders in exporting textile

Source: http://www.thaitextile.org/th/textile_intel/ (Accessed on 20 May 2012)

Based on our study tour on garment and textile exhibition of Guangzhou Trade Fair on 1 May 2012, we found that garment market in China vary in material, design, occasion e.g. working suits, sports outfits, wedding dresses, fire fighter suits, fire-proof clothes, uniforms and several other clothes of unique design or color for special occasions, as seen in Figure 3 and Figure 4. Also, at the interview with local people, we have learnt that the size of garment and textile market in China is huge for the following reasons: China is so populous a country; and the garment and textile sector, unlike such other industries as energy, tourism and minerals, is not under the government’s control. As a result of such a free-trade environment, both new and existing business operators are increasingly venturing into this potential industry.

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

At present, Chinese brands, which are popular among local people, includes Sunshine, Sew Choi E Yurn, 361o , while such other brands as Pao Si Neong and Chi Pi Lan, produced at mega-sized factories and also well-known among tourists, are exported overseas and gain high popularity. Regarding the fact that garment and textile industry in China is moving forward at a giant leap, the author has a view that this situation offers two investment options for interested Thai people: first, exporting raw materials such as plastic rubber or other materials for manufacturing process; and second, penetrating the garment market for Chinese middle class. Details are elaborated as follows :

Figure 3 Exhibition areas for garment (1)


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Figure 4 Exhibition areas for garment (2)

First option: Exporting materials for garment production such as plastic rubber, buttons and zips for garment decorations. According to a Xinhua news agency report as of December 2012, China is the world’s first-ranked importer of natural rubber. Such a huge demand for production materials in the garment market creates a potential market for Thai business operators, who can supply and export materials for Chinese garment production, because Thailand craftsmanship is renowned for detail-attention work and widely accepted quality. This is a better option than making products of the same type or same material, resulting in a less competitive edge. Yet, this option must be supplemented with reliable international logistics. “As an example, a Thai

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

entrepreneur, who produced plastic components for use in prevention of package opening/breaking for Thai ready-to-eat food and also exported these products to China over a decade, has been successful with Chinese trading partners and big-volume orders for years. However, the business was challenged by transportation to China, which was time-consuming and often failed to satisfy the buying needs. In order to overcome the obstacle, that entrepreneur started his/her own factory in China, creating prosperity with high yields� (An interview with the Thai Trade Center, Guangzhou, China on 27 April 2012). For this reason, component materials for garment production seem to better respond to the Chinese demand for exporting their garment overseas. Second option: Even though Chinese has gained the biggest share of the world’s exports for over 5 years, ready to wear clothes of Thai brands remains popular among some Chinese middle class, as a result of the existing Chinese customer base of garment and textile products from Thailand. This is confirmed by a January 2011 report on Thai textile exports, in which China was the fifth-rank, among the top five countries, of export markets for Thai products, indicating China is still our potential market. To be specific, Thai garment and textile exports to China from January to November 2011 reached USD 354.8 million, a rise of 50.6% from the previous year. Within this volume, textile contributed to USD 325.5 million and garment made up of USD 29.3 million, both of which increased, from the previous year, 53.2% and 26.3%, respectively. For Thai textile imports to China, the biggest amount was yarn, totaling at USD 93.5 million, a rise of 83.3%, whereas the product with the biggest amount for garment imports to China was ready-to-wear, reaching USD 25.2 million, a rise of 21.7%, as displayed in Figure 5.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Figure 5 Thailand’s volumes of garment and textile exports to major markets

(Source: http://www.thaitextile.org/th/textile_intel/) (Accessed on 20 May 2012)

Based on the information on Thai exports to China and Hong Kong, produced by Center of Information Technology and Communication, Office of Permanent Secretary Ministry of Commerce, Thai garment and textile industry has been growing, in particular garment products with a growth rate from -2.20% in 2009 to 14.94% in 2010, and recently, a rise to 41.63% in 2011. The report on Thai exports as of 2011, together with the related information on Thai exports, highlights the fact that even the market of Chinese ready-to-wear clothes is huge and able to operate great volumes of imports-exports, there is a demand for such products from Thailand, derived for some niche market, meaning Thailand still has a chance for exporting garment and textile products, especially ready-to-wear ones. This is because Thailand has a competitive advantage in product image and sewing skills, making some Chinese middle-class, with affordability and awareness for Thai craftsmanship as well as design, are interested to wear more of Thai clothes (An interview with the Thai Trade Center, Guangzhou, China on 27 April 2012).

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Table 1 Information on Thai exports to China and Hong Kong

Source: Center of Information Technology and Communication, Office of Permanent Secretary Ministry of Commerce

The coming free trade under the AEC Framework by 2015 will further drive Thailand’s exports to China. With the population of approximately 1,300 million, China is full of purchasing power and import-export potentials. There is no surprise that China is also targeted by other countries worldwide. In order to survive in such a competition, our business operators should draw on Thailand’s competitive advantage, grounded on Thai craftsmanship’s positive image and popularity to gain a market share.


8

Guangzhou Trade Fair and the opportunity for Thai food products

Keerati Thawisap June 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Guangzhou China’s key economic hub Guangzhou is Guangdong’s provincial capital and also the biggest city in the south of China. It is located on Zhujiang River. The history of Guangzhou can be traced back to 2,800 years ago. In the past, Guangzhou was the first and only port city open for trading with Westerners. At present, Guangzhou has become a prosperous economic hub, as evidenced in its highest GDP in the south of China, and also one of the top three port cities of China. In addition, Guangzhou is equipped with a modern transportation with a wide coverage of underground railway network in the inner city; climate and lifestyle are generally similar to what we have in Thailand.

Source: th.wikipedia.org

The Tianhe area of Guangzhou


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

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Guangzhou Trade Fair (or Canton Fair), organized in April and October each year, is well responded by investors worldwide that seek for their trading counterparts in China. It offers a chance to meet with Chinese business people, to know Chinese cultures and China itself because Chinese people are not easy to access. Why Guangzhou? This is because Guangzhou has topped the total trade rankings in China. Guangzhou Trade Fair, thereby a must-go event for business dealers and interested people, includes all kinds of light and heavy products such as technology products, agricultural products, food products, tourism and heavy-light industries from over 100 categorizations. It is the best trade fair in China, as evidenced in having been awarded as China’s Number 1 Fair for several consecutive years. During April and May 2012, this fair was organized for the 111th time at China Import and Export Fair (Pazhou) Complex. This recent fair venue reflects the host’s attempts in seeking the best place so as to better accommodate the increasing number of traders.

Food business in Guangzhou and China: the opportunity for Thai trading Chinese eating culture with chopsticks 1 is prevailing worldwide. Chinese food is also known as the world’s best food because it is cooked with sophistication and delicacy, creating a unique taste which varies by region, geography, and climate. Vegetables and grains are staple food in China. The author joined a research team on the southern Chinese market From 26 April to 2 May 2012, the same period as the exhibition of food, drinks and processed food products of China at Guangzhou Trade Fair. It is noticeable that only tea, wine and alcohol drinks were prevailing while such other products as those made from meat, milk, eggs, vegetables, fruits and grains, both processed and non-processed were not so recognized or memorable by our research team because the products were


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

not either unique or distinguished. On the other hand, Thai food with a choice of rice, vegetables, fish, fruits, meat, seafood, herbs, ingredients and menus, offers a great variety. Therefore, generally speaking, whether found at Guangzhou Trade Fair, served at the restaurants visited by our team, and even seen on the streets, Chinese food was not so diverse or outstanding in terms of appearance, variety, and artistic dimension. Even though Guangzhou has high demands and purchasing power in the food market, as reflected in McDonald in the city that is 24 hour open and the shops that are closed one or two hours later than those in Thailand, the food service provision does not exactly fulfill the customer satisfaction. This offers the opportunity for Thai business people to fill such a gap by positioning their products in the market as Thai food is internationally renowned for diversity, a perfect combination of tastes, and the world kitchen image. In particular, Chinese people themselves consider Thai food as the first class, expensive food, made with high standards for high income earners. In Guangzhou, according to our local guide, there are about 10 Thai restaurants, which leave some market gap to be filled.

Figure 1 Food processed product exporter at the fair

Figure 2 Fruit and vegetable exporter at the fair

Figure 3 Chinese tea and drinks...one of China’s core food products


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

The Chinese government these days places more importance on the domestic consumer market, which offers the opportunity for Thai business operators to add value to their products in service sector. Guangzhou is the capital of Guangdong province, the interesting city for the investment. Guangzhou is the third largest number of restaurant city in China (After Beijing and Shanghai, in 20042), but have only few number of Thai restaurant (In 2004, There were only 50 Thai restaurant in China3). Considering only Guangdong province, the size of Chinese consumer market increased from CNY 9 billion in 1978 to CNY 2.02 trillion in 2012, meaning a growth rate of 19% annually for the past three decades with the highest retail sales of consumption, in comparison with other provinces in China4. Therefore, China is still a potential food market with a gap to be filled in terms of a variety of food choices. It is strongly recommended for well-resourced Thai entrepreneurs to penetrate the market in order to trade and import-export or even open a restaurant in China while adding value to their products and subtly presenting Thai culture to Chinese people through our world class Thai food. http://www.oknation.net/blog/print.php?id=32170 Online documents, Thai restaurant opportunity in China, Investment opportunities and potential resources in China, Ministry of Commerce, 2007: Retrieve on August 12, 2555. 3 Export-Import Bank of Thailand, March 2004. 4 Guangdong Economy and Thai Business Opportunity, Thai Trade Center, Guangzhou, March 2012 1

2

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9

Business opportunity for furniture industry in the south of China

Siriphan Yospanya June 2012


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Guangzhou Guangzhou is Guangdong’s capital city and also China’s third-ranked economic city (GDP worth USD 163 billion as of 2010). It is also known as the south corridor of China and one of the most important Chinese portal cities (Source: http://en.wikipedia.org/wiki/ Guangzhou). In 2010, Guangzhou was selected by Forbes as China’s best business friendly city. This is because of a convenient public transport network that can support people and products, as well as relatively low costs in business operation, in comparison to Beijing and Shanghai. The city is also one of China’s top ten cities with a competitive advantage (Source: ThaiBizchina.com).

Source : thai.cri.cn

รูปที่ 1.24 แสดงบรรยากาศยามค�่ำคืนของเมืองกว่างโจว


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Business opportunity of furniture industry Guangdong province is China’s most important base, as seen in foreign investments from the world’s leading companies to their manufacturing bases in China each year. This is largely due to a cheap labor cost in the production process, with no need for high-skilled labor. In 2010, Guangdong’s furniture export volume totaled at USD 14,929 million, making 40% of China’s export volume. Approximately 6,000 key furniture firms (12% of Chinese furniture firms) operate their business in Guangdong (Source: ThaiBizchina.com). Drawn on our study trip to the 111th Canton Fair between 27 April and 2 May 2012 in Guangzhou city, we found that vintage furniture and decorations, made of wood, were attractive for foreigners and also in the current trend. However, such furniture items were mostly imitated from those made in Europe and America, which is one of China’s weaknesses. Other products of interest included furniture or decoration items for offices and hotels. Even though the Chinese furniture industry is not able to create an edge in design, it offers relatively attractive prices. Rubber wood furniture is one of China’s highlight products because this kind of furniture can be modified for such various functions as kitchenware, building materials, and drawing room sets. We can say that China has production problems in quality, followed by some difficulties creating a trustworthy brand among consumers. Such problems are particularly serious for small and medium sized furniture businesses as most of the local businesses are lack of funding, making Chinese furniture brands relatively unknown, in comparison to the world class brands.

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Figures 1 of wooden vintage furniture, metal furniture and rubber furniture

Consumer market in China In Chinese consumers’ opinion: “imported goods are always better than locally made ones, no matter such imported products are made in Europe, Thailand or Vietnam. Such an opinion make Thai products, in the eyes of Chinese people, standard and more trustworthy than those made in their own country (Source: ThaiBizchina.com). To conclude, the Chinese economy as well as behaviors and tastes of Chinese people these days have changed. In particular, the new generation of Chinese people with more income often buys brand products. They have become modernized and more open to globalization. This means that in order to penetrate into such a market, we need to rely on product differentiations in many aspects such as design and a range of materials so that furniture and decoration items from Thailand can gain some share in the Chinese market.


10 Yide Lu,

the wholesale market in China’s Guangzhou

Pongsutti Phuensane June 2012


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Guangzhou is Guangdong’s provincial capital and also the biggest city in the south of China. The city is located near Hunan, Macau, and Hong Kong while being a focal point of Zhujiang River economy. At present, it has become a trading and transporting corridor of the south of China and China’s first city that was made a special economic zone. As a Chinese special economic territory, Guangzhou’s economy has been rapidly growing with economic strength. Internationally, EIU (Economist Intelligence Unit), a world economic leading agency, has ranked, in a 2011 Hot spots Benchmarking global city competitiveness, in terms of competitiveness advantage, Guangzhou the sixth out of 120 global cities in eight dimensions, especially economic strength. In China, Guangzhou was rated as the fourth in economic strength. Besides, Guangzhou is also renowned as a wholesale city, where Source : EIU Global City we can find any types of products for sales, Competitiveness Index from big sized e.g. spare parts to tiny-sized (Economic Strength) products e.g. mobile phone, accessories, and hair bands. Therefore, selling places in Guangzhou are various, whether shops on a particular shopping street or neighborhood to shopping malls. Yide Lu is among such neighborhood, which offers a categorization of tiny products, toys, and decorations. This area is well-known for Thai people what want to buy in bulk for either wholesale or retail purposes.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Yide Lu Street (

)

Yide Lu has been well-known among local Chinese people and foreign residents, including foreign traders seeking cheap stuff for sales in their countries and Thai business people. In particular, gift products and accessory items such as hair bands and clips, mobile phone cases, toys, pens and stationery, flower accessories are available everywhere in the street of Yide Lu as the place contains a range of decoration items, souvenirs and toys that can be purchased on either wholesale or retail basis. Yide Lu was originally an old market for toys and gifts, which was as hectic as wholesale markets in Thailand (e.g. Chatuchak market, Yaowarat). In the past decade, however, the street in Yide Lu has changed in accordance with other incessant developments in China’s socioeconomics. Yide Lu these days are occupied by several wholesale shopping malls of hundred square meters, which offer a range of products from shoes, clothes, home decorations, and even imported products. Gifts, toys and other accessories remain Yide Lu’s highlights.

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Shops on the street of Yide Lu Shops on the street of Yide Lu are located on the street, most of which are stand-alone shops with their own brands such as Giordano and 360; fast-food franchises from overseas such as McDonald and Pizza Hut; and Chinese brands such as Kung Fu noodle and other Chinese restaurants (which serve greasy food with relatively mild taste). Besides, there are shops selling boiled eggs, grilled pork balls and squids, etc.

There are also shops located within allocated small areas for rent, just like Siam Square, Siam Center or Pratunam Khon Kaen, with divisions of product types from clothes, toys, devices and appliances that can be bought by both retailers and wholesalers. There are many shopping malls in this area, yet the biggest one would be One Link International Plaza, a wholesale market for miscellaneous products. “One Link�, located on Yide Lu street, is a six-floor building, each of which has a clear division of product categorization, with the underground floor for such products as dolls, toys, and key holders.First, second, and third floors contain gift products, accessories, newly created


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

stuff such as watches made of paper and products that can be used as souvenirs e.g. key holders, torches that can be used as thumb drive. Forth, fifth and sixth floors contain home furniture and decoration items, artificial flowers, and stuff for collections. Shops are mostly managed by factories and focus more on a wholesale basis. This means that we can buy directly from the factories at very cheap prices, depending on negotiation skills and purchasing amounts.

Products at One Link can be very cheap when bought in wholesale and also in a relatively high number so as to get prices cheaper than those paid for the same type of products in Thailand. So if we want to buy products for sales in Thailand, we need to ensure that we buy cheap enough to make profits from selling in Thailand. Another concern is that we mostly spend more time on the first floor because it seems to have more products to offer or we are too tired to explore every floor. From our observation, anything that is sold on the first floor is also available on other floors. On top of that, some of the products on higher floor are even cheaper than those of the same types available on the first floor.

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Debao, a shopping mall next to One Link, focus on event decorations such as decoration light and light bulbs, as well as artificial trees and home decoration items. From the above information, we can see that Yide Lu in Guangzhou offers a good investment potential for investors, especially trading or wholesale of small and medium enterprises. Before shopping on Yide Lu streets, it is advisable that we should prepare ourselves in price and design of the products we want to buy, including comparative information in order to get quality products at cheap price. The amount we need to buy is another important factor because this can affect the price negotiation. That is, if we order in bulk, we can get a good price. In addition, we have to consider a method or process for shipping the products back to Thailand as well as custom procedures. Last but not least, we have to prepare our body; Yide Lu streets cover a large area so shopping tools such as trolleys, calculators, price notes, and business cards should be ready. Such a preparation helps us save time and get the right products at the right price.


11

Consumer behavior and consumer attitude towards Thai products in Vietnam

Supakorn Sirisoontorn June 2012


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

88

After Vietnam has opened up to international communities, there has been an influx of foreign entrepreneurs to Vietnam. According to our field surveys on the lifestyle and consumer behavior in Vietnam, socioeconomic environments in such big cities as Ho Chi Minh City and Hanoi are mostly modernized, yet the lifestyle and cultures in several other cities or rural communities in Vietnam remain unchanged, as evidenced in many local tea/ coffee shops along both sides of the streets. International restaurants are rarely found because local food shops are still frequented by local residents. This is probably because the Vietnamese family institution is solid. As we can see that the Vietnamese modern consumers, though with good education and well-paid jobs, still maintain the same lifestyle as their previous generation did. Therefore, the consumption behavior of such a demographic group is interesting.

Number of Registered (Million)

Number of Registered Mobile Phone Numbers (million)

2004

2008

2009

Source: General Statistics Office, Vietnam

2010

2011


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

At the interview with local people, we learnt that there are two things which denote the socioeconomic status of Vietnamese people these days: motorcycle and mobile phone. The number of motorcycles in Ho Chi Minh City alone, where the population reached 9 million, was over 4 million. As for mobile phones, the growth rate is exceptionally high, with mobile phone shops found almost everywhere. As of 2004, mobile phone users in Vietnam were about 4 million and subsequently up to the 65 million within the four-year period. As of 2011, there was over 117.6 million mobile numbers (a slight drop from the previous year, which may be due to an economic recession, reflecting in the national consumption), higher than the national population of 91.5 million. Many types of Thai products in Vietnam have gained popularity. This is partly because most of the products entered the Vietnamese market for a long time; some of them have been in Vietnam for over 20 years while the country was still closed. Such products, therefore, are so well-recognized in the market these days that the packaging was copied by local producers or house brand producers of local supermarkets such as canned fish. At the interview with Thai entrepreneurs in Vietnam, the Vietnamese attitude towards Thai products are positive with acceptance in quality, compared to those made in China or even locally made. This is coupled by the fact that Thai products have been in the market for ages, which makes the products recognized by Vietnamese people. Thai goods, especially food, are positioned at the same level with those made in Vietnam, at slightly higher prices while products from such other countries as Japan, South Korean and Taiwan are regarded premium at more expansive prices.

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Traffic condition after office hours. Streets are full of motorcycles, some of which are imported from such countries as Thailand and China. Even though Thai motorcycles are more expansive than locally manufactured or imported from China, Vietnamese customers are willing to buy out of confidence in quality.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Luxurious shopping malls, in the heart of Ho Chi Minh City, sell brand name and imported products, with tourists, business people, and high income Vietnamese as main customers.

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The Vietnamese population is likely to make for a high potential market with purchasing power, coupled with the fact that Thai products is of a good image among Vietnamese consumers, creating the opportunity for Thai business and products in Vietnam. However, it is noteworthy that the Vietnamese consumption behavior is quite sophisticated because it is a mixture of both the traditional and the modern. Marketing and consumer research is, therefore, extremely important for Thai entrepreneurs who wish to operate business in this country. Drawn on the information from Thai Trade Center, Ho Chi Minh, some businesses from Thailand failed to penetrate the Vietnamese market, largely due to insufficient marketing surveys and studies. This means that it takes comprehensive marketing research, patience and time to gain a business success in Vietnam before the actual business operation. This may take over one year to conduct marketing surveys and studies in order to gain real insights into the needs and behaviors of Vietnamese people and make newly introduced products accepted in the market. In order to become successful in business abroad, marketing research is an integral part of the whole business operation. This is because the consumer behavior varies from one country to another. Vietnam, therefore, makes for a good case of this reason. In Vietnam, though with some social and economic developments as a result of globalization, some of the local population maintains the same consumption pattern as their older generation did. If entrepreneurs do a comprehensive study and thus better understand the Vietnamese market, they will be able to see some business opportunities and more likely to gain success.


12

Market for Thai ready-to-eat products in Vietnam

Supakorn Sirisoontorn June 2012


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Based on our surveys on markets and supermarkets in Vietnam, Thai goods, especially food products are generally seen on the shelf and also on the list of bestseller products for local people. This is confirmed by a report, produced by Thai Trade Center, Ho Chi Minh, which says that Thai products, especially ready-to-eat such as canned fish, snacks, and light meals, have gained popularity in the Vietnamese market for over 10 years.

Values of Food Import and Percentage of Food Import / Total Import

Source: General Statistics Office, Vietnam; and World Bank (Accessed on 30 September 2011)

Drawn on the above data, Vietnam, as of 2009, imported food products at the amount of USD 2,127 million or about 63,000 million baht annually. Within the five-year period, there was an average growth of 24% per year, with an increasingly growing trend. In addition, in the same year, the proportion of food products reached 7.9% of the whole import goods, reflecting that the food market in Vietnam is attractive for Thai entrepreneurs.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

In Vietnam, Thai products, especially ready to eat goods, are often found at retail stalls within such markets as Binh Tay Market in Ho Chi Minh City, which is well-known for retail and wholesale products from Thailand. At the interviews with local people, it was revealed that most people buy both food and consumer goods at the market while supermarkets or hypermarkets are solely located in major cities such as Hanoi, Ho Chi Minh City

Figures 1 Snacks from Thailand in Binh Tay Market

Figures 2 CO-OP Mart (supermarket)

and Hai Phong. People in other cities still do shopping at the market. Convenience stores are rare, even in big cities like Ho Chi Minh City. This is because the Vietnamese consumer is relatively frugal while convenience stores, which offer higher prices, targeted at tourists as their customers, rather local people. The Thai food products, exported to Vietnam, are in competition with those from other countries such as China, South Korea, and locally made. However, Thai products are of an advatage

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because of the better image in terms of quality in comparison with rival products from China or even those made in Vietnam. For example, Sam Mae Krua canned fish, which has been in the market for a long time, occupies larger space on the shelf in supermarket in comparison to other rival products. Even canned fish of house brand products, produced by the supermarket itself, are placed nearby at a cheaper price; yet such products are not as popular as the Thai products. Based on the previous factors, pricing is a key factor that determines the market positioning of products. Our survey found that Thai goods, especially food products, are positioned itself at middle level and targeted to mass market, with a slightly higher prices that those locally made. Another important factor is the distribution channel. Importing Thai products to Vietnam is often through distributors who focus on wholesale-retail shops within the market, instead of modern-trade malls, in order to suit the local consumer behavior. This is different from the channel distribution of food products in Thailand, which emphasizes modern-trade malls and convenience stores. It appears that the Vietnamese market is of a high potential for food products in terms of market size and the consumer attitude toward Thai products. Drawn on the information from Thai Trade Center, Ho Chi Minh, however, there are several concerns for Thai entrepreneurs who want to export products to Vietnam. Firstly, the Vietnamese consumer behavior varies by region, including the difference in consumption between urban and rural dwellers. Urban people tend to do more shopping at supermarket, following the trends of cleanliness and hygiene while those in the country still buy products from fresh markets. Entrepreneurs should thus conduct a marketing research to test their products in many areas before any product introduction to the market so that they have knowl-


edge on the real needs of each different area. Secondly, they need to find a reliable distributor so that the products can get the right channel to respond to the needs and behavior of consumers. Finally, the Vietnamese dong, is relatively unstable, causing problems in import-export transactions so a hedge should be considered to protect against contingent exchange rates.


13

Opportunities for Business related to motorcycles in Vietnam

Suthin Wianwiwat June 2012


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Vietnam had a population of 91.5 million with the number of motorcycles reaching approximately 24 million (as of 2012). In 2011, there were over 4 million motorcycles in Ho Chi Minh City alone. The market of new motorcycles in Vietnam has a growth rate of about 1 million annually, which is estimated that, by 2015, the number of motorcycles will reach 29 million (Source: http://122.155.9.68/talad/index.php/vietnam/sector/motorcycleparts, accessed on 7 June 2012). Based on the above information, business related to motorcycles in Vietnam is attractive with growing potential, following the increasing rate of motorcycle occupation. Therefore, products that can be offered in Vietnam are spare parts and accessories for motorcycles. Quality products are recommended, especially those with middle to high quality as motorcycles, for Vietnamese people, can indicate an economic status as a local joke says: “No motorbike, no wife�.

Streets in Ho Chi Minh City cramped with motorcycles (Photo by Tuoi Tre)


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Potential of Ho Chi Minh City is distinguished from other cities as it has the country’s highest number of motorcycles. Further, the city has a relatively open-minded population who earn high income, both from regular pays and financial support from overseas relatives. This means there are no obstacles in terms of pricing, which helps ease the profit making for entrepreneurs. In addition, such consumers are keen in being unique and showing off through luxurious motorcycles, which creates the business opportunity for interested investors. Like the South of Thailand, there are plenty of rainfalls in Ho Chi Minh City. Rain protection kits, therefore, has a business prospect. These days rain protection kits such as rain protection roofs for motorcycles remain largely unknown in Vietnam, where motorcyclists often wear raincoats when it rains. In Thailand, PPS Reforming Co.,Ltd. is the sole distributor of rain protection roofs for motorcycles. The product was released in April 2011, under the brand of Wonder Roof, at the price of 3,600 baht only. To enter the Vietnamese market may start from selling rain protection roofs for motorcycles in Ho Chi Minh City. If the business goes well, the entrepreneur then can continue with the establishment of production facilities in Vietnam.

Examples of rain protection roof for motorcycles (Photo: http://www.wonderroof.com , accessed on 7 June 2012)


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Another interesting business is to provide repair, maintenance, decoration and cleaning services with modern facilities because such an existing business is operating without standard or up-to-date facilities. Therefore, offering a new service with state-of-the-art technology makes for a product strategy that can lead to success. For example, a car care that provides cleaning service solely can be improved by using the cleaning technologies currently available in Thailand such as water pumps, high-pressure water injections, foam sprayers and wind pumps. Another example is that a car care service should be combined with car maintenance, lubricant oil filling, decoration or any services for motorcycle owners such as coffee shops, convenience stores, and customer lounges. Price can be freely set at a slightly higher rate than those of the local shops in order to be more attractive for customers as such a business is relatively new in Vietnam. Location in the city center makes for the better access to customers, yet the land price is very expensive. So a location that is far from the city center makes for spacious area at a cheaper price, which enables the operator to provide a wider range of services. It is important, thought, to find a location that is within the range of roads to residential areas. To conclude, one of the potential businesses for Thai entrepreneurs to invest in Vietnam is business related to motorcycles such as accessories to make motorcycles more attractive or function better, including a maintenance motorcycle service, equipped with modern facilities. Ho Chi Minh City, in particular, is a perfect city to pioneer such businesses before any further investments to other cities.


14

Business opportunity in the Cambodian retail market for Thai entrepreneurs

Supakorn Sirisoontorn July 2012


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A number of mega real estate projects are ongoing in Phnom Penh these days. Examples of hotels and casinos include Naga World, Canadia Tower, and Vattanac Capital (a multi-complex of shopping malls, offices, and apartments, located in the city center of Phnom Penh). These mega projects indicate an expansion in both economy and business in Phnom Penh, which is in response to higher demands for office, residential and retail areas. Drawn on a report produced by CB Richard Ellis, Phnom Penh Office, demands for office areas have increasingly risen and over 200,000 square meter office areas are expected to finish by 2013, a double growth from 2010. This is in commensurate with a double increase in rent within the past 5 years. This means that previously the economy and investment in Cambodia have been steadily growing, positively impacting on related business sectors. One of the sectors, expectedly a beneficiary of such a growing opportunity, is the retail business. Apart from retail shops and markets generally located around Phnom Penh city, there are some new shopping malls. One of these are developed by Hong Kong Land and Aeon Groups, which bought over 64,000 square meters of land near Sofitel Phokeethra, to become Aeon Shopping Mall, which is still under construction.


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At present, the most visited mall in Phnom Penh is Sorya Shopping Centre, located near Central Market, which is one of the city’s main tourist attractions. Sorya Shopping Centre has six floors with an area of 27,000 square meters. Based on our field survey, there was almost 100% occupancy rate with a range of food court, restaurants, cinemas, supermarket, and retail shops. Among these shops are modern restaurants or franchise restaurants of both Cambodia and overseas such as pizza, fried chicken, ice cream, most of which gain popularity among Cambodian customers, especially those with franchises are packed with local residents. In the meanwhile, there have been no hypermarkets such as Tesco and Big C as well as modern convenience stores; only supermarkets and traditional shops are available.

(source: skyscrapercity.com)

Sorya Shopping Centre


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Vattanac Capital

(Source: CBRE)

Based on economic figures of Cambodia, derived from the Thai Trade Center in Phnom Penh, business sectors including retail-wholesale, hotels and restaurants, were worth 38% of the 2011 GDP with a growing prospect. As estimated by the Thai Trade Center, the whole service sector would increase 6.9% in 2011 and 6.5% in 2012. Within this growth, 7.1% was to be contributed by trade sector and 11.2% by the hotel and restaurant sector.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Table 1 of Growing Prospect in Service Sector ภาคธุรกิจ บริการ คมนาคมและ โทรคมนาคม

พ.ศ. 2550

พ.ศ. 2551

พ.ศ. 2552

พ.ศ. พ.ศ. 2554 พ.ศ. 2555 1 2553 E E1 E1

7.2%

7.1%

3.9%

8.0%

9.1%

7.9%

การค้า

9.5%

9.4%

4.2%

7.1%

6.1%

7.1%

โรงแรมและร้านอาหาร

10.3%

9.8%

1.8%

11.2%

11.6%

11.2%

การเงิน

22.2% 19.3%

8.0%

12.7%

18.1%

12.7%

การบริหารจัดการ

0.1%

4.5%

1.0%

11.5%

3.6%

2.9%

อสังหาริมทรัพย์

10.8%

5.0%

-2.5%

-9.9%

1.3%

5.6%

อื่นๆ

12.1% 12.0%

2.9%

3.9%

5.6%

4.9%

E = estimate หมายถึง การประมาณการ Source : National Institute of Statistics of Cambodia, and Economic Institute of Cambodia (complied by Thai Trade Center, Phnom Penh)

According to our market survey in Phnom Penh, both ready-to-eat food products and fast moving consumer goods were mostly imported from abroad, especially Thailand. This can be seen in supermarkets and other shops distributing Thai products with labels in Thai language. Though there were shelves especially for products with Cambodian origin, there were only a few types and a small number of products. This meant an acceptance of Thai products in this country, many of which gain a large market share. Further, Cambodian people had access to the Thai media such television shows and dramas, making most of Cambodian people familiar and adopt the consumption behavior from Thailand.

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In summary, business opportunities for Thai entrepreneurs, especially those selling Thai products in Cambodia, can be reinforced by a range of factors. Firstly, there is a positive sign from the business growth in Cambodia and an increasing number of retail space, following new development projects of real estates and shopping malls in the capital. Secondly, the increasing growth of service sector in Cambodia is expected to rise by 6.5% in 2012. Within this sector, trading business is projected to rise by 7.1% and the hotel and restaurant business by 11.2%. Finally, Thai products are well known and widely accepted by Cambodia people, including the lifestyle of the young Cambodians who are willing to adopt the Thai consumer behavior. However, the political factor remains a risk in terms of product distribution or delivery channels. Even though Cambodia, in most cases, is politically stable, Thailand and Cambodia sometimes have political and border conflicts, which may adversely affect product delivery through available channels.


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Businesses related to tourism are of a promising future in Cambodia

Suthin Wianwiwat July 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

The Cambodian population size reached almost 15 million in 2011. With the GDP (Gross Domestic Product) worth of USD 12, 861 million, of which can be calculated per head at USD 852 (Source: http://en.wikipedia.org/wiki/Cambodia; accessed on 15 June 2012), which is about 16% of that in Thailand. It is interesting to note that, however, the Cambodian economy is dramatically rising at 8% annually for the past decade. Such an amazing rate has been largely driven by the tourism sector. Notably from 2004 to 2011, there were foreign tourists visiting Cambodia at an incessantly increasing number of about 1 million to 2.88 million, generating income out of tourism to USD 1,910 million, up from previously USD 673 million (Source: World Bank). In addition, during the first four month period of 2012, the number of foreign tourists reached 1.27 million, a 28% increase in comparison to the previous year. Among these tourists, those from Vietnam were ranked the highest at the number of 246,000 (19.4%) or a 35% increase, then followed by those from South Korea at 181,000 (14.3%), a 39% increase. The third-ranked was those from China at the number of 112,600 (8.9%), a 32% increase, which is targeted by the Cambodian government to increase to 500,000 by 2015 and then 1 million by 2020. In the meanwhile, Thai tourists to Cambodia surged to 65,200 (5.1%), a 87% increase, as a result of the improved relations between the two nations. (Source: http://www.mcot.net/cfcustom/ cache_page/371797.html, Accessed on 15 June 2012). Drawn from the above figures, it is estimated that the number of foreign tourists to Cambodia will be over 3 million by the end of 2012.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Angkor Wat

Angkor Thom

(Source: Wikipedia)

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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

About half of the foreign tourists to Cambodia aim for Angkor Wat and Angkor Thom, one the seven wonders of the world. The other half visit Phnom Penh, the capital city, and other provinces such as Sihanoukville which is renowned for beautiful beaches. The high season for tourism in Cambodia is from October to March, a rain-free period while the low season is from May to September, a rainy season. This means the tourist season in Cambodia is similar to the one in Thailand. Because of the growing potential in the Cambodian tourism sector, coupled with the governmental support in the development of tourist sites, it is reasonable to see the number of foreign tourists increase each year. As a result, demands for accommodation, restaurants, and other services are higher as well. In 2011, the Cambodia Investment Board approved six projects of tourism industry with an investment budget worth USD 14.5 million, a considerable amount in comparison to the USD 3 million of the previous year. The recently approved projects include the developments of tourist centers, shopping centers, five-star hotels and accommodations. Such investments are in response with the coming Asean Economic Community in 2015, in which the tourist sector will open more freely. This offers the opportunity for Thai investors to operate a business in relevant service areas such as accommodation, tours and guided tours, restaurants, and training.


Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Accommodation business including hotels, resorts, and home stays are of a bright prospect as a result of an influx of tourists. The hotel occupancy is higher than that of Thailand. Medium-sized hotels, guesthouses, and home stays should be a main target for investments because most of foreign tourists are those with middle income from Asia while the market itself can further grow. However, this business is still challenged by some factors such as troubles derived from the access to government agencies and increasingly high prices of land caused by the growth in real estate sector. Tours and guided sightseeing services, due to the relatively free and fierce competition in this business, it is advisable to Thai entrepreneurs to get their firms registered in Thailand and organized tours in cooperation with their local alliances in Cambodia in a response to tourists who want to travel in a variety of countries in ASEAN and use Thailand as a tourism center. In so doing, Thai entrepreneurs can get customers for both outbound and inbound tours.

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Restaurant business can be invested in a wide range of levels in both Phnom Penh and Siem Reap, where either Thai cuisine, which is internationally received by the world, or international restaurants with unique decorations in order to attract tourists around the world, especially those from Asia. Further, coffee shops, bakeries, fast food restaurants and food courts are well frequented by both Cambodian people and tourists. Training for service and tourism is another potential business for investment. This is because most of the labor and supervisors in service and tourism sectors remains unskilled in service provision while Thai personnel in the same sectors have an outstanding performance, proving an opportunity for hospitality school business.

In conclusion, service sectors related to tourism in Cambodia offer a good investment potential. It is a good time for Thailand, the tourism center of ASEAN with an edge in tourism and service industries, to invest in the booming tourism and service sectors in Cambodia. However, the investment in Cambodia is more likely to gain success if interested investors have a sound financial resource, and well-established connections with local business operators as well as government agencies in Cambodia.


16

Business opportunity for gas stations in Cambodia

Kawpong Polyorat, Ph.D. July 2012


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

The streets in Phnom Phenh, Cambodia, are packed with a great number of vehicles, as seen Figure 1 and Figure 2. This is one of results from the rapid growth in economy and an accelerated improvement of the nationwide infrastructure, making for the better mode of transport and communication among each region. A demand for vehicles in Cambodia both responds to and determines the rising fuel consumption locally, following the national economic growth. Drawn on the trade information complied by the Royal Thai Embassy in Phnom Penh, in 2010, fuel exports (benzene, diesel, aviation fuel, and fuel oils) from Thailand to Cambodia totaled at 441.5 million liters worth USD 281.1 million. In 2011, the rate of fuel imported from Thailand to Cambodia was in accordance with that of automobile imports at the rate of 39.24%. Within the vehicle market, there are two customer groups: the first group is those with high income who buy new cars and use services provided by quality and standardized service centers; the second is those with relatively low income who buy used cars. (Watcharas Leelawath, Trade and Investment in Neighboring Countries in ASEAN Framework. 2012)

Figure 1: A range of vehicles on Cambodian streets (1)

Figure 2: A range of vehicles on Cambodian streets (2)


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In addition, based on surveys on gas station business in Cambodia in comparison with other CLMV (Cambodia, Laos, Myanmar, and Vietnam) countries, there are many gas stations, which (as seen in Photo 3), mostly aimed at providing gas filling services. This is different from the gas stations in Thailand, which often offer a more comprehensive service (apart from gas filling) including food and drinks stalls, grocery shops, garage, car care, and coffee shops.

Figure 3: Gas Station in Phnom Penh (3)

Figure 4: Gas Station in Phnom Penh (4)


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

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Moreover, local entrepreneurs are lack of knowledge and skills in business management, yet full of finance resources. This is a good opportunity for Thai entrepreneurs, especially those with an edge in management as well as energy and automobile sectors, to invest in gas station business in Cambodia with a one stop service. This is not only in response to an increasing demand for energy in Cambodia, but also a value addition based on other services, apart from the gas filling solely. In order to enter the local energy business, Thai business investors may start from a joint venture with local operators or sell a franchise as a mode of investment in Cambodia.Importantly, the potential gas stations should provide a standardized garage service, equipped with specialized mechanics and modern repair facilities at reasonable rates. This will create a competitive edge over other garage services in Cambodia, of both small and medium sized, that are often lack of specialized mechanics. Most of the garages with standardized service, equipped with sophisticated facilities and thus accepted by high-end car users, are under the management of car dealers such as Toyota, Mitsubishi, Ford, Honda, Nissan, Isuzu, Mercedes Benz, Peugeot and Jeep Cherokee. Drawn on the data, produced by the Thai Trade Center in Phnom Penh, regarding the garages located in the city, 60% were owned and managed by Cambodian people. Another 30% belonged to Vietnam entrepreneurs and the other 10% owned by other nationalities.


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Market Analysis Mekong countries including Laos, Vietnam, southern China and Cambodia

Opening a garage stall at gas station is thus a promising investment especially when such a garage can provide a good quality service with specialized mechanics, and is also wellequipped with repair facilities at a reasonable price. Further, it is rational to consider locations or areas for investments based on the number of cars or economic background in each city. Areas in such provinces as Phnom Phenh, Ratakiri, Siem Reap, Sihanoukville and Mondulkiri are attractive in this matter because residents of these cities earn high income with good purchasing power, coupled with the fact that they own a number of cars and motorcycles (Source: Office of Small and Medium Enterprises Promotion, 2010).


Thanks • Thai Trade Center, Vientiane • Director, Legal and Tax Division, PricewaterhouseCoopers (Laos)Ltd, Vientiane Office • Assoc. Prof. Phouphet Kyophilavong, Ph.D., Deputy Research Director, Faculty of Economics and Management, National University of Laos • Khun Pannakarn Jiamsuchon, Director, Thai Trade Center, Guangzhou • Khun Tharabodi Adichaiwit, General Manager, Bangkok Bank (Veitnam), Ho Chi Minh City • Khun Pranomsri Somkhan-ngern, Director, Thai Trade Center, Ho Chi Minth • Khun Adisai Prasertsri, Honorary Advisor to Vietnam Ministry of Industry and Trade • Khun Chatchai Vuttantaweekij, Assistant Director, UniThai (Vietnam) Ltd, Vientiane Office • Khun Hen Thy, Director, Tax Consultancy Division • Khun Hang Sophath Molyzana, Senior Manager, PricewaterhouseCoopers (Cambodia) Ltd; Thai Trade Center, Phnom Penh • Staff at Department of International Trade Promotion , Phnom Penh Office


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