Vietnam & The Phillipines

Build a brighter future.

Vietnam went through a major development from one of the poorest nations to a lower middle-income country over the past 30 years. With an increasingly growing GDP over the past 9 years, it has become one of the fastest emerging economies in South East Asia. Furthermore, it is one of the few ASEAN community members that realized a positive economic growth during the ongoing COVID-19 pandemic, as its GDP has still grown by 2.9% in 2020. With the establishment of several new trade agreements, the EVFTA in 2020 being the most recent, business opportunities are optimized between Vietnam and Europe.

With a doubling of its GDP growth since 2000, Philippines is developing from a lower middle-income towards an upper middle-income country. Increasing urbanization, a growing middle class, and a large and young population resulted in the Philippines’ economy become dynamic and a vibrant labor market, reflecting strong consumer demand. Despite its contracting economy as a result of the COVID-19 pandemic, it is projected to be one of the leading ASEAN countries when it comes to GDP growth in 2021. With its unique geographic location, declining poverty and notable performance amongst sectors, excellent business opportunities are present in the Philippines.

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Sectors: Vietnam

Agriculture

With a share of 20% of national GDP, agriculture is an important sector for Vietnam. It is one of the top exporters of coffee, tea and rubber. With a growing and westernizing middle class, demand for high quality products has seen an increase in Vietnam. To keep up with this demand, Vietnam needs to modernize its agricultural sector.

There lie many challenges in productivity, excessive use of pesticides and fertilizers, climate change and water quality and availability. To overcome this, many opportunities lie for companies with the skill and know how to tackle these issues.

Automotive

The Vietnamese Automotive industry is a rapidly expanding sector over the past years. With its fast-growing middle sector consisting of 22 million people and expecting to double by 2026, the growth rate of car ownership is estimated to boom over the next decade. One of the main challenges is the stiff competition between ASEAN countries. Business opportunities for Dutch companies lie in the recent free trade agreements with Europe (EVFTA) and increasing demand for motor vehicles and components.

Education

Due to a growing middle class in Vietnam, there is an increasing demand for education and therefore a growing amount of money is spent on this. Since Vietnam is becoming wealthier, there is an increasing need for higher quality of education. Vietnam’s current educational system faces major skill gaps, and local qualifications in many fields are not well acknowledged. As investment in children’s education is given increased priority, the demand for an international learning environment is on the rise, making the market more attractive to step into for international education providers. International qualifications are seen as a valuable advantage, and in some fields they are almost essential. The government is also extremely committed to educational development, which has driven the improvement and continuous expansion of the education system.

Vietnam’s increasing wealth combined with government encouragement and consumer desire for high quality education are setting the table for increased foreign investment in Vietnam’s higher education sector, creating opportunities for Dutch companies. Besides this, there also lie possibilities for E-learning in the Vietnamese market. E-learning is an upcoming way of learning and COVID-19 has given a boost to this development.

Energy

Vietnam’s power system is at an inflection point. Over the past five years, load has increased at an average of about 10 percent a year, a staggering pace. Keeping up with the rapidly growing demand for power will require bringing a significant amount of additional capacity online. By Electricity of Vietnam’s (EVN’s) estimates, this upgrade to the power system will require Vietnam to attract more than $150 billion in new capital investment into the country.

 

Vietnam is considered to have the best wind resources in Southeast Asia. Located in the monsoon climate zone, and shaped by its over 3,000 km long coastline, Vietnam´s potential to develop and generate wind power is large. Furthermore, Biomass is an important source of energy in Vietnam, and being an agricultural country, Vietnam has a high level of biomass energy potential. Having one of the highest number of hours of sunshine annually in the world – approximately 2,000 to 2,500 on average – Vietnam’s potential for solar energy production is high. From this, one can conclude that the Vietnam’s natural endowments offer endless possibilities for renewables.

 

The innovative Dutch business climate, combined with its expertise in the renewable energy market, promises business opportunities to lay ahead. Sectors with explicit potential are; generated distribution, solar power innovations, the service industry for wind generation, energy storage through water management, and electric public transport and smart charging solutions.

Healthcare & Life Sciences

Vietnam has a fast-growing middle class and aging population. The middle class has more money to spend and expects higher quality of care. Together with this development, the government is making efforts to improve the quality of healthcare throughout Vietnam. There remain challenges regarding health access; many hospitals are outdated and overcrowded and are in need new medical equipment and more staff.

These developments have created several opportunities for Dutch companies. Vietnam’s growing middle class and rapid economic development has boosted the demand for higher quality and specialized healthcare services. Besides this, the country has entered the ‘aging phase’ which leads to a demand for medical technology which targets more frequent lifestyle and age-related conditions. The Vietnamese hospital system also needs an upgrade in its facilities, equipment, and services. Next to this, government encouragement for the import of medical equipment creates a strong market for foreign investors.

Industry

A diversified trade structure, rising wages and domestic consumption are the backbone of the Vietnamese economic growth. Nonetheless, labour costs remain competitive, which help attract foreign investments to the country. Industry contributed 34.5% of GDP and employed 28% of the total workforce in 2020. The energy sector has boomed in recent years (coal, hydrocarbons, electricity, cement, steel industry). Despite being a ‘newcomer’ in the oil industry, Vietnam has become the third largest Southeast Asian producer.

The country has also invested in high value-added industries such as cars, electronic and computer technologies. Manufacturing rose by 10.9% year-on-year in 2019, contributing a record industrial trade surplus of over USD 10 billion. With their growing middle class and high quality manufacturing Vietnam is considered to be the growing nation.

Information Technology

Vietnam’s information and communication technology (ICT) industry posted average annual growth of 26.1% in the 2015-2019 period, dominated by multinational businesses, the electronics industry has significantly boosted Vietnam’s trade volume and contributed to its GDP in the past decade. With emerging opportunities due to trade liberalization, corporate tax reduction, labor quality improvement, and government reforms, Vietnam has become a favorable option for foreign investors looking to relocate their EI investment in Asia.

 

Vietnam’s rising e-commerce industry is expected reach close to US$9 billion by 2025 representing significant opportunities for investors. This constitutes to nearly a tenth of the country’s overall goods and services sales. Electronics, fashion, toys, and furniture represent some of the fastest-growing sub-sectors in the e-commerce industry in Vietnam. Challenges include higher operational costs due to the cash- based economy, heavy traffic in cities such as Hanoi and Ho Chi Minh as well as underdeveloped infrastructure resulting in challenging last-mile delivery to rural areas.

Manufacturing

Vietnam is a major regional trading hub in Asia due to its geographical position (as gateway to South China and ASEAN markets), its long coast line (3260km along all major inter-Asia shipping routes from China to South-East Asia) and its abundant inland waterways. The Vietnamese ports are well placed along the inter-Asian shipping routes to take advantage of growing intra-Asia trade volumes.

With its long coastline, strategic location and skilled low-cost labour force, Vietnam is an interesting location for the Dutch maritime companies producing for third markets and equipment suppliers. Several major Dutch companies are already active in Vietnam’s main centres for shipbuilding: Hai Phong, Da Nang and Ho Chi Minh City. Vietnam also has an extensive port infrastructure with over 120 ports, of which 37 ports can accommodate ocean cargo vessels. With an average annual export growth of 12% the port infrastructure is in continuous development to facilitate this trend.

Tourism

The tourism sector is an important vehicle for economic growth, job creation, and shared prosperity in Vietnam. Unfortunately, Vietnam is not exempted from the negative influences of the COVID-19 pandemic on global tourism. Even though COVID-19 has created several challenges, it also created awareness amongst the Vietnamese about some important improvements that need to be made.

Opportunities for Dutch companies lie in the restructuring of the tourism market. For example, restructuring it in a sustainable and effective manner towards a market with high-quality and high-spending tourists, and creating proper products that can meet the diverse demands of international visitors. Besides this, there should be more focus on domestic tourism since Covid-19 will likely impact the international tourist markets for the next few years. Dutch companies can furthermore assist the Vietnamese with overcoming the infrastructure capacity strains, lack of skills of employees and the digital transformation of tourism promotion.

Transport & Logistics

Vietnam is set to see strong growth in trade over the coming years. This will support ongoing development and expansion of its logistics and transport. This sector is one of the fastest growing industries in Vietnam. The infrastructure sector is a key investment in Vietnam, because it will result in spill-over effects to other sectors. The continuously improving vast network of highways, metro’s, maritime ports, airports, and railroads provide the perfect platform for exports.

The innovative Dutch business climate, combined with its expertise in the Transport and Logistics market, promises business opportunities to lay ahead. Dutch companies can either set up their operations through a Vietnamese entity to provide logistics services in Vietnam or participate in parts of the supply chain of services, such as; warehousing & distribution centres, climate controlled logistics, and IT services.

Water

Vietnam with over 26% of land below sea level is similar to the Netherlands, as we have always had to protect ourselves from the risk of floods as well. To survive, the Dutch had to be inventive and develop a highly sophisticated means of water management. In fact, the high population density combined with an economy largely related to transport, navigation and ports, results in pressure on space and environment that has to be managed carefully. By involving relevant stakeholders and designing sustainable engineering and ‘smart’ infrastructure for complex settings, standards of Dutch water management are very high.

In this context, the Dutch water sector can provide knowledge, expertise and technology in water management to help tackle the water challenges that Vietnam is facing and contribute to the country’s sustainable development.

Sectors: The Philippines

Agriculture

The Philippines has recently transformed into a dynamic emerging economy that sustained a growth trajectory of 6.4% between 2016 and 2019. The agricultural sector employs one third of the population and accounts for 9% of the national GDP. Though the growth of this sector as a whole has not been optimal, they broke new ground with their “New Thinking” program. Which is set out to consolidate, modernize and industrialize the Philippine agriculture.

The challenges can be found in productivity, infrastructure and the lack of technical capabilities. These result in opportunities in the hog and pork industry, high value crops, innovation in farming technology, digitalization, storage and infrastructure. Dutch companies possess the skills and knowledge to fill these voids in the agricultural sector of the Philippines.

Automotive

The Automotive Industry in the Philippines has been a thriving industry in the country over the last five years. Across the Asia Pacific Region, the Philippines ranked 9th among the countries with the highest passenger cars sold. The Philippine automotive industry consists of three major markets: motor vehicles, motor vehicle parts, and component manufacturing.

One of the main challenges for the Automotive sector is competition with countries as Thailand, Indonesia and South Korea. Also, COVID-19 had a huge impact on the production of automotive products. On the other hand, as the Philippines have a largely growing middle class, demand for automotive products is growing.

Biotech

Biotechnology is a science that allows farmers to be more efficient and environmentally conscious by growing more crops resistant to pests and diseases on less land. This scientific advancement is essential in the nation, as almost half of Filipinos work in agriculture and the country is experiencing significant population growth.

Biotechnology in the Philippines is so important that a new biotechnology center is being built to support the Philippine Department of Agriculture. The project is being funded mainly by the U.S. Agricultural Trade Development and Assistance Act, Public Law 480. Agriculture makes up 20 percent of the Philippine’s GDP, yet Filipinos dependent on agriculture as their main source of income are some of the poorest in the nation.

Biotechnology in the Philippines increased the agriculture market by $642 million, and 14 climate change resistant rice strains have been created in recent years. The strains in-use now only take 5 to 7 years to breed as opposed to 10 to 12, and such results provide international hope for feeding ever-growing populations and combating a changing climate. For these reasons, it’s essential for foreign aid to continue and for biotechnology in the Philippines to remain active in agriculture.

Business Process Outsourcing

The Business Process Outsourcing (BPO) industry is considered one of the fastest growth industries in the world. It has grown at an average annual expansion rate of 20 percent.  The IT and Business Process Association of the Philippines (IBPAP) has stated that the IT-BPO and Global In-house Center (GIC) industry is the Philippines’ most important generator of jobs.  Its contribution to the Philippines GDP is approximately 17 percent in 2016, and it is now the Philippines’ second largest net foreign exchange earner after remittances from an estimated 10m overseas workers. The Philippines BPO industry has overtaken India as the leading call center country, and due to this, the subsector is projected to continue to maintain the largest contribution to the industry’s growth in future years.

BPO in the Philippines has the potential to help Dutch companies to focus on the core mission of their business while outsourcing their non-essential services such as email-support, bookkeeping, customer service, or accounting.

Education

The Philippines is one of the countries that has been investing more in its educational system, seeing it as an instrument for accelerating the country’s human capital development. This is reflected in the Philippine Development Plan 2017-2022 which states that the government intends to, “achieve quality accessible, relevant, and liberating basic education for all,” as well as, “improve the quality of higher and technical education and research for equity and global competitiveness.”

The Philippine education sector has therefore been given the highest allocation from the national budget, allowing the Department of Education (DepEd) to implement various educational reforms such as the K to 12 Program and the Universal Access to Quality Tertiary Education – all aimed at giving Filipino students equal access to quality education.

Energy

Due to the increasing population and the growing industry, the demand for electricity is increasing rapidly. The 2012-2030 Philippine Energy Plan (PEP) seeks to mainstream reliable and affordable energy services to fuel local productivity and countryside development. The PEP invites foreign expertise, investments, and innovation. In addition, the Philippines seeks to improve its environmental performance significantly by setting goals to generate energy consumption through clean sources.

Currently there is a lack of specific knowledge in the Philippines. The innovative Dutch business climate, combined with its expertise in the renewable energy market, promises business opportunities to lay ahead. Sectors with explicit potential are: generated distribution, solar power innovations, the service industry for wind generation, energy storage through water management, and electric public transport and smart charging solutions.

Healthcare & Life Sciences

The Philippines has a fast-growing middle class and aging population. The middle class has more money to spend and expects higher quality of care. Together with this development, the government is making efforts to improve the quality of healthcare throughout the country. There remain challenges regarding health access; many hospitals are outdated and overcrowded and are in need new medical equipment and more staff.

The speed and quality of implementation of health reforms as well as macro-economic progress will be crucial for further market opportunities to arise for Dutch companies active in The Philippines. Indicative fields that are expected to become or remain interesting in the medium to longer term future include: Construction and equipping of new health infrastructure in remote areas, capacity in emergency and disaster medicine services and population screening programs (e.g. cancer).

Industry

Before the COVID-19 pandemic, the Philippines has seen significant growth within the FMCG sector. The highest share in the Filipino FMCG sector in the third quarter of 2020 was food, followed by beverages and personal care. Food accounted for 58 percent of the total FMCG value, whereas beverages and personal care accounted for 17 percent each.

The Philippines’ large population, strategic location, and rising middle class has led to many advantages from a manufacturing point of view, which also has a positive result on the retail industry. Furthermore, lower inflation and increased purchasing power created more consumer confidence. Online retail activity is seeing a substantial growth, due to the support of government policy and market leaders. This combined with new logistics and transport opportunities, creates a valuable network for the retail market.

Manufacturing contains over 50 percent of the Philippines’s industrial sector and accounts for almost a quarter of their GDP. Due to a high unemployment rate, the manufacturing industry creates opportunities since it is a labor-intensive industry. The Philippine government has created a roadmap for structural transformation, which will for example lead to a more sustainable growth, upgraded technology, better competitive exchange rate, and more aggressive marketing and promotion programs. Besides this, the Philippines has a broad variation in manufacturing industries such as: aerospace, auto parts, E-vehicles, Electronics, Furniture, Natural Health Products, and many more.

Information Technology

IT, with a focus on business process outsourcing (BPO), is seen as a prime are that is projected to continue growing in the Philippines. The Philippines’ growing middle class and the young population are also important drivers of IT demand because their spending levels on technology products are on an upward trajectory, benefitting premium brands, even during COVID-19 crisis.

Challenges for this sector are slow and expensive internet, and high vulnerability to cyber-attacks. Also, smart cities, consumer electronics and increasing e-commerce are subsectors that offer many opportunities.

Maritime

The extensive area of its bays and coastal and oceanic waters gives the Philippines maritime sector and its allied industries a vital and critical role to play in the inclusive economic growth and sustainable development of the Philippines. The Philippines is strategically located along the international sea lanes of commercial ships that cater to the world’s seaborne trade. Seafaring, shipbuilding and fishing are the sector’s key strengths.

Several new opportunities have occurred for Dutch companies. For example, cruise tourism is emerging as the new up-and-coming business in the Philippines and is projected to attract more visitor arrivals in the future. Another new growth area in the maritime sector is the development of coastal and inland waterways. These lessen urban traffic congestion and pollution in highly metropolitan and urbanized areas and offer an alternative cost- and energy-efficient mode of transport. Finally, there are also excellent prospects for the further development of shipping and fishing enterprises.

Tourism

The Philippines’ tourism industry is a significant source of the country’s GDP throughout the years. In terms of tourism sector GDP share in Asia, the Philippines’ share was one of the highest-ranking. In the past year, though, the COVID-19 pandemic had disrupted the tourism market’s supply chain resulting in an economic downturn for the Philippines. This year, the Philippines’ tourism industry has created major strategies and plan for domestic traveling in the new normal to keep tourism alive and going with the closure of international borders.

As the COVID-19 pandemic continues to affect the industry, the Philippines’ domestic tourism market is likely to help the industry recover. Local tourism stakeholders adapting to the crisis, understanding travelers’ preferences, and providing a robust online travel service would propel its road to recovery. As online sales channels have been one of the preferences for sales distribution channel in the travel and tourism market in the past, its share is estimated to increase to over 60 percent by 2025, thus, giving a better choice for stakeholders to navigate their efforts.

Transport & Logistics

Transport & Logistics is a driver of the Philippines’ and firms’ competitiveness which is fundamental to job creation and economic growth. Efficient logistics connects firms to domestic and international markets; it affects the competence of the manufacturing global value chains, and competitiveness of a country’s economy within these value chains.

The logistics industry in the Philippines is a key GDP contributor, but lags behind the country’s neighbours when it comes to digitalisation. This is where opportunities lie for Dutch companies with expertise in this area.

The infrastructure sector is a key investment area in the Philippines that has the potential to facilitate the development of other sectors. For this reason, the government aims to accelerate the provision of safe, efficient, reliable, cost-effective, and sustainable infrastructure, providing the private sector a level playing field, reasonable returns and appropriate sharing of risks.

Water

The Philippines’ position on the Pacific Ring of Fire and within the western North Pacific basin makes it prone to natural disasters. The country also faces significant challenges in terms of water and sanitation access. The country is rapidly urbanizing, and its growing cities struggle to provide new residents with adequate water and sanitation services.

The Dutch water sector has successfully been involved in the Philippines for many years now and the Philippines are eager to learn from Dutch knowledge. Government agencies have already indicated an interest in Dutch expertise and technologies in the areas of wastewater treatment, improvement of water use, and flood management. Other opportunities for the Dutch water sector lie in integrated coastal zone management, water supply, and in the field of sustainable urban development. Dutch technologies are considered as superior quality and are therefore preferable options for water and environmental technology purchases.

The Team

Jorrit Wijckmans
President
Rik Grooten
Vice-President

Alicia van de Kerk
Treasurer

Rutger van den Berg
Consultant

Karlijn Delmee
Consultant
Luud Dortants
Consultant

Stef Hagen
Consultant
Timon Ho-Dac
Consultant

Yentl van den Hombergh
Consultant

Kaya Kapteijns
Consultant

Tanne Nevels
Consultant
Jikke de Ranitz
Consultant