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| India Inc firms up footprint in Vietnam |
| M Saraswathy / Mumbai Oct 13, 2011, 01:04 IST |
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Indian companies have found a new partner in Vietnam. ONGC Videsh Limited (OVL) signed an agreement of cooperation on Wednesday with Vietnam Oil and Gas Group (PetroVietnam), which is the trading name of Vietnam Oil and Gas Group.
Apart from this, several other companies — especially those from the FMCG sector —have found an attractive destination in the Southeast Asian nation. The Indian Merchants’ Chamber (IMC) said both countries have been engaging at the highest level for promotion of bilateral economic ties, both their governments have been working to create conducive environment for businesses and industry. “With uncertainties in European and American economies, Asian countries, particularly growing economies like Vietnam, offer greater prospects for growth of industries,” chamber president Bhavna Doshi said. The IMC is hosting the ‘India Calling —Conference to Vietnam’ next month.
At a time when Vietnam’s President, Truong Tan Sang, is visiting India to boost bilateral relationship, India companies are finding the easternmost country on the Indochina Peninsula as a popular region.
For instance, FMCG major Godrej is eyeing opportunities in Vietnam. Adi Godrej, its chairman, says Godrej Industries considers Vietnam as an important market. “We do not have a major expansion plans in Vietnam. But we would be happy to take a relook, if there are good acquisition opportunities in FMCG companies.”
Recently, Indian FMCG Marico entered the Vietnam market. That was in February this year — through an 85 per cent holding in International Consumer Products (ICP), a progressive FMCG company.
Milind Sarwate, the Group’s chief financial officer and chief HR officer, says the firm will devote time, money and share of mind towards strengthening its ICP business in Vietnam. “We are focusing on studying the country’s market,” he notes. “Vietnam, like other Next 11 (christened so by Goldman Sachs in 2005, being mooted as BRICS successors) countries, shares the characteristics of a rapidly growing population combined with significant industrial capacity or potential, leading to a high rate of economic growth in the medium term. (currently the GDP growth is at around 6%). They also have a population of approximately 89 million. A significant portion of that is young. This demographic advantage makes it an attractive destination particularly for consumer product companies.”
Ficci notes that Hanoi was trying to create a friendly business environment. “There is a huge scope for Indian businesses there,” says Rajiv Kumar, secretary-general of the industry chamber, “especially in sectors like infrastructure, technology and, more recently, gas and petrochemicals.”
OVL’s cooperation agreement with 1977-founded PetroVietnam (PVN) is intended for developing long-term cooperation in oil and gas industry. It will be in force and effect for three years.
Some of the key areas in which both the companies are desirous to work together are related to the exchange of information on the petroleum industry, exchange of working visits of authorities and specialists in various domains of the petroleum industry, new investments, expansion and operations of oil and gas exploration and production including refining, transportation and supply in Vietnam, India, and third countries according to the laws and regulations of their countries.
ONGC said Vietnam’s upstream oil and gas sector has attracted a host of International Oil Companies and Asian NOCs in the recent past. “OVL is keen to enhance its investments in Vietnam offshore for exploration and production of oil and gas,” it said in a release.
Pharmaceutical firm Ajanta Pharma, which has a presence in Vietnam also looks at it as a important market. Arvind Agarwal, CFO of the Mumbai-based company, says they will be looking at more and more product registration in the country, considering the fact that it is an emerging economy.
Tata Steel is also planning to set up a 4.5 million tonne integrated steel plant worth $5 billion in Vietnam. The Jamshedpur-based company is waiting to secure land from the concerned authorities for the project.
Data available with the IMC shows 42 companies that have operations in Vietnam by way of direct investment or through joint ventures (JV). These including ONGC, Godrej, Ranbaxy, United Phosphorus and RPG Group. IMC also informed that among sectors that have major presence in Vietnam are oil and gas, sugar, pharmaceuticals, dairy, marbles, auto components, plastic, IT, spices and rubber.
Doshi says Vietnam is in a growth phase and is establishing physical and social infrastructure, providing opportunities to Indian businesses to set up projects in tha tcountry and supply goods and services for infrastructure, manufacturing and services sector. “Vietnam produces excellent quality products at reasonable prices. These will would help Indian businesses to enhance competitiveness,” she adds.
Bilateral trade between the two countries increased from less than $100 million in 1991 to almost $3 billion in 2010. “Now that India has granted ‘market economy’ status to Vietnam and the FTA with Vietnam, as part of India -- ASEAN FTA -- has come into effect from June 1, 2010, there is a good scope to tap the hitherto untapped potential and raise the bilateral trade turnover to $5 billion by 2015 as fixed by the inter governmental Committee,” explains Doshi.
India figures among top 10 markets (sources) of imports for Vietnam. This is not the case when it comes to Vietnam’s top 10 export destinations, as a result of which India is having a huge trade surplus in its bilateral trade with Hanoi, she adds.
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