Investment Opportunities in CLMV


 

Investment Opportunities for India in CLMV countries

  • LOOK EAST – ACT EAST

    ‘GOI’s POLICY’

    • Hon’ble Finance Minister, while presenting the Union Budget for FY 2015-16:

      The ‘Act East’ policy of the Government of India endeavors to cultivate extensive economic and strategic relations in South-East Asia. In order to catalyze investments from the Indian private sector in this region, a Project Development Company will, through separate Special Purpose Vehicles (SPVs), set up manufacturing hubs in CLMV countries, namely, Cambodia, Laos, Myanmar and Vietnam

  • EXIM BANK STUDY ON CLMV

    • Partnering Govt. of India

      Exim Bank is working with the GOI for setting up a PDC to facilitate Indian investments and broaden the manufacturing base in CLMV countries.

      • Exim Bank Mission comprising a team of 5 officials undertook a visit to CLMV countries during January 19 – February 12, 2015
      • Objective of the Mission was to explore opportunities for Indian investments in potential sectors in the CLMV region
      • Extensive interaction with the key players (Indian Embassies / Ministries/ Trade bodies, Chambers of Commerce, etc) in the CLMV region
      • Findings of the Study presented to the Commerce Secretary and other Ministry officials

      Department of Commerce (DOC), GOI has conceived a Project Development Fund (PDF), to be managed by Exim Bank, for aggressively pursuing Indian interests in the CLMV region in accordance with ‘Act East’ Policy. An amount of Rs.100 crore has been allocated by the DOC for FY 2015-16 with a total corpus of Rs. 500 crore.

    • Functions of the Project Development Fund (PDF)

      • Detailed profiling of regions in CLMV countries, identification of investment centres and identification of suitable projects
      • Pre-feasibility and preparation of DPRs for select projects
      • Setting up Special Purpose Vehicles (SPVs), obtaining various approvals and achieving financial closure for the projects
      • Conducting road-shows for investors in the identified projects
      • Providing advisory services to Indian companies willing to invest in CLMV region

      PDF will identify viable projects in CLMV region and will help setting up those projects through SPVs with funding support from GoI with the main objective of facilitation of Indian trade and investments.

  • WHY CLMV ?

    Attractive Investment Destination

    • CLMV: Fastest growing economies in the region
    • Endowed with abundant natural resources and low-waged labour forces
    • Integral part of the Association of South East Asian Nations (ASEAN) region, covering 32 percent of its geographical area, and accounting for around 10.5 percent of its gross domestic product in 2013
    • Business association with the CLMV countries also gains prominence for India, as the ASEAN has economic partnership agreements with other Asian giants like China, Japan and South Korea
    COUNTRY Population million (US$ bn) GDP Growth (%) Exports (US$ bn) Imports (US$ bn) FDI (US$ bn) GDP per Capita (US$) Trade/GDP Ratio
    2013 2013 2008 2013 2013 2013 2013 2013 In percent
    CAMBODIA 15.4 15.7 6.7 7.0 10.2 11.7 1.4 1016.4 139.8
    LAO PDR 6.8 10 7.8 8.2 3.1 6.2 0.3 1476.9 93.0
    MYANMAR 64.9 56.4 3.6 7.5 10.5 18.4 2.6 868.7 65.1
    VIETNAM 89.7 170.6 5.7 5.4 138.1 143.9 8.9 1901.7 165.3
    CLMV 176.8 252.6 5.9 7.0 161.9 180.1 13.2 1428.9 138.5
    SHARE IN ASEAN-10 28.2 10.5 - - 12.7 14.2 10.5 - -
  • OPPORTUNITIES FOR INDIA IN CLMV COUNTRIES

    • India’s Current Engagements in CLMV Region

      • India is closely engaged with CLMV countries under the ASEAN FTA in goods and services, and through the Greater Mekong Cooperation, which was signed in 2001
      • During the last ten years, India’s total trade with the CLMV countries has grown from US$ 1.1 bn in 2004 to US$ 11.2 bn in 2013, more than a 10-fold increase
      • Trade balance is in India’s favour, with the surplus amounting to US$ 2.6 bn in 2013. Among the CLMV countries, India has a trade deficit with Myanmar, owing to increased imports of pulses and forest products from the nation
      • India’s approved direct investments in joint ventures and wholly owned subsidiaries in the CLMV countries amounted to US$ 40.9 mn during 2013-14, with the bulk of the flows directed to Vietnam (54.9 % of the total flows to the CLMV region)
    • Snapshot of Key opportunities for Indian Investors in CLMV


 

Investment Opportunities for India in Vietnam

  • VIETNAM: A Brief Profile

    • Located in the centre of the Southeast Asia region with a Population of 90 mn and land area of approx. 331,600 sq. km, Vietnam is world’s 13th most populous Country
    • Hanoi is the capital city and Ho Chi Minh City is the largest commercial centre
    • The country borders China to the north, Laos and Cambodia to the west and the East Sea and Pacific to the east and south
    • GDP: US $ 186 bn (2014)
    • Exports: US $ 158 bn (2014)
    • Imports: US $ 178 bn (2014)
    • Sovereign rating: BB- (S&P’s)
  • VIETNAM ADVANTAGES

    Trans-Pacific Partnership (TPP) Agreement

    • Being negotiated by 12 countries including the US, Australia, Malaysia, New Zealand, Singapore, Japan, Mexico, and Vietnam. These economies represent 26% of world trade
    • Elimination of tariff and non-tariff barriers on most goods; will lead to increased investment in Vietnam
    • TPP would open the entire US market for Vietnam as it would do away with 11,000 types of taxes and reduce the current tariff levels of 12%, 17% and 65% to 5% or 0%
    • Yarn-Forward Rule: requires TPP nation (for e.g. USA) to use a TPP member (for e.g. Vietnam) produced yarn in textiles in order to receive duty-free access. Yarn onward to be manufactured in TPP member countries
    • Significant for securing Vietnam’s economic interests vis-à-vis China - expansion of export market; mitigation of unfavorable trade balance with China. 50 percent of fabric in Vietnam - one of the largest garment and textile exporter- currently sourced from China. Only a small percentage from India
    • Opportunity to set up fabric manufacturing facility to enable export of finished products to countries like EU and USA
  • VIETNAM TEXTILE & APPAREL INDUSTRY

    On the Rise

    No. Segment Numbers
    1. Cotton Ginners 4
    2. Synthetic fiber producer 2
    3. Staple yarn manufacturers 96
    4. Filament yarn manufacturers 5
    5. Fabric makers 497
    6. Garment manufacturers 4424
     
      • Vietnam is the 4th largest garment exporter in the world; 2nd largest exporter of textiles to USA after China
        • Average growth rate of 14.5% in the last 5 years
        • Employing 25% of Vietnamese labor in the industrial sector
        • Industry uses 600,000 tons of natural cotton (of which 99% is imported) & 400,000 tons of fiber (of which 54% is imported)
        • Apparel exports of USD 18 bn
      • 5,000 textile and apparel enterprises in the industry
        • Installed capacity of approx. 5.1 mn spindles; 103,000 rotors; production of 680,000 tons of yarn from cotton & polyester
    • Developmental Goals

      No Indicators Unit Year 2015 Year 2020
      1 Revenue USD bn 19-21 27-30
      2 Export turnover USD bn 18 25
      3 Labor Million people 3.5 4.5
      4 Major products
      -Cotton Fiber
      -Fibers, synthetic fibers
      -Fiber of all types
      -Fabrics of all types
      -Sewing products
       
      -Tons
      -Tons
      -Tons
      -bn m2
      -bn products
       
      -40,000
      -210,000
      -500,000
      -1.5
      -2.85
       
      -60,000
      -300,000
      -650,000
      -2.0
      -4.0
      5 Rate of localization % 60 70
  • VIETNAM: INDUSTRIAL PARKS & SPECIAL ECONOMIC ZONES

    • 70% of total FDI in the Country is in IPs and SEZs which also account for approx. 40% of Country’s industrial output
    • 295 Industrial Parks (IPs) and 15 Special Economic Zones (SEZs) spread over 63 Provinces (mostly in the South-East region) covering an area of 83,000 ha; employing over 2.4 mn people
    • Major Investors are from Japan, Korea, Singapore, Taiwan and China
  • VIETNAM: INDUSTRIAL PARKS & SPECIAL ECONOMIC ZONES

    Standard Rate: 22% ; From 2016 – CIT Rate 20%

    • All provinces eager to attract FDI
    • Support all kinds of industries. However, certain provinces allow textiles (dyeing facilities) in specific IPs demarked for textile sector
    • Land Available on Long Term Lease basis (50 yrs to 70 yrs)
    • Labour (Skilled / Un skilled available) generally available. However, skilled labour availability is more in Southern Vietnam. Central Vietnam has more of unskilled labour. There are not many instances of labour strikes and overall conducive to foreign invePrice of utilities (Water / Electricity) almost flat across the Country. The primary differential in provinces is on account of land lease rentals, labour costs
    • All provinces have one stop investment body to ease foreign investment into the Province, with clear working days guidelines for approvals

 

Taxation & Incentives

  • Investment Incentives : Corporate Income Tax (CIT)

    Preferential Rates Conditions for the newly established Enterprise in Sectors Duration Tax Holidays
    Exemption 50% CIT Reduction
    10% Education-training, vocational training, health care, culture, sport, environment sectors (socialized sectors) Whole life 4 years
    • 9 years (socialized sectors in the Areas with difficult or specially difficult socio-economic conditions)
    • 5 years (socialized sectors in rest of the areas)
    Areas with specially difficult socio-economic conditions, economic zones, high-tech zones, high tech sectors, science research and technology development, developing specially important infrastructure facilities of the state, producing software 15 years 4 years 9 years
    20% Areas with difficult socio-economic conditions 10 years 2 years 4 years
  • Dividend and Capital Repatriation / Investment Incentives

    Dividend & Capital Repatriation

    An enterprise starting Operations in 2016 and making Profit only from year 2017 will pay Tax as follows: Year 2016 – No Tax since No profit; Next 4 years (2017 to 2020) – NIL; Next 9 years (2021 to 2029) – 5% Tax; Next 1 year (2030) - 10% Tax

    • Full repatriation of Profits to parent company without any withholding Tax

    Investment Incentives

    • 5 year exemption of import tax since operation for the cases if importing raw materials, materials and semi-finished products, which have not been produced in Vietnam
    • Import tax exemption on machine or equipment that has not been manufactured by country and made up of fixed assets such as: machinery, equipment, means of transport in line technology certified by Ministry of Science and Technology, means of transporting workers from 24 seats or more, waterway transport and construction materials

 

IPs / IZs / EZs in Vietnam

  • Ninh Binh Province – Northern Vietnam

    Khanh Phu IZ / Phu Son Industrial Zone

    • 6 kms from Ninh Binh City Centre; Located in the South of Red River Delt
    • Population – 900,000
    • 80 kms from HaNoi; 120 kms from HaNoi Intl Airport; 120 kms from nearest Port
    • 7 IPs in the Province
    • Major Investors - China, Japan & S Korea
    • Major Industries – Mechanics, Automotive Assembly, Construction materials, fertilizers production, Steel production, Garments, Footwear
    • Land Availability – 35 ha in Khanh Phu IZ and 72 ha in Phu Son IZ
  • Phu Tho Province – Northern Vietnam

    Trung Ha IZe

    • Population – 1.4 mn
    • 80 kms from Hanoi; 50 kms from Hanoi Intl Airport; 170 kms from nearest Port; 5 kms from River Port
    • 7 IPs in the Province
    • Major Investors - S Korea, Russia, Sweden, UK
    • Major Industries – Chemical fertilizers, Cement & Construction material, Textile and garments, Beverages, Processing of minerals, etc.
    • Land Availability at Trung Ha IZ – 12.73 ha in 1st Stage and 73.4 ha in 2nd Stage
    • Indian presence - McLeod Russell with 7 facilities in the province
  • Quang Ngai – Central Vietnam

    VSIP Quang Ngai

    • Population of 1.3 mn in the Province
    • 130 kms from Da Nang; 22 kms from Dung Quat Port
    • Located in Key Economic Zone in Central Vietnam (Dung Quat EZ)
    • Major Investors – Philippines, Taiwan, China, Singapore
    • Major Industries – Footwear, IT, Food processing, Steel works, etc.
    • 1,664 ha Integrated Township and Industrial Park with Land lease available until 2067
  • Tien Giang Province – Southern Vietnam

    Long Jiang IP

    • Population of 1.7 mn
    • Province ranked 4th in GDP growth rate for Mekong Delta Region
    • 70 kms from HCMC; 67 kms from HCMC Airport; 77.5 kms from Sai Gon Port
    • 7 IPs in the province
    • Major Investors – China, Korea, Singapore, Malaysia, Japan, HK
    • Major Industries – Food processing, Textile, Garments, leather & footwear, Chemicals, Mechanical & industrial, Wood & paper processing, etc.
    • Land availability – 182 ha
  • Tay Ninh Province – Southern Vietnam

    Thanh Thanh Cong Transasia IZ

    • 33 kms from HCMC; 35 kms from HCMC Intl Airport; 105 kms from Port
    • Population – 1.1 mn
    • 5 IPs in the Province
    • Major Investors - China, Korea, Taiwan, Hong Kong
    • Major Industries – Textiles, Mechanical industry, Food processing, Furniture processing, packaging, FMCG, etc.
    • Land Availability – 360 ha in Phase I and 400 ha in Phase II