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Tag: operations

  • Most Japanese firms want to expand Vietnam operations

    Most Japanese firms want to expand Vietnam operations

    Higher revenues have motivated almost 70 percent of Japanese firms in Vietnam to consider expanding their business here. Higher revenue was cited as the reason for expansion plans by 65 percent of Japanese businesses. Another 43 percent saw greater potential and high growth as encouraging factors. The majority of respondents also said that Vietnam has advantages in market scale and high growth, political-social stability and low labor costs.

    65.3 percent of Japanese companies in Vietnam reported profit last year, up 0.2 percentage points from 2017. The ratio of businesses reporting loss went down 2.8 percentage points to 12.7 percent last year. Japanese businesses in Vietnam seem to be most confident in their prospects this year among the Asia countries JETRO surveyed. 58.7 percent of businesses in Vietnam expect their profit to increase this year, while this figure is only 47 percent in Thailand, 44.7 percent in Malaysia and 39.5 percent in China.

    However, the ratio of businesses reporting profit last year is lower than other countries in Asia, including Indonesia at 65.5 percent, Thailand 67.2 percent, and Malaysia 68.9 percent. Japanese businesses also said that the top risks in the country were increasing labor costs, an incomplete legal system, lack of transparency in law enforcement and complicated tax and administrative procedures.

    They said that Vietnam has a high rate of employee turnover, with 36.2 percent of respondents mentioning this as a problem, higher than in Thailand at 33.2 percent and India at 32.5 percent.

    Labor costs account for 20 percent of total costs in Vietnam, higher than the Philippines at 16.8 percent and Indonesia at 16.5 percent.

    The localization rate in Vietnam remains low, the Japanese respondents said. Only 14.4 percent of Japanese businesses said they bought material and parts from local businesses last year, lower than in Indonesia at 19.5 percent, Malaysia 20.4 percent, and China 41.6 percent.

    This is the 32nd year that JETRO has surveyed business conditions of Japanese firms in Asia and Oceania.

    The survey polled 787 Japanese businesses operating in Vietnam in October and November last year.

    Japan was the largest foreign direct investor in Vietnam last year, with a total registered investment of $8.59 billion, accounting for 24.2 percent of the total, according to the Ministry of Planning and Investment.

  • Samsung in strategically key Vietnam for the long haul

    Samsung in strategically key Vietnam for the long haul

    South Korean conglomerate Samsung is committed to a long-term presence in Vietnam as a major base for its global operations. Won Hwan Shim, vice president of Samsung Electronics, reiterated the group’s commitment to Vietnam in a Friday meeting with Vietnam’s Prime Minister Nguyen Xuan Phuc. Shim said that Samsung’s plants in Vietnam had the most impressive growth among the company’s global facilities.

    Samsung, the world’s biggest smartphone maker, has been investing more and more in Vietnam, especially in its research and development centers, Shim said, adding that the group is transferring technologies to these local facilities.

    The company invested $600 million to finish the Samsung Ho Chi Minh City Research & Development Center in November 2017, its second such facility in the country after Hanoi, he noted.

    PM Phuc said that he expects more impressive growth numbers from Samsung this year, and also asked that Samsung continues to make Vietnam its most important global base, further expanding its operations here.

    Samsung has invested $17.3 billion in eight factories and two research and development centers in Vietnam, creating jobs for more than 160,000 locals.

    It is the largest foreign investor in Vietnam. Last year, Samsung estimated its exports from Vietnam was $60 billion, up 12 percent from 2017, accounting for a quarter of Vietnam’s total exports.

    Samsung last month closed one of two phone factories in China to focus more on low-cost countries like Vietnam and India for production as reported.

    The group’s two phone factories in Vietnam together make 240 million units a year. The factories, located in the northern provinces of Bac Ninh and Thai Nguyen, produce half of all the cellphones that Samsung supplies to the global market.

  • HSBC Gets Approval for Credit Card Operations in China

    HSBC Gets Approval for Credit Card Operations in China

    HSBC Holdings efforts to scale up its retail and wealth management business in China got a major boost with the U.K.-based company receiving permission to start a credit card business in China’s $1 trillion market.

    The approval from the Chinese authorities came after Peter Wong, Asia-Pacific Chief Executive Officer at HSBC, announced in a weekend interview that HSBC ended its joint venture with Bank of Communications Co. However, Wong believes that there are several other avenues of collaboration with Bank of Communications and that the two companies share healthy business terms.

    HSBC intends to maintain its stake of around 19% in the Chinese lender, Wong said on Saturday in an interview on the sidelines of China’s annual congress of lawmakers in Beijing.

    However, Wong did not specify when HSBC won regulators’ approval or provide details on how the business will be moved forward.

    The move makes HSBC the third foreign credit-card issuing company after Citigroup Inc. (C – Analyst Report) and The Bank of East Asia, Limited (BKEAY – Snapshot Report) to get approval to operate solo on the mainland. The permission to start credit card operations in the country would facilitate HSBC’s plan to expand China footprint.

    At its June 2015 Investor Day conference, HSBC unveiled plans to make increased investments in the under-penetrated Asian markets, with particular focus on China. Notably, the company continues to perceive China as an “engine of growth” and hence, intends to capitalize on Hong Kong’s high-quality customer base, where the market has grown over 13% in the past two years. Also, an ageing Chinese population is undeniably driving the demand for retirement and protection products in the country.

    More importantly, HSBC believes that building operations in its most-profitable Asian business will help it offset the negative impact from soaring expenses. Moreover, aided by such investments, the company estimates growth in pre-tax profits to outpace that in risk-weighted assets or RWAs, thereby enhancing its return on RWAs.

    Though Chief Executive Officer Stuart Gulliver’s plan seemed to suffer due to falling commodity prices, a slowing Chinese economy and a pretax loss in the fourth quarter, an independent credit card division in China would help HSBC expand the client base for its retail bank and enhance HSBC’s access to a rapidly growing market.

    According to a Bloomberg report, getting approved for its own operation in China “is a meaningful step for HSBC as it gives the bank the autonomy to run the business,” said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research. “Since the Pearl River Delta is HSBC’s focus, having its own credit-card business can help the bank expand in the region.”

    “There’s still strong demand for credit cards in China’s first-tier cities, but the business is getting saturated in some areas,” said Chen at Phillip Securities. “That’s why the potential in smaller cities is even bigger.”

    Though the Chinese economy is currently showing signs of weakness, we believe the country will resume its strength, given a sturdy performance history as well as efforts by its government to boost growth. This, in turn, will support HSBC’s prospects in the country.

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  • Ford to Shutter Operations in Japan, Indonesia

    Ford to Shutter Operations in Japan, Indonesia

    After pursuing “every possible option,” global auto giant Ford Motor Co. has said decided to close down all operations in Japan and Indonesia by the end of this year.

    “It has become clear that there is no path to sustained profitability, nor will there be an acceptable return over time from our investments in Japan or Indonesia,” said Karen Hampton, Ford’s Asia Pacific spokeswoman, in a statement.

    The company, she said, is committed to restructuring parts of its business that “have no reasonable path to achieve sales growth,” adding that Ford will provide ongoing support in both countries to customers for service, spare parts, and warranties.

    Industry-wide sales, even among domestic auto makers, in both Indonesia and Japan slumped in each of the last two years. Domestic automakers sold about five million vehicles in Japan last year with foreign brands holding less than six percent market share there.

    Ford's operations in Indonesia involved shipments of export cargo and import cargo in international trade.

    “In Indonesia, it was difficult for Ford to compete without local manufacturing and vehicles to sell in key market segments,” Ford spokesman Neal McCarthy told the Associated Press.

    The company, he said, has restructured its business there, but still has less than one percent of the market with “no reasonable path to sustained profitability,”

    The Ford retreat follows in the wake of rival GM’s closure last year of its manufacturing plant in Indonesia, the largest auto market in Southeast Asia.

    The GM plant was originally opened in 1995, but closed between 2005 and 2013, when it reopened with a $150 million investment.

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  • Singapore operations still play key role in StanChart’s future

    Singapore operations still play key role in StanChart’s future

    The woes besetting British lender Standard Chartered over the past three years have left their mark on Singapore.

    As one of the bank’s regional hubs with operations spanning commercial, retail and private banking and wealth management, Singapore has had to bear some job cuts and the restructuring of some business units.

    Nonetheless, a strategy update unveiled yesterday by chief executive Bill Winters provides some hopeful indications that the operations here will continue to play an important role in StanChart’s future. With indications that more power will be given to regional bases like Singapore, it is undoubtedly the case that Singapore remains one of the strongest franchises in the group.

    And even amid cost-cutting and restructuring across the bank, StanChart has made large investments here in the past couple of years. In fact, Singapore will be a key recipient of the increased investments in key growth areas that StanChart plans to make over the next few years.

    Two of the areas that StanChart plans to invest significantly in over the next few years are private banking and wealth management, and yuan internationalisation – both businesses for which Singapore is a key hub.

    In fact, the bank said its yuan deposits in Singapore have tripled since June last year.

    Its yuan assets, such as trade loans and working capital loans, have doubled in the same period.

    Singapore is also the hub to be in for banks that want to manage Asean’s rapidly growing wealth.

    The latest earnings figures for the Singapore business are not available, but Singapore chief executive officer Judy Hsu, said the operation here is still the second-largest contributor to the group, while also providing a strong base for StanChart to grow its regional businesses.

    To be sure, things have not been all rosy here. One sign of trouble could have been the sudden departure of former long-time Singapore chief executive Ray Ferguson to a Bahrain bank early last year with little explanation.

    His exit came as a surprise not least because he had become a Singapore citizen in 2010, a move he said reflected his commitment to a country that had been home to him and his family for a long time.

    His replacement, Mr Neeraj Swaroop, lasted only about a year before wealth management head Judy Hsu took over on Oct 1.

    A former senior executive told The Straits Times that there has been a series of departures of senior managers, from private and consumer banking and retail banking, since 2013.

    That was the year the bank first reported a drop in earnings after 10 straight years of delivering record profits. In the first six months of this year, net profit plunged 36.7 per cent compared with the same period a year ago.

    The stock has fallen more than 30 per cent this year.

    StanChart Singapore employees told The Straits Times that there have been some senior departures in the past few months and that some staff are thinking about leaving now in order to avoid a sudden loss of their jobs.

    But it is understood that the impact of the bank’s latest restructuring exercise will be minimal in Singapore.

    Even as Singapore’s position remains strong, analysts say the biggest challenge remains: What will StanChart’s future income stream look like?

    “It’s not just China slowing down, but that the overall bank’s income-generating power that’s under huge pressure,” added the former StanChart executive.

    And neither is it a simple decision to just move the headquarters out of London, as there are various complex issues such as regulation.

    The consensus seems to be that StanChart Singapore will have to sit tight to see how it rides out the turmoil, but there is a reasonable chance that it will emerge in a stronger position than before.