Vietnam Ready for New Spring in Security

After strong sales growth for the first half of 2011, the Vietnamese security market was affected by national economic issues. However, experts remain optimistic about 2012, as opportunities abound.

Vietnam is struggling with growing pains, as inflation and living costs climb. Both factors impair growth, with the national inflation rate reaching an all-time high of 23 percent in August 2011. “Foreign investment in real estate and construction projects have been placed on hold, as the government has imposed tighter restrictions on bank credit granted to investors,” said Phu Loc Nguyen, Director of Visco. Vietnam's inflation rate has been driven by rising food and fuel costs. Food and drink prices alone increased 34 percent, according to a recent release from the government's General Statistics Office.

Increased living expenses have improved worker compensation, but also driven up the cost of doing business. The appeal of Vietnam's cheap and plentiful labor force to build the nation into manufacturing powerhouse is attracting fewer foreign investors. Planned foreign direct investment into Vietnam fell 48 percent in the first five months of 2011 to US$4.7 billion, according to Bloomberg News. The murky economic outlook halted many government projects, including the Ho Chi Minh City airport. Even the national capital of Hanoi has delayed airport upgrades for two years in the face of slow growth.

It is necessary to inject more money to boost the economy without increasing inflation, said Parul Oswal, Industry Manager of Frost & Sullivan. “The economy has to go through a fundamental restructuring, or it will keep circling around instabilities and the measures to deal with them.”

The 2012 Vietnamese access control market will be worth $25 to $40 million, while video surveillance will be $17 to $22 million dollars and intrusion detection will be $1.5 to $2.5 million, Oswal said. Moreover, access control will grow 43 percent by 2016, with intrusion detection and video surveillance estimated to grow 20 to 25 percent and 21 percent respectively.

Business opportunities in the northern capital of Hanoi traditionally center around government projects. However, there are currently no tenders for government projects and 2011 sales were not as strong as expected, said , MD of iON. “Our sales target for 2011 is roughly 50 percent higher than the previous year at $1.5 million, and we are looking to reach $1.35 to $1.4 million by the fourth quarter.”

Other security players expressed the same concern over delayed government projects.

“Compared with other southeast Asian countries, Vietnam seems to have fewer government projects,” said Sharon Lee, Director of Brand Sales at Vivotek. “This deters a booming market, as there is no leader to drive growth forward.”

Despite these concerns, some economists predict the government's credit restrictions will calm inflation over time. Other foreign and local industry experts are similarly optimistic about the nation's long-term potential. Many companies reported impressive 10 to 30 percent revenue growth in 2011. “The security market has much potential here,” said Bryan He, Director of Secom. “It is small now in comparison with many other developing markets, but it is maturing really fast.”

Indeed, in the southern economic and financial center of Ho Chi Minh City, security vendors have discovered business opportunities in the commercial sector, although competition is fierce. “Vietnam's economy has grown over the last few years. The basic infrastructure is in place, which provides a good foundation to build upon,” said Jonathan Sinar, Risk Management Services in Fire Security and Traffic, Xtralis. “The market is still quite immature in comparison to others in the region, as reflected by the industry's offerings of basic, simpler cameras. However, great potential comes when a city gradually matures.”

Government projects delays are significant, as they form the bulk of the security market. Some experts said the ratio of projects between northern Hanoi and the financial center of Ho Chi Minh City is 7:3, while estimate the ratio to be an even steeper 9:1. This underscores the importance of Hanoi in Vietnamese security.

It is difficult to peg an exact figure for Vietnam's security market. Some industry experts have suggested a rough figure between $30 and $50 million, although this data requires more government information for a definite conclusion. Vietnam's market share in Asia for physical security represents 1.3 percent for electronic access control, roughly 0.5 percent for intrusion detection and 3.2 percent for video surveillance respectively, said Frost & Sullivan. Market size estimates are $17 to $20 million for access control, $1.5 to $1.8 million for intrusion and $15 to $20 million for surveillance. The same study also shows that electronic access control grew 47.6 percent, intrusion detection grew 25 to 30 percent and video surveillance grew 15.1 percent in 2010.