The Vietnamese economy has been growing at a steady pace over the last couple of years, and its GDP growth rate stood at 8.2 percent in 2007. With the government intending to sustain this growth for the next four to five years, security has become a vital part of the overall plan to attract more foreign investment.
The Vietnamese economy has been growing at a steady pace over the last couple of years, and its GDP growth rate stood at 8.2 percent in 2007. With the government intending to sustain this growth for the next four to five years, security has become a vital part of the overall plan to attract more foreign investment.
Vietnam has a transitional economy that is neither centrally commanded nor completely privatized, according to a U.S. Commercial Service report. The political climate of the country has been favorable to privatization in the last few years. Strong liberal reforms in the country have created a favorable climate for businesses and foreign investors. The country's accession to the World Trade Organization in the first half of 2007 further adds to the growth of Vietnamˇs economy. Although the agricultural output of the country has been reducing year on year, the industrial and service sectors have been growing consistently, with the two of them accounting for more than 80 percent of the countryˇs GDP. Manpower is abundant in the country, which in turn has encouraged the emergence of numerous companies of smaller scale. The government has taken upon itself to escalate infrastructure and telecommunications development to meet the growing demands of the market.
Many companies have begun considering Vietnam as a base for low-cost manufacturing, for both local and neighboring markets. Safety and security regulations are often applied in an arbitrary fashion. Since the Sept. 11 attacks, the government has undertaken efforts to increase security in public areas, most notably at airports, governmental and corporate buildings, and foreign and/or international organization sites. Tighter restrictions are also imposed on border crossings and traveling procedures. Particularly in the private sector, according to the same Commercial Service report, companies are placing more orders for security products and services, and they are upgrading existing systems with new technologies.
MARKET OVERVIEW
The country had an estimated market size for safety and security of US$90 million in 2007, of which security equipment accounts for 40 percent of the market. ¨With many Taiwanese and Korean companies setting up their factories in Vietnam, the countryˇs security market has experienced 7x growth over the last two years,〃 said Daniel Lim, Senior Manager of Product Marketing, CCTV & Access Control, Bosch Security Systems Asia Pacific. Primary sales of safety and security equipment have occurred in the Vietnamese construction market, where development of transportation (roads, bridges and airports), power (thermal and hydro), oil and gas (plants and pipelines), environment (water drainage) and buildings (hotels and commercial sites) has outpaced other types of development projects.
Competition is intense, nonetheless, as major suppliers include those from Japan, England, Korea, Malaysia, Singapore, China and Taiwan. Panasonic just entered into Vietnam in 2007, and its market estimate for the surveillance sector is $15 million. ¨Thriving vertical markets include town centers, factories, airports, banks, casinos and transportation,〃 shared Koji Yamada, General Manager, Professional Systems Division, Panasonic Systems Asia Pacific. ¨Although red tape is not as challenging as in China, logistics is still somewhat problematic as major infrastructure is not fully in place.〃
PRODUCT DEMANDS
For Axis, business in Vietnam is based on a large number of smaller orders. ¨IP-based surveillance in Vietnam is growing at 40 to 60 percent per year,〃 said Oh Tee Lee, Regional Director, South Asia Pacific, Axis Communications, ¨and government is the largest user and is quite strict when checking for each productˇs country of origin.〃 In bidding, users can stipulate that suppliers must have been involved in certain types of projects or projects of certain sizes. American IT channel players, such as Ingram Micro, FTP and CMC, are quite active in the countryˇs security business.
The security market in Vietnam is still in the nascent stages, with heavy dependence on imports of security systems, said Navin Rajendra, Research Analyst for Frost & Sullivan. High import cost is a major deterrent for the uptake of electronic access control systems (EACS) in the market. No proper standardization is another key concern which further thwarts the uptake of EACS. ¨Biometric technology is chiefly used for border security as well as by the Vietnamese military,〃 said Rajendra. ¨Private corporations in the country, on the other hand, still utilize standard access cards for physical access.〃 It is estimated that proximity cards, biometric scanners, contactless smart cards and keypads account for a sales revenue close to $4.3 million.
KEY PROJECTS
Power Plants
Electricity of Vietnam estimated that the countryˇs power industry will need about $19 billion in investment for all of its power projects, of which $8.2 billion will be required for power generation. Ten power generation projects are to be completed over the next two years. Over the period of 2006 and 2010, 37 additional power generation projects are planned. Construction of these power plants presents significant opportunities for the sales of safety and security systems, which are estimated to account for 2 to 3 percent of the total investment required for power plant developments.
Oil & Gas
Vietnam will have two oil refineries which are expected to be completed by 2010 in the two central provinces, Quang Ngai and Thanh Hoa. There are also two huge projects, Phu My and Ca Mau, that include gas, power and fertilizer production facilities. As Vietnam plans to build up several petrochemical complexes, demand for safety and security originating from these complexes will be high. These projects will present great sales opportunities for high-end security and access control systems.
Airport & Aviation
As a prerequisite to economic growth and industrialization, Vietnam is investing heavily in its airports as one of the top priorities. Its burgeoning tourism industry attracted nearly 2.3 million foreign visitors in 2007. An needed over the next five years. This will increase the countryˇs network to four international airports and 28 to 30 domestic airports. Airport modernization, expansion and rehabilitation of such magnitude will generate significant sales of surveillance and access control systems.
Buildings & Properties
Vietnamˇs residential, industrial and commercial property development is rising in major cities and provinces. Ho Chi Minh City plans to build two dozen office, hotel and apartment projects by 2008, valued at $85 million. These construction projects will present a big opportunity for sales of safety and security equipment and services. Other large cities in Vietnam also present similar opportunities.
Transportation In this sector, the Prime Minister approved a 20-year project to develop the countryˇs railway transport system at an estimated cost of $10 billion. In addition, new urban areas and economic zones are also in the planning and design stages for Ho Chi Minh City and surrounding provinces. In Hanoi, a proposal has been made to create two new districts and 31 new wards. The growth and expansion of urban and economic zones will attract new residential, industrial and commercial investment and construction. This extensive development of Vietnamˇs infrastructure presents abundant sales opportunities for security players.
Industrial Parks
New industrial zones, like Cai Mep, and industrial ports, like Cat Lai, will reel in large investment and construction projects. Given the rapid development in the industrial and commercial sector, construction sites are a prime target for theft and burglary due to ineffective law enforcement, undisciplined security guards and a major low-income population. As a result, investors and developers can be expected to increase their usage of access control and surveillance measures to guarantee the security of their operations.
THE INS & OUTS
The government of Vietnam strictly monitors foreign investment in its security service market. Foreign firms are no longer allowed to provide security services. However, foreign investors can produce safety and security equipment and provide repair and maintenance, such as post-sales services, under the current foreign investment law. Import of certain kinds of security equipment that service police operations must be approved by the Ministry of Public Security.
In general, companies will find greater success in high-end commercial and residential markets, including foreign-invested enterprises since they are much less price-sensitive and prefer brand name recognition and quality. Areas for investment include foreign-invested, high-rise buildings, private residential compounds, ¨Western〃 companies in Vietnam that must abide by Western safety and security standards, and sites that cater to the foreign and overseas Vietnamese population.
Barriers to market entry include governmental restrictions and underdeveloped administrative, legal and financial systems. An underdeveloped security-safety regulatory environment also diminishes the market size, and hence sales potential for equipment. estimated $4.6 billion for new airport infrastructure is