Medical Equipment and Products in Vietnam: A Strategic Reference, 2007

How to Strategically Evaluate Vietnam

Perhaps the most efficient way of evaluating Vietnam is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to medical equipment and products are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries

Demand/Market Potential Driven Firm

Relative Accessibility

Accessibility/Supply Averse Firm

In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).

Latent Demand and Accessibility in Vietnam

This report provides a detailed overview of factors driving latent demand and accessibility for medical equipment and products in Vietnam. Latent demand is largely driven by economic fundamentals specific to medical equipment and products. This topic is discussed in Chapter 2 using work carried out in Vietnam on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for medical equipment and products in Vietnam. I use the term “micro” since the discussion is focused specifically on medical equipment and products.

Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Vietnam. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Vietnam. The numbers are only indicative of an average firm whose primary activity is in Vietnam. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Vietnam. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “surgical, medical and dental instruments and supplies”, as defined in Chapter 3. Again, while “surgical, medical and dental instruments and supplies” does not exactly equate to “medical equipment and products”, it nevertheless gives an indicator of how Vietnam compares to other countries for a proxy adjacent category along various dimensions.

Chapter 4 deals with macro-accessibility and covers factors that go beyond medical equipment and products. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Vietnam:
Openness to Trade in Vietnam
Openness to Direct Investment in Vietnam
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Vietnam. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Vietnam. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier. SHOW LESS READ MORE >

1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Vietnam 1
1.3 Latent Demand and Accessibility in Vietnam 3
2 MEDICAL EQUIPMENT AND PRODUCTS IN VIETNAM 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Data 5
2.3 Best Prospects and Key Suppliers 6
2.4 Accessibility: Market Entry 8
2.5 Latent Demand: Leading Segments 9
2.6 Accessibility: Trade Event 10
3 FINANCIAL INDICATORS: SURGICAL, MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 11
3.1 Overview 11
3.1.1 Financial Returns and Gaps in Vietnam 12
3.1.2 Labor Productivity Gaps in Vietnam 15
3.1.3 Limitations and Extensions 15
3.2 Financial Returns in Vietnam: Asset Structure Ratios 16
3.2.1 Overview 16
3.2.2 Assets - Definitions of Terms 16
3.2.3 Asset Structure: Outlook 19
3.2.4 Large Variances: Assets 20
3.2.5 Key Percentiles and Rankings 23
3.3 Financial Returns in Vietnam: Liability Structure Ratios 38
3.3.1 Overview 38
3.3.2 Liabilities and Equity - Definitions of Terms 38
3.3.3 Liability Structure: Outlook 40
3.3.4 Large Variances: Liabilities 41
3.3.5 Key Percentiles and Rankings 44
3.4 Financial Returns in Vietnam: Income Structure Ratios 55
3.4.1 Overview 55
3.4.2 Income Statements - Definitions of Terms 55
3.4.3 Income Structure: Outlook 57
3.4.4 Large Variances: Income 58
3.4.5 Key Percentiles and Rankings 61
3.5 Financial Returns in Vietnam: Profitability Ratios 74
3.5.1 Overview 74
3.5.2 Ratios - Definitions of Terms 74
3.5.3 Ratio Structure: Outlook 76
3.5.4 Large Variances: Ratios 77
3.5.5 Key Percentiles and Rankings 80
3.6 Productivity in Vietnam: Asset-Labor Ratios 95
3.6.1 Overview 95
3.6.2 Asset to Labor: Outlook 96
3.6.3 Asset to Labor: International Gaps 97
3.6.4 Key Percentiles and Rankings 100
3.7 Productivity in Vietnam: Liability-Labor Ratios 115
3.7.1 Overview 115
3.7.2 Liability to Labor: Outlook 116
3.7.3 Liability and Equity to Labor: International Gaps 117
3.7.4 Key Percentiles and Rankings 120
3.8 Productivity in Vietnam: Income-Labor Ratios 131
3.8.1 Overview 131
3.8.2 Income to Labor: Outlook 132
3.8.3 Income to Labor: Gaps 133
3.8.4 Key Percentiles and Rankings 136
4 MACRO-ACCESSIBILITY IN VIETNAM 149
4.1 Economic Fundamentals and Dynamics 149
4.1.1 Historic U.S.-Vietnam Bilateral Trade Agreement in Force 149
4.1.2 Integration into the World Economy and Reform 149
4.1.3 State Bank Supervision Becoming More Evident 149
4.1.4 Foreign Direct Investment 150
4.1.5 From Agriculture to Industrialization 150
4.1.6 USAID in Vietnam 152
4.1.7 Economic Relationship with the United States 153
4.1.8 Political Risks 153
4.1.9 Political System 154
4.2 Marketing Strategies 154
4.2.1 Distribution Channel Options 154
4.2.2 Pricing Issues 156
4.2.3 Agents and Distributors 157
4.2.4 Finding a Partner 158
4.2.5 Franchising 158
4.2.6 Direct Marketing Options 158
4.2.7 Joint Ventures and Licensing Options 159
4.2.8 Creating a Sales Office 160
4.2.9 Foreign Investment Licenses (FIL) 161
4.2.10 Selling Strategies 162
4.2.11 Advertising and Trade Promotion 163
4.2.12 Pricing Issues 165
4.2.13 Public Sector Marketing 166
4.2.14 Intellectual Property Risks 167
4.2.15 Hiring Local Counsel 168
4.2.16 Performing Due Diligence and Checking Bona Fides of Banks, Agents, and Customers 168
4.3 TRADE REGULATIONS, CUSTOMS, AND STANDARDS 169
4.3.1 Tariff and Non-Tariff Barriers 169
4.3.2 Tariff Rates 170
4.3.3 Import Tariffs 171
4.3.4 Licenses Required for Imports 172
4.3.5 Labeling Issues 173
4.3.6 Local Standards 174
4.3.7 Technical Regulations 176
4.3.8 Warranty and Non-Warranty Repairs 177
4.3.9 Bonded Warehouses 177
4.3.10 Controls on Exports 177
4.4 Investment Climate 178
4.4.1 Openness to Foreign Investment 178
4.4.2 Conversion and Transfer Policies 182
4.4.3 Expropriation and Compensation 183
4.4.4 Dispute Settlement 183
4.4.5 Performance Requirements and Incentives 184
4.4.6 Right to Private Ownership and Establishment 186
4.4.7 Protection of Property Rights 186
4.4.8 Transparency of the Regulatory System 187
4.4.9 Capital Market Risks 188
4.4.10 Political Violence 189
4.4.11 Corruption 190
4.4.12 Bilateral Investment Agreements 190
4.4.13 OPIC and Other Investment Insurance 190
4.4.14 Labor 190
4.4.15 Free Trade Zones and Free Ports 191
4.5 Trade and Project Financing 192
4.5.1 The Banking System 192
4.5.2 Foreign Exchange Control Risks 194
4.5.3 Banks with Correspondent U.S. Banking Arrangements 195
4.5.4 General Financing Availability 195
4.5.5 Availability of GSM Credit Guarantees 196
4.5.6 Availablity of Loan Guarantees 196
4.5.7 Insurance and Project Financing from the Export-Import Bank of the U.S., OPIC, and the IFIS 196
4.6 Travel Risks 200
4.6.1 Local Business Practices 200
4.6.2 Travel Issues 202
4.6.3 Infrastructure for Conducting Business 203
4.6.4 Country Data 208
4.7 Key Contacts 208
4.7.1 U.S. Contacts 208
4.7.2 Government of Vietnam 212
4.7.3 Commercial Banks 216
4.7.4 Other Contacts 217
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 220
5.1 Disclaimers & Safe Harbor 220
5.2 Icon Group International, Inc. User Agreement Provisions 221