작성일자: 2014.2.3

작성자: 호치민 무역관 Mr. Hong Suk Kyoon(sukkhong@kotra.or.kr), Ms. Phuong Nguyen(kotra.sgn@gmail.com)

 

 

1. GENERAL ENVIRONMENT

 

□ Geography & Climate:

 

 ○ Vietnam is located on the eastern margin of the Indochina peninsula and occupied about 331,211.6 square kilometers. It borders the Gulf of Thailand, South China Sea, alongside China, Laos, and Cambodia. The S-shaped country has a north-to-south distance of 1,650 kilometers and is about 50 kilometers wide at the narrowest point.

 

 ○ Vietnam is a country of tropical lowlands, hills, and densely forested highlands, with level land covering no more than 20% of the area. The country is divided into the highlands and the Red River Delta in the north, the coastal low land, and the Mekong Delta in the south.

 

 ○ Vietnam in the northern regions has a humid subtropical climate, with humidity averaging 84% throughout the year. However, because of differences in latitude and the marked variety of topographical relief, the climate tends to vary considerably from place to place. The climate in the southern regions especially Hochiminh City and surrounding Mekong Delta is predominantly tropical savanna climate with high humidity and a distinct wet and dry season.

 

□ Population:

 

      Source: Statistic Yearbook of Vietnam 2012

 

□ Economy Overview:

 

 ○ Vietnam is a densely populated developing country that has been transitioning from the rigidities of a centrally planned economy since 1986. Vietnamese authorities have reaffirmed their commitment to economic modernization in recent years. Vietnam joined the World Trade Organization in January 2007, which has promoted more competitive, export-driven industries. Vietnam became an official negotiating partner in the Trans-Pacific Partnership trade agreement in 2010. Agriculture's share of economic output has continued to shrink from about 25% in 2000 to less than 22% in 2012, while industry's share increased from 36% to nearly 41% in the same period. State-owned enterprises account for roughly 40% of GDP. Poverty has declined significantly, and Vietnam is working to create jobs to meet the challenge of a labor force that is growing by more than one million people every year. The global recession hurt Vietnam's export-oriented economy, with GDP in 2012 growing at 5%, the slowest rate of growth since 1999.

 

 ○ Between 2008 and 2011, Vietnam's managed currency, the dong, was devalued in excess of 20%, but its value remained stable in 2012. Foreign direct investment inflows fell 4.5% to $10.5 billion in 2012. Foreign donors have pledged $6.5 billion in new development assistance for 2013. In February 2011, the government shifted from policies aimed at achieving a high rate of economic growth, which had stoked inflation, to those aimed at stabilizing the economy, through tighter monetary and fiscal control. Although Vietnam unveiled a broad, "three pillar" economic reform program in early 2012, proposing the restructuring of public investment, state-owned enterprises, and the banking sector, little perceptible progress had been made by early 2013. Vietnam's economy continues to face challenges from an undercapitalized banking sector. Non-performing loans weigh heavily on banks and businesses. In September 2012, the official bad debt ratio climbed to 8.8%, though some independent analysts believe it could be higher than 15%.

 

      Source: Statistic Yearbook of Vietnam 2012

 

        Source: Vietnam Report http://www.vietnam-report.com/vietnam-fdi/

 

 

2. MARKET SIZE & TREND

 

 ○ Tapioca starch is manufactured from cassava fresh roots. There are two main kinds of tapioca starch: (1) Natural tapioca starch: Used for making feed, foodstuff, etc. and (2) Modified tapioca starch: Being made from natural tapioca starch with the combination of some other chemicals which give higher grades applied for food industry, paper industry, textile industry, etc.

 

 ○ To have an overview about local demand for tapioca starch, it would be necessary to see the local production for food and beverage by years.

 

      Source: Statistic Yearbook of Vietnam 2012

 

 ○ Regarding the export of tapioca starch, according to the General Custom Office, in 2013, cassava and its products (tapioca starch, tapioca chip) was ranking number 7 in the list of items, which achieved high export value. According to the General Custom Office, export value of tapioca related products achieved USD 1.1 Billion in 2013. Vietnam is ranking the second in the world about exporting cassava after Thailand. So far, Vietnam has around 560,000㏊ cultivating cassava with the total production output of 9.4 Million tons. 30% of the cassavas are used in food and feed industry, materials for making bio ethanol. 70% are for export in forms of tapioca starch or tapioca chips.

 

 ○ As of 2013, Vietnam has around 6 bio-ethanol factories and nearly 100 tapioca starch manufacturing factories with a hundred of small private production units that also produce tapioca starch.

 

      Source: General Custom Office, VINANET http://vinanet.com.vn/tin-thi-truong-hang-hoa-viet-nam.gplist.294.gpopen.223432.gpside.1.gpnewtitle.nam-2013-xuat-khau-san-va-san-pham-giam-ca-ve-luong-va-tri-gia.asmx

 

 

3. TAPIOCA STARCH - LOCAL PRODUCTION SITUATION

 

 ○ It could be said that Vietnam is quite strong at manufacturing tapioca starch (or cassava powder) thanks to its rich natural resources, which are suitable for growing cassava plants in mass. If in the end of 2002, the country has had around 41 factories producing tapioca starch with total designed capacity of around 3,130 tons starch per day, today, it has increased to approximately 100 factories and hundreds of small private production units across the country cassava with the total production output of 9.4 million tons annually.

 

 ○ Except many other small private production units, the number of tapioca starch manufacturers is expected to increase in recent years, especially after Vietnam imports new cassava seeds such as KM60, KM94, KM65, etc. which give high crop productivity and become much more specialized in industrial processing high grade tapioca starch. Besides, Vietnam has several areas, which are suitable for cultivating cassavas roots. Some of the popular names that could be mentioned include Tay Ninh Province, Gia Lai Province, Kon Tum Province, Binh Thuan Province, and Quang Nam Province, etc.

 

 ○ Particularly in Tay Ninh Province, its annual production output and export quantity of tapioca starch has reached around 60,000 tons and being exported to China, Korea, Taiwan, and EU. Currently, Tay Ninh has more than 45,000㏊ for planting cassava, ranking for the biggest province of cultivating, manufacturing and exporting tapioca in Vietnam.

 

 ○ Another point that should be taken into account is that beside purely local manufacturers, many other foreign-invested companies also set up their factories here for locally manufacturing tapioca starch. In general, local production of tapioca starch is very strong in terms of both quality and production output. Thanks to this great investment in the area, Vietnam has been ranked as the third biggest tapioca starch exporter in the world, just behind Thailand and Indonesia in term of grading.

 

□ Kinds of products

 

 ○ Most of local manufacturers are able to turn out tapioca starch with the starch content of 85% Min nad moisture 13% Max. Generally, they have the similar specifications as below:

  - Starch content: 85% Min

  - Moisture: 13% Max

  - Peak Vicosity: Min 700BU

  - Ash: 0.2% Max

  - pH: 5-7

  - SO2: 30ppm Max

  - Whiteness: 90% Min

  - Slurry residue: 0.10% Max

  - Packing: 50㎏ or 25㎏ Net in PP Bag with PE Liner

 

□ Production technology

 

 ○ We actually do not have specific information regarding local producing technology of each manufacturer because this is quite “sensitive information” that local producers do not reveal. However, as we contacted a lot of local manufacturers to ask about the specifications and production output, they said that most of local production lines are “Chinese lines with Chinese technology”. Some big companies like Tay Ninh Sugar use production line imported from Thailand.

 

 ○ Below is a diagram of manufacturing procedure posted by Vedan for reference:

 

          Source: VEDAN

 

□ Raw materials regions

 

 ○ In 2012, the total cultivation area of Vietnam is estimated to reach 550.6 thousand ㏊ (Vietnam Statistic Yearbook 2012) with the average production output of fresh cassava of approximately 9,745,500 tons. In comparison with that in 2005, the production output of tapioca in 2012 has increased 68.9%.

 

 ○ It should be noticed that Vietnam cultivates many different kinds of cassava, which give different production output. The harvest season of cassava roots is from December to April.

 

 ○ Cassava is planted a lot in the following provinces:

  - In the South: Tay Ninh Province, Binh Phuoc Province, Dong Nai Province & Binh Thuan Province.

  - In the Central Highlands: Gia Lai Province, Kontum Province, Daklak Province.

  - In the Central Coast: Quang Ngai Province, Binh Dinh Province, Phu Yen Province, Quang Nam Province, Nghe An Province.

  - In the North (smaller quantity compared with the South & Central Coast): Yen Bai Province, Son La Province, Hoa Binh Province.

 

 ○ Following is the statistic figures of tapioca cultivation breakdown by areas for reference:

 

 ○ Planted areas of cassava by province

 

      Source: Statistic Yearbook of Vietnam 2012

 

 ○ Production of cassava by province

 

      Source: Statistic Yearbook of Vietnam 2012

 

 

4. COMPETITION SITUATION

 

 ○ As mentioned above, the number of tapioca starch manufacturers has increased significantly in a few recent years. Across the countries, there are approximately 100 factories with hundreds of small private production units. Some manufacturers actually owned 3 to 5 factories in different provinces. They are able to turn out products with high quality standards for export.

 

 ○ Below is the list of some major producers that take the lead in terms of production output. Top ten manufacturers include Quang Ngai Agricultural Products & Foodstuff JSC, Vedan Vietnam, Binh Phuoc General Import Export JSC, FOCOCEV Tapioca Starch, Hung Duy Co., Ltd, FUJISAN (Thanh Vu), Tay Ninh Sugar, Tay Ninh Tapioca, and Friend Group.

 

           Source: Kotra’s Survey

 

 

5. PRICING

 

 ○ Below is the quotation of some tapioca starch manufactured and provided by local manufacturers.

 

 ○ We have contacted these producers to ask for the quotation. They remarked that the prices will be fluctuated depending on the time or placing orders and quantity. So the following prices are not fixed and are provided just for reference.

 

      Source: Contacted by phone and email with local manufacturers to get quotations

 

 

6. DISTRIBUTION STRUCTURE

 

 ○ The distribution structure of tapioca starch can be summarized by the diagram as below:

 

 ○ Tapioca starch manufacturers → Export directly → Import-Export Trading companies → Export market → Local End-users (companies that use tapioca starch as input materials for manufacturing food or feedstuff)

 

 

7. OTHER RELATED INFORMATION

 

□ The issuance of license for the investment in manufacturing tapioca starch from cassava fresh roots:

 

 ○ The manufacturing of tapioca from cassava fresh roots nowadays is considered a “heavy-polluted industry” that caused a lot of pollution to the local rivers. The cultivation of cassava root is also taken into consideration because it is said that it would make the soil degrading after years. Meanwhile, there have been so many tapioca starch-manufacturing factories across the country. Some provinces have eliminated the investment in manufacturing tapioca starch from cassava fresh roots.

 

 ○ As we contacted some provincial DPI (Department of Planning & Investment) and Industrial Park developer, they said that tapioca starch manufacturing investment projects have been suspended from issuing investment license due to the above reasons.

 

 ○ As this period drops in the long holidays (Chinese Lunar New Year), many DPI offices in Binh Phuoc, Gia Lai, Kontum have stop working and started their holidays, so we could not talk directly to the person in charge. However, for those who we can talk with (both the provincial Department of Planning & Investment and Industrial Zones developer), they all said that tapioca manufacturing projects are not encouraged to be invested for now. Particularly for Dong Nai Province, the People Committee has issued an official document that clearly indicated that they do not approve any more investment project that related to tapioca manufacturing industry.

 

□ Land lease related matter:

 

 ○ According to Decree 142/2005/ND-CP of the Government on collection of land rents and water surface rents, economic organizations tat rent land for execution of investment projects on agricultural production, forestry, aquaculture or salt production; for use as ground for construction of production and/or business establishments; construction of public facilities for business purposes; construction of infrastructures for assignment or lease; for mineral activities, production of building materials or making of pottery articles are subject to rent paying.

 

 ○ The State shall lease land or water surface with rents collected annually or in lump sum for the whole land or water surface lease term in the following cases: oversea Vietnamese, foreign organizations or individuals that rent land for execution of investment projects on agricultural production, forestry, aquaculture or salt production; for use as ground for construction of production and/or business establishments; construction of public facilities for usiness purposes; construction of infrastructures for assignment or lease.

 

 ○ The annual land rent unit shall be equal to 0.5% of the land price according to the use purpose of the rented land, promulgated by provincial-level People’s Committee.

 

 ○ For land of urban centers, commercial or service centers, traffic hubs, concentrated population quarters, which may yield special profits or be used as ground for production, business and/or service activities, provincial-level People’s Committee presidents shall base on the local situation to decide on the promulgation of land rent units higher than the set rent units.

 

 ○ For land in deep-lying, remote, highland or island regions, areas facing socio-economic difficulties, areas facing particular socio-economic difficulties; land used for agricultural production, forestry, aquaculture or salt production, land used as ground for production and/or business activities of projects in the domains entitled to investment encouragement or special investment encouragement, provincial-level People’s Committee presidents shall decide on the promulgation of land rent units lower than the set land rent units.

 

 ○ The annual land rent or water surface rent shall be the rented area multiplied by the land rent unit or water surface rent unit.

 

 ○ The land rent unit of each project shall be kept stable for 5 years. At the end of this period, directors of provincial/municipal Services of Finance or presidents of district-level People’s Committees shall adjust land rent units for application to the subsequent period.

 

 ○ Source: Decree 142/2005/ND-CP of the Government on collection of land rents and water surface rents and Decree 121/2010/ND-CP of the Government amending and supplementing a number of articles of the Government’s Decree No. 142/2004/ND-CP

 

□ Regulations related to foreign investment project:

 

 ○ Foreign investors investing in Vietnam for the first time must have an investment project and shall conduct investment procedures in order to be issued with an Investment Certificate, which shall act concurrently as the business registration certificate.

 

 ○ There are different types of establishment: Establishment of economic organization with 100% capital of investor; Investment in the form of a business co-operation contract; Investment in the form of capital contribution, purchase of shareholding, merger and acquisition of enterprise.

 

 ○ In case of establishment of economic organization with 100% capital of investor, foreign investors shall invest in the form of 100% of their own capital to establish a limited liability company, shareholding company, partnership or private enterprise in accordance with the provisions of the Law on Enterprise and relevant laws.

 

 ○ Investors shall have autonomy in investment and business in accordance with the Law on Investment, except for investment and business in sectors in which investment and business is prohibited by law. As for “conditional sectors”, investors shall have autonomy in investment and business if they satisfy the conditions for investment stipulated by law.

 

 ○ Procedures for setting up a FDI (foreign-direct-investment) company:

 

  1) Obtain Investment Certificate:

  - Foreign investor must have an investment project before being granted an investment certificate. The investment certificate also serves as the business registration certificate. The investment certificate shall be issued as part of the investment registration and/or evaluation processes based on (1) the type of project, (2) the scale of invested capital and (3) whether such project is in conditional investment sectors.

  - The investment certificate for foreign project will have a fixed term not longer than 50 years, which by law may be extended up to 70 years with the approval of the Government.

  - The investment certificate will set out the specific scope of business activities that a foreign investor is permitted to undertake in Vietnam, the amount of investment capital, the location and the land area to be used, and the relevant incentives (if any). The investment certificate must also indicate the project implementation schedule for the investment.

 

  2) Procedures:

  - The licensing authority (usually DPI – Department of Planning & Investment) shall issue an investment certificate within a time limit of 15 working days (for cases of a foreign project subject to the registration process) or 30 working days (for cases of a foreign project subject to the evaluation process) from the date of receipt of a complete and valid application.

  - The above registration process applies to a foreign-invested project with invested capital of less than VND300 billion and is not included in the list of conditional business sector. The evaluation process applies to the two following cases:

   · For foreign projects with capital of at least VND300 billion: the evaluation process will in substance focus on the project’s compliance with the applicable infrastructure master plan, land use master plan and the master plan for raw materials and other natural resources. Other factors to be considered include land use requirements, project implementation schedule and environmental impact.

   · For foreign projects included in the list of conditional business sectors regardless of the scale of the invested capital: The evaluation process will focus on compliance with applicable sector conditions. If the project has capital exceeding VND 300 billion other factors as discussed above shall also be considered.

 

  3) Licensing Authority

  - The licensing authority is further decentralized to provincial people’s committees and provincial boards of management of industrial zones, export processing zones and hi-tech zones (“Board of Management”). With respect to certain important or sensitive business sectors, the grant of investment certificate by a provincial people’s committee or a Board of Management must be based on an investment policy or economic plan that has already been approved by the Prime Minister.

  - According to Clause 3, Article 37 Chapter V regarding the procedure for direct investment of Decree 108/2006/ND-CP detailing and guiding the implementation of a number of articles of the Investment Law, projects for which Prime Minister shall approve the investment policy include foreign investment projects in the following domains:

   · Ocean shipping business;

   · Establishment of network for provision of postal, delivery, telecommunications and Internet services; establishment of wave transmission networks;

   · Press printing and distribution; publishing;

   · Establishment of independent scientific research institutions.

  - When an investment project defined in this Clause of this Article is included in the planning approved by the Prime Minister or by a person authorized by the Prime Minister and satisfies the conditions required by law and treaties to which Vietnam is a contracting party, the investment certificate-granting agency shall carry out procedures for granting an investment certificate to the project without having to submit the project to the Prime Minister for decision on the investment policy.

  - When an investment project defined in this Clause of this Article is NOT included in the planning approved by the Prime Minister or by a person authorized by the Prime Minister or does not satisfy conditions for opening the market in treaties to which required by law and treaties to which Vietnam is a contracting party, the investment certificate-granting agency shall assume the prime responsibility for consulting the branch-managing ministry, the Ministry of Planning and Investment and other concerned agencies, sum up their opinions and submit the project to the Prime Minister for decision on the investment policy.

  - Provincial/municipal Planning and Investment Service shall receive dossiers of investment projects.

 

 ○ Investment registration for foreign investment projects:

  - An investment registration dossier comprises:

   · Investment registration document (made according to a set form);

   · Business cooperation contract, for investment under a business cooperation contract;

   · Report on the financial capability of the investor (which is made by the investor and for which the investor shall bear responsibility).

  - For an investment project associated with the establishment of an economic organization, in addition to the dossier referred as above, the investor shall also submit:

   · The business registration dossier corresponding to the type of enterprise as provided for in the enterprise law and relevant law;

   · The joint venture contract, for investment in the form of establishment of a joint-venture economic organization between a domestic investor and a foreign investor.

  - In short, the foreign investor should contact the local DPI (Department of Planning and Investment) for getting forms and submitting required dossiers (as forms).

  - Source: Decree 108/2006/ND-CP of The Government detaling & guiding the implementation of a number of articles of the Investment Law.