Opening Remarks from IFC Vietnam

Dialogue to Drive Japanese Investments in

Vietnam

January 22, 2021

Senior Regional Manager

Kyle Kelhofer

IFC: A member of the World Bank Group

2SOURCE: WORLD BANK, IFC

Own

Account

Committed

Private

Sector

Development

Sizeable

Portfolio

Consistent

Triple-A

Credit Rating

WBG

Collaboration

Global

Footprint

Largest global development

institution launched in 1956,

focusing on the private sector

in developing countries

Headquartered in Washington,

D.C.

102 offices in 95 countries

worldwide

29 offices in 24 countries in Asia

Leveraging the full range of World Bank Group

knowledge and capabilities

Increasing annual own account commitments to

US$25 bn by 2030 globally

Since 1989, IFC has been

rated AAA credit rating;

owned by 185 countries

Committed portfolio as of FY20:

US$59.8 bn worldwide

US$19.1 bn in Asia

What IFC can offer

3SOURCE: WORLD BANK, IFC

ADVISORY

Loans• Project and corporate financing

• On-lending through intermediary institutions

Equity• Direct equity investments

• Private equity funds

Trade and Commodity Finance• Guarantee of trade-related payment

obligations of approved financial institutions

Derivative and Structured Finance• Derivative products to hedge interest rate,

currency, or commodity-price exposures of

IFC clients

Blended Finance• Using donor funds to crowd in private

financing

Syndications• Capital mobilization to serve development

needs

• Over 60 co-financiers (bank, fund, DFIs)

Create proprietary projects and investment

opportunities by developing a sustainable

pipeline of bankable transactions

• Early-stage, project level intervention in return

for proprietary rights for equity and debt

arranger role

• Promoting and anchoring the design and

implementation of platforms and programmatic

approaches

• Working closely across the World Bank Group

to help develop policies, regulations and

frameworks for private sector investments

Innovative Solutions Combining IFC’s

Expertise and Tools to:

• Help create new markets

• Unlock investment opportunities

• Strengthen clients’ performance and impact

• Improve environmental, social, and corporate

governance standards

IFC Asset Management Company (AMC)

• Mobilizing and managing capital for

businesses in emerging markets

INVESTMENT UPSTREAM

AMC

Our approach to supporting project development

4SOURCE: WORLD BANK, IFC

Legal & Commercial Framework

• IFC will help with consulting government and

government-related entities to develop key project

documents in a manner that represents the

interests of both public and private sectors

• IFC actively supports the development and

negotiation of key project documents to ensure

bankability

• IFC leverages the World Bank Group’s convening

power to resolve project-development issues

Financing

• IFC will play an integral role in the financing

process, including investing for its own account

and mobilizing other sources of debt (and

equity, if necessary). IFC’s due diligence is

broadly accepted by development finance

institutions (DFIs), export credit agencies

(ECAs), and commercial banks.

• IFC’s access to a large client and equity/debt

investor base helps raise capital for projects.

• IFC’s access to all WBG instruments and

services helps further de-risk projects

Technical, Environmental & Social (E&S)

• Reviewing designs, implementation, and mitigation

plans according to IFC’s Performance Standards

• Ensuring transparent and efficient bidding processes

to secure competitive engineering, procurement and

construction (EPC) pricing

Overall Development Support

• IFC dedicates a team of experienced staff with

financial, technical, and legal backgrounds,

adding to the expertise of the development

team

• IFC’s brand, reputation, and involvement

reassure project participants and stakeholders

• IFC has a track record of “hands-on” project

development as principal and advisor in

challenging environments

• IFC and World Bank-managed trust funds and

donor grants may be sourced to fund

consultants and studies

• IFC’s global presence and knowledge of local

environments help ensure application of best

practices, leveraging the global expertise of the

World Bank Group and facilitating government

interactions

About IFC Upstream

5SOURCE: WORLD BANK, IFC

IFC Upstream Works in Early-Stage Development with Clients

▪ Providing advisory services and other capacity support to clients (governments and private sector) to

develop, enable, and seek investment for transformative projects

▪ Working closely across the World Bank Group to help develop policies, regulations, and

frameworks for private sector investments and to provide necessary political-risk and financial products

to address gaps in commercial and financial structures

▪ Investing in and helping develop projects at an early stage through a variety of means, with a focus on

high-impact projects where IFC can add significant value

▪ Create, deepen, and expand markets where they are weak or do not currently exist

…in Markets with Challenging Operating Environments

▪ Challenging regulatory environment

▪ High-risk perception

▪ Complexity to achieve bankability for large-scale, transformative projects

▪ Limited availability of early-stage risk-capital and other project-development resources

Models of upstream cooperation

6SOURCE: WORLD BANK, IFC

•

1

▪ Early-stage engagement

via a project services

advisory (PSA) mandate

on which IFC will work

with project sponsors on

developing the project

within a clearly defined

scope for a fee

▪ IFC could also support

with de-risking the project

and attracting other

strategic investors

▪ The PSA would indicate

IFC rights/intent to

negotiate a Lead

Arranger mandate for

financing the project

Upstream Project

Advisory 2

▪ Partnership on project

development via a joint

development agreement

(JDA) or collaboration

agreement (CA) in which

IFC contributes to project

development costs

▪ In return, IFC would seek

key rights as a project

development partner,

including the right to

negotiate a lead arranger

mandate

▪ Suitable for projects with

commercial rationale, strong

sponsor, and clear IFC

value-add

Co-Development

3

▪ Joint investment and

implementation (via

JDA/CA) with a private

sponsor of a pilot project to

establish “proof of concept”

of a novel business model,

followed by scale-up of the

business if proven viable

▪ Utilized for very specific

scenarios in which IFC

resources are used to

support capital expenditure

and some operational

expenditure with the aim of

proving a business model,

concept and technology

Pilot Projects

4

▪ Partnership with

experienced sponsors

on project development

via JDA or shareholder

agreement (SHA)

▪ Used to support strategic

partners with significant

track record in

delivering projects

▪ Engagement informed by

existence of a strong

pipeline of

multiple projects within

areas of strategic

importance for IFC or

with common themes

Multiple-Project

Platforms

Project Development Funding

Employing a holistic approach combining project development support and investment for clients and partners

In all cases, IFC would be seeking a Lead Arranger role in the financing and an option to invest in the projects

IFC and World Bank Group Activities in Vietnam

7SOURCE: WORLD BANK, IFC

IFC long-term commitments by fiscal year in Vietnam

US$ Million

7

94

239

507

660

600

FY19FY17FY16 FY18 FY20FY15

Investment

Since 1994, IFC has

invested over $8bn

in Vietnam, spanning

over 153 projects

Advisory

The current IFC

Advisory program

consists of 15

projects with $26m

in total funds

No. of Employees

Spanning over two

offices, IFC Vietnam

team consists of over

80 employees

As of FY20, World Bank has provided ~$24bn in grants,

credits, and concessional loans to Vietnam through 209

operations. Vietnam's existing portfolio consists of 37

active projects, with total net commitments of ~$7bn.

World Bank also manages a portfolio of 45 active advisory

projects leveraging country-level partnerships and trust funds

from development partners

Vietnam in strong shape prior to Covid-19

SOURCE: WORLD BANK, IFC

1. Association of Southeast Asian Nations 2. World Trade Organization 3. The European Union − Vietnam Free Trade Agreement 4. Comprehensive and

Progressive Agreement for Trans-Pacific Partnership

1986 2007 2020

Increasing role as manufacturing hub“Doi Moi” program stimulated market reforms Accession to global trade

Adoption of Restructuring program

1987 1988

Adoption of Foreign Investment Law and Land Law

1994

Removal of US Trade Embargo

Ratification of EVFTA3

1995

Member of ASEAN1

Member of WTO2

2018

Ratification of CPTPP4

Key development milestones

Poverty reduction without losing equity Vietnam with stable and increasing GDP growth

1990

Law on private business

1990

Law on export /import duties, exchange rate

2001

10-year plan enhancing role of private sector

2017

Private sector regarded as key economic engine

Vietnam public debt well-managed

% of GDP

5.0%

6.0%

2.0%

1.0%

3.0%

7.0%

4.0%

8.0%

Global

2011 2013 2015 2017 2019

Vietnam

ASEAN

Asia-Pacific

%, Constant 2010 prices

0%

10%

20%

30%

40%

50%

60%

70%

80%

20132011 2015

Domestic

debt

2017 2019

Foreign

debt

Public

debt cap

0

5

10

15

20

25

30

35

40

20%

10%

50%

60%

30%

40%

70%

GNI IndexPoverty rate

1992 98 04 08 12 14 2018

Poverty rate (LHS ) GNI Index (RHS )

Vietnam is effectively managing the pandemic

9SOURCE: OUR WORLD IN DATA

Vietnam controlling COVID-19 situation well…

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Vietnam

China

Thailand

Indonesia

Philippines

Singapore

Total positive cases per millions, As at 30 November 2020 No. of tests per positive

case, As at 30 November 20

5,372

1,077

698

559

40

19

15

13

7

Singapore

S. Korea

Malaysia

Japan

China

Philippines

Vietnam

Thailand

Indonesia

…with aggressive testing at large scale

By managing effectively, the second wave

in Danang, Vietnam held globally as

exemplary model for COVID containment

and management

Vietnam

aggressive

testing only

surpassed by

Singapore and

China

Mar-20 May-20 Jul-20 Sep-20 Nov-20

Vietnam economy remains resilient

10SOURCE: WORLD BANK, BLOOMBERG

The only SE Asia country with positive GDP

growth in 2020 . . .

Vietnam is also projected to embark on

strong recovery trajectory . . .

7.9%

6.7%

6.7%

5.9%

4.5%

4.4%

4.0%

3.5%

China

Vietnam

Thailand

USA

Malaysia

Philippines

Indonesia

Singapore

Real GDP growth forecast, as at January 2021Quarterly GDP growth yoy, %

-10%

0%

2%

-8%

-4%

8%

4%

-20%

-2%

-12%

6%

Indonesia

Malaysia

Thailand

Philippines

Singapore

Vietnam

Vietnam GDP

declined to +0.36%

growth at 2Q20,

but is now

accelerating

upward

Sep-16Sep-14 Sep-18 Sep-20 Dec-20

2021F 2022F

5.2%

6.5%

4.8%

6.0%

3.5%

4.8%

4.7%

3.3%

The long-term future to be driven by growing private sector

11SOURCE: GSO, FITCH

Investment disbursed by sector, $bn

Private sector consumption growing fast . . .

driving 70% of Vietnam GDP

7.2%

6.3%

6.2%

4.4%

4.5%

2.7%

2.2%

Vietnam

Indonesia

Malaysia

China

Singapore

Philippines

Thailand

72.7%

68.1%

59.4%

56.8%

52.7%

37.8%

34.2%

Thailand

China

Malaysia

Vietnam

Singapore

Indonesia

Philippines

CAGR 2010-20 % of GDP, 2020

Private consumption

Private sector investment growing fast . . .

largest share of investment in Vietnam

2011 18 202012 1613 14 15 17 19

88

Private FDI

Private

Domestic44

State

52

61

73

94

Prime population profile continues to be the springboard

12SOURCE: OECD, EUROMONITOR

Prime working-age population

25%

30%

35%

40%

45%

50%

1980 2000 2020 2040 2060

Vietnam

China

Philippines

Japan

% of working-age population

45% of Vietnam

population is prime

working-age

Robust middle-class formation

Middle class growth, 2019-2024 CAGR (%)

13.9%

7.9%

7.2%

5.0%

4.5%

2.8%

1.1%

Vietnam

Philippines

Indonesia

Thailand

Malaysia

Singapore

China

Fastest middle-

class growth in

SE Asia

Vietnam is the beneficiary of global supply chain re-alignment

13SOURCE: JAPAN RESEARCH INSTITUTE, SAVILLS, BLOOMBERG

Company

Country of

origin

Decision

year Location Industry

Hanwa Aero South Korea 2019 Hanoi Aerospace

Yokomo Japan 2019 Ha Nam Automotive

Huafu China 2019 Long An Textile

Goertex USA 2019 Bac Ninh Airpods

TCL China 2019 Binh Duong Electronics

Foxconn TW, China 2019 Bac Giang Hardware

Lenovo HK, China 2019 Bac Ninh Hardware

Nintendo Japan 2019 Not disclosed Hardware

Sharp Japan 2019 Binh Duong Electronics

Kyocera Japan 2019 Hai Phong Electronics

Asics Japan 2019 Not disclosed Garment

Luxshare ICT China 2020 Bac Giang Technology

Panasonic Japan 2020 Binh Duong Electronics

Pegatron TW, China 2020 Hai Phong Electronics

Wistron TW, China 2020 Ha Nam Software

Oppo China 2020 Bac Ninh Mobile devices

TopBand China 2020 Dong Nai Technology

Hoya Japan 2020 Not disclosed Med-tech

Matsuoka Japan 2020 Not disclosed Medicine

Meiko Japan 2020 Not disclosed Meiko

Yokoo Japan 2020 Not disclosed Mobile devices

Shin-Etsu Japan 2020 Not disclosed Metal

Nikkiso Japan 2020 Not disclosed Medicine

List of companies which have announced

intention to relocate to Vietnam since 2018

0.9%

0.6%

0.3%

0.3%

0.3%

0.2%

0.1%

0.0%

0.0%

-0.1%

-0.1%

-0.3%

-0.3%

HK - China

Thailand

Vietnam

S. Korea

Malaysia

Taiwan

Singapore

Mexico

Indonesia

Philippines

India

China

Canada

Changes of import shares by country in

Japan, US, and EU between 2018 and 2020

Vietnam infrastructure spending points to high(er) GDP growth

14SOURCE: OECD, FITCH CONNECT

Higher infrastructure spending correlates

with higher GDP growth

Vietnam infrastructure investment heading

into period of increased spending

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 5% 10% 15% 20% 25%

(1960-80)

(1975-90)

Average Infrastructure Investment, % of GDP

(1960-80)

Average GDP growth, % yoy

(1995-05)

(2000-17)

(2000-15)

(2000-15)

(1980-95)

Asia, higher infra

spending correlates

with higher GDP

growth

4.5%

8.0%

4.0%

7.0%

5.5%

9.0%

6.0%

7.5%

0.0%

-4.5%

5.0%

6.5%

3.5%

8.5%

201920132011 2015 2017 2021F 2023F 2025F

GDP growthInfrastructure investment growth

Prior infra

spending

correlated with

high GDP growth

Projected infra

spending points to

high(er) GDP growth

China

Singapore

Thailand

Japan

Vietnam still needs to capture more value to avoid the “middle income

trap” – Moving up and beyond basic assembly….

15

R&D Design Components Assembly Marketing Embedded Services

Pre-Production Manufacturing Post-Production

Sh

are

of

To

tal V

alu

e-a

dd

ed

3

2

1

3

2

1

SOURCE: OECD

…..and improving FDI value addition linkages

16SOURCE: OECD

Domestic value added to export in key sectors

%

Domestic value added to export

%

50%

55%

60%

65%

70%

75%

80%

85%

90%

11072005 20171309 15

China

Philippines

Vietnam

Malaysia

Indonesia

Thailand

53%

59% 58%

64%

38%

55%52%

56%

Computers

& Electronics

ManufacturingTextile &

Apparel

Overall

2005 2016

….. for more spill over effects in firm innovation capacity, management

capabilities and skills

17SOURCE: WORLD BANK

23%

53%

32%

82%

14%

83%

3%

75%

33%

62%

8%

86%

Product innovation (% firms) New to market (% innovating firms)

Vietnam CambodiaLao PDR MalaysiaPhilippines Thailand

Proportion of firms with product innovation in

Southeast Asia region

Product innovation rate by firm size and ownership

type in Vietnam

12%

40%45%

23%

70%

19%

Small Medium ForeignLarge Domestic JVs

By type of firmBy size of firm

Proportion of firms using certificate of quality in

Vietnam

Proportion of firms finding it difficult to find relevant

skills in Vietnam

50%

9%

24%

6%

Foreign-owned

Linked-firms

Domestic

Non-linked firms

56%

26%

57%

87%

17%

60%

88%

74%

20%

77%

44%

69%

31%

93%

Computer & IT

Technical skills

Foreign language

Leadership

Work ethic

Writing

Interpersonal

LinkedNon-linked

18

Thank you!