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Vietnam gives Lotte space to grow

Released at: 08:50, 11/08/2017

Vietnam gives Lotte space to grow

Mr. Dong-Bin Shin. Photo: Duc Anh

Chairman of the Lotte Group, Mr. Dong-Bin Shin, spoke exclusively with VET about the South Korean giant's upcoming business plans in Vietnam.

by Hai Van

The Lotte Group launched its smart city project in Ho Chi Minh City last month. What are the major factors behind the company’s expansion plans in Vietnam?

Actually, it’s quite a long story. In the middle of the 1980s our honorable Chairman, who is my father, visited Vietnam for the first time. He thought: “Wow, this country is going to be a regional superpower in the future.” That was my father’s opinion at the time and I share the same opinion. He thought that he really had to make investments in Hanoi or Ho Chi Minh City. At the time, I believe, the population of Vietnam was around 80 million. Now it’s approaching 100 million, or double the size of South Korea’s.

So what factors are behind Lotte Group’s expansion in Vietnam these days?

Well, at that time our major investments were in Japan and South Korea. However, the growth rates in those two countries had been going down. Also, their populations were aging. Compared to them, I believe Vietnam’s population is very young. The economy and the population growth in Vietnam are two other reasons. I think it is necessary for us to go outside of South Korea and Japan, to new growing countries like Vietnam. In my view, Vietnamese people are young and hard working.

Why has Lotte launched its smart city project at this time?

We recently built the fifth-tallest building in the world, in South Korea, called Lotte World Tower. It’s 555 meters high with 123 stories. It received a Gold Rating in the US Green Building Council’s Leadership in Energy and Environmental Design (LEED) system. Energy efficiency in skyscrapers is usually not very good, but our building received a Gold Rating. We believe we possess certain knowledge and know-how about how to conserve not only energy but also waste, wastewater, and dirt as a full package. Many South Korean companies, as well as many Japanese companies, possess very good know-how and technology on how to save energy. Electricity costs are high in Vietnam, as is the temperature. We try to use our know-how and technology in a way that is good for this country and also good for us. We also try to transfer that know-how to Vietnam. If you stay in one of our apartments, you will see that your electricity bill will be less than in other apartments.

The Lotte Group has invested in a wide range of businesses in Vietnam, from confectionery and FMCG to retail, property and other fields. Which sector is the group’s most profitable in Vietnam?

I think it is retail. As you may have seen, we have many Lotte Marts in Ho Chi Minh City and Hanoi and the number is growing.

But I haven’t seen very many Lotte Marts in Vietnam.

There are currently 13 Lotte Marts nationwide, and I believe the number will increase in the next couple of years.

Do you think the number will be increased? By how many?

Definitely! I think maybe two or three this year. We are going to expand continuously. Vietnam’s middle class is huge and young, which is very good. If you go to a Lotte Mart or our department stores, most customers are in their early 20s and 30s. If you go to South Korea or Japan, our customers are in their 50s and 60s.

Does Lotte Group have any plans to develop integrated shopping malls in Vietnam?

Yes, we do. These consist of department stores and hyper markets and also some shopping malls and theaters. We have several candidates for these types of huge shopping centers in Ho Chi Minh City as well as in Hanoi and also some in other areas.

What is the significant feature of the integrated shopping malls in Vietnam that Lotte will be involved in?

First of all, it can provide jobs to young people and women in Vietnam. Also, it can be an interesting place, where customers can spend their time on various things while shopping. It would improve lifestyles in Vietnam.

As well, we are not just selling products but trying to improve the local economy. For instance, we have 40-50 hypermarkets and shopping centers in Indonesia. Nowadays, we sell not only agriculture products but also industrial products such as shoes, which were initially made for our shopping centers in Indonesia, and those products are now even sold in South Korea. So we could find good suppliers there, but three years ago we did not believe there were any good shoe makers. And we now work with the South Korean Government to import certain agriculture products. In the case of Indonesia, mangoes would be an example. We used to import mangoes mainly from Philippines, but now we do so from Indonesia as well. It is good for us because we can import good quality mangoes with reasonable prices. It is very important for retailers to have many other supply sources. And I think this is good for Indonesia, too. I think we can also do similar in Vietnam. Twice a year we have held a “Vietnamese Fair” to import Vietnam’s agricultural products in South Korea. I will try to continue such activities, as they are good for the Lotte Group and also good for Vietnam.

What do you view as the Lotte Group’s major achievements in Vietnam to date?

The Lotte Hanoi Hotel, for example, always has an occupancy rate of 90 per cent. There is very good demand here, not only among business travelers but also among tourists. I think tourism in Vietnam has significant potential. We are looking for other areas to build more hotels to cater to foreign tourists, such as Da Nang, which is popular for traveling and also recreation.

In terms of FMCG, we have more than 200 Lotteria fast food restaurants in Vietnam, which have been doing very well. Regarding Lotte Group’s chemicals industry, we are now building a chemicals compound near Ho Chi Minh City. If you look at Samsung TVs and mobile phones, some of the plastic packaging has been provided by our company. We have also supplied Hyundai. I think this new compound will be ready by the end of this year and we will provide not only raw materials but also, for instance, packaging for mobile phones and automobile spare parts.

Most recently, in June last year, we began e-commerce activities in Vietnam.

What exactly has the Lotte Group done with e-commerce in Vietnam?

On our e-commerce website, we sell not only products from department stores and Lotte Marts but also other products. Almost 100 companies provide products to our e-commerce site. We also have a membership program called L.Point. The number of customers who have an L.Point card is increasing. Points can be transferred to our e-commerce site, so whenever you buy something you can accumulate more points. Combining online and offline channels is what we do very well. Many companies do these separately, but we prefer to combine them.

Vietnamese tax authorities are considering taxing Facebook account holders conducting business via social platforms. What are your thoughts on this?

I don’t know the full details, but if taxes are charged equally on everybody then this will not affect us. If I was a Facebook retailer, I would accept the government’s regulations. But I agree it would not be easy to tax Facebook retailers.

What things about Vietnam have impressed you the most?

Vietnam is a very energetic country and appears to have a very good future. I think that many countries in Asia, like Japan, South Korea, and China, are facing aging populations. Though Vietnam has recently had to face this issue as well, compared to those countries, it’s still much younger. And the middle class is huge, which has a positive impact on retail. Vietnam is becoming the next China, and many companies have opened a manufacturing base in the country, like Samsung, Canon, Toyota, and many others. This is a very positive sign. If we look ahead to the next ten or 20 years, the Lotte Group is likely to see 6-7 per cent growth in Vietnam. So I’m very excited.

And in what areas do you believe the country needs to improve?

Sometimes I think that administrative procedures take too much time. In countries like South Korea and Japan, such things can be decided very easily and in a relatively short period of time. So, bureaucracy could be a problem in Vietnam at the moment, but it’s much better now compared to the past.

Another thing is that the rate of job turnover is relatively high. For example, in South Korea, if you work for a hotel, then you can work for another hotel if you want to change jobs. That’s perfectly normal. But in Vietnam, for example, it seems that if you’re currently working for a hotel, then tomorrow you could find a job with an electricity company. The job mobility of Vietnamese people is very high.

Add to these the traffic problems. Hanoi is better, but the traffic jams in Ho Chi Minh City can be very heavy. Vietnam needs better infrastructure, like urban railway lines and buses. Lotte’s construction company is now proposing various infrastructure projects, such as roads and bridges.

If you were asked by a South Korean business partner to brief them about Vietnam’s business and investment environment, what would you say?

I think that, basically, we are satisfied with our Vietnamese partners. But there is a lack of information. So, if we receive a proposal from a Vietnamese company, we may not know very much about that company and need more information. In South Korea, for instance, if the company is listed, then we can access a huge amount of information. But in Vietnam, it can be very difficult to judge. It’s a matter of finding trustworthy information about potential Vietnamese business partners.

The Lotte Group is said to be developing plans to cultivate cacao in Vietnam. How will these plans proceed?

The cacao price fluctuates based on various factors, such as temperatures and also disease. In our confectionery business, chocolate is a very important ingredient. We believe it is necessary to not only rely on small farmers in Western Africa, as we do now. If we can have separate sources here in Vietnam, we can have a better, more stable supply. The quality would also probably improve. We are now talking with several government officials and Vietnamese companies to determine whether they can provide the land and plantations for cacao.

For instance, coffee used to come primarily from Brazil, but now Vietnam is one of the largest producers of coffee beans. That helped many food companies to stabilize their profitability. This is why we are hoping to grow cacao in Vietnam.

Ho Chi Minh City and the Lotte Group last month inked a deal to build the Eco-Smart City complex in Thu Thiem in District 2. The VND20.1 trillion ($885.46 million) project is expected to break ground within 2017 and take six years to complete. Spanning 7.45 ha, the complex includes shopping malls and office buildings integrated into residential areas. Roads and other infrastructure within the complex will also be developed by Lotte and be left under the authority of Ho Chi Minh City’s administration upon completion. The project will be one of Lotte’s biggest overseas investments. Four subsidiaries of the South Korean conglomerate will be involved in the development of Eco-Smart City: Lotte Asset Development Co. Ltd., Lotte Shopping Co. Ltd., Hotel Lotte Co. Ltd., and Lotte Engineering & Construction Co. Ltd.

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