Building Vietnam’s success story

The construction industry is very resource intensive. Vietnamese people are becoming more aware of the benefits of protecting the natural environment and the TPP and EVFTA both specify environmental regulations that must be ratified and enforced. How important is the environment to Hoa Binh Construction Group (HBCG)?

We as a group recognise the environmental impact that could affect the world and the fact that when we exploit natural resources to exhaustion it will not only lead to poverty and all of the other issues but also lead to wars because everyone is fighting over scarce resources and wars could have very serious consequences as well. So, we understand that if we are careless with our natural resources it will lead to many negative consequences down the road.

What kind of steps is HBCG taking in order to mitigate its environmental impact?

We have already created a green environment committee that consists of 17 very smart and very capable engineers that we selected from our staff. For Vietnam there is a green building council and Hoa Binh was the first member and one of five platinum members and the only Vietnamese company among those five platinum members. The other four are foreign members.

What inspired you to take such a proactive approach to protecting the environment?

First, being environmentally friendly is a part of our core value. One of our core values is to steer construction in an environmentally friendly way and to minimise our impact on Vietnam’s natural resources. This is also one of our main concerns. If we have exploitation of natural resources, not only would it lead to a harder environment for us to live in but also could lead to the destruction of the whole society.

Do market drivers like the CPTPP and EVFTA play a role in driving people to be more environmentally conscious?

We also need that type of driver because not everyone is as driven to be as environmentally friendly. So, with a little bit of incentive from governments around the world I think that could only help.

As part of the CPTPP and EVFTA it will require Vietnam to agree to the ILO declaration which will change labour laws. Specifically, these changes would mean that workers could organise independently of the government. Is that something that concerns HBCG?

Over the growth of HBCG we have always made our staff’s wellbeing a priority. Only when our staff are content and satisfied can they be creative and efficient in their work and that leads to a better product and more efficiency in our business. That ultimately benefits our shareholders and our clients. We always look to balance the interests of our staff, our shareholders, and our clients, so we welcome the privatisation of labour unions if that’s something that our staff are interested in.

I do have one concern. Private unions would be something new in our market and if there is not a way that they are run in a fair and efficient way then the people leading that private union can take advantage or manipulate the staff and then it turns into something that will not be beneficial to the staff.

Besides regulations there should be clear by-laws of the union that show very clearly the roles and responsibility of each side because I understand that there are unions that bring efficiency and make a business better but there are also unions that impede the development of the business. Eventually there needs to be a balance of interests between the employer and the employee.

The market for foreign investors in Vietnam is slowly allowing more foreigners to own land in Vietnam. How do you feel about the government giving exemptions to foreign ownership restrictions on some high-rise developments?

It could have been done even earlier. It’s a good way to boost the economy because clearly there is a bigger pool of potential buyers. It also increases Vietnam’s capability to do business overseas in that it gives foreigners the ability to settle here longer term. It also helps with the diversity of culture domestically.

How important is foreign investment to HBCG?

Hoa Binh is a publicly listed company so foreign investors can buy shares directly from us or on the market. Last year we issued shares to Hyundai Elevator from Korea, giving them 11% ownership, and then on the market there are many Korean Funds, Finnish Funds, in total about 30% of the company is foreign owned.

What does the future look like for HBCG?

In the last three decades, every year we grew five-fold, so an average of 38% per year. Our turnover in 2015 was five billion. In 2016 it was 10 billion. In 2017, 17 billion. We have to keep that speed for the long term. But in the construction industry, the rate of domestic growth is only 10% per year. If we only do our business in Vietnam, the domestic market will not allow us to grow at that speed. We have to go global. We have no other choice.

What are the main countries that you operate in?

We first went abroad in 2011 and we started to do business as a construction management company rather than as a general contractor. We have worked outside of Asia but only in investment and development businesses, not yet in construction.

Our first project was in Canada. We proposed to build a condominium with 31 floors and 350 units. We’ve brought the land and have the planning approved. We have a government license for overseas investment and we have already transferred some money there. We plan to invest first and then move on to becoming a general contractor and co-operate with the local contractors to do that.

What do you look for in an overseas partner organisation?

We want to cooperate with small but fast-growing companies, who have a construction license and knowledge about the local markets and standards. So, we work with them as a partner. They don’t have experience like us. So, they also need us to do high-rise building. We are sure, in Canada, even Lend Lease doesn’t have the same experience as us. Every year we build 100 buildings. Hotels, office buildings, condominiums – are about 80% of our business.

Up until 1995 in Vietnam, the construction industry was not growing due to a global embargo. After Vietnam integrated with the world economy many foreign investors came here. We had a very unique opportunity to develop the construction industry in Vietnam. We learned from many big international companies.

We worked with more than 10 big, general contractors from Korea, Japan, China, France, Germany, Australia, and the USA. I don’t think any construction company in the world has the same experience. We know many construction methods and we know which one is the best for each project.

How do you incorporate new technologies into your business?

We learn from very low-level countries to very high level. International construction companies have their own way of constructing high rise buildings. Some are very good but very expensive. Some are very cheap but not very safe and not very high quality. We know many ways to construct a building so we can satisfy many clients. We’ve become very competitive because we have a lot of knowledge about construction methods.

Not only that but we also have a very competitive supply chain in Vietnam. Now a lot of materials are exported to many countries. Twenty or thirty years ago high-quality material had to be imported. But now everything we need we can buy in Vietnam and to a very high-quality standard.

Now raw material manufacturers understand clearly the requirements of the market. They have to buy very good machine systems. All of the machines need to be modern and new. So, the products have become higher quality, some even higher quality than imported materials because they have new machines.

How do you feel Vietnamese contractors compare to Chinese contractors?

Many years ago, Chinese contractors were very strong in the global market because their price was very competitive but after many years, many countries found that to cooperate with Chinese contractors was not very safe for many reasons. They delayed their projects but their request for essential time costs increased the budget. It was very difficult for the client to refuse to pay because the Chinese government is very strong.