(Tiểu luận) report topic direct foreign investment historical methods of pepsico since it penetrated into the vietnamese market 3

VIETNAM GENERAL CONFEDERATION OF LABOUR

TON DUC THANG UNIVERSITY
FACULTY OF BUSINESS ADMINISTRATION

INTERNATIONAL FINANCIAL MANAGEMENT
REPORT TOPIC
DIRECT FOREIGN INVESTMENT
Instructing Lecturer: ĐỖ THỊ MỸ HƯƠNG
Group: 8 - N01
Student’s name: Nguyễn Anh Kiệt - 719H0393
Trần Gia Bảo Trân - 719H0801
Huỳnh Quang Sang - 719H0500
Hồ Tấn Phát

- 719H1102

Major: INTERNATIONAL BUSINESS
Academic Year Code: K23

HO CHI MINH CITY, 04/2022

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TABLE OF CONTENTS
PART I: INTRODUCTION..........................................................................................................2

PART II: BODY.............................................................................................................................3
Question 1: Historical methods of PEPSICO since it penetrated into the Vietnamese market
3
1.1 Historical methods of international business of PepsiCo..........................................................3
1.2 Advantages of international business of Suntory Pepsico.........................................................4
1.3 Disadvantages of international business of Suntory Pepsico....................................................5
Questions 2: The motives for initiating PEPSICO including revenue-related motives and
cost-related motives.......................................................................................................................5
2.1 Revenue - Related Motives........................................................................................................5
2.2 Cost - Ralated Motives..............................................................................................................6
Questions 3: Analyze the impact of Covid 19 pandemic on this MNC’s value based on
valuation model..............................................................................................................................8
3.1 Impact of Covid 19 on the economy of Viet Nam.....................................................................8
3.2 Exposure to exchange rate:........................................................................................................9
3.3 Exposure to interest rate..........................................................................................................15
3.4 Exposure to government’s policies..........................................................................................21
Question 4: In your opinion, is this firm a good or bad FDI? Give explanations and reasons
for your answer............................................................................................................................23
4.1 About Foreign Direct Investment............................................................................................23
4.2 Opportunities for PepsiCo.......................................................................................................23
4.3 Pepsi's challenges when investing directly in Vietnam...........................................................24
Question 5: The roles of direct foreign investment in Vietnam’s economic development over
the past twenty years...................................................................................................................24
PART III: CONCLUSION..........................................................................................................28
PART IV: REFERENCE.............................................................................................................29
PART V: MEMBER’S CONTRIBUTION.................................................................................30

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PART I: INTRODUCTION
In terms of governments and businesses, foreign direct investment has been a critical
component. Corporations will easily buy new products and technology, as well as sell their
existing products to international customers, by purchasing a controlling interest in foreign
assets. Governments will also build opportunities and boost economic activity by attracting
foreign direct investment.
Foreign direct investment is extremely important to international investors and foreign
direct investment in has played an essential role in the development of emerging markets. At the
same time, businesses investing abroad will notice higher growth rates and diversify their profits,
benefiting investors. To understand how MNCs engage in FDI, the motivations for initiating
direct investment abroad include revenue-related and cost-related motives from the perspective
of foreign investors. will be discussed below in this report. In addition, foreign direct investment
also presents both advantages and disadvantages for not only the investor but also the host
country. At the micro level, investments carry some risks that need to be considered carefully. On
a macro level, it can cause problems for a country's domestic labor market and capital draw in
the long run.
In this report, we choose PepsiCo, a company that has invested in Vietnam for nearly 20
years as a typical example because it is the largest American food and beverage company in the
world, with products with present in more than 200 countries. At the same time, it shows the
existence and development of Pepsico corporation when reaching out to the world. At the same
time, an analysis of the benefits and limitations of foreign direct investment for the host country
as well as whether the advantages outweigh the disadvantages for Vietnam will be presented in
the next report below.

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PART II: BODY
Question 1: Historical methods of PEPSICO since it penetrated into the Vietnamese market
1.1 Historical methods of international business of PepsiCo
In the early 1990s, PepsiCo began to penetrate the Vietnamese market. PepsiCo Group is
one of the first foreign-owned beverage companies to set foot in Vietnam since 1991 in the form
of a joint venture. Accordingly, at the end of 1991, the International Beverage Company (IBC)
was established, under a joint venture between the Saigon Tourism and Trading Company
(SPCo) and Marcondray - Singapore with a capital contribution ratio of 50%-50%.
In 1994, a new member joined the company, Pepsico Global Investment Company and
PepsiCo officially entered the Vietnamese market when a joint venture with IBC International
Beverage Company with the birth of two companies. The first products were Pepsi and 7 Up
from the early days when the US lifted the embargo against Vietnam in 1994. Current capital
ratio is: SP Company. Yes. 40%, Macondray Company Inc 30% and Pepsi Cola International
30%. In 1998, due to capital investment and business development requirements, the company's
shares changed again: Pepsi Cola International 97% and SP.Co 3% according to Decision No.
291/GPDC7 dated December 28, 1998. Capital investment is 110 million dollars, legal capital is
70 million dollars.
On April 28, 2003, Pepsico Global Investment acquired a 3% stake in Vietnam,
International Beverage Company became a 100% foreign owned enterprise and changed its name
to PEPSICO Vietnam International Beverage Company. . Male. PepsiCo's products are now
available nationwide with big and famous brands such as Pepsi, Poca, 7Up, Mirinda, Aquafina,

Sting, Twister, Lipton Tea, Quaker Soya.
April 2013 - The strategic beverage alliance Suntory PepsiCo Vietnam was established
between Suntory Holdings Limited and PepsiCo, Inc. in which Suntory accounted for 51% and
PepsiCo accounted for 49% with the launch of new products Olong Tea + Plus and Mountain
Dew.
Historical international business method since Suntory Pepsico entered the Vietnamese
market from the initial joint venture method into the current 100% foreign owned enterprise.

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1.2 Advantages of international business of Suntory Pepsico
-

The Suntory-Pepsico joint venture in Vietnam is applied to both take advantage of
experience, production technology and take advantage of sales experience and wide system
in the market

-

The international joint venture allows Pepsico to enter the Vietnamese market more quickly
and at a lower cost and quickly penetrate the distribution channel of the domestic market,
increasing the likelihood of the success of the joint venture. partners already have
relationships with key suppliers and customers, and are fluent in the language and customs

procedures.

-

A joint venture helps Pepsico to limit risks rather than owning the whole thing, because
each partner only bears the risk for its own capital contribution.

-

The joint venture between SP.Co and Marcondray-Singapore - Pepsi Cola International
helps to improve the competitiveness of domestic enterprises in the beverage industry.

1.3 Disadvantages of international business of Suntory Pepsico
-

There is a conflict, ownership dispute between the participating parties due to disagreement
on investments or profit sharing.

-

There is a situation where large companies acquire small companies due to their
inexperience and small scale.

-

The possibility of great risk if the joint venture company has a deadlock.

-

Language, thinking and cultural barriers between the parties' cooperation.

-

Encountered many legal problems when joint ventures related to culture projects.

-

The firm Pepsico will not reap any rewards from the investment until the subsidiary is built
and a customer base established.

Questions 2: The motives for initiating PEPSICO including revenue-related motives and
cost-related motives
2.1 Revenue - Related Motives
 Attract new sources of demand:
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When a company reaches the limit of growth in the home country, such as stiff
competition, or develops enough to reach near-perfection in the domestic market category.
Therefore, in general, businesses can look to foreign markets to make full use of their inherent
potential as well as find potential needs from other countries (especially in countries with low
barriers to entry like economic, political, ... to help MNCs penetrate and expand easily).
EX: PepsiCo's products are enjoyed by consumers in more than 200 countries and regions
around the world and consumed by a huge amount more than a billion times a day. Thanks to

market expansion strategies by region and user segment, PepsiCo generated $70 billion in net
sales in 2020, including convenience food and supplement categories including Lays , Doritos,
Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream. PepsiCo's product
portfolio includes a wide range of exciting foods and beverages, including many iconic brands
that generate more than $1 billion annually in estimated annual retail sales.
 Enter profitable markets:
Some businesses create opportunities for themselves by entering certain markets where
those industries are currently highly developed. However, a particularly common negative
problem with this strategy is that companies that have been successful in this new market, set out
policies to prevent new competitors from entering, they have used measures to reduce the price
of products when other new entrants have just begun to enter the market.
EX: Currently, Pepsi has more than 22 brands in its portfolio. Besides carbonated drinks, Pepsi
will provide healthy snacks and low-calorie drinks. To boost up and to the perch brand, unlike
Coca Cola - a brand that focuses on valuable media, Pepsi wants to target the young generation,
who are rich in energy and enthusiastic "flaming fire". PEPSICO will focus on customers from
13 to 35 years old, from all walks of life from middle to upper class, from modern people to
people with minimalist lifestyles. Besides, the price of products from the brand is also very
diverse, suitable for all choices of users.
 Diversify internationally:
Because the economies of countries may not transform at the same time, the corporation
may take advantage of the consistent net cash flow that comes from selling items across
countries. The corporation can lessen the volatility of net cash flow and hence the possibility of a

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liquidity shortage by spreading worldwide sales and manufacturing. Furthermore, if shareholders
and creditors view the MNC's risk to be reduced, the firm may have a cheaper cost of capital
with more steady cash flows.
EX: The impact of the Covid-19 outbreak has caused PEPSICO's goods trade to be delayed and
short in Vietnam, but the outbreak is also a time to show that Vietnam needs to restructure the
market, open up, diversify market diversification, especially the market. such as Africa, the
Netherlands, America, Japan, ... to avoid the risk of depending on certain markets.
2.2 Cost - Ralated Motives
 Fully benefit from economies of scale and use foreign factors of production: Establish a
subsidiary in new markets where goods can be produced inexpensively and can be sold
domestically or be exported and efficiency has lower costs of labor, land, capital or
technology.
 Use foreign raw: Establish a subsidiary in a market where raw materials are cheap and
accessible. Sell the products in that market and elsewhere.
 Use foreign technology: Participate in a joint venture or acquire an existing overseas plant
to learn about foreign production processes, so as to improve its own operations.
 React to exchange rate movements: Establish a subsidiary in a new market where the local
currency is weak but is expected to strengthen overtime.
EX: In 1994, at the time of the US embargo against Vietnam, PepsiCo entered the Vietnamese
market when it entered into a joint venture with the IBC International Beverage Company with
the launch of the first two products, Pepsi and 7Up from the United States. the first day when the
embargo against Vietnam was lifted in 1994. And in 2003, the company was renamed PepsiCo
Vietnam International Beverage Company. Many beverage products are not released such as:
Sting, Twister, Lipton Ice Tea, Aquawna. In the following years, through the merger and
acquisition of factories, the company expanded its production and business to officially become
one of the largest beverage companies in Vietnam. An example of PEPSICO company expanding
production and business in both the field and source of raw materials as well as the user market.
According to evaluation articles, after 35 years of progressive corporate renewal, Vietnam's

economy has developed strongly. Vietnam is an in 5 national family with the fastest economic
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growth in the world over the past 30 years. Vietnam's average GDP growth rate reached 7% per
year in the period 2009-2019. In the commercial year, Vietnam is in some of the countries in the
world with a positive GDP growth. There are also factors that show that Vietnam's economy is
attractive to global businesses thanks to its cheap labor force, stable exchange rate and low
inflation.
In 2010, PEPSICO showed Vietnam as an important country in its market expansion
strategy by Pepsico announcing to continue investing in Vietnam 250 million USD for the next
three years and opening a new factory in Vietnam. Can Tho. At the same time, 2 years later,
PEPSICO bought, sold and imported the San Miguel factory in Dong Nai _ The largest PepsiCo
factory in Southeast Asia was inaugurated in Bac Ninh.
Questions 3: Analyze the impact of Covid 19 pandemic on this MNC’s value based on
valuation model
3.1 Impact of Covid 19 on the economy of Viet Nam
From an economic point of view, Covid-19 can be considered a pandemic that has farreaching effects on world economies. Evidence demonstrates that the effects of the pandemic
have spread to different spillovers such as travel, tourism, supply chains, stock market volatility
and oil price volatility. Of course, the beverage industry is equally affected by difficulties in
importing and exporting goods and materials. Likewise, this pandemic has created an overall
panic among consumers and companies that have distorted the way consumption patterns are
established and created market anomalies. COVID-19 has also posed an unprecedented challenge
to MNCs like PEPSICO as the virus spreads rapidly and causes an economic slowdown.

As the covid pandemic rages, it may take weeks or months for currency markets to focus
on controlling the spread of the virus, and some countries may lose ground. Also, there's more
going on in the world of money than the evolution of the pandemic. Policy changes are still
important but will also pose political risks to countries and MNCs over the 2020 pandemic, so
monitoring the relative progress of the virus is important to understand currency movements.
The Covid-19 epidemic has complicated developments, disrupting socio-economic
activities of countries around the world; The US-China trade conflict continues. In the country,
natural disasters and epidemics have a significant impact on the activities of the economy and

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people's lives; unemployment and underemployment rates are high. However, with drastic and
effective solutions in realizing the dual goal of "both disease prevention and socio-economic
development", Vietnam's economy still achieved positive results with maintaining growth.
Although GDP growth in 2020 is the lowest in the 2011-2020 period, before the negative impacts
of the Covid-19 epidemic, it is a success for our country with the highest growth rate in the
group of countries in the world. Along with China and Myanmar, Vietnam is one of three
countries in Asia with growth this year; At the same time, the scale of our country's economy
reached more than 343 billion USD, surpassing Singapore (337.5 billion USD) and Malaysia
(336.3 billion USD), making Vietnam become the leading country in the world. The country has
the 4th largest economy in Southeast Asia (after Indonesia 1,088.8 billion USD; Thailand 509.2
billion USD and the Philippines 367.4 billion USD). billion USD).
3.2 Exposure to exchange rate:

 Vietnam in 2019 before the Covid epidemic occurred:
In the second quarter of 2019, the foreign exchange market experienced strong
fluctuations. Specifically, the USD/VND exchange rate increased by 0.84% in just 5 weeks from
the end of April, peaking at 23,360 VND/USD (bank rate). However, in June, VND had a strong
recovery when the USD/VND exchange rate continuously decreased, the total decrease of the
whole month was 0.43%. Accordingly, the bank rate decreased by 100 VND/USD, to 23,260
VND/USD for buying and 23,380 VND/USD for selling. The free exchange rate decreased by
115 VND/USD on the buying side and 110 VND/USD on the selling side, respectively at
23,300/23,320 VND/USD. The central exchange rate was adjusted up and down alternately,
ending June at 23,066 VND/USD - an increase of only 1 VND/USD compared to the end of
May. For the whole 6 months, the USD/VND exchange rate increased by 0.41 %, while the
central rate increased by 1.06% from the end of 2018 until the end of June 2019. Compared with
some countries in the region such as the Philippines, Malaysia, Singapore..., Vietnam is in the
group of countries with a stable local currency.
Many favorable factors for a stable trend in the third quarter of 2019 according to BIDV's
research, stated that "Interbank VND/USD interest rate differential is expected to remain stable
at a positive level, term 1 week fluctuated around 0.7 - 1.2%. Market sentiment is expected to
remain steady, easing concerns as international pressures are expected to ease. On the other hand,

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Vietnam's macroeconomic context is still stable such as stable growth, low inflation, and foreign
currency inflows are still maintained, which are the core factors to help the domestic foreign

exchange market no longer suffer. The foreign exchange market in the third quarter of 2019 still
has many favorable factors to maintain a stable trend from the beginning.”
In summary, the exchange rate situation of Vietnam after 2019 is lower than in 2018
specifically, in the fourth quarter of 2018 it increased by 1.8%, in the first quarter of 2019
increased by 1%, in the second quarter of 2019 it increased by only 0.3%. However, with the
USD/VND exchange rate being stable and not excessively increasing by 2.5-3%; This is
considered a supportive increase for interest rates, credit growth and the goal of controlling
inflation. At the same time, the State Bank of Vietnam controls interest rates and exchange rates
in line with the macro balance, market movements and monetary policy objectives,
synchronously combining monetary policy tools and intervention measures. foreign exchange
market when necessary to stabilize the foreign exchange market. One of the focus of monetary
policy management from now until the end of 2019 of the State Bank is to continue to stabilize
the exchange rate through controlling VND liquidity.

 Exchange rate in 2020:
Although there was a period of steep climb in the first few months of 2020, the
USD/VND exchange rate has since fallen deeply so far. The value of the US dollar slipped due to
double shocks from the loosening monetary policies of the Central Banks of countries around the
world, the negative outlook on US economic growth in 2020.

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Specifically, the first four months of 2020 are the period of strong growth of the

USD/VND exchange rate. The central rate climbed to 23,245 VND/USD on February 25, up
0.4% compared to the beginning of the year due to the strong increase in USD price, this is also a
new peak established during the past 3 years. However, this peak was quickly broken about 2
months later, the central rate continued to climb to a new level of 23,272 VND/USD on April 24.
Accordingly, the buying price of USD at banks fluctuates around 23,075-23,300 VND/USD, and
the selling price in USD ranges from 23,230 to 23,510 VND/USD. On the free market, the
buying price fluctuates at 23,170-23,450 VND/USD and the selling price ranges from 23,18023,500 VND/USD.
While in the past, the selling price of USD on the free market was always lower than at
the bank, now the reversal is much higher. Also, to stabilize the exchange rate, on March 24,
2020, the State Bank adjusted the USD selling rate at the SBV's Exchange with the buying selling exchange rate at the State Bank of Vietnam level of 23,175-23,650 dong/USD, keeping
the buying price unchanged and reducing the selling price by 257 dong (equivalent to more than
1%) compared to the level announced on March 23. Thus, the selling price at the State Bank
Exchange was about 100 dong cheaper than the banks at that time.

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Analysis of buying prices in USD on the free market from the beginning of 2020 to
December 29, after the intervention of the State Bank, the upward momentum of the exchange
rate was reduced. The selling price of USD on the free market is back lower than the USD price
at the bank. At the same time, the State Bank kept the USD selling rate at the Exchange fixed at
23,650 VND/USD in the next 3 months. On July 16, the State Bank increased the selling price of
USD at the Exchange to VND 23,873/USD and accordingly the USD selling rate at the
Exchange was managed according to the fluctuations of the central exchange rate.

After the sublimation period, the uptrend of the central exchange rate USD/VND slowed
down and entered a period of steady decline from May 19 until now. As of December 29, 2020,
the central rate of USD/VND returned to the starting level of early 2020, approximately 23,150
VND/USD. The USD/VND exchange rate at banks and on the free market both declined and
went sideways after the intervention of the State Bank from March 24, 2020. As of December 29,
2020, the buying and selling price of USD at banks was popular at 23,010-23,220 VND/USD
and the buying and selling price on the free market was popular at 23,290-23,320 VND/USD. In
which, the buying price in USD at banks decreased by 0.3% compared to the beginning of 2020
while the selling price decreased by only 0.04%.

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Contrary to developments in the banking market, the USD/VND exchange rate on the
free market in mid-December tended to increase slightly by 0.5% and 0.6% compared to the
beginning of the year and were 280 dong and 100 dong higher than banks, respectively. because
of the difference in the domestic gold price - the world gold price is at a high level, up to more
than 3 million VND/tael as of December 29, 2020. One of the factors that caused the exchange
rate to decrease was the weakening of the USD.
During the regular Government meeting in early September, Prime Minister Nguyen
Xuan Phuc said foreign exchange reserves had reached about 92 billion USD. This is a record
level of foreign exchange reserves of Vietnam. The figure by the end of this year can reach 100
billion USD, 5 times higher than 20 billion USD at the beginning of the term. Therefore, after
nearly a year of maintaining the buying price at 23,175 VND/USD since November 29, 2019, the

State Bank Exchange Department lowered the buying price of USD to 50 VND, to 23,125
VND/USD in afternoon session 11/24/2020. The decrease in USD buying price of the State Bank
of Vietnam Exchange was stronger than in 2019 in the context that the State Bank bought a large
amount of foreign currency from commercial banks, equivalent to more than 30,000 billion
VND. Besides, the supply of USD in Vietnam is assessed to be abundant thanks to the trade
surplus. The General Department of Customs said that in the first 11 months of 2020, the trade
balance of goods was estimated to have a record trade surplus of 20.1 billion USD (the same
period last year, the trade surplus was 10.8 billion USD). The fact that the State Bank lowers the
price to buy USD will reduce the attraction of foreign currencies, help the supply of foreign
currencies stay in the market more, and contribute to stabilizing the domestic exchange rate in
the context that the demand for foreign currencies tends to increase at the end of the year five.

 Exchange rate in 2021:
The USD/VND exchange rate experienced a year of ups and downs, mainly due to
impacts from the international market. And the most encouraging thing is that the US recognizes
that Vietnam is not a currency manipulator. This is the result of the careful, flexible and
synchronous exchange rate management by the State Bank in the past year. In 2021, the central
exchange rate of the Vietnamese Dong against the USD announced by the State Bank of Vietnam

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increased by 0.1%, while the exchange rate on the interbank market decreased by about 1.6%
compared to the beginning of the year.

On the free market, the exchange rate of Vietnam dong against the US dollar increased by
0.5% due to the widening gap between domestic and international gold prices. Currently, the
domestic gold price is about 11.2 million dong/tael higher than the world gold price. The factors
affecting the exchange rate this year mainly come from the international market, in which the
two main factors are the US economic growth slowing down due to the impact of the Covid-19
pandemic and the Federal Reserve the US (Fed) kept the loose monetary policy to stimulate the
economy affected by the pandemic, so the dollar only increased slightly by 0.1% compared to the
beginning of the year.

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 The buying price of USD decreased sharply: Since the beginning of the year until now,
the State Bank has adjusted 3 times to reduce the buying price of USD. Specifically, on June
8, 2021, it decreased by 150 VND/USD, on August 11, 2021, it changed from buying for a
6-month term to buying spot, and at the same time reducing the purchase price by 225
VND/USD. The third time to reduce the purchase price of USD by 100 VND/USD on
November 5, 2021, to 22,650 VND/USD. The downward adjustment of the buying price is
an inevitable consequence in the context that both the central exchange rate and the selling
price of the State Bank and the USD price in the interbank market decreased compared to
the beginning of the year. At the same time, the State Bank sharply reduced the buying price
in USD on the basis of abundant domestic foreign currency supply when Vietnam's trade
balance in the first 11 months had a surplus of 225 million USD and the estimated amount of

remittance Returning to Vietnam reached a record of 18.1 billion USD, despite the Covid-19
epidemic.
 The selling price of USD also dropped sharply: In the morning of December 7, 2002, the
central exchange rate continued to be adjusted sharply by 27 dong compared to the previous
session, listed at 23,237 dong/USD, marking the third strongest increase session
consecutive. Meanwhile, the selling rate was suddenly adjusted by the State Bank of
Vietnam, down sharply by 706 VND/USD compared to the previous session, down to
23,150 VND and remained fixed until now. Thus, after continuously increasing hot in the
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first week of December, the State Bank has stabilized, when sharply lowering the selling
price of USD to create intervention supply. The listed operator's selling price as above is 742
VND/USD lower than the ceiling price, reflecting the message of willingness to create
supply at low prices, cool down the market and create liquidity for banks.
According to Mr. Hoang Cong Tuan - Head of Macro Research Department, the
exchange rate will be stable soon, specifically that "Although in 2021, there will not be too many
foreign exchange reserves. However, Vietnam is still running a surplus on the overall balance.
Therefore, the pressure on the exchange rate is not much, while the USD has appreciated again,
but the increase is not high. And with the Omicron variant that has just appeared, the possibility
of the US raising interest rates quickly in the first half of 2022 is almost nonexistent. Therefore,
Mr. Tuan believes that the exchange rate in the coming time will be very stable and only
fluctuate at 0.5% compared to the present, but the general trend is not yet showing that the
Vietnamese dong depreciates against the USD. As for the Vietnamese dong to appreciate, we

certainly don't expect it, because comparing the factors, we don't have too many advantages”.

3.3 Exposure to interest rate

 In 2020:

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Before the impact of the Covid 19 epidemic, according to a report by market research
company Kantar Vietnam, the fast-moving consumer goods (FMCG) industry grew slowly,
beverage products decreased significantly (-6.8%), a Part of that may be due to restrictions on
travel, sightseeing, gathering of friends as well as the reduced demand for parties and prioritizing
health protection during the epidemic season.
In addition, the Covid-19 epidemic also had a substantial impact on inventory spending
during the epidemic season. With anxiety and bewilderment during the outbreak, consumers
began to increase their purchases and stockpile fast-moving consumer goods actively. The
beverage is the industry most affected during the epidemic season, while all other categories
have double-digit growth. Specifically, beverage consumption decreased by 14.1%; milk and
dairy products by 10.3%; packaged food by 26.2%; personal care products by 29%; home care
products increased 11.4%.
Notably, consumers' shopping carts changed due to the impact of the Covid-19 epidemic. The
list of cuts includes party products such as beer (down 24 percent) and soft drinks (down 19
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percent). Consumers increase their purchase of personal hygiene and home care products;
products to enhance nutrition and immune system for children and the elderly (milk powder,
drinking yogurt); convenience food, and cooking condiments (instant noodles, instant porridge,
canned food...).

Therefore, to stabilize costs for the production process and help beverage businesses
maintain business during the covid season, the Government has proposed measures to stabilize
lending interest rates. Specifically, in the first quarter of 2020, the overnight and 1-week
interbank term rates had efore, to stabilize costs for the production process and help beverage
businesses maintain business during the covid season, the Government has proposed measures to
stabilize lending interest rates significant fluctuations. They closely followed each other,
averaging 2.08% overnight and 2.37% one-week average. Interbank interest rates started to
increase from the beginning of January 2020, peaking in the quarter at 3.5% and remaining
above 3% within a week. Facing adverse developments due to the COVID-19 epidemic, the US
Federal Reserve and other central banks have reduced their operating interest rates. On March
17, 2020, the State Bank also officially lowered the available interest rate from 0.25 to 1
percentage point, specifically: lowering the refinancing interest rate from 6% to 5% per year. and
the rediscount interest rate is from 4% to 3.5% per year; overnight lending rates in interbank
electronic payments and loans to cover capital shortfalls of the State Bank for banks from 7% to

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6% per year. The interest rate offered to buy valuable papers through open market operations is
from 4% to 3.5% per year. This move affects interbank interest rates; overnight interest rate at
the end of the quarter was only 2.19%. The State Bank's cut in operating interest rates is in line
with the general trend of the world, enabling businesses to better access capital flows when the
COVID-19 pandemic is casting a shadow over the global economy. In addition, the reduction of
the refinancing interest rate also shows that the State Bank can meet the needs of credit
institutions if they have a need to access capital. This has a positive effect on market sentiment.
According to a report at Economic Report Quarter IV_2020 - Institute for Economic and Policy
Research_VEPR predicts that by 2020, the interbank interest rate will end at 0.15% for the

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overnight

interest

rate

and

0.

26%

for

one-week

forward

rate.

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 In 2021:

In 2021, the covid 19 epidemic broke out again and became a dangerous global pandemic
in early June, forcing businesses to close social distance for a long time. This leads to delayed
production, import or export of goods, etc., causing business costs to increase. Many companies

have suffered heavy losses, even bankruptcy and closed presentations. The state has taken some
adjustment measures in banks’ lending rates to help businesses stabilize and survive this
pandemic. Also, in 2021, according to the report "VIETNAM ECONOMIC REPORT" of the
Konrad Adenauer institute, banks’ lending interest rates fluctuated in different quarters. Interbank
rates suddenly increased sharply in early February 2021, with overnight rates reaching a peak of
2.86% on February 8 and one-week rates reaching a height of 3.66% on February 9. However,
this is only a seasonal phenomenon due to the high demand for cash among the people during the
Tet holiday. Indeed, interbank rates quickly stabilized after the Lunar New Year, fluctuating
between 0.25-0.30% for the overnight rate and 0.35-0.50% for the one-week rate.
After maintaining low-interest rates in the middle of Quarter 1, interbank interest rates
suddenly increased sharply at the end of April 2021, with overnight interest rates reaching a peak
of 1.54% on May 31 and interest rates going to a height 1.54% on May 31. a week reached a
peak of 1.67% on May 28. However, this is only a seasonal phenomenon due to the lack of local
liquidity in some small banks, while the liquidity of the whole system is still relatively abundant.
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On the other hand, due to the impact of the fourth epidemic, credit demand is expected to
decrease. At the same time, the liquidity of the whole system is still relatively abundant. On the
other hand, due to the impact of the fourth epidemic, credit demand is expected to decrease.
In the interbank market of 2021, interest rates recorded a sharp decrease in Quarter 3,
with overnight and 1-week interest rates down 38 basis points and 46 basis points, respectively,
compared to Quarter 2. This reflects an abundant liquidity position from the beginning of Quarter
3. With a low growth rate (up 1.42%) and an inflation rate of only 1.82% in the first nine months

of 2021, the State Bank has an incentive to continue maintaining monetary easing to stimulate
the economy recover again. Therefore, it is likely that interbank interest rates will not increase in
Quarter 4. In the first nine months of 2021, the State Bank will continue to operate interest rates
according to the macro balance, inflation, market movements, and targets. The monetary policy
creates conditions to reduce the cost of capital for people, businesses, and the economy. The
State Bank of Vietnam, together with credit institutions, has exempted or reduced interest rates
by nearly VND 2.5 million billion for about 1.7 million customers.
Since the appearance of the COVID-19 epidemic until now, the State Bank has adjusted
three times the operating interest rates, a total reduction of 1.5-2.0% per year; reduced the ceiling
interest rate by 0.6-1.0% per year for deposits with terms of less than six months; reduce the
ceiling of short-term lending interest rates for priority sectors with a total reduction of 1.5% per
year (currently at 4.5% per year); ready to support liquidity for credit institutions, creating
favorable conditions for credit institutions to access capital from the State Bank at a lower cost.
In the first months of 2021, the State Bank of Vietnam kept the operating interest rates
unchanged, creating favorable conditions for credit institutions to access capital from the State
Bank at a low cost.
For Suntory Pepsico Vietnam, thanks to the Government's policy of stabilizing interbank
interest rates with low levels, it has created many opportunities for businesses to stabilize capital
sources and maintain businesses in combination with management strategies. Adapting to the
covid 19 epidemic after the outbreak in 2020, the company has experience in preparing for and
overcoming the pandemic outbreak in 2021 with ease. This has helped increase the value as well
as the net revenue of the subsidiary in Vietnam and the parent company abroad; especially, the
payment of Pepsico in the US in 2021 has increased to USD 7,618, an increase of more than
USD 7,618 and 0.498 in millions except per share amounts compared to 2020.
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3.4 Exposure to government’s policies
1) Inflaction:
Inflation has become a growing concern for central banks around the world. A strongerthan-expected recovery in economic activity in the first months of 2021, reflects the stimulus
measures governments have deployed to mitigate the impact of the pandemic and greater
mobility and containment measures. lower block. However, inflation and inflation expectations
in the region are also increasing.
All of this is happening as countries are threatened by new variants of COVID-19, such as
Delta, and new waves of infections could delay recovery and economic growth. The potential
risks are great. Many countries in the region are currently facing two risks of economic
slowdown and high inflation, leading to a large impact on the poor.
Not only during the current pandemic, but for many years now, central banks have used the
replay app, explicitly or implicitly. When the growth expectations themselves are higher than the
growth targets, this often leads to an interest rate upgrade. That reduces the development
mechanism, especially the poor. The big question for today is whether the developments data
reflect temporary or permanent pressure on prices and whether development expectations have
an impact. Most importantly for policymakers, it raises the question of what to do.
At the same time, it is required to resist development also because it will help maintain
people's health and because it will empower MNCs to make sound investment decisions at home
and abroad, ultimately also help with economic recovery. Conversely, if development
expectations are left unchecked, the central bank does not work, negative activity will be
worthwhile both in the short-term working on increasing development and in the medium term
adding to the costs generated. due to early response and lanyard certification.
According to studies, the management of continuum of development can affect different
economic levels of an unrestricted population differently as lower development is related to
poverty and class reduction. growing middle class. Growth and release are compatible with
unemployment and negative with inequality. Several models are proposed to show that a 1%
increase in development would increase the proportion of lower income households by about 7%

and decrease the proportion of high-income households by about 1%.
2) Investment:

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The COVID-19 crisis threatens to create major obstacles to financing sustainable
development. Resources mobilized domestically will be affected due to the decline in economic
activity. External private capital inflows are expected to fall by $700 billion from 2019 levels.
Fiscal space is likely to shrink further as domestic spending increases and the exchange rate
moves against the USD.
In the short term, official development finance should be utilized to limit the decline of
other sources of finance. No amount of funding will be enough to close the COVID-19 financing
gap.
Over the medium term, actors in development finance and beyond need to work closely to
"build back better" for a more equitable, sustainable, and resilient world. As well as funding
many public goods and services, building back better will require action from all financial
sources with the common goal of supporting national sustainable development strategies. In
addition to development financing, there is a need to restore trade and, in the case of small island
developing states, promote a sustainable ocean economy.
COVID-19 poses a major impediment to the work of financing developers. The projections
of the private externals are supported by prior certification. Portfolio investments and various
investments are not likely to recover quickly, COVID-19 pandemic still looms large in most
modes of development, possibly leading to a wave originating in secondary portfolios. and

investment inflows continued to decline, the portfolio of projects and other investment flows
decreased by 80% and 123% respectively compared to 2019. Projects indicate that even in the
scenario relation, Global FDI will decrease at least 30%, with flows to the developing economy
likely to fall even more sharply. The World Bank's forecast of a 35% reduction in FDI inflows
into developing economies supports this figure. In the wake of the Covid pandemic, global FDI
fell with a one-year lag and had a more detrimental effect on developed economies than on
developing economies, and the impact on FDI would be immediate because The most prominent
sector in FDI inflows into developing economies will be most affected in the first few months
from the onset of the pandemic, given the magnitude of the impact.
3) Tax:
Governments implement a range of tax policy and regulatory measures that can support
government responses to maintain the liquidity of domestic households and businesses and
MNCs. Protection systems enacted to limit the effectiveness of some tax measures on a large
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scale and thus call for targeted policy responses and propose a range of targeted tax measures:
may be extended to SMEs and foreign businesses and the most affected areas or industries such
as the tourism, travel and hospitality industries. Such relief measures could include income tax
credits, tax rate cuts and exemptions, term extensions and deferrals, expansion of loss-passage
rules, or restrictions on advance tax payments. A temporary tax exemption can help protect
existing formal employment, as well as a tax exemption for mobile money and cash transfers that
can provide maximum financial support for individuals.
Question 4: In your opinion, is this firm a good or bad FDI? Give explanations and reasons

for your answer
4.1 About Foreign Direct Investment
Foreign direct investment is critical for developing and emerging market countries. Their
companies need multinational funding and expertise to expand their international sales. Their
countries need private investment in infrastructure, energy, and water to increase jobs and wages.
 Pros of Foreign Direct Investment:
-

Diversifies investor portfolios

-

Provides technology to developing countries

-

Provides financing to developing countries

-

Promotes stable, long-term lending

 Cons of Foreign Direct Investment:
-

Not suitable for strategically important industries

-

Investors have less moral attachment

-

Unethical access to local markets

4.2 Opportunities for PepsiCo
-

Over the years, investors can get an impression of a new Vietnam in terms of business
environment. This place is currently an attractive investment location and a promising
land for foreign companies to invest in Vietnam, including PepsiCo.

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