Investment Incentives in Vietnam’s Central Highlands Region

The Central Highlands have long been a strategic economic, political location in the history of Vietnam. Sharing borders with Laos and Cambodia, this region is one of the most important location for the economic development of Vietnam in the next few years.

A region full of potential

The Central Highlands, or the Western Highlands, is located in the West and South West of Vietnam. The region contains five provinces: Lâm Đồng, Daklak, Dak Nông, Gia lai and Kon Tum. These provinces are expected to show high potential for development in renewable energy, agricultural and tourism in the coming years.

According to the Minister of Public Security’s speech in the fourth conference on investment promotion in Central Highlands total investment capital has reached VND 266 trillion in 2015 with an annual growth rate of 11.3 percent between 2011 and 2015. To date, there have been 140 FDI projects worth US$772.5 million in the Central Highlands. This number is expected to grow significantly in the next few years, especially as the government is trying to improve the region’s infrastructure and paying more attention to renewable projects in its long-term plan of development.

Tourism and agriculture are two important sectors that appeared very promising to foreign investors, especially investors from Korean, Japan, and China. However, Central Highlands are not being fully explored, thus, bringing more opportunities for future investors to enter the race.

Opportunities for renewable energy projects

The Central Highlands is a prominent location for solar potential maps in Vietnam. According to Vietnamese authorities, the total hours of sun in Central Highlands varies from 2000 to 2600 hours per year. Korean Solar power investors in this area are upbeat on the prospects for the region and have published findings indicating a direct solar radiation generation of 5 kWh per square meter. With this in mind, Vietnam’s Central Highlands is an ideal place to develop a solar power plant.

In addition, the region’s wind power capacity could reach 2000MW, which is even more than the second largest hydro power plant of Vietnam in Hoa Binh.

Realizing the favorable conditions for developing renewable energy of this region, Central Highland provinces have issued a number of preferential mechanisms and policies as well as simplified administrative procedures, to attract investors. Daklak is topping the list with 4 projects worth US$3.3 billion from AES Corporation, Vietnam’s Xuan Thien Limited Company, South Korea’s Solar Park Limited and Vietnam’s Long Thanh Infrastructure Development and Investment Company.

Promising land for coffee, tea, and pepper

In addition to its advantages in solar and wind power, the region is also getting more and more popular as a promising land for FDI projects in agriculture. Central Highlands cover an area of 5.46 million ha, in which 2 million ha are used for developing agricultural. Besides, the region contains 74.25 percent of the red basalt soil of Vietnam, making it an ideal place for large-scale production specialized in coffee, pepper, tea, cashew, cassava, rubber.

Realizing the growth potential of this sector, investors from Korea and Japan have launched several projects with advanced agricultural techniques to maximize production in the region. New policies and tax incentives are also available to encourage and attract investments. Although climate changes may appear to be a threat, agriculture will continue to grow and strengthen its position as an important sector of Central Highland’s provinces.

Top destinations for tourism

Dalat, Kon-Tum and Gia Lai are famous destinations for eco-friendly and historical tourism. Cool weather, beautiful natural sight-seeing, historical museums and also the variety of food specialties are the reasons why more and more tourist chose these destinations for a get-away on the weekend. In 2016, Dalat city of Lam Dong province welcomed 5.4 million visitors, an increase of 6 percent compared to 2015. On top of this, the number of international visitors reached 270,000 people with most travelers coming from South Korea, China, Thailand and the United States.

The city also has been ranked by The New York Times as one of top 52 tourist destination in the world. Although the region’s tourism industry used to suffer from the past because of poor infrastructure and facilities, the situation is getting better recently thanks to investments from government also foreign investors. New tourist products with better services are now provided, making the region even more attractive to tourist. Besides, many investments in hotels, amusement park, restaurants are about to kick off in the near future, helping these provinces to fully exploit tourism potential of this region.


The Central Highlands contributes 9 percent of Vietnam’s GDP. Ignoring all the advantages it has developed in its economy, the region still remains poor compared to others. Foreign investment is limited in both quantity and quality. However, with new incentives and support from the government, the investment’s environment of Central Highlands becomes more and more attractive.

Beside many investment incentives such as corporate income tax exemption, land use rental reduction, import tax exemption, etc., FDI projects can benefit from province-specific investment support. For example, investment project in high-tech applied agricultural business can receive support from Kon Tum province for the development of greenhouses and net houses with a support level of VND 50,000 per square.

Each province in the region have different types of support and incentives to attract foreign direct investment, thus to maintain the sustainable growth of the region. In the future, Central Highlands will continue to consolidate its position as an important region in the economic development of the whole country.


Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region.


This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Trump And The ‘Normalisation’ Of Relations With Cuba

On 8 November, Washington imposed fresh sanctions on Cuba, targeting the tourism and business industries. The latest actions of the Trump administration, while serving to erode Barack Obama’s diplomatic efforts with Cuba, must be interpreted within the wider context of prolonged historical tension between Washington and La Havana.

New sanctions against Cuba

The latest US sanctions against Cuba pose a major obstacle in the way of trade and travel relations between the two countries. The restrictions, which directly target many state-owned Cuban businesses, aim to prevent the Communist government from benefiting from American capital. For Americans, travel and business opportunities in Cuba are significantly reduced. This is the latest example of President Trump’s determination to undermine the policies of his predecessor.

The new restrictions forbid American engagement with some 180 Cuban businesses. As part of the crackdown on US trade with Cuba, the hotel industry is targeted severely. 83 of the Island’s hotels are blacklisted, precluding American tourists from staying there. Such hotels include Ambos Mundos, where Ernest Hemingway frequently sojourned. In addition, tourist agencies, shopping malls, marinas, and liquor producers with links to the Castro administration are affected and fuel the threat to tourism on the island.

The travel restrictions imposed on Americans travelling to Cuba primarily target individual visits. Now, tourists can only visit Cuba ”under the auspices of an organisation subject to US jurisdiction” while they must be accompanied by a US representative of the organisation. Thus, the only means of travelling to Cuba for Americans is through an organised trip.

The sanctions also threaten US businesses seeking investment opportunities in Cuba.American industries will be prohibited from investing in the Mariel Special Economic Development Zone. This is a sprawling industrial hub west of La Havana that the Castro government is using to attract foreign investment. Currently, 27 companies from Europe, Asia, and Latin America have received permission to inaugurate business on the 115,000-acre site. This will be a blow to US companies with interest in the Mariel zone, as other international investors will benefit from the new investment constraints.

The reasoning

The actions of the White House against Cuba come after President Trump restored the annual tradition of voting against a UN resolution that denounces the US trade embargowith the island. Last year, Barack Obama signalled historic change in the dynamics of US-Cuban relations. His policy to restore diplomatic relations with Cuba and the abstention to vote against the UN resolution appeared to symbolise closer relations between the White House and the Castro administration. However, Trump’s revival of Cold War relations between the two countries appears to subvert Obama’s ambitious diplomatic efforts.

Those in favour of isolating the Castro government emphasise democracy and human rights as crucial elements underscoring Trump’s Cuba policy. Since the decision to impose a trade embargo on Cuba in 1962, Washington has argued that the government in La Havana has impoverished its people and failed to fairly distribute the capital that it has accumulated. Nikki R. Haley, the US ambassador to the UN, stated that Trump’s position on Cuba reflects “continued solidarity with the Cuban people and in the hope that they will one day be free to choose their own destiny.”

Along the same lines, Treasury Secretary Stephen Mnuchin posited that the latest sanctions aim to ”to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.” He believes this can only be achieved through supporting the ”private, small business sector” in Cuba, as the alternative means economically and politically supporting the Communist government.

In contrast, the Island’s political leaders assert that the sanctions directly damage the Cuban people. Josefina Vidal, Cuba’s main US affairs diplomat, stresses that revenue for the Cuban government is revenue for Cuban society, with strong investment in the areas of education and healthcare.

The position of Trump or the United States?

Since coming to power in January, eroding the Obama legacy has been a primary goal for Donald Trump. There is enough evidence to suggest that the President’s destruction of Obama’s Cuba-friendly policy is an attempt to differentiate himself as much as possible from his predecessor, already evidenced in healthcare and the Iran deal. On the other hand, Trump has only restored a position that accurately reflects US scepticism of Cuba since the Cold War era.

The new sanctions only reintroduce measures against travel and business that were present before Obama’s historic thawing of relations. The only change is that the latest restrictions emphasise the significance of the Cuban people. Under the ”Cuban people” category, authorised travelers must interact with private individuals and engage in activities that enhance civil society on the island.

It is also important to note that it took Obama until the end of his presidency to restore diplomatic relations with Cuba. His rush to ”get things done” before the end of his second term may have compromised a meticulously thought-out long term solution to the impasse between Washington and La Havana. In 2015, Roberta Jacobson, the chief US negotiator for the normalisation of US-Cuban relations, was cautious of raising expectations regarding the historic restoration of diplomatic relations between the two countries given the treatment by the Cuban government of its people. Despite this uncertainty, in 2015 US-Cuban diplomatic relations were normalised.

The sentiments of hardline politicians highlight the continued existence of distrust that America has towards Cuba. Cuban-American lawyer, Senator Robert Menendez, strongly opposes the Obama policy and claims the latest sanctions are too lenient on the Castro government. Although he recognises the sanctions as a step in the right direction, he is concerned with the fact that they don’t affect existing trade and travel transactions between the two countries.

Return to Cold War politics?

Since the election, Trump has displayed a conspicuous position regarding Cuba. During the 2016 presidential campaign, he stated that the US should not prop up the Cuban government, thereby taking a dig at Obama’s diplomatic efforts to normalize US-Cuban relations. In June, the president announced he was retracting Obama’s ”terrible and misguided deal” with Cuba. He also labelled the former president Fidel Castro a ”brutal dictator”, making the links between the revolutionary and current regime of Raul Castro clear.

The current stand-off in relations between Washington and La Havana continues, with the foreign ministers of North Korea and Cuba having met on 22 November to reinforce their unity against the United States and its ”unilateral and arbitrary lists and designations”. The 86-year-old Raul Castro is expected to leave power in 2018, but with his likely successor – Vice President Miguel Diaz-Canel – expressing a strong stance against US “imperialism”, the animosity is likely to continue, further undermining the prospects for US investment in the country.


Niall Walsh is an Analyst at Global Risk Insights. As originally appears at:

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Will Egypt’s Economic Recovery Stall Under Yet Another ‘State Of Emergency’?

Amidst an economic reform program, Egypt continues to be troubled by a wave of deadly terror attacks. On 12 October President Abdel-Fattah el-Sisi declared yet another state of emergency – aimed at fighting terrorism. In the context of recent attacks, the policy’s effectiveness is in question.

 A series of major attacks

Egypt continues to be plagued by a stream of major terrorist attacks carried out by the Islamic State. Last week, Egyptian security forces conducting a police operation in the western desert fell victim to an attack that killed at least 16 people. A week earlier, a radical Islamist killed a Coptic Christian cleric in the city of Al-Salam, just outside Cairo. Coptic Christians in particular have been frequently targeted by Islamist militants in Egypt. Since December 2016, suicide bombings have claimed more than a hundred victims of Egypt’s Christian minority. Two of this year’s deadliest attacks occurred in Tanta and Alexandria on 9 April, Palm Sunday, killing 45 people.

Following the Palm Sunday attacks, President Abdel-Fattah el-Sisi declared a state of emergency – the first since 2013. After an extension in July, the state of emergency expired at the beginning of October. However, in an effort to confront the dangers of terrorism and its financing and in order to maintain security in all parts of the country, as well as ensuring the protection of public and private property and the livelihoods of citizens, President Sisi announced a new state of emergency on 12 October – effective for three months initially.

State of emergency: the new (old) normal

Since its founding in 1952, Egypt has been under a state of emergency for a total of 53 years. The most prominent instances have included the Suez Crisis, the Six-Day War, and former President Anwar Sadat’s assassination. Following the Egyptian revolution of 2011, the state of emergency was lifted in 2012. Since then it had only been briefly reinstated twice in 2013. But after the attacks in April of this year, President el-Sisi stated that “a State of Emergency [will be implemented] for three months after legal and constitutional steps are taken.”

These legal and constitutional steps are anchored in Article 154 of the country’s 2014 constitution. They stipulate that duration of each state of emergency is limited to three months and needs to be approved by the House of Representatives. In principle it can then only be renewed once. However, a new state of emergency can be requested under certain circumstances, and this is the tactic el-Sisi used in mid-October.

The latest state of emergency is linked to a significant increase of government intervention: in addition to expanded police powers, surveillance operations can also be increased. Worryingly, there is no appeals process for State Security Emergency Court verdicts.

Although the government had already targeted the press and NGOs prior to April 2017, the state of emergency now also allows it to monitor all forms of communication and to impose censorship prior to publication.

Reportedly, some 60,000 people have been imprisoned between 2013 and 2017, while the number of extrajudicial killings increased from 326 in 2015 to 754 in the first half of 2016 alone. The government created a Supreme Court for the Administration of Media, has not yet annulled the anti-protest law and furthermore passed a restrictive NGO bill in 2016.

Yet despite all of these measures, the number of terrorist attacks is not decreasing.

Undermining economic recovery

While the Egyptian government seems unable to substantially thwart the terrorist threat, it directs its increased powers towards political activists and journalists – all against the backdrop of its comprehensive reform program for economic recovery.

This week the International Monetary Fund (IMF) mission will visit Egypt for the second review of the government’s economic reform program, which includes liberalisation of the exchange rate regime, fiscal consolidation, as well as business environment reforms. Although GDP growth saw a decline in FY16 and again the first quarter of 2017, preliminary reports published by the IMF are cautiously positive.

Tourism, as an important income stream, has suffered under the country’s deteriorating security situation. While its share of GDP was 12.8% in 2014, it fell to 7.2% in 2016. It is expected to increase by 1.3% in 2017, but this is only a modest rise relative to where it could be.

Despite positive developments, such as the announcement that Egypt’s St Catharine’s Monastery has been included as an official Roman Catholic Church pilgrimage destination for 2018, an attack on police forces near the monastery earlier in October is likely to deter tourists from visiting.

Egypt’s new state of emergency is meant to provide the government with the necessary tool to fight terrorism and to ensure security in the country. Yet while terrorism wages on, key democratic institutions are being eroded.

Although the country is recovering economically – detailed results will be presented after the upcoming visit of the IMF to Egypt – unstable domestic security will almost certainly have a negative impact on market confidence. Egypt’s economic recovery requires both tourism and FDI.

Recent figures from the IMF and announcements by Egyptian Minister of International Cooperation Sahar Nasr have suggested that FDI may exceed its $10 billion target this year. This will be a key indicator of whether the state of emergency and associated restriction of freedoms have spooked investors.


Friederike Andres is an analyst for Global Risk Insights. As originally appears at:


This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Will Colombia’s FARC Peace Deal End In Economic Boom Or Destabilization?

Colombia is at a critical crossroads: the next six months will determine whether it is destined for an economic boom, or destabilization. How Colombia balances the competing priorities of security, budget deficit, and economic growth in the lead-up to the 2018 presidential election, will determine risks for the coming decade.

Hard-earned upsides at risk

Colombia has come a long way in the past decade. Last year, the government reached a peace agreement with the Revolutionary Armed Forces of Colombia (FARC) paramilitary group, after more than 50 years of violent conflict. In June, the FARC completed a months-long process of handing in all of its weapons, a major milestone.

The country’s leaders have also stewarded a healthy economy, with GDP growth averaging 4% annually from 2000 to 2015 and inflation in line with developed economies at around 3%. Colombia has diversified its economy away from dependence on fossil fuel exports, meaning less exposure to dipping commodity prices.

Moreover, Colombia’s membership in the Pacific Alliance (PA) with Mexico, Chile, and Peru, has expanded its access to export markets and improved its growth prospects. From 2010 to 2015, the GDP of PA countries grew by 1.5% more, and had 3.6% less inflation, than the Latin American average. At the recent Pacific Alliance Summit, the four member-states committed to implementing mutually favorable trade conditions, creating a common infrastructure fund, and agreeing a common pension fund investment tax rate.

But all of these impressive positive developments are at risk if Colombia fails to follow through with austerity measures on a budget deficit partly created by decreasing commodity prices. Fitch has signaled a possible credit downgrade if GDP growth and revenues do not improve. Colombia’s GDP only grew 1.1% in the first quarter of 2017, and a 2.0% expansion is expected in 2017.

Colombia is also walking a fine line in continuing to reduce its interest rate to spur consumer spending, risking the acceleration of an already high rate of inflation, and the weakening of the currency. But perhaps the greatest threat to growth and stability comes from the potential for the benefits of the peace deal to be lost following the 2018 presidential elections.

Opportunities in agriculture and tourism…

The peace agreement with the FARC includes ambitious rural development goals, in which Colombia banked on the demilitarization of violence-plagued regions to allow for further reduction in defense spending. This would free up funds to balance the budget and attract much-needed longer term foreign direct investment. Colombia aspires to capitalize on its diverse climate, natural resources, and urban centers to diversify and make its economy more competitive.

The FARC largely resided in rural and tropical regions of Colombia, where there are now opportunities for investment in infrastructure modernization, and expansion of the agriculture and tourism industries. Currently, Colombia only uses 16% of its arable land for farming, leaving considerable room for growth in agricultural employment and production. According to a GRI source at ProColombia, the country’s export bureau, avocado and pineapple production are priorities in this regard.

…threatened by unfinished business

Yet these ambitions could still be derailed. Colombia faces the tall order of reintegrating thousands of rural militants back into the formal economy, displacing illegal sources of revenue such as cocaine production. If the process takes too long, disillusioned militants may simply return to illegal activities.

This is made more likely by the fact that the demilitarization of the FARC created a power vacuum in their previously held territories. Smaller gangs and militias have taken the opportunity to use the lands for cocaine production, which soared 52% between 2015 and 2016.

Meanwhile, the socioeconomic crisis in neighboring Venezuela has resulted in a wave of refugees flowing into Colombia, creating potential security risks. Colombia has indicated its social programs are unable to absorb any additional immigrants, which is likely to force some immigrants to turn to petty crime, increasing risks in urban centres.

…and political divisions

The FARC peace agreement, despite its benefits, has divided the country. President Santos spent significant political capital pushing through the deal, and has a 24%approval rating, barely higher than that of the FARC itself.

Former President Alvaro Uribe consistently voiced opposition to the peace deal, and has vowed to overturn it if his party wins the presidency in 2018. In June, Uribe’s party, the Democratic Center, and presidential candidate Andres Pastrana’s Conservative Party, announced a coalition. This increases the chances that the deal could be torn up after the next elections.

While a more right-leaning government would maintain austerity and pro-trade policies, which would be largely positive for the economy, the cancellation of the FARC peace deal could result in a backlash by militants, as the deal promised them political representation in Colombia’s congress and economic incentives. FARC militants returning to arms would force the government to expand military spending, reducing the available funds for infrastructure and economic development plans.

Speed is of the essence

The government’s ability to buttress growth and avoid Colombia falling into the ‘middle-income trap‘ will depend on whether it can rapidly generate FDI, infrastructure modernization, and development of new industries. This in turn requires swift implementation of the FARC peace plan, laying a solid foundation that would not easily be undone by a change of ruling party next year.


Samuel Schofield is a Contributing Analyst at Global Risk Insights. As originally appears at:

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.


Young Wanderlust: How Millennials Are Changing China’s Travel Industry

This week, over 700 million Chinese will be on the move, hitting the nation’s superhighways or boarding trains, planes, buses, and cruise ships to embark on National Day (国庆 guóqìng) vacations. Six million far-flung travelers will visit 100 different countries, while the vast majority, traveling within China, will generate 480 billion yuan ($72 billion) in revenue over this year’s extra-long eight-day break. The projections indicate more trips and more revenue than last year’s holiday — unsurprising, given that outbound travel spending has seen double-digit growth year after year since 2004.

As the supersized Chinese tourism industry grows, so, too, does the variety of trips that the country’s travelers will make. The days of chartered European bus tours offering hardcore shopping opportunities and Chinese-food banquets are waning. Many travelers now want unique cultural experiences and adventure: rain forest tours in China’s Yunnan, trips tracking animal migration through Africa, and excursions to bask under the glow of the aurora borealis. The North Pole is hot this year.

Millennial tastes

Some of these changes are natural as a young industry matures, and tourists look for new and upgraded experiences, experts say. But there is another force at work that is greatly impacting China’s travel industry — the millennial generation.

As the first group of Chinese to come of age with truly mainstream international travel, the middle- and upper-class children of the 1980s and 1990s are typically more globally minded. Their preferences are shaped by their distinctive socioeconomics: This group is more affluent and staying single longer than their predecessors. And they are digital natives.

“I prefer the kind of traveling that is free and unconstrained, which opens up my mind and allows me to experience different cultures and ways of life. That way, I feel free from the bounds of my limited knowledge and vision of the world,” says investment manager Tia Lu 陆余恬, 27, who is spending the holiday week traveling across the U.S. with a group of five friends — hitting everything from New York City’s Museum of Modern Art to Yosemite National Park in California. “People in my generation want an in-depth experience in the culture and way of life when we travel to a new place.”

In this spirit, some of China’s millennials are steering clear of organized tours, instead preferring to book their own travel, take solo trips, and seek out adventure and unique experiences. For them, travel is an escape, an expectation, and even a way to push back against the cultural pressures inherent in Chinese society.

“When we travel, we see more and more different kinds of lifestyles, what people in other countries and the young people there are doing, and we find inspiration for ourselves,” explains Hong Kong-based travel blogger Sheryl Xie 谢丹妮, 26. Exposure to different lifestyles and value sets is important for members of her generation, Xie says, as they struggle to create their own paths, distinct from the social and familial expectations of buying homes and settling into stable jobs. “Young people, they’ve got minds of their own — they can choose what they want to do.”

That’s a message that Xie shares with her roughly 3,000 followers on Weibo and WeChat. Though she works full time in the financial planning industry, Xie is also one of numerous young travel bloggers who are powering China’s independent travel industry. In her blog, Xie shapes her own travel tales around personal growth, writing about how travel has inspired her to think more broadly about happiness and personal values. “That’s one reason to travel, to discover other ways to live,” she says.

But though her travel to places like Cuba, Japan, and the U.S. has become a formative part of Xie’s life, these experiences are relatively new to her. In fact, for Xie, who grew up in the southwestern city of Chengdu, international travel wasn’t even something that had crossed her mind until her late teens, when the miniseries documentary To Berlin by Thumb (搭车去柏林 dāchē qù bólín) was aired. Before watching the journey of Gu Yue 谷岳 hitchhike westward from China, Xie had never even considered the possibility of international travel. It wouldn’t be until later in her university years, when she was an exchange student in Taiwan, that she first left mainland China.

The world is a new oyster

Her experience marks a critical feature within China’s current experience of travel: Though the country has been the world’s top source of international tourists for the past five years (spending $261 billion last year alone), world travel has only recently become accessible to most Chinese. The millennial generation has grown up alongside this opening up, which began in the early 1990s, when the Chinese government began to ease travel restrictions to more countries and the economy strengthened. And as millennials entered into their teens and early adulthood, the industry really began to boom. And now they are major contributors: This fall, over 50 percent of travelers are 23 to 34 years old, making them uniquely poised to shape this industry.

The rise of China’s travel industry alongside the coming of age of this generation also means that millennials tie their personal life satisfaction to their ability to travel, suggests Dr. Suosheng Wang, associate professor of tourism management at Indiana University, who recently published a study (paywall) relating to this topic. Part of this is external: Posting photos of exotic trips starts interesting conversations on social media and signals to others that you are happy, successful, and have had some valuable life experience, Wang found. But he also points to specific stresses on this demographic — for example, being single children responsible for aging parents, perhaps while becoming parents themselves — as added reasons why travel is important.

“They are a hardworking group, working in a very competitive environment to earn money and have a good promotion. It’s a dull, routine life,” he says. This relates to why they don’t just want to travel — they want to escape and “explore those exotic places where people haven’t traveled yet.”

As young people seek out these unique travel experiences, and share them on social media, these preferences trickle down into the mainstream. For Ivan Xiang 向仕强, who owns a travel agency in Chengdu, the impact has been very clear. As travelers’ tastes shift from sightseeing tours to more in-depth (and pricey) cultural experiences like rural homestays or adventure-based mountain-climbing trips, he’s seen a sevenfold increase in his profits over just two years. This is not only accounted for by young travelers — Xiang also sees this as a trend that is linked to their preferences.

“Because they have lived a better life, and they have seen more of the world, they will prefer something unique,” he explains. And while the trips he offers are currently limited to rural areas in Western China, like Sichuan and Xinjiang, Xiang says he’s planning to add a nature-focused trip based in Africa to keep up with customers’ evolving tastes.

Getting away from Chinese menus

The same impact is felt in the upper echelons of the market. Dirk Eschenbacher, a founding partner of the Beijing-based premium travel agency Zanadu, which provides customized vacations to destinations as far afield as California’s Coachella music festival, Northern Europe, Namibia, and Bhutan, states that finding the next new spot or a novel adventure is key across age groups for his clients. Once a place becomes popular in the mainstream among Chinese tourists — for example, by offering menus in Mandarin and Chinese barbecue on the streets — it’s time to move on. “That’s something that our audience doesn’t want to experience,” he says.

The quest to find these new experiences has led to a burgeoning world of travel blogging, where community members rely on one another for advice and inspiration. In addition to travel-focused blogs on China’s major social media platforms like Weibo and WeChat, major travel booking sites like QunarCtrip, and Qyer have created space for a lively social media community, where hundreds of millions of users, included sponsored and amateur bloggers, make profiles to share their photos, travel stories, and recommendations.

These communities can lead to inspiration for new trips, or for new lives. Such is the case for Jeff Wang 王瑞斌, 34, of Beijing, who recently quit his office job of seven years to focus on things he loves. “I want to be a professional traveler — that’s my dream,” he says. Wang is spending his free time working on his own blog, based on his solo trips to Europe and Asia. Though he knows it’s a distant dream, he already feels excited by comments and questions that he’s gotten about his posts: “Actually, I feel like I have had an impact on others — it’s exciting to be a part of that.”



Simone McCarthy is a graduate of Columbia School of Journalism and a student of Chinese language and culture.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

5 Stocks To Ride On The South Korean ‘K-Wave’

Cosmetics and Media companies have gained from the ‘K-Wave’

South Korean (EWY) companies are capitalizing on the rise in cultural exports following the so-called ‘K-wave’. Also termed as “Hallyu”, this rise in South Korean pop culture has boosted the country’s fashion, tourism, media, luxury goods and cosmetics sectors. Data from the government indicates that South Korea’s cosmetics exports rose 44% to $4.2 billion, more than double its 2014 figure of $1.79 billion.

Production of cosmetics rose by 21.6% to 13.05 trillion won ($11.46 billion) in 2016.The country’s largest cosmetic company, AmorePacific, led the way with output of 4.4 trillion won ($3.85 billion) accounting for 33.6% of the total production output. Meanwhile, LG Household and Healthcare contributed 27.45% to total output. Aekyung Industrial and Innisfree made up 1.94% and 1.5% of total production of cosmetics in 2016.

AmorePacific recorded sales growth of 18% while LG Household & Health Care’s sales surged 14% last year. Operating profits of these companies jumped 10% and 28% respectively in 2016. Shares of AmorePacfic and LG Household & Health Care have returned -5.4% and 16% during the year so far. In comparison, the benchmark KOSPI Index has gained 18%. Cosmetics stocks have trailed broad markets in 2017 as tensions with China (FXI) hurt the country’s exports. However, with these tensions easing now, cosmetics stocks have room to run. Last year, China contributed to 20% of AmorePacific’s total sales and 7% of LG Household’s revenues.

Since 2014, AmorePacific and LG Household & Healthcare’s market capitalization have gained exponentially putting them ahead of the nation’s large shipbuilding and petrochemicals companies. AmorePacific is now among the country’s top ten largest stocks with its market cap reaching nearly $17 billion.

However, not all cosmetic companies stocks have gained. Shares of Tonymoly have remained weak since its debut and have lost 9.1% YTD. Meanwhile, shares of cosmetics manufacturers, Korea Kolmar Co. and Cosmax have returned 9.7% and -3.8% respectively.

Sell side analysts remain bullish on Korean cosmetics stocks as they continue to find new markets in places like Europe and the United States. AmorePacific has received 19 buy ratings, 1 sell rating and 18 hold ratings, while LG Household & Healthcare has 27 buy ratings, 1 sell rating and 9 hold ratings.

CJ E& M, a broadcasting company, witnessed sales growth of 14% last year and the company’s shares are up 6.9% in 2017 so far. Mike Suh, senior vice-president at CJ E & M, expects the company will not see high octane growth from the K-wave waning anytime soon. “I believe Hallyu will last for the next 10 years at least, which means infinite opportunities for content exports,” he said.

South Korea’s duty-free store operators have also benefited from the popularity of Korean cosmetics, particularly from Mainland Chinese consumers. Duty free retailer Hotel Shilla and department store operators Shinsegae and Lotte Shopping have reported sales growth of 14%, 15% and 1% last year and their shares have gained 18.6%, 30.4% and 37% so far in 2017.

Hallyu has also boosted South Korea’s popularity as a tourist destination, with 17.2 million foreign tourists visiting the country last year, nearly double that of the 8.5 million tourists recorded in 2010.

Year to date, the best performing consumer stocks in South Korea are F&F, Fashion Platform, and Hankook Cosmetics. Shares of these companies have surged 66%, 59% and 43% YTD.

Valuations in the South Korean consumer sector look compelling with average price to earnings multiple of 16.6x. Kukdong Corporation, SD Biotechnologies, and Pan-Pacific Co are the most attractive stocks based on their cheap valuations. These stocks have one year forward PEs of 5.2x, 7.9x, and 8.1x and are trading at the steepest discount to their peers. Meanwhile, AmorePacific, Samick Musical Instruments and Cosmax are the most expensive local consumer stocks with PEs of 30.1x, 28.3x and 26.5x respectively.

How Critical Is The ‘K-Wave’ to South Korea, And Can It Grow Beyond China and ASEAN?


Korean Wave or “hallyu” refers to the growing popularity of South Korean culture, entertainment and music in South East Asia. These cultural exports are contributing significantly to the growth of South Korea’s (EWY) economy in the form of tourism, media and export related consumer products. The South Korean government has also seen a window of opportunity and taken steps to capitalize on the “K-Wave” by supporting the promotion of its media, beauty and cosmetic exports. The government has set up a $1 billion investment fund to promote these industries in addition to introducing a slew of tax incentives. 

Exports of Cosmetics is a key driver for South Korea’s economy

The export boom following the K-Wave has become key to South Korea’s economic growth in the past few years. The country has become the third largest exporter of cosmetics and beauty products in the world.

In 2016, South Korean exports of health care and cosmetic products crossed the $10 billion milestone. As per reports by the Ministry of Health and Welfare in South Korea, annual exports grew an average of 19.4% between 2012 and 2016. This rise in demand for South Korean products has been primarily driven by the popularity of K-pop culture in South East nations, and China in particular.

Publicly listed equities in the cosmetics and tourism sectors in South Korea have gained 19.9% and 6.9% YTD. In comparison, the South Korean benchmark KOSPI Index has surged 17.9% while the iShares MSCI South Korea Capped ETF (EWY) is up 26.5% YTD.

China is key to South Korean beauty products; but caution prevails

China (FXI) is the largest export market for South Korea’s beauty products contributing 33% to total exports in 2016. However, in 2017, exports to China have dwindled as China came in conflict with South Korea over deployment of US missile defense system THAAD in the country. A recent report by Bloomberg highlights the changing tastes of Chinese consumers that could be a worry for the Korean cosmetics industry.

China has traditionally been the largest consumer of South Korean make-up products but their sales of late have been dropping at duty free outlets. Macquarie reports suggest that in May, Korean sales of skin care products dropped at duty free outlets as Chinese consumers are beginning to prefer colored makeup from American brands. However, the trend of Korean beauty products is now picking up in western European countries including Italy (EWI) and France (EWQ).

Sohn Mun-gi, vice minister of food and drug safety said, “The K-Beauty has seen a rapid growth thanks mainly to the government’s effort to improve regulations and support programs, including the expansion of functional cosmetics regions. We will continuously help domestic cosmetics products export smoothly to other countries and ease procedural regulations unrelated to safety through talks with regulators in the future so that the beauty hallyu can spread all over the world.”

The Korean Customs department has labeled five product lines as “Hallyu” products to include culture, living, food, clothing and accessories, home appliances, and computers.In 2016, South Korea’s cosmetic industry crossed a trade surplus of 3 trillion won ($2.6 billion). The Ministry of Food and Drug Safety in South Korea reported that in 2016 the country’s cosmetics production grew 20% to 13.05 trillion won ($11.5 billion). Exports of cosmetics products surged 61% year over year to $4.2 billion last year. China was the biggest market for South Korean beauty products. Exports to China increased 33% year over year to 1.72 trillion won ($1.5 billion) last year contributing to 37.6% of total exports. Exports to Hong Kong and the United States (SPY) also grew 81% and 45.6% to 1.37 trillion won ($1.2 billion) and 343.69 billion won ($300 million) respectively.

Chinese Tourism: 5 Stocks To Ride The Boom Of The Century

China’s tourism is booming

China (FXI) is driving the global tourism industry with the country’s tourists spending more on international travel than the United States, Britain and Germany combined. China was the world’s largest outbound tourism market for the 5th year in a row in 2016 and has recorded double-digit growth in overseas tourism expenditure for the 13 consecutive years. In 2017, the China Tourism Academy expects the country’s tourism industry to earn nearly 6 trillion yuan ($ 0.88 trillion) and estimates 7 trillion yuan ($1.03 trillion) to be earned in tourism revenues by 2020.

Data by iResearch, a China-based research provider, suggests that China’s online travel grew 52% in Q1 2017 to 210 billion yuan ($30.97 billion). Online transportation booking forms 71.9% of the online travel market while online accommodation and holiday bookings account for the remaining 29%.

The top players in China’s online travel market are Ctrip (CTRP), Qunar and Alitrip with market shares of 35.2%, 17.3% and 13.6% respectively.

Year to date, the best performing tourism based stocks in China are China International Travel, Ctrip (CTRP) and Huangshan Tourism. Shares of these companies have surged 38%, 37% and 23% YTD. Valuations in the Chinese tourism sector look compelling with average price to earnings multiple of 36.9x. Chinese tourism based companies Bright Real Estate Group, Car Inc, Nanjing Public Utilities and Huangshan Tourism are the most attractive stocks based on their inexpensive valuations. These stocks have one year forward PEs of 5.9x, 15.1x, 16.2x and 17.9x and are trading at the steepest discount to their peers. Meanwhile, Xi’an Tourism, China United Travel and Wuhan Sante Cableways are the most expensive tourism stocks in China with PEs of 196x, 134x and 87x respectively.

Expedia Aims To Double Market Share In APAC Region With Mix of Tech And Takeovers

Expedia’s aggressive expansion in Asia

Expedia (EXPE), the world’s largest online travel agency, is setting out to double its market share in Asia. Over the next five years, Expedia expects Asia to account for one-third of its travel bookings. Simultaneously, it plans to increase the gross number of bookings from its non-U.S. businesses to two-thirds from the current 36%. The company is planning to invest heavily in technology-based innovation and regional partnerships in order to achieve these aggressive expansion goals in the fast growing Asian (AAXJ) markets.

Greg Schulze, Expedia Group’s senior vice-president for commercial strategy and services, explained the company’s plans to focus on Asia backed by the fact that 50% of the world’s millennial population resides there. A Euromonitor report states that the Asia-Pacific is currently the fastest growing region in the world for online travel portals.

In Singapore, a regional hub for APAC, the number of traditional travel agencies that shut down in 2015 was 119, the highest recorded in 10 years, as the younger population in Asia prefers to make their travel bookings online, according to data from the Singapore Tourism Board. In April, Expedia set up an innovation lab in Singapore (EWS) to test its products. Schulze explained the decision stating, “Singapore is a very fast-growing market for us… It’s a strong market with high online adoption.”

“Heavy investment in technology is key to Expedia’s success,” he continued, further emphasizing the heavy investments in technology. “We’re in travel, but we’re a technology company and our edge is that we invest more than US$1 billion a year in technology. Of our 20,000 employees, we have 5,500 engineers and data scientists.”

However, investing solely in technology is not enough for the company to win in Asia. Expedia also needs to engage in partnerships with local players and strategic acquisitions in order to grab additional market share in Asia.

Expedia lags its rivals in Asia

With a market share of only 5% in Asia-Pacific’s online travel industry, Expedia has yet to truly mark its presence in Asia.

However, its closest rival, Priceline (PCLN), has a strong presence in the region. The company has a dedicated travel site for Asia Pacific named as well as its popular hotel reservations platform As per Euromonitor, Expedia has a larger market share in Japan (EWJ), Singapore and Malaysia (EWM), while Priceline leads in emerging economies including Indonesia (EIDO), Vietnam (VNM), Thailand (THD) and the Philippines (EPHE).

Further, Ctrip (CTRP) the leading travel agency in China, has also started expanding in international markets. Ctrip has a 26% stake in India’s largest online travel portal, MakeMyTrip, and has also acquired Scotland-based flight search engine Skyscanner. The company is now focusing on capturing a higher market share in these regions.

Expedia has entered into an agreement with Ctrip, but its presence in China remains limited as Priceline has a 9% stake in Ctrip. In 2015, Expedia sold its majority stake in Chinese online travel agent eLong to Ctrip as its poor performance was a drag on Expedia’s earnings. Despite the fact that Expedia operates its own website in China after its divestment from eLong, its market share is tiny.

Expedia already has an alliance with Malaysian airline carrier AirAsia with the company having operated its travel booking website AirAsiaGo since 2011. This partnership enables Expedia to sell AirAsia flights alongside its hotel rooms for significant savings.

Due to it’s massive population, Indonesia is expected to receive considerable attention from the region’s largest online travel agencies in the coming years. Currently, local players Traveloka and dominate the market.

Chinese International Tourists Now Spend As Much As US, Germany, And UK Tourists Combined

International travel in China

Chinese (FXI) tourists spent more on international travel than any other country in the world last year despite weak currency and slowing economic growth. International tourism expenditure in China, the world’s biggest outbound tourism market, grew 12% to $261 billion in 2016 as per a report by the United Nations World Tourism Organization. This number is nearly half of the 25% growth recorded in 2015 but marks the 13th consecutive year of double-digit growth in overseas tourism expenditure by Chinese tourists. The number of international Chinese travelers rose 6% to 135 million in 2016. When China joined the Word Trade Organization back in 2001, a mere 12 million tourists from China travelled abroad. However, by 2016, this number has grown nearly 10 times to 135 million international tourists.

“Despite the many challenges of recent years, results of spending on travel abroad are consistent with the 4% growth to 1.2 billion international tourist arrivals reported earlier this year for 2016,” UNWTO secretary-general Taleb Rifai said.

Compared to the United States (SPY), Chinese tourists spent nearly twice as much on international travel in 2016 compared to Americans. This was the fifth year in a row that China’s international tourism expenditure was the highest in the world, beating out leading markets of United States, Germany (DAX), Great Britain (UK) and France (EWQ). Overall, Chinese tourists spent nearly the equivalent of American, German, and British tourists combined. In 2016, American international tourists spent $122 billion, while Germans and British spent $81 billion and $64 billion. In the past two decades, China has emerged as a key source of tourists in the international market.

The rise in international tourism from China has benefitted countries in the Asia Pacific region as well as Europe (EZU), United States and the Middle East (GULF). In Asia (AAXJ), Japan (EWJ) and South Korea (EWY) witnessed the highest arrivals of Chinese tourists.

In 2017, China’s total tourism expenditure is estimated to touch nearly 6 trillion yuan, or $865 billion with inbound and outbound tourists combined as per reports by the China Tourism Academy and online travel agency giant China’s government has a five-year plan to boost tourism, with the country aiming to hit 7 trillion yuan in tourism revenues by 2020. Additionally, the World Travel & Tourism Council expects China to remain amongst the top 10 fastest growing markets for leisure travel for the next ten years.

What’s Behind China’s Love Affair With Morocco?

From trade to tourism, Morocco is quickly becoming a media darling in China, as the country’s stability, location and culture entice Chinese investment.

Chinese involvement and investment in Africa is well documented, with Beijing a major trading partner for the continent’s resource exporters. One of the latest countries to benefit from China’s attentions is Morocco, which is witnessing an unprecedented boom in bilateral relations. Morocco is quickly becoming an important partner for China on a range of issues: one can even say that Morocco-fever is gripping the Middle Kingdom.

Despite being only the second African country to recognize the People’s Republic of China in 1958, Morocco has until recently been overshadowed by the likes of Angola, and closer to home, by Algeria. Lacking substantial oil reserves, Morocco took a backseat during China’s resource binge in the 2000s, but has since seen an outpouring of Chinese interest as Beijing seeks to diversify its investments in the region. Morocco’s rise in popularity can be traced to King Mohammed VI’s visit to China in 2016, a trip which is credited with jump-starting bilateral ties: Morocco now boasts three Confucius Institutes.

China and Morocco’s shared stances on non-intervention make them compatible partners, as does the fact that Morocco has not been overly critical of China, despite being a Major Non-NATO ally of the United States. China’s refusal to comment on the Western Sahara issue (a contested region claimed by Morocco) meshes nicely with Morocco’s silence on China’s actions towards its Muslim population in Xinjiang. While some Moroccans bemoan the plight of their co-religionists in China, Rabat has not openly voiced these concerns. Likewise, by refraining from commenting on the Western Sahara issue, China distinguishes itself from other external partners like the AU, EU and U.S which have all raised concerns about Moroccan actions in the region.

Alongside mutual non-interference, Morocco is also increasingly benefiting from Chinese efforts to diversify its foreign investment, especially regarding technology and tourism. Morocco is also becoming the default investment destination in North Africa, as the region continues to be unstable, with Morocco reaping the benefits of stability. Moreover, growing anti-Chinese sentiment in more established China-Africa relationships is also leading China to diversify its investment portfolio to hedge against anti-Chinese protests and backlashes that threaten existing investments. To this end Casablanca will be hosting the China-Morocco Trade Week in December 2017.

China on a spending spree in Morocco

Alongside traditional exports to China such as phosphates, Morocco is seeing a tidal wave of Chinese investment in a host of sectors. Between 2011 and 2015 Chinese FDI in Morocco increased 195%, with a 93% increase between 2014 and 2015 alone. Since then things have only continued to accelerate. The Chinese-built 952 metre King Mohammed VI bridge (itself part of the 42 km Rabat motorway bypass expansion) was opened in July and in November 2016, China’s Chint Group Corp was chosen to construct a 170MW solar plant. Furthermore, Moroccan authorities met with China Railway in December to discuss the construction of a multi-billion, high-speed rail link between Marrakesh and Agadir.

The Bank of China opened an office in Casablanca in March 2016 as part of Morocco’s Casablanca Finance City initiative. Similarly, Yangtse Automobile has announced a $100 million investment (expected to create 2,000 jobs) in Tangier to produce electric cars and buses for export to Europe, citing Morocco’s location as an asset in boosting exports to Europe while also shortening supply chains. Tangier is also the location of Morocco’s ambitious $10 billion Tangier technology hub project. Aided by a $1 billion investment from China’s HAITE Group, the project aims to build a smart city with 300,000 residents and provide 100,000 jobs in order to create a new technology and manufacturing hub near Tangier. The project is expected to attract investment from some 200 foreign companies, many of them Chinese.

Another growth market are citrus exports to China. As the third largest citrus exporter, Morocco has needed to seek out new markets in the wake of Russia’s agriculture import ban, with China a perfect candidate. The first batch of high-end Moroccan citrus exports set out for Shanghai in November. Copag – Morocco’s largest citrus producer – has partnered with Chengdu’s Bideng Trade Co. to sell Moroccan fruit in China. The growing demand for foreign food in China – spurred by rising incomes and health concerns regarding Chinese produce – provides an excellent opportunity. Given Morocco’s existing integration into EU food supply chains, Rabat is already beholden to high quality standards, a fact that appeal to many Chinese consumers. Indeed Chinese importers have cited Morocco’s ability to pass the EU Proficiency Test for Pesticide Residues as a seal of confidence.

Indeed China’s interest in all things Moroccan has even seen the African country begin to export donkeys to meet the demand of China’s traditional medicine market. China is importing more than 80,000 donkeys (and growing) from across Africa to supply hide and gelatin for traditional medicines, as Beijing’s annual consumption of 1.8 million animals remains insufficient.

Moroccan tourism and culture take China by storm

Alongside manufacturing and other investments, the most explosive growth has been in the tourism sector. Even before Rabat’s decision to drop visa requirements for Chinese visitors in July 2016, Ctrip as part of the 2016 National Day Travel Prediction Report predicted a 3500% increase in visa applications to Morocco. As a result by November 2016, Morocco saw a sixfold increase in Chinese arrivals – a fact all the more impressive given that no direct flights exist between the two countries. With 42,000 Chinese tourists in 2016 – a 300% year-on-year increase from 2015 – Morocco has announced a goal of 100,000 visitors from the Middle Kingdom in 2017. As a result, Chinese investors from Guangzhou met with the Moroccan Society of Tourist Engineering in late February to discuss investments in hotels, resorts, spas and amusement parks.

All this comes as China’s government-run Global Times declared Morocco the best potential destination for 2017, based on visa procedures, tourist flows, and tourist satisfaction. This has resulted in Morocco becoming a trending topic on Weibo, with photos of the North African country especially popular. This trend has been fostered by a partnership between Morocco and Chinese smartphone maker Xiaomi, whose team travelled to Morocco to snap promotional photos for its latest smartphone. Morocco has become the star model to showcase the 23 mega-pixel camera on Xiaomi’s M1 Note 2 smartphone. Photos of Morocco were prominently featured during Xiaomi’s November launch conference for the M1 Note 2. An added bonus for Morocco is that Xiaomi is providing the photos for free as pre-installed content on its phones, thus introducing Morocco to tens of millions of Chinese consumers.

Morocco was also a star attraction at the Beijing International Book Fair in August, marking Morocco’s second consecutive appearance at the event. On the other hand, The Donor by Chinese director Zang Qiwu won the top prize at the 2016 Marrakech Film Festival in December. The amount of hype surrounding China-Morocco relations and cultural exchanges has even led to the spread of fake news, with Chinese media incorrectly reporting that author Liu Zhenyun had won a popular Moroccan literary prize. This was no mere typo, as the alleged prize does not even exist, with Chinese officials having to debunk the story.

Whether this was an orchestrated effort to reinforce the trending China-Morocco narrative that backfired, or simply a viral rumour sparked by an excited netizen, it demonstrates that Morocco is clearly top of mind in China.


Jeremy Luedi is a Senior Analyst at Global Risk Insights.

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