From the perspective of a foreign investor, it feels like Vietnam is experiencing something of a perfect storm of positive conditions at the moment. I’ll explain what I mean by this in a moment – but I thought that first it might be a good idea to just look at some of the remarkably impressive figures that are coming out of the country at the moment, and that are ensuring that it stands out even in an area as competitive as the south east Asian region.
First the headline figure on foreign direct investment in Vietnam, that I think shows just how far the country has come and the amount of progress it has made in terms of encouraging overseas investors to buy into Vietnamese businesses. Foreign direct investment (FDI) has been on the rise since 2009, and by 2016 it had hit an impressive $15.8billion, according to figures from the country’s Ministry of Planning and Investment (MPI). Businesses that are benefiting from foreign direct investment now make up around 70 per cent of the country’s export turnover.
The general financial health of the nation is also extremely encouraging for investors – foreign or otherwise – with the country’s stock markets all heading in the right direction throughout 2017. The VN and HNX indexes grew by a combined total of 15 per cent year-on-year, and the total value of companies traded on Vietnam’s big exchanges rose to well over a third of the country’s total GDP. The private sector in Vietnam is growing, and now contributes to around 40 per cent of GDP.
A perfect storm
So what is behind all of this – and what is causing that perfect storm of great conditions for foreign investors in particular? Why is Vietnam currently such a prime target for overseas investors looking for good returns? Well, as I see it, there are a number of important factors.
The biggest is the Vietnamese government’s commitment to making sure that the country is increasingly ‘business friendly’. Over recent years they’ve introduced a number of new financial regulatory frameworks that I have touched on in previous posts, but essentially they have managed to create an environment in Vietnam that makes it easier for foreigners to invest legally, while boosting the economy, controlling inflation and keeping interest rates manageable. They’ve simplified procedures in many areas of the economy, particularly in terms of foreign direct investment (FDI) and foreign portfolio investment, created greater transparency, and in turn really boosted the amount of competition within the economy. Some of the changes have been aimed directly at specific sectors – in the form of incentives such as tax breaks and cuts – while the government has also done a lot to support start ups.
It’s clear that businesses within the country feel confident that they can invest capital in order to grow, and this healthy outlook is in turn attractive to external investors. The State Bank of Vietnam (SBV) has done a great job in this regard and deserves a lot of credit for the current positive investment environment.
A vibrant workforce
Another factor in Vietnam’s recent growth – and a huge plus point for foreign investors – is the quality of the nation’s workforce. It’s young – while most countries in the region are experiencing an increasingly ageing population, in Vietnam most people (demographically speaking) are of working age. The World Bank estimates that their workforce could hit 70.44 million by 2039 – with many well-trained and skilled.
This trend is just another encouraging underlying factor in the growth that businesses right across Vietnam are experiencing – and it all suggests to me that the positive environment for foreign investment that currently exists in the country isn’t going to change any time soon. Manufacturing has led the way in terms of growth in Vietnam, but there are also encouraging signs in other sectors too – not least in property and agriculture.
The Vietnamese government and the financial authorities have made a great deal of progress in terms of clearing away any regulatory obstacles in the way of foreign investment – and I’d encourage anyone who is looking for a new opportunity to take a look at what the country can offer.
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