A lot of people are skeptical about investing in Vietnam. If you are one of these people, this article will hopefully help you make a decision.
According to InvestAsian, “Vietnam’s stock market has been on investors’ radars for a while. The Southeast Asian nation’s popularity is somewhat due to Vietnam’s similarities to China in the 1980s and 1990s during its much earlier stages of economic growth. Equities and currencies all throughout Asia have seen a roller-coaster ride recently. Regardless, the Vietnam stock market is among Asia’s best, outperforming competing exchanges in places like Hong Kong and Thailand.”
Vietnam vs China
Vietnam has made rapid progress over the past several decades, averaging GDP growth rates exceeding 7% all throughout the 1990s and 2000s. The country remains one of Asia’s more promising markets as it opens to foreign investment – and buying property is arguably the best way to gain from Vietnam’s economic rise as a whole.
Vietnam has especially become competitive in its industrial sector. China is falling in popularity among global companies that increasingly prefer building factories in Southeast Asia. This is probably caused by rising costs, more regulations, weaker growth, and a strong “home-bias” in the Chinese market. A looming trade war with the United States also certainly doesn’t help problems in Asia’s biggest economy. Whatever the cause might be, East Asia is experiencing a downturn while Southeast Asia is on the rise.
According to InvestAsian, “many investors are looking at Vietnam – Southeast Asia’s third most populous country and one of the fastest-growing in the region. But foreigners have, at least up until recently, had few options when investing in Vietnam.”
Lack of investment variety in Vietnam is quickly changing though. During the summer of 2015, the government relaxed property ownership rules for foreign investors. Anyone with either a 3-month tourist or residence visa may now own land on a renewable, 50-year lease. Foreign companies have even less restrictions when buying property. It’s not quite that simple and there are additional rules, discussed further below, that you should consider.
However, there’s little doubt Vietnam is going in the right direction and making it way easier to invest here as a foreign buyer.
What Are the Advantages of Investing in Vietnam?
With a population of about 90 million, ranking 13th in the world and 3rd among ASEAN countries, Vietnam has enormous market potential to make any business investment a profitable one. As the country’s economic conditions have been continually improved, Vietnam’s GDP per capita tripled from more than $600 per person per year in 2005 to almost $2,185 in 2016, empowering its consumers with significantly more purchasing power. For the time being, the majority of the population is in the lower-middle-income bracket, but the upper-middle-income proportion is predicted to grow from less than 1% in 2011 to almost 10% in 2030. Also, a “super-rich” elite has appeared in Vietnam and according to the statistics of World Bank, in 2016, Vietnam had 200 “super-rich” people with assets of over USD 30 million, up five times compared to 10 years ago.
Moreover, there are considerable changes in spending habits of Vietnamese people. Although most of them are still conservative and choosey when it comes to spending their hard-earned income, Vietnamese people are shifting from shopping to satisfying basics needs to also boasting their styles and new-found social status. Besides, demand for modern retailing services is surging, making the retail trade sector an attractive investment field in Vietnam for domestic and foreign investors.
Another factor that has facilitated the growth of Vietnam’s economy and made the country a good investment ground is tourism.
According to Hanoi Team Building, “With its well-preserved cultural diversity and intact natural habitats, Vietnam has become a popular tourist destination among outdoor enthusiasts. Each year, millions visit the country to experience the picturesque coastlines, wildlife-filled forests and serene mountains with breathtaking peak-top views, and whether the guests realize it or not, their presence has a direct impact on the country.”
Impact of Tourism in Direct foreign investment in Vietnam
Although the tourism industry in Vietnam is still developing, it plays a key economic role in the country. Tourism attracts foreign investment and creates jobs. It also provides investment opportunities for small business owners. Shifting the Vietnamese workforce from agriculture to the services industry created by tourism growth presents the potential for higher disposable incomes and reduced poverty. Tourism in Vietnam benefits the hotel, construction and retail sectors as well as other service-oriented industries. A service-based economy requires higher education levels than a subsistence agricultural economy since tourism sector jobs include receptionists, clerks and tour guides who must interact with the public and keep precise business documents. Seeking locally owned and operated businesses direct the most money to local economies.
Vietnam is a market which is largely overlooked, probably because many investors have preconceived ideas based on the country’s history. Financial markets have been demonstrating an ability to shock and surprise investors in recent times and basing your decisions on what has happened in the past in similar circumstances, has not always been the right move.
Looking to the future and not relying on events in the past is in some ways the key to deciding if you want to invest in Vietnam. It has had to endure a long recovery from civil strife and war back in the late 20th century, but this has helped to lay the foundation stones for the rapid economic growth that we are now witnessing.
Despite the fact that the country is still under communist rule it has been open-minded about the importance of outside investment, so there definitely seems to be an argument for paying to find out if Vietnam can deliver the sort of returns that other more developed economies are struggling to achieve.