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Tips For Investors: Is It Worth Investing In Vietnam?


 

As investors keep withdrawing their capital from Greece, Italy, Spain and other eurozone economies, a natural question arises: Where to invest the money?
 
There must be some countries around the world where a favorable investment environment is being formed, thus leading to an unexpected and powerful economic breakthrough like in Japan (1960s-1970s), China (1980s), or in Brazil, Turkey and Indonesia (1990s). One of such countries is Vietnam .
 
80% of Vietnam ’s territory is occupied by mountains. This is an agricultural country, with urban citizens constituting 30% of the country’s population. This is a big but relatively poor state. The GDP per capita is as low as $3100, which makes Vietnam occupy  the 166th place in the global rating.
 
However, not everything is that gloomy. According to the Asian Association of Traders and Investors under Masterforex-V Academy, Vietnam has made a powerful economic breakthrough over the last decade, thus increasing its influence in the region. According to Bloomberg, the Vietnam economy is Asia’s 3rd most promising economy after China and India.
 
It is highly probable that in a couple of decades we will be talking about a “Vietnam ese economic miracle”.
 
What makes Vietnam so attractive for investors?
 

 

 

 

According to Masterforex-V Academy, the interest is caused by a number of factors:
 
1.       Rapid economic growth.  Today’s Vietnam is one of Asia’s fasted-developing economies.
 
Industrialization. The local authorities are planning to make Vietnam an industrial country with competitive industries by 2020. Today’s industrial production accounts for 40% of Vietnam ’s GDP. Nevertheless, the Vietnam ese keep building refineries, motor vehicle assembly plants computer manufacturing facilities etc. Some 80.000 cars are assembled in Vietnam every year: BMW, Isuzu, Toyota etc.
 
Hi-tech and innovation. The focus is on electronics, biotechnologies and IT. The local IT industry is developing especially fast. “Canon” has already built its facility in Vietnam to manufacture laser printers. Vietnam ’s export of electronics makes $3 billion a year. This year Nokia is planning to build its own manufacturing facility in Vietnam and is ready to invest some $12B in this project.
 
Open economy. There are 135 duty-free export-oriented industrial zones located in Vietnam . Some of them enjoy tax rebates. That is why there are many foreign investors in the country, including Americans. Vietnam ese businessmen assume that in several years Vietnam can turn into the ASEAN’s trading and investment center. In 2006 the direct foreign investments in Vietnam were equal to $10,2B while in 2008 they reached $60B. Obviously, the global crisis diminished the foreign investment flow. However, the huge domestic market and domestic investments saved the day. During the last pre-crisis years there was a stock-buying craze in Vietnam .


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Export-oriented economy. For example, Vietnam is one of the world’s major coffee producers and the 3rd biggest exporter of crude oil in South-Eastern Asia. By the way, Vietnam exports most of its products to the USA.
 
Developed small-scale business. Most Vietnam ese households represent small-scale businesses. During the crisis the Vietnam ese authorities simplified the procedure of starting a business. For example, one can open a café in 3 days.
 
 
However, all the factors listed above do not suggest that Vietnam is free of economic problems. Alas, the Vietnam ese refer to their political system as socialism with elements of market economy. It means that the biggest share of the country’s economy is state-owned (energy sector, mining industry, crude oil and transportation sectors etc.) it accounts for 52% of Vietnam ’s GDP. Land cannot be bought or sold as well.
 
There are some other negative factors affecting Vietnam ’s economy.
 
High inflation. Consumer prices grew by more than 18% in 2011. This is the highest rate in Asia.
 
Currency devaluation. The Vietnam ese Dong lost 9.3% of its value in 2011.
 
Ratings. In late 2010 Moody’s Investors Service downgraded Vietnam ’s credit rating form Ва3 down to В1, with a negative forecast.
 
Public debt. The country’s public debt is growing rather fast. So far it has reached 58.7% of GDP. Some experts say that on reaching 70% the Vietnam ese economy may face a severe crisis with disastrous consequences.
 
 
USDVND. According to Masterforex-V Academy experts, USDVND is fluctuating within the 19305-21203,5 range. A break above the top of the range will resume the rally, thus continuing the devaluation of the Vietnam ese Dong.  In this case, the closest level of resistance will be found at 21226.

 

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2.     Natural resources. Vietnam is quite a large country. Its territory can be compared to the one of Germany, France or Norway. The land is rich in rare-earth metals, chrome, gold, oil, gas, zinc, copper, etc. They attract foreign investors.
 
3.     Demographic factor. It is a highly populated country (over 90M people – the world’s number 14). Yet, the population is growing fast. That is why the local authorities are forced to curb the population growth. A third child may result in a 25% income cut with a loss of party membership, which in its turn makes life much more difficult.
 
The average age is 27.4 year. On the one hand, it is a benefit for the labor market. On the other hand, the rate of unemployment is high while the labor migration is considerable. Over 250 000 Vietnam ese go overseas in order to find better-paid jobs in 100 countries around the world. Only in 2010 they send their families some $8B.
Other problems include poverty, lack of skilled workers and significant social burden. A lot of money is spent on multiple social and unemployment benefits.
 
 
3.    Social stability. The Vietnam ese’ quality of life has improved over the last few years. In 2009 Vietnam left the UN’s list of underdeveloped countries (its GDP per capital exceeded $1000). In the 1990s 58% of the Vietnam ese lived below the poverty line. In 2010 it the poor represented only 9.5% of the population. The Communist Party of Vietnam promises that in 2020 every Vietnam ese household will on a car.
 
These changes were reached through rapid economic growth and efficient social programs. Poor citizens don’t pay taxes. Women retire at 55, men retire at 60. Young people are sent abroad to become skilled experts in various fields. Even though the income tax varies from 0% to 40%, Vietnam can be considered a socially stable country.
 
According to the 2011 Legatum Prosperity Index, Vietnam is number 62 (it went 16 places up within a year).



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4.       Fixed property. According to last year’s investment list published by the US Association of Foreign Investors in Real Estate (AFIRE), Vietnam was recognized the world’s most number 1 in terms of investing in fixed property. Relatively cheap property, many free niches, climate, no serious rivalry and many other factors make Vietnam an ideal place for real-estate investors from around the world. 
 
 
5.       Tourism. Over the last few years Vietnam has been popular with foreign tourists and travelers. Over 5 million tourists visited Vietnam in 2011. (+15-20%). Some experts say that Vietnam starts taking over the initiative in the region, gradually ousting Thailand. Moreover, Vietnam is considered the safest country in the region.
 
 
Within a decade the Vietnam ese authorities are planning to invest up to $12B in the improvement of the country’s tourist industry, including the construction of new resort complexes, casinos, international airports etc.
 

 

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6.       Political stability. It is well known that Vietnam is a one-party state. The Communist Party of Vietnam is in control of the country. It ensures political stability and simultaneously makes radical and efficient reforms. There are several factors contributing to the existing political system:
 
First of all, as the result of multiple reforms, the quality of life in Vietnam has improved significantly over the last few decades. Secondly, most Vietnam ese historically respect and support the Communists as the power opposing foreign military interventions. Moreover, people do not want to start another war or major conflict in the country as they remember the horrors of the recent wars.
 
Mass media start getting more freedom. However, any agitation against the Communist Party is prosecuted. Strange as it may seem, but Vietnam ’s middle class is expanding, which is attended by social differentiation. There are no billionaires in Vietnam . However, there are several dollar millionaires. There are concerns about the young generation without fears and gratitude (they are said to haven’t seen the horrors of war). Therefore, some people are worried that sooner or later this generation may demand for cardinal changes.
 
 
Another major factor for investors to consider is corruption. According to the corruption index provided by Transparency International, Vietnam is number 112th, which means it is a highly corrupted country. Unfortunately, bribery is a routine in Vietnam despite severe punishment.
 
7.      Mentality. As a nation, the Vietnam ese are tolerant and enduring. They are purposeful and patriotic. They have self-respect and respect to old people. And finally, they are hardworking. They are ready to do any work, no matter how hard it may seem. This nation is hard to conquer but easy to cooperate with.
 
The bottom line: Obviously, Vietnam has considerable potential and abundant resources. The country is gradually going forward, which means that investing in Vietnam ’s economy looks promising and rewarding.
 
Market Leader and Masterforex-V Academy would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
 
In your opinion, is Vietnam really worth investing in?


 

 

You are free to discuss this article here:   forum for traders and investors

 

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