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Expert opinion: Why Vietnam attracts foreign investors?

Expert opinion: Why Vietnam attracts foreign investors?

Wednesday 04, 12 2019
"In addition to the potential market of 100 million people, by investing in Vietnam foreign investors can interact with their counterparts around the world," said Dr. Vo Tri Thanh said.


At the seminar "Vietnam economy 2020-2030: Depression or prosperity?" held on the morning of November 5 in Ho Chi Minh City, Dr. Vo Tri Thanh, former Deputy Director of the Central Institute for Economic Management and Research (CIEM), said that in the coming time, growth is forecast to keep going down whether the US-China trade war continues or stops.

Vietnam’s major trading partners will experience lower business growth in the next 2-3 years. Many studies show that there will be an economic crisis occurring in 2020 or 2021, which may not be as big as in 2008. The possible reasons behind this include many existing financial bubbles, loosening monetary policies, and low long-term bond yields of the US, which is even lower than that of short-term bonds. Moreover, public debts in European countries and the US are high.

Dr. Thanh predicted that there would be 7 major trends for the world in the next 7-8 years. There would be a “multipolar” world with increasing geopolitical pressure, aging population structure, emerging large middle class in Vietnam, revolution 4.0 digital conversion, undealt FTAs, competing resources, the rise of Asia including China, India, the dominance of USD, and the rise of digital currencies such as Libra.

For Vietnam, Mr. Thanh mentioned the achievements after 30 years of reforming from a poor to a developing country, and from agriculture to industry-service orientation. Currently, agriculture only accounts for 15% of GDP. The private sector has become a driving force, playing an important role in economic development.

Answering the question about investors’ view about Vietnam, Mr. Thanh mentioned that Vietnam is currently ranked 8th in the world thanks to stable political situation, young population, trade war shift, and integration reform.  “Investors investing in Vietnam will easily invest in other countries, because we have 16 FTAs. In addition to the potential market of 100 million people, by investing in Vietnam foreign investors can interact with their counterparts around the world. Vietnam also has the advantages of infrastructure and manpower, especially the consistency of business policy”, Mr. Thanh assessed.

Potential industries

Dr. Vo Tri Thanh pointed out five potential sectors of Vietnam. These are industries that have traditional comparative advantages such as textiles, leather shoes, electronics, agricultural products and seafood; consumer services such as retail distribution, tourism, entertainment, education, health care, pharmacy; supporting production network / value chain, connecting with pioneering businesses including logistics support services, supporting industries; emerging industries such as green economy, creative economy, fintech platform economy; infrastructure and real estate including real estate of houses, offices, tourism, retail, industrial zones ...
Regarding banking and finance sector, Mr. Thanh said that the economy is still dependent on the banking system. Banking restructuring has made positive progress, and many banks have entered digital transformation. Bad debt was below 2% as of August 2019.
“However, the financial market still has many problems: Basel II is still a challenge to many banks; Bad debt group 4 -5 is still high in some banks; Stock market has continuously experienced fluctuation; Liquidity decreased significantly, at about VND 4,000 billion / day in the first 9 months of 2019; The bond market has many incomplete fundamentals including legal framework, accounting standards, judicial effect, credit rating agency…”, Mr. Thanh stated. 

Mr. Thanh said that next year Vietnam's economy will slow down clearly. "In 2020, there will be a growth of 6.6 to 6.8% in the number of projects. Vietnam may still be a bright spot but to achieve 7% GDP is extremely difficult," Mr. Thanh commented.
At the seminar, he strongly emphasized that in the current context, businesses should formulate short and medium-term instead of long-term strategies, because there are too many risks and fluctuations that may occur. Enterprises should make forecasts within a certain period, with regular adjustments.

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