5 Pivotal Vietnam Developments: 1st Half 2009

Opportunities to conduct business and investment in Vietnam strengthened considerably in light of the following factors:

1. The economy appears to be on the mend. Indicators reported for the second quarter showed improvements in overall economic growth, the balance of trade, inflation, consumer confidence, and more optimistic projections for both the short term and the long run. Also, Vietnam was the only one of the top 30 exporters to the US to increase shipments early in 2009. And the largest shopping center in Vietnam opened in Hanoi in June – about the same time a government economist reported domestic consumption rose 352% between 1997 and 2007. Meanwhile the IMF reported Vietnam should be among Asia’s top performers this year.

2. Public equity markets are coming to life. Earlier this year, the investment climate was gloomy as foreign interest waned and domestic investors pulled money out of public equities. The VN Index in HCM City sank more than 80% below its 2007 high — to 235 in February. Over the following four months, the market soared above 500 and ended the first half of the year just below 450. As investors returned, Prime Minister Nguyen Tan Dung announced late in June that all state-owned enterprises will be privatized by July 2010. The market doubtless will continue its roller coaster performance, and probably will be a more adventurous ride than in the world’s more established markets.

3. Interest continues to grow in green technology. In the second quarter of 2009, Vietnam showed more signs of merging environmental concerns with business interests. Examples: In May the first solar panel factory in Vietnam started production; in April the prime minister halted construction of a new hotel in Hanoi to preserve green space; and also inspectors ignited public outrage when they announced 100% of surveyed businesses had discharged toxic waste into one of Hanoi’s main rivers. The government is seeking investment in water infrastructure.

4. The communications sector is surging. Vietnam now has more phones than people, and most of them are cell phones – evidence Vietnam has spectacularly leap-frogged telecom technology. There are 15.3 new phone subscribers so far in 2009, and about 80% of the country’s 97 million phones are mobile. Vietnam also has more than 22 million internet broadband subscribers. As telecom expands, IBM has begun collaborating with several Vietnam technology companies to use radio frequency identification technology to track seafood exports.

5. Transportation and energy are priorities. The government is responding to the country’s infrastructure needs. In May Vietnam’s Atomic Energy Commission announced it chose sites in the southeastern province of Ninh Thuan for its first nuclear power plant. In April the prime minister approved expansion plans calling for 10 international airports in Vietnam. Also in April, ground was broken for the longest stretch of expressway in Vietnam – 164 miles between Hanoi and China; and construction began on two power plants with a combined electrical capacity of nearly 2,000 megawatts.

Read the complete Summer 2009 Vietnomics Update (PDF).

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