Vietnomics LLC previously published a newsletter updating the business climate in Vietnam. Here are some previous updates:
Autumn 2012 Update: Vietnam’s Growing Pains
Vietnam’s economy may be back on the road toward robust growth after inflation has been brought under control. Economic expansion improved somewhat from 4% in the first quarter to 4.4% in the second quarter of 2012. Retail and service sales are higher than last year. New companies outnumber those going bankrupt by a 7-1 ratio. Inventories are down 29%, another positive sign. But the international investment community remains skeptical about the government’s ability to solve banking problems, especially bad loans. Investors question whether Vietnam will move forward with privatization of government-owned corporations as well as business culture reforms. The mixed signals have prevented Vietnam’s 12-year-old stock markets from appearing on the radar screens of most global investors. Over the next few years, that will change. Today there are 105 securities companies in Vietnam, 1.2 million accounts, and a $40 million market capitalization. That’s still too small to merit listing in the Wall Street Journal, but Vietnam’s day is coming.
Spring 2012 Update: Vietnam’s Bull Market
While American stock markets posted their best year-opening quarter in years, Vietnam’s stock market more than doubled the US gains. After two down years, Vietnam appears destined to be among the world’s best investment performers for 2012 — and likely 2013 as well. To understand the upside remaining after a 25% increase in Vietnam market values so far this year, investors need only look at the recent history of Vietnam’s developing public markets. The leading Vietnam stock index closed the first quarter of 2012 at 441; it would need to rise another 147 points (33%) just to reach 50% of its all-time high of 1174 less than five years ago. So far the optimists who predicted a significant increase in Vietnam investing in 2012 have been right – as Vietnam’s economy started to improve after a dismal 2011. In the second quarter, Vietnam appears to be in an early stage of economic expansion.
Winter 2012 Update: Mixed Messages Sideline Foreigners
Vietnam begins 2012 at a crossroads and needs meaningful reforms to complete the transition to a market economy that it started a generation ago. At times, the country seems to be moving decisively toward restructuring and consolidating its banking system, controlling public spending, and privatizing inefficient state-owned corporations. Even so, as one of the world’s most promising economies, Vietnam also faces stagnation unless the government can convince global investors it is ready to control the power of state-owned companies, private conglomerates, and institutions that are content with the status quo. Optimists contend that now is the time to invest in Vietnam, partly because many investors have lost patience just when Vietnam offers exceptional value. Supporting that view are surging exports, a modest 5% budget deficit, and less foreign debt. The question for 2012 is whether Vietnam’s homeostatic forces will allow reform needed for the country to realize its economic potential.
Autumn 2011 Update: Discovering the “V” in CIVETS
Summary: The Vietnam opportunity in the 3rd quarter attracted more attention from global investors, who now have a catchy acronym to go with their enthusiasm: CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) is replacing BRIC (Brazil, Russia, India and China) as the promising new frontier. Vietnam belongs in this emerging group because of its demographics (young, ambitious, entrepreneurial); its political and social stability; its sustained pace of growth; and its emergence as a manufacturing hub. For early adopters with long-term objectives, these strengths trump concerns about high inflation for 2011 and the related issues of currency instability, slower growth, and imbalances in trade and government spending.
Summer 2011 Update: Things Are Looking Up in Vietnam
Summary: Still reeling from the 2009 global recession, Vietnam’s economy has been challenged in the first half of this year. Businesses are coping with runaway inflation, high interest rates, an increasingly unsettled workforce, and inadequate access to capital for industrial production. Even so, bright spots are materializing. Exports are rising dramatically and expected to reach the government’s $79 billion target for the year. And the worrisome trade gap appears to be getting under control as exports grow faster than imports. The key question for the second half of 2011 for US investors: Can the government get inflation under control? If so, today is a golden opportunity to invest in Vietnam.
Spring 2011 Update — Vietnam Rebalances its Economy
Summary: After a decade of economic expansion that consistently outpaced most developing economies, Vietnam’s government is now emphasizing efforts to solve serious problems that could derail this frontier market’s ambitious plans. High on the agenda are bringing inflation down to single digits, strengthening confidence in the local currency, and reducing the trade and budget deficits – all necessary to restore the confidence of foreign investors. This agenda of tightening the economy led to slower growth (by Vietnamese standards) in first quarter that is likely to persist for much of 2011.
Winter 2011 Update — Vietnam Begins 2011 with Critical Decisions
Summary: Vietnam ended 2010 facing internal challenges and a chorus of foreign analysts raising questions about whether the government has the will and the wherewithal to handle them. Fortunately, the answers will begin coming in January (though not necessarily to the satisfaction of the international business community) when the ruling Communist Party holds its 11th Congress and chooses leadership and direction for the next several years. The meeting follows a decade of robust economic growth that attracted increasing attention from multinational corporations and investors. However, the country faces high inflation, a large trade imbalance, lacking confidence in its currency, still unresolved financial problems in one of its biggest state-owned companies, and downgraded bond ratings. Americans interested in this frontier market need to pay close attention as the party lays the foundation for Vietnam’s economic development over the next decade.