On my blog I have thus far mostly looked at foreigners investing in Vietnam via the stock market. Even if you are only looking at investing in Vietnam this way, it is still important to understand the pulse of the economy beyond Vietnam’s listed companies. That was in part why in an article on the blog a week or so ago it was dedicated to small business ideas.
Vietnam has a relatively low valuation measure in terms of market capitalization to GDP, which in part illustrates that a lot of business is done from those that are not listed. Also the fact that the history of the Vietnam stock market only spans a couple of decades or so, this means that many businesses have not matured enough yet to consider listing on the stock market.
Let’s now look at what drives foreigners to invest in Vietnam and take advantage of how smaller businesses grow and prosper in Vietnam.
Before I examine why and how foreigners invest in Vietnam in terms of establishing their own businesses, here is how to invest in Vietnam via the stock market.
HOW TO INVEST IN THE VIETNAM STOCK MARKET – A GUIDE TO ALL OPTIONS
Below I given some detailed summaries on choices between ETFs, CEFs, other funds and direct ownership of Vietnam stocks.
Now let’s turn to investing in Vietnam and doing so outside of the stock market. I am going to keep this short and simple and try to compress it into 5 key drivers why FDI is growing rapidly in Vietnam.
TOP 5 REASONS FOREIGNERS INVEST IN VIETNAM IN 2022
|Reason to invest in Vietnam||Comments|
|Growing economy with stability||Vietnam’s economy has been one of the strongest in the world over the last couple of decades at least. It is increasingly becoming more stable also, this is noticeable looking at the last decade where inflation, currency, credit growth is less volatile. From a political perspective there has also been less internal conflict within the population compared with many developed economies.|
|Ease to set up and do business||There has been plenty of improvement in the ease of doing business measures in Vietnam. It is open to foreigners to set up a company which is fairly straight forward (I have done so).|
|Attractive labor market||The workers in Vietnam are renowned for being on average young, and also hard working, well-educated and a relatively cheap source of labor.|
|More trade agreements||Vietnam in recent years has formed new agreements with EU and UK for example. Overall this gives confidence they are committed to be a significant player in world trade in the long term. It also highlights that other countries in the world are taking an increasingly favourable view towards doing business with Vietnam.|
|Key manufacturing hub||Vietnam is considered a highly desirable country to potentially start up a manufacturing base. This trend has gained further traction to diversify in an uncertain world and as other options such as China have become more relatively expensive as the years have gone on.|
I MANAGED TO MAKE IT INTO VIETNAM, SO..
I entered Vietnam a bit over a fortnight ago now (via testing positive on a rapid test and being taken to the relevant facilities for a few days!), and as many would be aware that is not that simple over the last couple of years. Tourism has not started up yet again for the time being except for limited options such as “sandbox tourism”.
WHO CAN ENTER VIETNAM NOW?
Aside for such sandbox schemes for limited tourism, generally Vietnam has only been open in recent times to Vietnamese repatriates, foreign investors, foreign experts / highly skilled workers, students and diplomates / officials. Temporary resident card (TRC) holders also were required to complete some lengthy paperwork up until the latter half of January to get back in.
Perhaps it is a sign that if I can enter Vietnam then it in a small way illustrates my point earlier about the ease of setting up and doing business in Vietnam is improving and attractive. In the future that might be a subject I explore in further detail on this blog.
WHEN WILL VIETNAM REOPEN TO TOURISTS IN 2022?
At the time of writing Vietnam is due to open up for tourism (I mean in a general sense aside from the limited “sandbox” schemes), “ideally at the end of March, and no later than the end of April”, according to a statement by the PM in the first week of February. We shall have to wait and see, but I wouldn’t be surprised if we are getting very close now. The bigger questions might be what various rules are placed on travelers when it comes to the re-opening.
In fact, news reports yesterday were circulating that a mid March opening could occur. Potentially vaccinated travelers would only need a negative covid test result (via a rapid test), at their accommodation on day 1, before being free to travel around. The talk is still some travel insurance would still need to be taken out. However no need to book designated tour packages. I am not sure abut the need to get a PCR test prior to flying, wouldn’t surprise me if this persists for a little while or if they remove this requirement. Could some common sense be winning out in the next month? We should caution though that as I write these are not rules in place yet, just reports of recommendations from several ministries. So nothing finalized or red stamped as I write this in mid Feb anyway.
IS VIETNAM OPEN FOR BUSINESS IN 2022?
Vietnam has copped a bit of criticism from some with the severity of the lockdowns when cases spiked from the delta variant, and also being behind some neighboring countries in kickstarting tourism quickly.
I don’t agree with many of the harsh criticisms from that point of view, in the context of from the point when adequate vaccine supplies came in. Whether Vietnam could have done a better job securing such supplies earlier in 2021 is another separate question.
However once supplies came in, I am sympathetic to the view that they have taken reasonable steps to open up as we headed into 2022. The speed of the eventual vaccine rollout when they got the supplies, and the high vaccination rate was a clear success anyway.
Ideally they would have preferred to see overseas tourists come into Vietnam straight away as 2022 began. However they would have been mindful that a significant part of the population although having had their first jab, still needed a bit more time for the second and for it to take effect. It is not such a great look if overseas travellers fill up some hospital beds at the same time as some locals had not had all that much time to organise their vaccinations. Also weighing on such decisions would be that the Vietnamese celebrating Tet came up just at the time perhaps otherwise the country may have decided to open up to overseas tourists. I suppose in the context of waiting just that few more weeks later after Tet meant that opening tourism to foreigners just got delayed that little bit more. In saying all that I am unsurprised Vietnam lagged some of its neighbours in welcoming foreign tourists in the last couple of months.
With the Tet celebrations this year in the rear vison mirror, and a large amount of an already highly vaccinated population getting their booster shot around March, a proper opening up of he borders seems appropriately very imminent.
Overall I think that confidence from businesses in Vietnam policy makers handling “opening up” is still relatively strong. As I highlighted earlier, measurements of the “ease of doing business” is improving in Vietnam. Whilst its world ranking hasn’t moved a lot in recent years, I refer more to the big picture of the last decade. For example, below is the decade trend of their world ranking according to the World Bank’s Ease of Doing Business measures.
SHOULD I THERFORE BUY REOPENING STOCKS IN 2022?
I tackled this question late last year in a blog post. In short, other governments around the world and their willingness to interfere and lockdown harshly even AFTER their populations have high vaccination rates is somewhat of a deterrence.
Having said that investor sentiment for such stocks in emerging markets has been poor, so from a contrarian point of view they are worth consideration for small positions as explained in the below link.
My sense over the last month or so though is that governments are moving away from the lock down approach which may bode well for stocks that benefit from a reopening of borders.
Let me know if you are planning on travelling to Vietnam in 2022?
Is Vietnam a good investment?
To stay updated on my journey on exploring how to best invest in the Vietnam stock market, please feel free to enter your email address in the subscriber area below to be notified of posts I make. (I will not spam your inbox, expect perhaps usually one relevant weekly update).