The economy of Vietnam is a mixed socialist-market economy, with a dominant state sector and a growing private sector. Vietnam is one of the fastest-growing economies in the world, with a GDP growth rate of around 7% per year in recent years.

The country’s main industries include agriculture, forestry, fishing, manufacturing, and services. Vietnam is a major producer of rice, coffee, rubber, and other agricultural products, and the country’s forestry and fishing sectors also contribute significantly to the economy. The manufacturing sector, which includes textiles, footwear, and electronics, is an important contributor to Vietnam’s export growth. The service sector, including tourism, finance, and telecommunications, is also a significant contributor to the economy.

Vietnam has a large and growing labour force, and the country has attracted significant foreign investment in recent years. The government has implemented a number of economic reforms in recent years, including liberalizing the financial sector and improving the business environment, in an effort to promote economic growth and development.

However, Vietnam’s economic growth has not been without challenges. The country faces significant infrastructure bottlenecks and a lack of skilled labour, and the government has struggled to address issues such as corruption and weak institutions. In addition, Vietnam’s economic growth has been fueled in part by cheap labour, and there are concerns about the sustainability of this model as wages and living standards rise.

Investing in vietnam

Vietnam is an emerging market with a rapidly growing economy and a number of investment opportunities for both domestic and foreign investors. If you are considering investing in Vietnam, here are some steps to consider:

1. Research the market: It is important to research the market and investment opportunities in Vietnam thoroughly. This includes understanding the country’s economic conditions, political landscape, and the industries and sectors that are performing well. Researching any potential risks or challenges that may affect your investment is also a good idea.
2. Consider your investment goals: Before investing in Vietnam, it is important to consider your investment goals and how they align with the opportunities available in the market. Do you want to generate income, grow your capital, or achieve a combination of both? Understanding your goals will help you identify the investment opportunities that are most suitable for you.
3. Choose an investment vehicle: There are several investment vehicles available in Vietnam, including stocks, bonds, mutual funds, and real estate. Each vehicle has its own risks and rewards, and it is important to choose one that aligns with your investment goals and risk tolerance.
4. Diversify your portfolio: Diversifying your portfolio is an important risk management strategy that can help protect your investments from market downturns or the underperformance of individual investments. Consider investing in a range of assets and industries to spread risk and potentially increase your returns.
5. Use a financial advisor: If you are new to investing or uncertain about the best investment opportunities in Vietnam, it can be helpful to seek the advice of a local financial advisor. A financial advisor can provide guidance on investment options and help you create a customized investment plan that meets your needs.
6. Monitor your investments: Once you have made your investments, it is important to monitor them regularly to ensure they are performing as expected and to make any necessary adjustments to your portfolio.

Overall, investing in Vietnam can be a rewarding opportunity for investors who are willing to do their research and carefully consider the risks and rewards of different investment options. It is important to have a well-thought-out investment plan and to diversify your portfolio to manage risk and potentially increase your returns. Seeking the advice of a financial professional can also be helpful in navigating the investment landscape in Vietnam.

Vietnam may be familiar to the American public, thanks to a long war fought in the 1960s and 1970s, but the country has begun to attract the attention of investors.

After shifting from a highly centralized planned economy to a socialist-orientated market economy, the country has become significantly more attractive to international investors looking to diversify into frontier markets.

Here is a look at Vietnam’s changing economy, how investors can gain exposure, and some important benefits and risks to consider.

Vietnam’s Changing Economy

Vietnam’s economy began as a largely agricultural feudal system until French colonization in the mid-19th century. After the country’s regions developed very different economies, they became further politically divided in 1954, with the north embracing communism and the south embracing capitalism, eventually setting the stage for the Vietnam War.

Between the 1970s and 1990s, Vietnam was a member of Comecon and heavily dependent on the Soviet Union and its allies. The dissolution of Comecon led to trade liberalization, currency devaluation, and a policy of economic development. Throughout the ensuing 1990s, tens of thousands of businesses were created and the economy grew at a rapid clip.

The growth briefly came to an abrupt halt during the Asian Financial Crisis in 1997, pushing the country to focus on macroeconomic stability rather than growth. Since then, the economy has grown to a gross domestic product (GDP) of $219.8 billion, stable credit rating, strong exports to the U.S., and modest public debt relative to its growth rates.

The country’s economy is heavily reliant on foreign direct investment to attract capital from overseas, but that capital has been producing strong economic growth. PricewaterhouseCoopers recently estimated that the country may be the fastest-growing of the world’s economies with a potential annual GDP growth rate of 5.2%, which would make it the world’s 20th largest economy by 2050.

Investing in Vietnam with ETFs

The easiest way to invest in Vietnam is by using exchange-traded funds (ETFs), which provide instant diversification in a single U.S.-traded security. With $387.7 million in assets under management and a modest net expense ratio of 0.7%, the Market Vectors Vietnam ETF (NYSE: VNM) is the most popular fund for investors looking for exposure to the country.

The Market Vectors Vietnam ETF offers exposure to publicly traded companies that are primarily domiciled and listed in Vietnam and/or generate at least 50% of its revenues from the country. As of December 2015, the fund held approximately 30 different companies consisting of 44% financials, 15% energy, and 14% consumer staples, among other sectors.

While this is one of the only ETFs offering exposure to Vietnam, investors should be aware that the fund is heavily weighted in financials (44%) and small-cap stocks (68%). These factors may make investors in the fund overexposed to financial concerns – such as interest rate changes – while experiencing greater volatility than larger blue-chip equities.

Benefits & Risks of Investing in Vietnam

Vietnam’s economy involves a number of different benefits and risks that international investors should carefully consider. While the country’s rapid growth rates may attract investors, they should carefully consider the higher risk profile, government controls, and reliance on key industries to support that growth over the long-term. These factors may make the country too risky for some portfolios.

The Benefits of Investing

• Rapidly Growing Economy. Vietnam’s economy has been growing at between 4% and 8% since its recovery from the Asian Financial Crisis of 1997.
• Self-Powered Economy. Vietnam relies on the petroleum industry for its domestic energy consumption and for export; crude oil production is expected to gradually decline.

The Risks of Investing

Socialist-orientated Economy. Vietnam may have transitioned from a centrally planned economy, but the government still controls many key industries.

Early Stage Market Economy. Vietnam remains at an early and vulnerable stage of its economic development and is, therefore, riskier than developed markets.

In related development, webinar Inside Out will be organised to provide business briefings and insights for Vietnam’s post-Covid investment opportunities.

Global Business Services (GBS) LTD and Vietnam Insider join hands to present the “Inside Out” webinar series, shedding light on Vietnam’s situation during the Covid-19 period to support foreign investors dealing with a dynamic business, regulatory, legal and operational landscape.

In the initial Inside Out webinar on 01 October, there will be presentations and Q&A from speakers as follows:

• Conditions in the Real Economy – Richard Burrage, Managing Director of Cimigo Vietnam
• Debtor Management in Covid-19 conditions: Oliver Schwartzhaupt, Chief Risk Officer, Vietnam Maritime Bank (MSB) and Dmytro Kolechko, Head of Risk Management Division, Vietnam Prosperity Bank (VP Bank)
• Legal framework & process – Tran Minh Thu (Katleen), Principal Lawyer, GBS
• Moderator: Rahn Wood, Partner of GBS
• The main focus of the webinar will be on the success of Vietnam in combatting the Covid-19 pandemic, the ongoing economic challenges, and Vietnam’s policies to recover and develop the economy.

The webinar aims to attract over 500 real-time viewers, who are individual investors, business owners and representatives from several investment funds, enterprises in different countries.

If you are a foreign investors, expatriate or business partner, who is hungry for insights about Vietnamese business conditions, this is where you can hear directly from leaders across sectors!