Foreign investors' confidence in Vietnam

In 2011, Vietnam’s economy is expected to grow by 7.1%: this is the forecast from Vietnam’s Minister of Planning and Investment, Cao Viet Sinh. The Asian country’s growth and development will continue along the same trajectory as last year, when GDP grew by 6.71%. Why do foreign investors in Vietnam view this figure positively?

The Vietnamese government had initially projected GDP growth of around 7.51% year-on-year, but the inflation problem has forced a change in the government’s plans; it has therefore decided not to push too hard on growth targets but to focus on curbing high inflation. The double-digit rate of price increases, which stood at 12.31% last month, is a concern for the government, which has therefore decided to implement fiscal and monetary measures (including the devaluation of the dong) aimed primarily at not discouraging foreign investors: thanks to the adoption of these policies, according to data from HSBC economists, the consumer price index is expected to decline by 2011 and reach an average level of around 9.91% year-on-year. Hanoi intends to further strengthen the presence of Foreign Direct Investment, which plays a fundamental role in the balance and development of the Vietnamese economy, and has assured that the decline in domestic demand will be offset by foreign capital and that investor confidence will remain intact.

According to some economists, in addition to the problem of inflation, in order to continue its extraordinary growth process experienced so far and remain competitive, the Asian country should reform the structure of state-owned enterprises, considered inefficient, modernize the education system, effectively combat corruption, and continue the difficult challenge of better wealth redistribution over the next five years. To ensure greater equality and further foster the emergence of the middle class, the Government must continue the fight against poverty, whose results in recent years have been truly satisfactory.

Although there is still much work to be done, foreign investors’ confidence in Vietnam has not waned: with industrial production growth in 2010 reaching +13.81%, average GDP growth (from 2004 to 2008) of 7.61%, a population of nearly 90 million people, and a strategic geographic location, Vietnam is currently one of the most attractive markets on the international stage for investment. A recent analysis by Citigroup identifies Vietnam (along with other countries including Indonesia, China, and India) as one of the countries with the highest potential growth rates of the 21st century.

The country can count on a young and low-cost workforce, strong political and social stability, an open policy towards foreign capital, and the consolidation of a middle class with a strong propensity for consumption. Vietnam, in particular, which has managed to simplify its regulatory framework, needs capital, technology, and know-how foreigner.

The rapid processes of internationalization and liberalization of services have allowed for gradual and increasing integration into the globalized world. Furthermore, in 1995, Vietnam joined ASEAN, the Free Trade Area (which also includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, and Thailand), created to increase trade, promote cooperation and mutual assistance among member states, and accelerate economic growth and stability in the region. The Vietnamese market offers diverse opportunities, from sourcing, to infrastructure, mechanics, and the agro-industrial sector: Italian companies that have invested here are still few in relation to the opportunities offered.

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