Until the 1980`s Vietnam was as poor as Ethiopia, but since 1990 Vietnam has seen astounding economic growth and is benefitting heavily from the ongoing U.S.-China trade war. Vietnam could be an exciting and important country to be added to your international portfolio.
Inspired by China, in 1986 Vietnam’s Communist leaders launched the “Doi Moi” (renovation). The results may be the most underappreciated economic success story on earth. Since 1990, Vietnam has become the world’s second-fastest growth rate per capita after China. But unlike China, Vietnam has not slowed down. Vietnamese GDP rose by 7.1% in 2018, its best performance since 2007. GDP growth is likely to hit 7% in 2019 as well.
Vietnam’s economic boom should continue. Why? Here are some facts:
1. Vietnam has a young and educated population.
2. More than 65% of Vietnam’s population (95 million) are under the age of 35.
3. Government spending on education reached almost 6% of its GDP.
4. Vietnam has attracted massive foreign direct investment. Foreign direct Investment rose by 9.1% in 2018 to $19.1 billion (a 6th straight annual record)
5. Labour costs in Vietnam are still low compared to China. Doing business in Vietnam is far easier than for example in India.
6. The government recently cut the corporate tax rate to 20%.
7. Vietnamese are hardworking and entrepreneurial. There is a great mix of young, educated and ambitious workers.
8. Vietnam is the clear winner of the U.S.-China trade war.
9. International companies relocate from China to Vietnam to avoid U.S. tariffs on Chinese goods.
10. Vietnam’s exports to the U.S. are soaring. The trade surplus with the U.S. will reach $50 billion in 2019.
11. Vietnam signed a trade deal with the EU to eliminate 99% of tariffs on goods and services.
Vietnam has made remarkable progress but it still isn’t on the radar of most investors. Here lies the investment opportunity: Vietnam is firing on all cylinders but is still classified as a frontier market. Once it is promoted to the MSCI Emerging Markets Index (should happen in 2020 or latest 2021 the stocks should rise significantly.
Vietnam’s per capita GDP is $2,500 compared to China’s $9,750. Taking this figure into consideration Vietnam stands where China was in about 2007.
Sven Franssen