Much has been said of the rising economies of Asia as they step out of the shadow of the giant that is China – and perhaps none more so recently than Vietnam. Indonesia and India may be stealing the show, but those in the know are choosing Vietnam.
At a recent briefing session hosted jointly by TMF Group and Compass Offices in Hong Kong, participants learnt why now really is the best time to invest in Vietnam. I'll now share some of that insight.
One of the most dynamic economies in ASEAN, Vietnam’s economy has grown at a constant 7.5% for the two decades prior to 2010. Despite the high inflation faced by the country from 2011 to 2013, Vietnam’s GDP still managed to grow 5.6% on average.
Early last month the World Bank projected that Vietnam’s GDP would advance 5.5% this year and a growth of 5.6% is expected in 2015. Monthly inflation fell from 3.6% in September to 3.2% in October, the lowest rate since October 2009. Vietnam is heading towards their lowest annual inflation rate in 10 years. For the first nine months of 2014, Vietnam’s retail sector registered total sales of more than US$76bn, a year-on-year increase of nearly 11%.
Vietnam is well positioned for retail sector growth due to its demographic dividends. According to Nielsen, 56% of Vietnam’s population is under the age of 30. In addition, the Boston Consulting Group forecasted that the middle class population in Vietnam - those with a minimum monthly spending of US$714 - would increase from 12 million to 33 million by 2020. This is in line with the rise in per capita income from US$1,900 to US$3,000.
But while that’s great for the local economy, what does it mean for investment?
The country recognises that the FDI sector is integral to its economic growth. FDI inflow in 2013 exceeded US$22bn, an increase on the previous year of more than 35%. It does seem that retail is leading the way.
Under the World Trade Organisation obligations, Vietnam is required to open its door for the establishment of wholly foreign-owned businesses which include retailers, effective from 11 January 2015. As a result, some of the world's leading retailers such as Marks & Spencer, Aeon and Lotte Mart are gearing up to strengthen their presence in the Vietnamese market. In September 2014, Marks & Spencer opened a 1,200 sqm store in Ho Chi Minh City and plan to open a another 19 in Vietnam by 2020. In the same month, Korean retail giant - Lotte - also announced its goal to open 60 supermarkets throughout the country by the end of the decade, after launching its impressive Lotte Centre in Vietnam second largest city, Hanoi. Japan’s leading retail group Aeon is constructing a mixed development in Hanoi that comprises of hotels, restaurants, entertainment sites, offices and a sports centres besides retail spaces.
Vietnam is certainly calling out to foreign investors.
Read more about investing in Vietnam.