Vietnam Eases Regulations to Attract Foreign Investment

Vietnam, a growing $200 billion economy, has been making consistent efforts to maintain its appeal with investors from across the globe. One of the prime efforts of the government has been devaluing the currency to make it attractive for foreign investors and make Vietnam more competitive in Southeast Asia.Another significant change has been the lifting of the existing ban on FDI (Foreign Direct Investments) giving foreign investors a wide choice of alternatives to invest in Vietnam. The buzz is that lifting the ban on FDIs will open the door for millions of dollars to enter the country.

The communist government is also selling off state-owned assets that are operating at a loss or mismanaged. Foreign investors will be able to buy property in Vietnam. Also, foreign investors were bound by a maximum cap of 49% in buying shares  of listed companies, but now, this has been increased to 100%, which indeed is a huge difference. Entrepreneurs and leaders in the country no longer fear losing authority to foreign companies, thanks to the genuine efforts by the government. Pham Luu Hung, who is the Associate Director of the Institutional Research & Investment Advisory side of SSI Securities Service in Hanoi, strongly believes in improving business regulations and administrative transparency. By doing this, Vietnam would be able to sustain at least 6%-7% of their GDP growth.

However one of the important hurdles in this growth is the presence of tough competition from other Asian countries. For instance, the Philippines offer several incentives to attract foreign investors and are growing at a rate equal to Vietnam. Philippines boast of an English speaking workforce and cheap labor costs. This creates an ideal environment for foreign investors.

Other significant competitors growing on the same lines are Cambodia, India, Bangladesh and Myanmar. World Bank expects Cambodia to grow at a rate of 6.9% this year. Thus, looking at competition, Hanoi has a detailed plan to regulate ease of trade in the country, fairness in paying taxes and easing of starting new businesses.

Vietnam also houses several private enterprises, which till now faced the barriers of law and difficulty of access to capital. With the above changes, these barriers have been eased and these companies making up half the GDP, would be able to perform effectively. In order to enter Southeast Asia’s single-market ASEAN Economic Community, Vietnam is expected to experience tariff cuts and also sign a free trade agreement with Europe.  Vietnam is already a member of U.S led Trans-Pacific Partnership and is bound to follow the rules laid by them in the areas of labor laws, copyrights and environmental protection.