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Home>UPDATE: Why Vietnam still attracts emerging-market bulls

UPDATE: Why Vietnam still attracts emerging-market bulls

UPDATE: Why Vietnam still attracts emerging-market bulls

09/19/2017

By William Watts, MarketWatch

Foreign investment fuels boom

Sunday marked the debut on PBS of Ken Burns and Lynn Novick's "The Vietnam War" (https://www.wsj.com/articles/the-vietnam-war-review-finding-humanity-in-a-slo-mo-disaster-1505408291), kicking off what promises to be an exhaustive and illuminating 10-part examination of a conflict that still casts a shadow over the American psyche more than four decades after U.S. forces exited the conflict.

Vietnam faced economic chaos following the fall of Saigon in 1975 and the unification of the country under a Communist government. In 1986, the government instituted a number of far-reaching reforms after a severe economic crisis. In the 1990s, the country began increasing economic relations throughout the region and the world. This included the reestablishment of trade relations with the U.S. in the 1990s and Vietnam's joining of the World Trade Organization in 2007.

While the economy picked up steam, the path remained bumpy. Vietnam was relatively insulated from the chaos of the 1998 Asian economic crisis due to its small size. But the nearly two decades since has seen chaotic periods of boom and bust, as well as the bursting of a property bubble in 2011. Still, the country's economy has grown at an impressive clip of more than 6% a year since 2000, according to World Bank data.

While Vietnam has embraced markets and outside investment, it remains a one-party state, ruled by arguably one of the most authoritarian regimes in Southeast Asia. Human-rights groups have expressed alarm over the country's biggest crackdown on activists in years, Reuters reported (http://www.reuters.com/article/us-vietnam-arrests/vietnam-jails-dissident-for-five-years-in-crackdown-on-activists-idUSKCN1BT0P1).

Investors, however, are encouraged by the long-run economic outlook and point to factors including a well-educated workforce and a high degree of openness to outside investment.

While a high debt-to-gross domestic product ratio of 62% and the lack of a current-account surplus give some investors pause, low labor costs and a highly specialized workforce have allowed Vietnam to become a key part of Southeast Asian supply chains, wrote analysts at Pavilion in Montreal.

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