Leader: Why investors should be taking more notice of Vietnam

Those with memories of helicopters taking off from the roof of the US embassy in Saigon in 1975 are unlikely to associate Vietnam with peace, prosperity and stability.

In the years that followed, the country slid into communist stagnation. In the 1980s, its population of 66 million had a GDP per capita of around $227. Its biggest export was scrap metal and its only friend the Soviet Union.

Even the period of reform known as Doi Moi, beginning in 1986, was overshadowed by the more noteworthy expansion of its Asian neighbour, China, and there was little to suggest Vietnam would one day emerge as a global player.

Like other countries emerging from destructive conflicts, it has a relatively young and dynamic population

Paradoxically, however, the very destructiveness of the Vietnam War laid the foundations for the region’s resurgence. It cemented a desire for predictability, and the resulting continuity — however unsatisfactory from a human-rights perspective — enabled Vietnam to move from being a net importer of commodities such as rice and lamb to becoming a major exporter.

Doi Moi took this economic realignment a step further. Its aim to create a “socialist-oriented market economy” on the China model, combining old-style state control with new market freedoms, led to the creation of a stock exchange and numerous private enterprises.

These reforms accelerated in the 1990s, with the normalisation of relations with China and the removal of the US embargo, which allowed international organisations such as the World Bank and the IMF to engage properly with Vietnam.

While Bangladesh, for example, can challenge in terms of low-cost manufacturing, it can’t boast of the same global influence as Vietnam

Since then, the country’s industrial and manufacturing growth has been significant, often outperforming other Southeast Asian countries in various metrics. Electronics is a key example, with around 60% of Samsung’s smartphones now being made in Vietnamese factories.

And, although the tensions between the ‘socialist’ and the ‘market’ components of Vietnam’s system are obvious, this has proved more durable than many would have predicted. Indeed, while China has leaned too heavily towards political control in recent years, Vietnam has generally managed the balance more successfully, standing out in a region characterised by quasi-democracies and military dictatorships.

Also, like other countries emerging from destructive conflicts, Vietnam has a relatively young and dynamic population, with a median age of around 32. This translates into a large and increasingly affluent consumer base and relatively low labour costs.

Investors who were looking in a different direction 30 years ago should maybe take note

Furthermore, Vietnam occupies a key geographical location — effectively a gateway to a market of over 600 million people across the ASEAN region, which has contributed to its appeal for foreign investment.

Fund manager

Dragon Capital is a case in point: founded by Dominic Scriven in 1994, it is the longest-established, independent, Vietnam-based fund manager, with $5bn (£4bn) of AUM. One third of this is in Vietnam Enterprise Investments Limited (VEIL), launched in 1995 and now a FTSE 250 company.

Vietnam has actively engaged with the UK IFA community

When I spoke to Scriven about Vietnam’s transformation, he noted two factors: the continued growth of the investor base; and what he believes is Vietnam’s imminent classification as an ‘emerging’ market. Both should attract further investment.

Indeed, since listing in London in 2016, VEIL has seen a significant increase in individual investors and institutions.

Vietnam has also actively engaged with the UK IFA community, although Scriven acknowledges that it will take perseverance to establish trust in the market.

Vietnam still faces fierce regional competition, of course. But, while Bangladesh, for example, can challenge in terms of low-cost manufacturing, it can’t boast of the same global influence as Vietnam.

The very destructiveness of the Vietnam War laid the foundations for the region’s resurgence

As Scriven concludes: “On the top leader’s desk, there are four red phones that go directly to Moscow, Beijing, Delhi and Washington, DC. There aren’t many countries where the top leadership has those four phones, or equal diplomatic communication with each.”

Investors who were looking in a different direction 30 years ago should maybe take note.

Tom Browne is editor of Money Marketing 

This article featured in the June 2024 edition of Money Marketing. 

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