Despite crisis, Vietnam a lot more attractive investment than Thailand, senior executives agree

63% of senior business executives believe that Vietnam is now a more attractive investment opportunity than Thailand, according to figures released this week by Solidiance.

The poll, conducted by strategic marketing consultancy Solidiance, quizzed C-level executives from blue chip companies on which of the two countries they would consider investing in, taking into account the current market conditions, regulations and general financial climate.

Correspondingly, 21% of those polled chose Thailand as their favoured investment destination while 15% believed that the two showed equal promise.

Damien Duhamel, Managing Director of Solidiance, commented: “Vietnam has enjoyed impressive GDP growth rates, averaging more than 7% over the past two decades. It is fair to say that it also has better short- and long-term political and economic perspectives compared to Thailand. This research seems to prove that senior executives are noting this
trend and consistently stating a preference for Vietnam over other SE Asia investment destinations.”

According to Duhamel, despite relatively low levels of FDI into Vietnam in the 1980s and 1990s, since 2006 the country has emerged as the preferred destination for Asian investors with FDI amounting to $20 billion USD in 2007 and nearly $60 billion USD in 2008.

“With an economy that is gradually liberalizing and a strategic geographic location in southeast Asia, Vietnam is catching up fast as an investment hot spot and a force to be reckoned with,”

Duhamel states. “Its GDP per capita is still roughly four times lower than that of Thailand and two times lower than that of China, making it a prime candidate for consumerism growth spurts.”

Seck Yee Chung, Vietnam-based partner at international law firm Baker & McKenzie, believes that the country’s growth, though dampened, is likely to continue, commenting: “Despite the global economic downturn, there are still investment and growth opportunities in Vietnam in 2009. There is no doubt that this global crisis will impact FDI over the next 18 months, but I anticipate that Vietnam’s growth will nonetheless remain one of the highest across Asia Pacific.” Seck also added that there is currently a lot of foreign interest in import and distribution activities as Vietnam's commitments to the WTO has opened this sector for foreign investment and participation - albeit with restrictions and conditions that need to be carefully examined. M&A opportunities should also not be ignored.

However, according to Duhamel, investing in Vietnam is not without pitfalls. “By mid-2008, the economy had overheated, commodity prices spiralled and CPI was around 25%,” he comments. “Add to that difficulties with financing and managing staff attrition, it certainly seems like a challenging proposition. But for those prepared to seek out long-term rewards, in spite of short-term difficulty, the pitfalls are well worth the risk.”

At the moment, however, Duhamel predicts a  cautiously positive outlook for 2009. “Despite current doom and gloom and a certain slow down Vietnam will hold up. As far as specific industries are concerned, there are few countries worldwide that can expect to offer growth of 10% in the automobile industry, 12% in construction materials, 20% in medical devices and around 40% in e-commerce”, Duhamel comments. “Vietnam is one of those few.”

The comments from Seck and Duhamel arose at a recent investment conference, copresented by Solidiance and Baker & McKenzie, focusing on the merits and pitfalls of investing in Vietnam.

www.solidiance.com