Vietnam has many outstanding advantages in attracting foreign investors that are looking for replacing China in the US-China trade war.

Vietnam is ranked No. 1 among 7 emerging Asian countries as production destinations, according to Natixis SA. Natixis SA assesses based on demographics, labor costs, electricity costs, business advantages and logistic, production of total direct foreign investment (FDI).

Vietnam is taking advantage of the trade tension brought to become a production and export gateway, selling everything from shoes to smartphones. Vietnam trade turnover is equivalent to about two times GDP, higher than all other Asian countries, except Singapore.

Here are some factors that make Vietnam attractive to foreign investors.

Low cost

gsic_bloomberg_vietnamwinsinfinancialwarbetweenUSAandChina
Average salary of general labor in some Asian Countries (10/2017).

Vietnam has largest labor force in Southeast Asia, up to 57.5 million people, higher than Malaysia (15.4 million people) or Philippines (44.6 million people). The average monthly salary of workers in Vietnam is 216 USD, less than half of that in China ( World Bank, 2017).

Thanks to government subsidies, electricity price in Vietnam is also cheaper than other countries in region, just about 7 cents per kWh. The price in Indonesia and the Philippines is 10 cents per kWh and 19 cents per kWh (GlobalPetrolPrices.com, June, 2018).

Agreement

Vietnam pursued free trade agreements with South Korea and Europe, together with 10 other countries, signed an agreement for the Comprehensive and Trans-Pacific Partnership (CPTPP) agreement in Chile in March.

Vietnam reached a trade agreement with the EU in June, almost free all taxes. In Southeast Asia, only Singapore has a similar agreement with the EU.

Vietnam is also creating favorable conditions for foreign investors to conduct business more easily, proposing securities laws that allow foreign ownership to be up to 100% with listed companies, except for some areas such as Bank, telecommunications contact.

Geography

The position of Vietnam’s armor is also a beneficial factor. Other countries like Indonesia, Philippines and Malaysia are all farther away.

Chinese companies that need raw materials or products from the US will be more accessible to these products through Vietnam. Vietnam is China’s largest trading partner in Southeast Asia as the two countries become increasingly central to the other’s production chain.

The stability

Vietnam is also one of the fastest growing economies in the world, estimated at 7% this year. VND was quite stable in 2018 when compared to other Asian currencies like rupees and rupiah, which dropped sharply.

VND will remain relatively stable in the short term, according to Fitch Solutions Macro Research, a unit of Fitch Group, in October. The supporting factor for VND is the inflow of FDI and strong production.

“Tăng trưởng kinh tế mạnh và ổn định chính trị là các yếu tố rất quan trọng với nhà đầu tư”, Tony Foster, quản lý đối tác tại Việt Nam, công ty luật Freshfields Bruckhaus Deringer LLP, nói.

Source: Như Tâm, Bloomberg – NDH

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