Vietnam, Asia’s other communist dynamo, is in fine form. The government estimates that GDP expanded by 6.2%-6.4% year-on-year in the second quarter after a 5.8% rise between January and March. This follows a 5.5% expansion during the global recession of 2009. Inflation has eased to 8.7% as global commodity prices have cooled. The trade deficit is stable and foreign direct investment is increasing again, says Standard Chartered.
The long-term picture is also impressive. Many economies in Asia have ageing populations. But Vietnam’s labour force will jump from 53 million in 2005 to 71 million in 2035. Labour costs are cheap, with monthly minimum wages around a quarter of China’s level. This should continue to underpin the manufacturing sector. “On the consumption side, 85 million consumers are too many to ignore,” says Standard Chartered. Incomes are rising fast and consumers’ purchasing power is expected to double in seven years.
On the minus side, corruption and red tape are key problems, says FAZ.net. The World Bank’s Ease of Doing Business Index ranks Vietnam 93rd out of 183 counties. Yet all in all, Vietnam is a compelling story. One way in for long-term investors is the London-listed Vietnam Opportunity Fund (VOF). It is currently available on a 33% discount to its net asset value.