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Viet Nam: New WTO Entry and Exciting Investment Opportunities

Vietnam has officially become a member of the WTO this week. Congratulations!

Everyone knows Vietnam, in a certain way. But in terms of investment opportunities, you may be pleasantly surprised:

PRO

  • strong economic growth: Since the country’s gradual shift from a centrally planned to a market economy, GDP is skyrocketing at 7.4% over the past 10 years (second only to China in Asia) and the government has a target of 7. 5-8% until 2011.
  • successful reform: The “Doi Moi” (modernization) program has successfully privatized more than 2,500 State-owned Enterprises (SOEs) and encouraged the creation of numerous companies.
  • New membership in the WTO: The entry is expected to pave the way for strong and healthy growth in the long term.
  • excellent demographics: The literacy rate is at an impressive 90+% and half of the population of 84 million is under 25 years of age. The local culture also fosters a strong work ethic.

As a result, Vietnam has been attracting a lot of foreign investment, driving growth in both exports and domestic consumption.

Cons

  • still a baby: The Vietnamese market is still in an early stage of development and lack of liquidity (low trade volume) can lead to high volatility. This is not a market for people with a short-term investment horizon.
  • Single country risk: Investing in a single (and emerging) country poses significant risks, for example, of possible political turbulence, sudden changes in economic policies and a large withdrawal of foreign investment.

Investment products available

There is a Vietnamese fund listed on the London Stock Exchange (ticker: VOF.L) and new mutual funds appear week after week for this exciting country.

Keep in mind, however, that most funds require a relatively high management fee (1.7-2%), plus a hedge fund-like performance fee (20% of every dollar earned when return on investment exceeds 8% per year). While the higher fee is somewhat understandable given the higher cost of doing business in Vietnam, emerging markets funds/ETFs in other regions might be a better deal at this stage.

Conclution

Be careful, but keep an open mind! Track the performance of the funds for a couple of months and get an idea… and why not book a ticket to Vietnam and have a first hand look at it before making a decision? Tourism is booming there!

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