The Vietnamese flag flies at the Hanoi Stock Exchange (HNX) in Hanoi, Vietnam, Monday, September 10, 2018.
McCallan | Bloomberg | Getty Images
Vietnam’s long wait for emerging market status may soon be over.
The Southeast Asian country is currently classified as a frontier market and has been on the FTSE Emerging Markets Watch List since 2018. Confirmed earlier this month It has kept the country on its watch list.
The agency highlighted the Vietnamese government’s support for market reforms and recommended more meetings between local authorities and foreign investors. Upgrading to emerging market status could result in global funds injecting billions of dollars into Vietnam’s financial market, which currently has a market capitalization of just over $200 billion.
Before confirming the news, Thanh Quan Trong, head of Vietnam equity research at Maybank Investment Bank, said in an interview with CNBC’s “Street Signs Asia” program that the FTSE Index may upgrade Vietnam to an emerging market country as soon as September 2025. .
Prime Minister Pham Minh Chinh set a similar target earlier this year, and FTSE Russell suggested Vietnam should stick to its current pace of reforms if it wants to meet the deadline.
“We are seeing good progress in Vietnam in resolving regulatory bottlenecks, upgrading the market to emerging market status,” Throne told CNBC.
The Vietnamese government is “focusing again on the economy,” he said, with GDP expected to grow by at least 6.2% next year, which will bring “benefits.” indeed, World Bank forecasts GDP It will grow 6.5% by 2025 “driven by growing global demand and recovering domestic consumer confidence.”
According to the Vietnam Institute of Economic and Research Policy, Vietnam’s gross domestic product (GDP) growth It is expected to reach 7.4% in the fourth quarter of 2024reaching the 7% target set by the government.
Chip strength
Nguyen Phu Trong is not alone in his broader positive assessment of Vietnam’s mid- to long-term prospects.
Christine Philpotts of Ariel Investments told CNBC that “countries like Vietnam… are relatively well-positioned” because they are less reliant on foreign capital or have lower external debt. As a result, Vietnam has become a relatively safe place to invest, she said.
The Vietnamese government is betting on the development of artificial intelligence, leveraging its assembly, testing and packaging capabilities to meet global demand for chips. the country’s national strategy Including the ambition to develop into an ASEAN artificial intelligence solution research and development center by 2030. US$1 billion investment in South Korea’s manufacturing industry extended to 2025.
Vietnam’s chip capabilities allow it to compete with neighboring Malaysia in attracting global semiconductor companies. The Southeast Asian country is already home to large manufacturing centers for Samsung and Foxconn.
Despite its own internal political strugglesThe country has benefited from the trade dispute between the United States and China as businesses seek to best protect their supply chains. Indeed, Vietnam looks set to continue to solidify its position in global manufacturing supply chains.
“It has the geographical advantage of being close to China on the one hand, and open access to the export markets of developed countries on the other hand. The latter is thanks to the numerous free trade agreements.” Citi Research Group told CNBC.
Arman added that Vietnam’s politically neutral status gave it an advantage to “exploit the dynamics of Sino-U.S. relations” by attracting investment from Chinese parent companies for re-export to the United States.
“Overall, Vietnam is doing pretty well right now. In some ways, this has to do with the slowdown in the Chinese economy because China+1 is underway. Businesses are hedging their bets and shifting expansion to Vietnam. This poses a huge threat to China and Vietnam pressure.
risk
on the other hand. Vietnam’s skilled labor shortages and infrastructure issues, in particular, are long-standing concerns Its power supply stabilityis an obstacle for foreign investors.
At the same time, the government also carried out comprehensive reforms to combat corruption. The crackdown was described by local media as a “burning furnace” and led to the arrest of a number of officials accused of taking bribes.
“There may be some turmoil in the short term, but the long-term result will be less corruption, which can only be good for a country,” said Boris Hall, a lawyer at Baker McKenzie in Vietnam. Haydon said the anti- The corruption campaign has even made officials so intimidated that “they are afraid to agree to anything, which is hindering the deployment of infrastructure.”
Vietnam ranks 83rd out of 180 countries Transparency International Corruption Index 2023The score is higher compared with its Asian neighbors Thailand (ranked 108th), Cambodia (ranked 158th) and Laos (ranked 136th).
While Vietnam has leveraged U.S. and Chinese influence, Hayden believes the Southeast Asian country is “at the mercy of global developments,” such as the Russia-Ukraine war and the ongoing Middle East crisis. The U.S. election in November could also have a negative knock-on effect on Vietnam.
“A potential Trump administration’s more aggressive stance on foreign trade policy could change the regional and global supply chain architecture, thereby affecting investment flows in Vietnam,” Aman said.
