Vietnam Policy Changes Boost Foreign Investments

Vietnam is on the rise as increasing levels of foreign direct investment support strong economic growth and help to drive development across the country. Its big cities, Ho Chi Minh City and Hanoi, are at the forefront of the transformation as more people flock to its urban centers and new high rise buildings change its skylines.

Foreign investors are taking note: They ploughed an estimated $15.8 billion into the country in 2016–a new record. And Vietnam’s policy changes are encouraging them to do so. The country relaxed foreign ownership rules for real estate in 2015, Yahoo reported.

“Vietnam witnessed strong growth in FDI in 2016. This can be attributed to a strong economy backed up with political stability and relatively low labor costs when compared to the region,” says Stephen Wyatt, Country Head of JLL Vietnam. “Manufacturing dominates FDI, accounting for 64%, but 7% of the total FDI is attributed to real estate. The sector attracted $1.53 billion in newly registered capital in 2016 with 59 newly registered projects.”

Demand is increasing for office, retail and hotel stock around the country. 

Vietnam’s burgeoning tourism industry, which welcomed 10 million visitors last year, is driving hotel developments. The Hoi An South Integrated Resort is currently being constructed, with its first phase to be completed in 2019; meanwhile Halong Bay got its first five-star property, Wyndham Legend Halong Bay, last June.

Industrial real estate is also enjoying a boost. “Industrial parks in the north, south and central regions are witnessing strong activity. For instance, the Long An Province in southern Vietnam is experiencing a strong demand for ready-built factories and industrial land.”

Vietnam’s upward trajectory looks set to continue, despite the slowdown affecting other Asian countries. It posted GDP growth of 6.2% last year–a figure which is forecast to rise to 6.7% this year amid the growing affluence and higher consumption levels of the country’s middle class who are developing a taste for foreign brands from Starbucks to Louis Vuitton. Vietnam’s middle class is expected to double to 33 million people by 2020 while Ho Chi Minh City is home to Southeast Asia’s fastest-growing middle class, according to Boston Consulting Group.

The country has also benefitted from the return of overseas Vietnamese, known as Viet Kieu, who are becoming major players in spurring Vietnam’s economy and growing its thriving start-up scene in Ho Chi Minh City and Hanoi.