THE POTENTIAL CHALLENGES OF INVESTMENT ENVIRONMENT IN VIET NAM

  • Inflation

Inflation is one of the major concerns of international investors when they decide to invest into a certain market. As the world economy has changed in recent years, inflation has become one the top risk considerations of a country’s domestic economy, especially developing countries including Vietnam. Nonetheless, notwithstanding the efforts of the Vietnamese Government, inflation is to be considered under the gradually possible lowest control.

Whilst inflation in Vietnam in the years 2011- 2012 was relatively high (around 12% to 18.58%), it rapidly dropped to 6% in 2013 and then continued decreasing by around 1% in 2014 which is considered a good signal for the economy of Vietnam. However, international investors are advised to be cautious and well-prepared in order to face any such volatility in the economy’s inflation rate. The increase of the price of goods, minimum wage, and other market considerations may create challenges for investors.

It should be noted that the Vietnamese Government is aware of the current inflation situation as it prepares to promulgate policies to reduce the inflation rate. Such State policies may also unexpectedly affect an investor’s business or operations. Thus, in order for investors to ensure their own economic interests, they should take the initiative in searching and reviewing all policies to control inflation.

  • Changes of laws and policies

Vietnam is a dramatically changing economy in recent years and in various sectors of the country, especially with respect to new legislation and policy making. This is marked by the promulgation of a great number of laws and policies in the field of economics and commerce.

However, within the context of a rapidly developing country, the legal and policy system has been necessarily changed and adjusted. Such adjustments should not create risk for investors, and the greater economy, if they are made reasonably and appropriately. Unfortunately in Vietnam, changes to laws and policies have sometimes occurred unexpectedly and unpredictably. To some extent these changes influence the normal business activities of investors, particularly if they are not sufficiently prepared to cover such changes within their own plans and strategies.