Vietnam has made amazing progress over the last decade. Its annual GDP growth averaged 6.3% with a remarkably high GDP per capita CAGR (Compound Annual Growth Rate) of 14%, which places the nation only behind China in Asia.
With a stable currency, highly competitive labor cost, an improving regulatory environment and favorable business conditions, the country most certainly has earned the interest of foreign direct investment in recent years.
Vietnam Allows Foreigners to Own Property for 100 Years
According to a draft decree, foreign investors will be allowed to extend their home ownership by another 50 years, after the first 50-year period ends.
Foreigners can extend their home ownership period at province-level administrations three months before the first 50-year term expires. The relaxation of foreign ownership restrictions is expected to boost an ailing real estate market saddled with oversupply.
The new law on foreign ownership will allow foreign investment funds, foreigners with valid visas, international firms operating in Vietnam and overseas Vietnamese to lease residential properties on a long term basis.
The types of investments affected under this law will be all residential property types including condos, villas and townhouses. There will be no volume limit, but the total number of units owned by all foreign buyers must not exceed 30% of the units in one apartment building, or 250 landed property units per district.
Most importantly, the restriction of foreign property ownership to residential purposes will be lifted. Under the new law, properties owned by foreigners can be sub-leased, traded, inherited and collateralized.
Currently, foreigners may only lease property for a period of 50 years. The new changes will take effect in July 2015.
Vietnam is Internationalizing its Stock Market
In line with its World Trade Organization promise, Vietnam will give a greater share of ownership to foreign stock investors.
Such measures will mean no limits for foreign ownership in Vietnamese firms, except for sectors under specific laws and industries related to national security.
As of now, foreign investments are restricted to 49% of Vietnamese equities and 30% of banks.
Vietnam to Allow Greater Foreign Ownership of Banks
With a financial sector having taken repeated blows by bad debt — the country is still recovering from toxic debt and a real estate slump caused by unrestrained lending and costly state spending in non-core areas — Vietnam is changing rules to allow foreign investors to hold a bigger share in local banks.
The current 30% restriction on foreign investment in banks covers total foreign shareholdings. A single foreign investor is limited to a one-fifth stake.
As foreign institutional investors see little incentive in holding a minority share, a decree will soon be issued to enable them to increase their ownership in national banks past the current 30% ceiling, Prime Minister Nguyen Tan Dung has said.
It is hoped that such steps will cut pressure on local banks and enable them to restructure and recapitalize.
In fact, future test cases with foreign strategic partners have proven successful says Nguyen Thuy Duong, who handles financial services for Ernst & Young in Vietnam. Vietnam foreign investment has helped local banks a lot, bringing about many changes inside the institutions.
But Vietnam Still Has Much Work to Do
Despite improvements in macroeconomic stability and the Vietnamese stock market being near record highs, inflation has come down significantly from 27% to around 6 to 7% — and the above mentioned measures, Vietnam still has a long way to go before it can call itself a nation where foreign capital is comfortable to reside for the long-term.
More has to be done in the areas like removing trade barriers, infrastructure, the connectivity of technology and communication and the access to high-quality skills in the labor force.
Additionally, government policies such as providing tax incentives can certainly help.