Vietnam made amazing progress over the last decade. Their annual growth averaged 6.3% with a remarkably CAGR (Compound Annual Growth Rate) of 14%. This makes Vietnam Asia’s second fastest growing economy, only behind China.
With a stable currency, highly competitive labor cost, and favorable business conditions, Vietnam has earned the interest of foreign investors.
Vietnam Allows Foreigners to Own Property for 100 Years
Foreign investors will be allowed to extend their home ownership by another 50 years, after the first 50-year period ends. This is according to a draft decree.
Also, foreigners can extend their home ownership period three months before the first 50-year term expires. Relaxing foreign ownership restrictions will boost an ailing real estate market saddled with oversupply.
The new law on foreign ownership will allow investment funds, non-locals 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.
Foreign owned properties can also be sub-leased, traded, inherited, and collateralized under the new law. The new changes took effect in July of 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. Sectors related to national security are the only exceptions.
There’s now a 49% foreign ownership limit for all companies in Vietnam. Banks have even stricter requirements, allowing maximum foreign ownership of just 30%.
Vietnam to Allow Greater Foreign Ownership of Banks
Vietnam is still recovering from toxic debt and a real estate slump. Unrestrained lending and costly state spending are the cause of these issues. As such, 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 non-Vietnamese investor can only hold a one-fifth stake.
Foreign institutional investors see little incentive in holding a minority share. But the new decree enables them to increase ownership in national banks past the current 30% ceiling.
These steps will hopefully cut pressure on local banks, enabling them to restructure and recapitalize.
Test cases with foreign strategic partners have proven successful says Nguyen Thuy Duong, who handles financial services for Ernst & Young. Vietnam foreign investment helps local banks a lot, bringing 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%. 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.
There needs to be more progress in areas such as infrastructure, technology, and access to high-quality skills in the labor force. Government incentives such as tax relief can also help.
Want to invest in Vietnam? There’s a few different ways to do so. You might be interested in our guide to buying property in Vietnam. We also have an article explaining how to trade stocks in Vietnam.
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