Investing Daily, 9 July 2015. Why Vietnam Should Be on Your Radar, by Chad Fraser.

An edited extract of the original article is reproduced below.

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With Grexit fears rising and Chinese stocks nosediving, it’s understandable if you’re feeling a bit skittish about investing beyond America’s borders these days…

One Pacific Basin nation the newsletter sees as a strong investment is Vietnam—which is marking 20 years of normalized relations with the US this week.

To say Vietnam has come a long way in that time would be a major understatement: consider that back in 1995, two-way trade between the US and its former adversary stood at just $450 million. Since then, it has surged 80-fold, to $36 billion, making the country America’s 26th-biggest trading partner.

Vietnam is now home to Asia’s fastest-growing middle class, with over two million citizens taking out membership annually, according to a 2014 study by the Australia-New Zealand Banking Group [Ed’s note, ANZ Group is AusCham’s 2015 Platinum Sponsor].

At the same time, the country is benefiting as China shifts its focus to domestic consumers in a bid to cut its reliance on exports, says Pacific Wealth analyst Benjamin Shepherd.

“China’s slow makeover is benefiting other countries in the Pacific Rim, as manufacturers that looked to China for cheap labor are finding better deals elsewhere,” he wrote in a June 12 article. “Vietnam, particularly, is luring many of those companies.”

Young, Skilled Workforce Attracts Global Giants

Indeed, the list of multinationals that have set up shop in Vietnam in the last few years reads like a who’s-who of corporate titans. It includes Ford Motor Co. (NYSE: F), Toyota Motor Corp. (NYSE: TM), Intel Corp. (NasdaqGS: INTC), Samsung Electronics (OTC: SSNLF) and tire maker Bridgestone Corp. (OTC: BRDCY).

For context, the average Vietnamese factory worker makes around a quarter of what his or her counterpart in China brings home, according to a March 2015 Economist article, and roughly 80% of what an Indonesian worker makes.

The Vietnamese workforce is also comparatively young, with the country’s 90-million-strong population’s median age coming in at just 29.2 years, according to the CIA World Factbook, compared to 36.7 years for China. (The United States, for its part, has a median age of 37.6.)

“The Vietnamese workforce is also quite well educated, with the country ranking 17th on the Program for International Development’s scorecard of countries whose citizens have 10th grade reading, science and math skills,” wrote Shepherd in the May issue of Pacific Wealth. “That puts Vietnam ahead of Australia, Austria and France.”…

The country also stands to gain from the Trans-Pacific Partnership, which moved closer to becoming a reality on June 23, when the Senate voted to grant President Obama “fast track” authority with regard to the TPP—something he’s pursued for years…

Shepherd, for his part, sees the TPP as a clear winner for Vietnam:

“For instance, more than a third of all apparel the United States imports come from Vietnam, amounting to about $7 billion in trade for the country,” he wrote in the May issue of Pacific Wealth. “Because the trade agreement essentially eliminates tariffs, those imports should suddenly become much more competitive.”…

 

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