Vietnam is expected to double its economic size by 2030. (Photo: VNA) Why is Vietnam so favoured by global investors, that it accountsfor 25 percent of all the global money invested in Frontier equities, whenVietnam is just one (5 percent) out of 22 countries in the MSCI Frontier index?
Firstly, Vietnam truly values education. The vast majority ofpeople do in every country, but Vietnam had already achieved over 80 percentadult literacy in the 1980s, ahead of China in the 1990s and India in the2010s.
Any country needs 70-80 percent to industrialise and Vietnam isdecades ahead of not just mainstream emerging markets, but also Frontiermarkets like Nigeria or Pakistan where the number is still around 60 percent.
Moreover, the country’s leadership – perhaps inspired bycommunist roots that that have always prioritised education – have encouraged astrong focus on education at secondary school and university level too.
Nearly a decade ago, Vietnam already had 125,000 students atuniversities abroad, with the 8th largest national representation of anycountry at US universities. The vast majority bring home these hard-earnedskills.
Industrialisation does not just require a population that canread and write. It’s vital that factories have power too. Here againVietnam is way ahead of so many peers.
The latest data for 2018 shows per capita electricityconsumption was above Mexico or Egypt, and more than double that of India orIndonesia. It is estimated that countries need 300-500 kwh per capita ofelectricity to industrialise. Vietnam had soared past that level in 2005,nearly a generation ago.
According to Robertson, thethird key element in economic success is reaping the benefits of thedemographic dividend. When a country’s fertility rate drops below threechildren per woman, parents stop spending all their money on feeding theirchildren and start saving money to invest in their children. Bank depositsbegin to boom, and with that comes a bank lending boom.
So, while high fertility countries have small banking sectors(around 20 percent of GDP), and a high double-digit cost of borrowing, Vietnamwith a fertility rate of 2 children per woman has deposits above 100 percent ofGDP and low interest rates.
At the same time, the adult share of the population is high, andthe cheap financing to create infrastructure and investment in the privatesector, supports job creation.
Vietnam is experiencing the sweet spot of the demographicdividend and will do so for many years to come, even as countries like theRepublic of Korea begin to age quite dramatically by 2030.
The country now exports far more per capita than China. In 2021Vietnam had the world’s third largest trade surplus with the US, ahead ofGermany and Japan, and only behind China and Mexico.
Its competitive minimum wage is still half that of China’s butlikely to rise in coming years, adding fuel to an improving domestic demandstory.
Robertson also forecast that the currency starts to gradually strengthenin coming years, like Germany or Japan’s did in the 20th century or China’srenminbi has done since 2005.
Vietnam is expected to double its economic size by 2030, and intoday’s money, be a trillion-dollar economy by 2040, and a 1.7 trillion USD economyby 2050 similar in size to where the world’s top-10 economy RoK is now./.
VNA
