Despite a Pro-Investment Regime, Foreign Investors in Vietnam Face Underlying Risks

Despite a pro-investment regime backed by an increasingly well-educated labour force, Vietnam’s business environment continues to be hampered by insufficient infrastructure and a poorly developed financial system, according to Maplecroft’s Country Risk Report on Vietnam.

 

The report notes that given the single-party political context, foreign investors in Vietnam face underlying risks of frequent political interference in business activities, while the effectiveness of the regulatory framework is undermined by excessive bureaucracy. Extremely entrenched corruption also leads to weak and inconsistent enforcement of laws, posing risks to investors.

 

Constitutional amendments, announced in late November 2013, have expanded the Communist Party of Vietnam’s (CPV) central authority – and dampened hopes for greater economic and political liberalisation. Factional divisions, combined with growing social discontent, create conditions that could lead to greater social unrest. These sentiments have been met with increased restrictions on social expression, particularly in regards to the internet and social media.

 

The government’s zero-tolerance approach towards public dissent will become even more unsustainable in light of a young, well-educated and digitally connected population.

 

Under-performing state-owned enterprises (SOEs) have been restructured or dissolved and the government has steadily equitised or privatised those outside the defence sector. However, the political and economic influence of SOEs remains strong, and vested interests in the public sector have succeeded in blocking reforms.

 

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