Reference no: EM132236389

Political stability

Vietnam is one of the more politically stable countries in South East Asia. Its leadership does not welcome dissent. Internal conflict is rare although recently there have been a small number of high-profile protests including in relation to an environment disaster in Central Vietnam. There are restrictions on freedom of speech which can affect internet usage, particularly the use of social media and personal blogs, access to which can be blocked without notice. Party leaders and the leaders of the government, are selected every 5 years at the National Party Congress. The most recent Congress was held in January 2016 and in May 2016 a national election was held to elect the 500 Deputies who make up the National Assembly, Vietnam's legislative body.

Financial stability

Economic growth averaged 6.2% in recent years. The government aims to achieve the growth of 6.5% in 2017. GDP per capita has increased by 350% since 1991 (2nd only to China) and Vietnam now has the fastest-growing middle-class in South East Asia. Although slowing in recent years, growth has now ticked up again, led by the foreign-invested manufacturing sector. The country has long been an attractive FDI destination, particularly for Japan, South Korea, Taiwan and Singapore. FDI inflows average 8% of GDP annually, the highest among major emerging markets in ASEAN and proportionately larger than China. More than half of total FDI stock is in manufacturing. Electronics and mobile phones, in particular, have since 2010 attracted large investments; around 70% of Samsung's smart-phones are now made in Vietnam. Most manufacturing outputs are for overseas markets.

Corruption risks

Despite ongoing reforms, corruption continues to negatively influence Vietnam's business environment. Companies are likely to experience bribery, political interference and facilitation payments. The Vietnamese Penal Code and the Law on Anti-Corruption criminalises the public sector corruption but not that of the private sector, in the form of attempted corruption, facilitation payments, extortion, abuse of office, fraud, money laundering, and active and passive bribery.

The problem with corruption is that it can favour certain companies and markets and prohibit others from thriving. This effectively creates a closed market that is not governed by consumers, but by those corrupt foreign officials. If the market is not a reflection of consumer demand, it can be extremely different to predict and to be successful in.