top of page

Vietnam one of the hottest investment destinations at present - what can Sri Lanka learn from their

Vietnam is attracting an average of over $11bn per annum, and has had one of the most consistent GDP growth rates over the past 10+ years within the SE Asia region. Compared to its other neighbouring countries, Vietnam offers one of the most liberal FDI environments, with a significant population size, high employment growth, comparatively low wages regionally, and close trade agreements with the world's strongest and biggest economies. These are all contributing to Vietnam becoming one of the most sought-after investment destinations for Real Estate development in all of Asia, with investors flocking in from China, the US, Singapore, Malaysia, and even India. Not long ago however it has suffered a similar fate to Sri Lanka, undergoing a long drawn-out civil war between 1955 and 1975, where the Americans played an infamous role.

It has taken a little over 40 years to reach this point where the country really is coming alive with diversity in business opportunities, culture, and with the growth in tourism, the celebration and improved access of pristine countryside and coastlines. Vietnam in man ways we believe sets a good example for Sri Lanka, in how a once war-torn country can transform itself over a longer-term period with patience whilst retaining its national identity. If we were to break down the Vietnam experience into its component parts, we get the following structure:

- War Ends 1975

- Industrial Collectivisation, causing economic disruption

- Free-Market Reforms to address triple-digit inflation

- Private ownership, economic deregulation, foreign investment

Sri Lanka's current post-conflict economic redevelopment currently faces the budget-deficit challenge, with huge loans at high-interest eroding the country's foreign reserves, which has been impacted further by weakening export performance in light of lower agricultural productivity in increased global competition as more frontier and emerging markets become connected to the global market. The country therefore must rely more heavily in the scope for foreign investment by positioning itself as a hub for trade in the SE Asia region, and we are beginning to see policies sympathetic to this idea - loosening of conditions for foreign direct investment, simpler visa and citizenship laws, opening up of land-banks for investment, longer lease-hold periods on government land with reduced taxes, and special tax and vat incentives for companies looking to base themselves in Sri Lanka. These are all very positive, and it will take time for the benefits to take effect. However, Vietnam's resurgence was also in-part down to an authoritarian single party leadership where economic redevelopment could occur uninterrupted by a change in government. Sri Lanka is a democracy, and see run democratic elections every 4 years for both the President and Parliament - this change in leadership every four years, especially given the country's currently weakened position, is actually a risk to economic recovery and development. Investors and business owners need greater certainty that their investments will not be challenged by a change in administration or a wobble in the economy by radical shifts in policy, and this is what we believe to be one of the biggest challenges to Sri Lanka's redevelopment. This doesn't necessarily mean single-party rule vs. democratic government, but it does mean taking a strong look at the future of the country by all parties, and aligning to a single and simple set of goals which all members of government can support, thereby creating stability for economic growth.

bottom of page