Investors In Vietnam  Learn to Live with Corruption Crackdown

Investors In Vietnam Learn to Live with Corruption Crackdown

A crackdown on corruption in Vietnam unnerved some foreign investors when it intensified in 2017, but they are now getting much more sanguine about it. Some even say the business climate is improving as a result. While the campaign by the government of Communist Party General Secretary Nguyen Phu Trong has slowed some deal making in a country already plagued by Soviet-era bureaucracy, it has not deterred foreign investors from putting their money in Vietnam.

Vietnam’s economy grew 6.8 percent in 2017, the strongest pace since 2010, while foreign direct inflows hit record highs for two years in a row, reaching U.S. $17.5 billion in 2017. To some foreign investors, the crackdown was long overdue. Nearly two-thirds of Vietnam’s people have had to pay a bribe to get access to public services, Transparency International said in a 2017 report. Out of 16 Asian countries surveyed, only India fared worse.

The anti-corruption drive is a good signal to many foreign investors, said Somhatai Panichewa, chief executive of Amata VN Pcl, a unit of Thailand’s top industrial estate operator Amata, which in January 2018 announced major investments in Vietnam. “We think the government is serious about showing the public that investing in Vietnam is no longer ‘know-who’ but about ‘know-how,’” she said.

That doesn’t mean the business conditions are easy for foreign investors. Executives on the ground must navigate a minefield of new challenges, said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi. However, it has also shed light on deep-seated graft, mismanagement and nepotism within state owned enterprises (SOEs) in the country at a time when a long-delayed privatization drive is accelerating.

Vietnam has failed to meet its privatization targets in previous years but has plans for over 100 initial public offerings as well as partial stake sales in about 400 companies by 2020. “It seems that managers of SOEs –– at least the most important ones –– are now more cautious in their activity, in particular in relation to equitization [partial privatization], divestment and so on,” the European Chamber of Commerce said in a statement.