VIETNAM IS CHANGING
For investors, Vietnam looks different in significant ways from 10 years ago. Those differences include legal reforms, the newly established stock market and a breakneck GDP growth record, which has consistently exceeded 7% since 2002. Most important, there is a philosophical understanding among the top leadership that the country needs to engage rather than shirk from the international community, as witnessed by its recent efforts to undertake the sometimes wrenching structural reforms necessary to join the WTO.

VIETNAM: EXCITING
A recent Merrill Lynch report estimated Vietnam "will be the fastest-growing [Asian] country in the next 10 years, far more exciting [than] Thailand, far more than anywhere else in ASEAN" (the Association of Southeast Asian Nations).

Last October's sovereign bond issue underscored that optimism. Originally planned as a US$500 million flotation, the debut deal attracted $4.5 billion worth of actual orders, goading underwriters to increase the issuance to $750 million to soak up the excess demand. Similarly, the January initial public offering of Vinamilk, a state-run dairy conglomerate, was fully subscribed, pushing the equity market's total value past $1.1 billion. The planned listings of other state-owned enterprises promise to push the stock market's capitalization even higher.

All the good economic and financial news gave international ratings agency Moody's enough reason to upgrade Vietnam's sovereign rating for the first time in seven years, from B1 to Ba3.

INFRASTRUCTURE DEVELOPMENT
Vietnam is now calling for $25 billion in foreign direct investment (FDI) to top up the whopping $115 billion the government has provisionally earmarked over the next five years for a wide range of projects, including big capital outlays for infrastructure development.

REFORMS
There have already been several noteworthy reforms, many offering foreign investors greater legal protection than ever before. Changes to the legal framework, specifically the Unified Enterprise Law (UEL) and the Common Investment Law (CIL), promise to level the competitive playing field for foreign and domestic businesses.

Previously, foreign investors were limited by the business models that were available to them, which in essence consisted of either joint ventures with state enterprises or business cooperation contracts that were heavily and at times arbitrarily regulated by the government. Now, foreign firms can diversify into other business models, most notably 100% wholly foreign-owned businesses, as well as limited and joint stock companies.

EQUITIZATION PROCESS
Vietnam is also giving special emphasis to the equitization process, opening the way for foreign businesses to buy shares in state concerns. Sectors that were previously off limits to foreigners, particularly in the financial services, have recently opened up in anticipation of entry to the WTO. Standard Chartered, ANZ Bank and HSBC have all recently taken stakes in local commercial banks, and there are currently 28 different foreign bank branches now operating in Vietnam - perhaps the most visible indication of how deeply capitalism has taken root here over the past decade.

Beefed-up incentives and greater ownership rights have recently paved the way for a number of big-ticket foreign investments. On February 28, US technology giant Intel announced $300 million investment plans to build a chip testing and assembly plant in Vietnam. As Intel enters the market, its suppliers, service and support partners are likely to follow to reduce shipping and transportation costs, company executives indicated.

SUPPORT
Microsoft head Bill Gates also visited Vietnam in April 2006 and met with Prime Minister Phan Van Khai, signaling that his firm might be the next major global player to invest in the country's fledgling but arguably energetic software sector. The Vietnam Software Association (VINASA), with support from the government, has recently stepped up its marketing activities and set a goal to secure 10% of Japan's software outsourcing market by 2010.

FDI
Japan, Asia's largest and Vietnam's third-biggest foreign investor, has recently warmed to the opportunities on offer. Since 2003, notably in the wake of the anti-Japanese riots in China, Vietnam has benefited from a new tendency among Japanese firms to diversify their investments across the region. Rising labor costs in China - now twice as high as in Vietnam - and power shortages have driven some big new Japanese investments away from China and toward Vietnam.

In January, Japan's Nidec raised its investment in the Ho Chi Minh technology park to $1 billion, approximately double the $500 million it had previously committed. Japanese investors have also committed combined funds of more than $250 million to industrial parks in Haiphong, Long Binh, and Dong Nai provinces. Camera maker Canon, meanwhile, has recently shifted its global production to Vietnam. Yamaha and Mabuchi Motors, too, have recently invested heavily in manufacturing facilities here.

Vietnam's call to foreign investors comes at a time that China and India still consume the lion's share of Asia-directed FDI. China is increasingly the locomotive of Asia's economic growth, whereby its growing appetite for imports and willingness to shoulder trade deficits is helping to fuel the growth of its smaller regional neighbors. But as Asia's emerging division of labor comes into clearer view, Vietnam has plenty of comparative advantages to leverage in attracting new investments.

VIBRANT YOUNG WORKFORCE
Wages in Vietnam represent some of the least expensive - albeit low-skilled - labor in all of Asia. With 60% of Vietnam's 82 million population born after 1975, the country has a vibrant young workforce, with an additional 1.5 million workers each year, leading to 20% per annum growth in domestic consumption in recent years.