Vietnam Is Getting Crushed By A Property Bubble

Ho Chi Minh City

Photo: Wikimedia Commons

Vietnam is one of the Next-11: a leading emerging market economy identified by Goldman’s Jim O’Neill.However, a couple of years after the rest of the world, this vibrant economy is seeing its property bubble burst.

An article by Thomas Fuller in the New York Times describes a country where the private sector is increasingly influential, but sometimes at odds with the Communist government. He writes:

Like property bubbles in other parts of the world, investors in Vietnam took advantage of free-flowing credit to construct buildings with the hopes of flipping them for a profit. One key difference is that some of the largest property speculators in Vietnam are state-owned corporations with top connections in the Communist Party and access to cheap money. Those companies are now grappling with unsustainable debt levels, or in the case of Vinashin and Vinalines, two large government conglomerates, flirting with insolvency.

The various state owned companies have become bloated and packed with friends of the ruling party who are essentially using the state for profit. The result is hundreds of unfinished and empty buildings, rising unemployment, and shrinking foreign investment.

The state has slashed interest rates in an effort to boost lending and stimulate the economy, but until the country begins to open up and dismantle state companies, things are unlikely to improve.  

Read the full article at the New York Times

Don’t miss: China Is Replacing Its Workers With Robots

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.