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Selecting a good business sector in Vietnam may seem daunting due to the abundance of investment opportunities. Many foreigners are enthusiastic about replicating their business models in the Vietnamese market. However, recent consumer credit issues have cast doubts on the feasibility of certain business sectors. One such example is F88, a formerly successful consumer credit company that was once highly regarded among venture capitalists.
By carefully considering and conducting research, expats can identify a good business sector in Vietnam. It is crucial to keep in mind that the Vietnamese government tightly controls currency transfers. As expats, they must declare imported funds or tax-paid income to transfer money out of Vietnam via a bank. Vietnamese citizens also encounter restrictions when transferring assets abroad, as only a few imperative reasons allow for such transfers.
Entrepreneurs and finance for businesses in Vietnam
If you’re an expat looking to start your own business, it’s important to choose the right industry. Unfortunately, the pawn shop business is not a wise choice in many countries, including Vietnam. Not only is it a low-regulated industry, but it is also often associated with unsavory characters like the mafia and uneducated, muscled individuals. Additionally, pawn shops are not scalable businesses and encounter numerous problems when dealing with increased clients.
Attracting top financiers to a pawn shop business can also be extremely challenging. High-interest rates charged by pawn shops can make it difficult for them to operate within the bounds of the law. Moreover, when you go through a pawn shop, they may inflate the price of insurance and make additional commissions by selling you collateral insurance. This can be particularly problematic when it comes to credit risk and insuring your vehicle.
To make matters worse, pawn shops may also require you to take life insurance at an inflated price, which can be up to three times more expensive than your own personal or accidental life cover. Additionally, they often charge additional processing and administrative fees, which can quickly add up and exceed the 20% maximum interest rates in Vietnam when aggregated with the interest rate fees.
Expats in Vietnam investing in business and finance
Expats in Vietnam who are involved in finance need to be aware of the risks associated with pawn shops. These businesses tend to attract clients with bad habits, such as gambling, adultery, and drinking-related accidents. In addition, pawn shops often deal with medical costs resulting from these risky behaviors. It’s important for expats to understand that engaging in illegal activities to obtain money to cover these costs could result in serious legal consequences. Therefore, it’s advisable for expats to invest in travel insurance to mitigate any financial risks associated with medical emergencies or accidents. Ultimately, pawn shops are not a suitable business sector for those looking to establish a long-term and sustainable business in Vietnam.
Employees working in pawn shops do not need sales or management skills. Instead, they rely on forceful debt collectors to recover their loans. This approach is not sustainable in the long term, and it can lead to a negative reputation for the business.
Venture capital and the F88 failure
Investing in certain business sectors in Vietnam can be risky, as exemplified by the recent failure of F88. Venture capitalists initially viewed F88 as a promising investment opportunity. However, their optimism was short-lived, as F88 ultimately failed due to its heavy focus on consumer credit. This demonstrates that expats and investors must be wary of putting all their eggs in one basket and diversifying their portfolio to minimize risk.
The failure of F88 highlights the importance of conducting thorough research before investing. Investors must look beyond the hype and evaluate the long-term viability of a company. They must also be aware of the specific risks associated with the sector they are investing in. In the case of F88, investors may have been better served by investing in a more diverse range of companies with less reliance on consumer credit.
Stocks and bond trading in Vietnam
Furthermore, the bond issuance on the Vietnam stock market has come under scrutiny recently. Some bonds were discovered to be closer to junk bonds than safe investment vehicles. This is a matter of great concern, as bond issuances are supposed to be a reliable source of investment income for investors. Bond issuances can be an attractive investment opportunity for expats as they offer a steady stream of income. However, the current situation in Vietnam requires investors to exercise greater caution before investing in bonds.
Expats and investors need to be aware of the risks involved before investing in Vietnam. They should conduct their due diligence and seek the advice of a financial advisor to ensure that their investments are sound. This is particularly true for those looking to invest in the Vietnamese stock market, as there are a variety of stocks and sectors to choose from, each with its unique set of risks and potential rewards.
As an alternative, consider exploring investment opportunities in Vietnam’s fast-growing markets. Mekong Capital, for instance, is a private equity firm that focuses on investments in consumer-driven businesses in Vietnam. Their approach has been to partner with Vietnamese entrepreneurs to create scalable businesses that can achieve significant growth. By investing in businesses with proven business models, you can mitigate risks and access a broader range of opportunities.
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Expats and investors in Vietnam need to do your due diligence
So while investing in Vietnam can be a lucrative opportunity, it is important to exercise caution and conduct thorough research before investing. Expats and investors should be aware of the specific risks associated with investing in certain sectors, such as consumer credit, and should diversify their portfolio to minimize risk. They must also be cautious when investing in bonds, as the current market conditions may make some bonds riskier than they appear. By following these guidelines, expats and investors can make informed decisions and maximize their returns while minimizing risk.
Selecting a good business sector in Vietnam requires careful consideration and research. It is important to avoid sectors such as pawn shops that are associated with bad people environments and are not scalable businesses. Instead, investors should look for sectors that are aligned with the values of the Vietnamese people and are sustainable in the long term.