Why Vietnam Is Poised For The Future

At a recent live event, experts talked about the vibrancy of Vietnam and why Vietnam is poised for the future. It has a lot of potential that’s still waiting to be tapped, so we thought we’d summarize the findings for you.

Professor Dao Nguyen Cat, Editor-in-chief of the Vietnam Economic Times explained, “Vietnam’s economy grew more than 7 percent in 2018, when it also attracted a record $19 billion worth of FDI, and it concluded talks on a free trade agreement with the EU and joined the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). It is now fully on the “radar” of international investors.”

Mr. Nguyen The Hao – Deputy Editor-in-chief of VNEconomy 

Here are the Key Numbers Behind Vietnam’s Potential

10% is the rate of contribution by the private sector (excluding households and individuals) to Vietnam’s GDP. It remains low while this sector creates many jobs. New jobs in the non-State sector accounted for only 26.1 percent of the total in 2000 but now account for 60 percent.

FDI is currently an important additional capital, accounting for about 25 percent of the country’s total investment, contributing about 20 percent of GDP. In 2017, FDI contributed nearly 8 billion U.S. dollars, accounting for 14.4 percent of total budget revenue.

Fulbright University Vietnam’s economic expert Mr. Huynh The Du pointed to two reasons behind the poor contribution by the private sector. Firstly, for a long period, the private sector was not considered a growth engine, but preferential treatments were given to state-owned enterprises and FDI sectors. Secondly, he felt that Vietnam’s economic policies remain flawed, forcing businesses to prioritize short-term business considerations over the longer-term.

Mr. Huynh The Du

The consensus among experts is that it will be hard for many sectors that grew quickly in 2018, such as agriculture-forestry-fishery production, tourism, and real estate, to sustain a similar pace this year. Unfortunately, some unresolved institutional bottlenecks relating to public investment and the project financing framework of build-transfer (BT) and build-operate-transfer (BOT) may affect the growth rate in 2019.

In order for the private sector to thrive and drive economic growth, these panelists advocated that the government continues to enhance Vietnam’s business environment, to simplify the existing complicated policies. In addition, all enterprises, regardless of their size and whether they are from the public or private sector, should compete fairly with one other.

14% is the country’s credit growth target for 2019 (the same as 2018, but lower than previous years). As all banks have to apply the Basel II capital adequacy ratio (CAR) in 2020, they will not be able to provide additional credit when their CAR reaches this limit. However, raising their capital base is a challenge for big lenders.

According to Mr. Nguyen Xuan Thanh from Fulbright University Vietnam, the key concern of the banking system is capital expansion, not bad debt. When a bank has sufficient funds and meets Basel II standards, the State Bank of Vietnam (SBV) should appropriately loosen the credit quota. Otherwise, its credit growth will be squeezed.

Mr. Nguyen Xuan Thanh (left) and Mr. Pham Thanh Ha (next to Mr. Nguyen) on the panel

Mr. Pham Thanh Ha – Director General of the Monetary Policy Department, SBV affirmed credit this year would still be focused on the Government’s five priority sectors of agriculture businesses, export-oriented businesses, small and medium-sized enterprises, enterprises operating in auxiliary industries, and hi-tech enterprises, to support economic growth while managing risk.

Deputy Minister Nguyen Van Hieu said Vietnam has become a member of most global multilateral financial organizations, signed more than 60 agreements for the encouragement and protection of investment, and over 90 free trade agreements. He emphasized that, “Overall, free trade agreements, especially new generations of free trade agreements, would help Vietnam integrate deeper into the global economy and create conditions to boost its economic development and restructuring, promote trade, attract foreign investment, create more jobs, develop the manufacturing sector, improve labor productivity and the competitiveness of the economy.”

All this leads us and others to conclude that Vietnam is poised for the future.

This blog post is contributed by Trong Tran (Leo), Audience Development Executive at PR Newswire. Leo is in charge of partnerships, expanding our media network, co-organizing our annual Media Coffee event, sharing helpful information in Vietnam market with the media through his articles and interviews. You can contact him at trong.tran@prnasia.com or connect with him on Facebook.