On January 14, 2019, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) officially came into effect in Vietnam. The country's National Assembly passed a resolution approving the deal and related documents on November 12, 2018. The agreement is expected to boost Vietnam's GDP growth by USD 1.7 billion and exports by over USD 4 billion by 2035.
The CPTPP was signed in Santiago in March 2018 by 11 countries including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It will create a huge free economic sector where its participants whole the keys to enter a market size of about 500 million people. Member countries account for about 13 percent of global GDP. The agreement will gradually eliminate 98%of tariffs on agricultural and industrial products, ease investment regulations and enhance protection of intellectual property.
The Ministry of Industry and Trade in Vietnam is co-operating with the Embassy of Australia and the World Bank to build an e-commerce portal to introduce free trade agreements that Việt Nam is participating in, including CPTPP, with search tools specific for commitments and regulations in each sector and industry for each partner participating in the agreements.
(Source: Vietnam News)
Over 96% of Vietnam National Assembly deputies voted yes to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 12 November, 2018, making Vietnam the 7th nation to ratify this agreement.
The members of the CPTPP are ew Zealand, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, and Viet Nam. Vietnam’s total trade turnover with CPTPP member states is in excess of USD 67 billion USD, accounting for 15.8% of its total trade value.
The CPTPP removes around 90% of trade barriers. The signatories have also agreed on provisions regarding intellectual property protection, e-commerce regulation, investment protection and investor-state dispute settlements.
The reduction of tariffs and non-tariff barriers will boost the its strong base of exports of cellphones, garments, shoes, seafood, and agricultural products. Furthermore, Vietnam will become a more attractive location for manufacturing since tariffs are on the rise between the United States and China. A government study estimated a boost of 1.3% for Vietnam’s GDP, while exports are expected to increase by 4% by 2035.
With the ratification of Vietnam, after New Zealand, Canada, Japan, Mexico, Singapore and Australia, CPTPP will come into effect on December 30, 2018 for these countries. The agreement will enter into force for Vietnam 60 days after Vietnam officially notifies New Zealand, the official depository, in writing of the ratification. The same 60 day period for entry into effect will apply for the remaining 4 members, following each nation's respective ratification.
(Sources: Vietnam Plus; Nhan Dan)
The prime ministers of Vietnam and Japan counterpart annouced plans to build up the strategic relationship between the two countries at a joint press conference during Vietnam's PM visit to Tokyo in October 2018.
The two countries will continue to reinforce their mutual economic linkage through Japanese investment and coordinate for effective use of Japan’s official development assistance (ODA) as well as other preferential loans for the economic and social development of Vietnam, including in areas such as the development on infrastructure, personnel training, climate change response and industrialization. Vietnam and Japan are also pushing ahead the conversation of trade liberation and equal and free investment through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP).
The conference also witnessed MOUs signing between ministries, agencies and business of the two countries. Some noteworthy MoUs include collaboration in trade and industry between the Vietnamese Ministry of Industry and Trade (MoIT) and Japan’s Wakayama prefecture and the BOT (Build–operate–transfer) contract between MoIT, Sumitomo Group and Van Phong Power Company Limited on Van Phong 1 thermal plant whose capacity is expected to reach 1,320 MW. Vietnamese low-cost carrier Vietjet signed an aircraft financing agreement with Mitsubishi UFJ Lease & Finance Company Limited (MUL), a member of Japan’s leading finance group Mitsubishi UFJ Financial Group (MUFG), and banking group BNP Paribas (France), to finance Vietjet’s acquisition of up to five brand new aircraft, worth US$614 million.
As of April 2018, Japan had 3,693 FDI projects in Vietnam with a total registered capital of over USD 49.8 billion USD, the second highest among countries investing in Vietnam.
(Sources: VietnamNews; VietnamNet)
Eighty one projects in Kien Giang province, Mekong Delta are opening for investment until 2020. Of the 81 projects, 15 will be in industrial production; 13 in hi-tech agricultural and aquatic cultivation and processes; 11 in commerce; 10 in technical infrastructure in industrial parks; nine in transport; seven in tourism; six in the environment; six in water supply in urban and rural areas; and four in housing and urban development. Many of them are now operating and providing jobs for local residents.
According to the provincial Department of Planning and Investment, more than USD 1.34 billion of investment capital has been registerd by Japan, Russia, Australia, Korea and Malaysia focusing on transport, tourism, services, petroleum transport and sport shoe production. These projects are among the total 48 foreign direct investment (FDI) projects with total registerd investment cpaital of USD 2.7 billion.
The province ha been focusing on transport infrastructure, electricity grids and water drainage systems and also improving local administration, and setting preferential policies and assistance for the investors.
According to data released by the Foreign Investment Agency (FIA), foreign direct investment (FDI) commitments during the first eight months of 2018 stood at USD 24.35 billion, reflecting an increase of 4.2% year-on-year. FDI disbursement also went up by 9.2% to USD 11.25 billion. More than 1,900 new projects received licenses. They had a total registered investment capital of USD 13.48 billion, up 0.2% from the first 8 months of 2017. During the same period, 736 operating projects received additional capital injections of USD 5.6 billion, 87.2% of capital injections during the January to August period of the previous year. USD 5.3 billion was spent by overseas players in acquiring shares in Vietnamese companies, a y-o-y spike of 51%.
Around 44% of the total investment flow or USD 10.7 billion, was directed towards manufacturing and processing. USD 5.9 billion went to real estate trading, while retail and wholesale received USD1.87 billion.
Japan continued to the largest FDI contributor, investing USD 7 billion or nearly 30% of funds during the period. South Korea and Singapore came in second and third, with investments of USD 5.2 billion (21.2%) and USD 3.5 billion (14%) respectively.
Hanoi and HCM City were the top two destinations for FDI, accounting for USD 5.9 billion (24.4%) and USD 4.4 billion (18.2%) of investment respectively. They were followed by the southern province of Bà Ria - Vũng Tàu which drew USD 2.17 billion, accounting for 9% of total investment.
The list of largest projects included Japanese Sumitomo Corporation’s smart city project in Hà Nội’s Đông Anh District, with an investment of USD 4.1 billion; a USD 1.2-billion polypropylene manufacturing plant from South Korean Hyosung Corporation in Bà Rịa - Vũng Tàu; additional funds of USD 1.2 billion for the Laguna project from Singapore-headqaurtered Banyan Tree Holdings; and the USD 600 million Lotte Mall Hanoi project.
(Source: Vietnam News)
Vietnam's Minister of Industry and Trade, Tran Tuan Anh and EU Commissioner for Trade, Cecilia Malmstrom, announced that the legal review for the FTA (Free Trade Agreement) between Vietnam and the European Union (EU) which started in late 2015 have concluded. Up to 99% of Vietnamese products exported to the EU would be tariff exempt.
The legal review process for the EU-Vietnam FTA (EVFTA) was initiatied after the completion of negotations in December 2015. Subsequently, the EU altered its regulations on the approval process for FTAs, separating investment protection and investor-state dispute settlement into a separate deal called the Investment Protection Agreement (IPA). The EVFTA and IPA have both been processed. The EU and Vietnam intend to process the ratification and implementation of the FTA as soon as possible.
The EU will provide support to Vietnam to continue building its legal system, assisting in the implementation of commitments in the FTA and raising competitiveness of small and medium-sized enterprises,in order to strengthen trade and investment collaboration.
Vietnam is the second country in the South East Asian region, after Singapore, to enter into FTA with the EU. The EU is currently the third largest trade partner of Vietnam and one of the country’s two biggest export markets. Bilateral trade between the two has increased 12-fold from USD 4.1 billion in the year 2000 to USD 50.4 billion in 2017. It is estimated the EVFTA could raise exports from Vietnam into the EU by USD 16 billion during first one or two years, with the number reaching USD 75-76 billion by 2028.
According to European Commission figures, the FTA could boost Vietnam's booming economy by as much as 15 % of GDP, while for the EU, the agreement is viewed as a stepping stone to a wider EU-south-east Asia trade deal.
(Sources: Vietnam News; Vietnam Express;PL English)
According to the latest economic update for Vietnam from the World Bank, issued in June 2018, cyclical increase of global demand along with recovery from the FDI (Foreign Direct Investment) and the private sector is driving economic growth. Growth is also supported by a shift of labor away from agriculture into more productive manufacturing and service sectors.
Real GDP grew by 7.4% during the first quarter of 2018, benefiting from a favorable external environment. The country's trade balance continued to improve on the back of strong trade performance and FDI inflows, leading to a current account surplus, estimated at 6.8% of GDP as of 1Q18. The exchange rate has been relatively stable and reserves have continued to rise, reaching about USD 63 billion in the first 4 months of 2018, equal to around 3.6 months of imports.
Public debt has stabilized since 2017, with an overall fiscal deficit of 4.5% of GDP, and the public-debt-to-GDP ratio declined to 61.4% in 2017 from 63.6% in 2016.
The World Bank projects a 6.8% growth in real GDP ifor the year, up from 6.5% in the previous forecast. The growth is projected to moderate to 6.6% in 2019 and 6.5% in 2020, due to an expected slowdown in global demand. Inflation is expected to remain around the 4% target set by the government.
The update highlights certain risks, such as slower progress in restructuring state-owned enterprises and banking sectors adversely impacting growth prospects. External risks include escalating trade protectionism, heightened geopolitical tensions and faster-than-expected monetary tightening. The report recommends reform priorities which could reduce trade costs and improve competitiveness. These include reducing trade costs related to time to comply with specialized control measures and procedures before and at the border; improving trade-related infrastructure and the quality of connectivity; building a competitive logistics service sector; and strengthening interagency coordination and partnership with the private sector.
(Sources: World Bank, Vietnamnews)
Vietnam has set several objectives in terms of improving its business environment through Resolution 19 issued last week. These objectives include improvement in the World Bank’s global Doing Business Index; directing capital towards start-up companies; and paying additional attention to business dispute and bankruptcy resolution.
Other areas of priority include elimination and simplification of at least half of redundant investment and business permit requirements; reducing the amount of domestic goods subjected to lengthy specialised product inspections by half; and reducing the percentage of imported goods subjected to prolonged customs clearance periods from from 27 per cent to less than 10 per cent. Finally the government will apply technological improvements to online administrative procedures and public services.
Resolution 19, which is in its fourth installment since 2014, aims to boost the private sector and enhance the the use of information technology in all economic sectors, ranging from public service and finance to healthcare and tourism.
Resolution 19 sets incrementally higher targets of reform each year and requirements on ministries to revise their internal procedures and relevant legal documents to spur business. The Ministry of Planning and Investment’s Central Institute for Economic Management (MPI/CIEM) and other relevant agencies are responsible for the implementation, working on issues such as simplifying procedures on taxes, social insurance, and construction permits while strengthening land and property rights and encouraging judicial administrative procedure reforms.
As a result of efforts implemented through Resolution 19, the 2017 Doing Business report recgonised Vietnam’s significant progress over the past year, jumping nine rankings, from 91 in 2016, to 82 in 2017. There were significant improvements in the Doing Business indicators on: protecting minority investors (up 31 places); trading across borders (up 15 places); paying taxes (up 11 places); and getting electricity (up five places, combined with a jump of 27 places last year). From 2016 to 2017, businesses in Vietnam reduced time for paying taxes from 872 to 540 hours, time to clear exports from 147 to 115 hours, and time to clear imports from 177 to 145 hours.
(Source: Viet Nam News)
The Mekong Delta province of Tra Vinh is luring investments on major projects in 2018, most of which are in high technology industry, organic agriculture, processing and technical infrastructure. By giving incentives, the province invites investors to implement high technology projects in highly competitive sectors, such as brackish water shrimp raising, coconut processing, cow breeding and beef processing, shipyard building and mechanic factory construction, and fruit and peanut processing factories. The province also aims to develop its tourism sector through establishment of nearly 65 hectares of cultural area called Ba Hon pond and a 30 hectares of hot spring resort Duyen Hai town.
In 2017, Tra Vinh attracted 49 projects, including five FDI projects worth US$ 143 million, and 44 domestic-funded projects with total capital of US$ 153.3 million.
Chairman of the provincial People’s Committee Dong Van Lam said "Tra Vinh will push ahead with administrative reforms and promote the one-stop-shop mechanism to create a friendly environment for investors. Moreover, the province will support businesses with land clearance, technical infrastructure investment, labour training, and promotion of trade, investment and tourism to help investors expand operations to create an important driving force for the local economic development breakthroughs".
The Vietnamese government has, in April 2018, released a resolution that will help to transform Vietnam into a modern industrial country by 2030. The government is targeting Vietnam’s industrial sector to contribute 40% to national GDP by 2030, of which the targeted share of the processing and manufacturing industry will be 30%.
Vietnam's success in building a significant industrial base has been brought about by a confluence of factors: a stable political climate; a government that has been dynamic in implementing reforms such as incentives and economic liberalization; a large and youthful population which form a low-cost labor pool. Vietnam has a population of 93 million, half of which are under the age of thirty. The country’s monthly minimum wage is at US$175 maximum, compared to China's US$317 maximum. Moreover, the recently signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is expected to further lift investment and trade in the country.
Vietnam’s impressive export growth is largely driven by Foreign Direct Investment (FDI). According to the General Statistics Office (GSO), in 2017, the value of Vietnam’s exports was estimated at $213.77 billion, a year-on-year increase of 21%. A major proportion of these exports, 72% originate from the foreign-invested sector. Moreover, as a testament to the country’s bullish outlook, in 2017, Vietnam attracted US$35.6 billion of FDI, an increase of 44.2% compared to 2016. Notably, a large amount of this FDI went into the processing, manufacturing and property sectors.
(Sources: Vneconomictimes; General Statistics Office; Hanoi Times; Viet Nam News)
A new Law on Foreign Trade Management came into effect in Vietnam on January 1 this year. Foreign-invested traders and branches of foreign traders in Vietnam are able to exercise their right to import and export in accordance with the Law and treaties to which Vietnam is a contracting party. The Ministry of Industry and Trade will announce the list of goods and the roadmap for exercising of the right to export or import these goods in accordance with treaties to which Vietnam is a contracting party.
These traders and branches may buy goods in Vietnam and export them abroad under export declarations made in their own names. It should be noted that he right to export in this case does not include the right to organize a network for buying goods in Vietnam for export. They may also import goods from abroad into Vietnam in order to sell them to traders that have the right to distribute such goods in Vietnam. This right does not cover the right to establish or join a goods distribution system in Vietnam.
Foreign traders without presence in Vietnam that are members of the World Trade Organization and other countries having bilateral agreements with Vietnam shall have the right to export and import according to the provisions of Vietnamese law and treaties of which Vietnam is a member.
(Sources: Vietnam Law and Legal Forum; Thu Vien Phap Luat)
According to the Vietnam Foreign Investment Agency, Vietnam attracted VND 812 trillion (USD 35.88 billion) in foreign investment in 2017. More inbound investment is still expected to go into Vietnam in the coming years as the Vietnamese government continues to privitize state-owned enterprises and liberalize the market in different sectors.
One of these sectors that will see a major reform is logistics. By February 2018, a decree will be officially effective which will allow foreign companies to invest in the country’s logistics sector, either by establishing wholly-owned companies, or by taking a stake of up to 49% in an existing local business. Specifically, 17 subsectors of the logistics industry will be opened. These include services for multimodal transport, customs brokerage, technical analysis and inspection, warehousing, wholesale and retail support, and other related services.
The decree will hopefully help lower the logistics costs in the country, which is a major bottleneck in the progress of the Vietnamese logistics sector. Logistics costs in Vietnam is about 25% of its GDP, while it's only 9.5% in the US, 11% in Japan, and 16% in South Korea. According to Vietnam Logistics Business Association (VLA), this high logistics costs is attributed to the limited size of Vietnam's logistics players, lack of significant experience and qualified human resources, and limited application of information technology. In addition, many local logistics firms have yet to establish a close connectivity with import-export enterprises, while they face difficulties due to a lack of infrastructure that connects ports with warehouses, as well as the lack of specialized freight forwarding centres.
Opportunity-wise, according to VLA, Vietnam's logistics sector is growing strongly at a rate of 15-16% per year. The value of the Vietnamese logistics market is estimated to contribute to about a quarter of the country's GDP, much higher than the manufacturing industry. Moreover, with total import-export revenue of over USD 400 billion in 2017, and a high economic growth rate over the past few years, the logistics sector is considered to have a large room for expansion and development.
(Sources: Thu Vien Phap Luat; HKTDC Research; Nhan Dan Online)
Vietnam's economy, valued at nearly USD 220 billion in 2017, is targeting to achieve USD 300 billion by 2020. The country's economy, which grew at 6.7% in 2017, is very stable, with inflation under control, exports expanding, and a robust industrial sector. FDI is surging at USD 35 billion, an increase of 30% from the previous year, while the number of newly-established enterprises in 2017 is expected to exceed a record 120,000 enterprises, with a registered capital of nearly USD 132 billion.
At a recent event, the Vietnam Business Forum, the Prime Minister emphasized that the government will prioritise investment in infrastructure towards smart and efficient connectivity to improve transparency, and help businesses cut cost and boost competitiveness, while encouraging capital flow into education and technology. Considering stable macroeconomics and society a competitive edge, the government will continue restructuring the economy, overhauling the state-owned business sector, handling bad debts, controlling budget deficit and public debts, reforming the taxation system, and improving social welfare policy. It pins its hope on a new generation of businesses that are capable of competing at home and abroad.
(Sources: World Bank; Dantri; Voice of Vietnam)
Strong export growth in Vietnam in 2017 is attributed to the expansion of production of foreign-invested businesses. This sector’s export turnover reached USD 125.5 billion in the first 10 months of the year, a year-on-year increase of 22.1%. Export turnover of the domestic economic sector totaled USD 48.2 billion, up 17.2% compared to a year ago. Vietnam’s total export turnover is expected to hit USD 200 billion for 2017, as compared to USD 169.2 billion in 2016.
Vietnam’s imports in the first 10 months of the year reached USD 172.5 billion, an increase of 22% compared to the same period last year. Many large groups and businesses, such as Samsung, Vietnam Electricity and Viettel have strengthened imports of machinery and equipment to serve their operations in Vietnam, leading to a strong increase in import turnover.
(Source: Vietnam Economic News - Ministry of Trade & Industry, Vietnam)
In the first nine months of 2017, Vietnam attracted an unexpectedly high amount of foreign investment capital worth USD 25.34 billion. The Ministry of Planning and Investment predicts foreign investment in Vietnam will continue to increase to USD 28 billion until the end of this year. Vietnam is regarded as an attractive investment destination, and its commitment to enhance its infrastructure and improve its business climate are seen as driving forces to lure foreign investors to establish a business in the country.
The manufacturing and processing industry accounts for the highest proportion of FDI (49.6% of the registered FDI), followed by the electricity production and distribution sector (21%) and mining (6.2%). The biggest investments in Vietnam came from investors from Korea, Japan and Singapore, with the respective investments amounts being USD 6.31 billion, USD 5.91 billion and USD 4.14 billion.
(Sources: Vietnam Business News; Vietnam Investment Review)
The Vietnam and European Union Free Trade Agreement (EVFTA) is under final legal review to be ratified in early 2018. The Framework Agreement on Comprehensive Partnership and Cooperation of this agreement has already taken effect. Since the negotiations on EU-Vietnam Free Trade Agreement (EVFTA) concluded in 2015, the share of Vietnam in total trade between the EU and ASEAN has increased significantly. This positive sign has led to more discussion on bilateral trade agreements with European countries in the recent years.
To be able to pursue the FTA negotiations, Vietnam is amidst the ratification of the remaining three conventions of the International Labor Organization (ILO) that tackles the elimination of forced labor and collective bargaining agreements. In addition to this, Vietnam has amended its national labor laws in order to align with the FTA's conditions.
On the other hand, Vietnam has also discussed bilateral and multilateral agreements with other European countries, such as with the Swiss government in the process of negotiating an FTA between Vietnam and the European Free Trade Association (EFTA) that includes four countries: Switzerland, Norway, Iceland, and Lichtenstein. Vietnam is also in the talks with the United Kingdom for an FTA, in which an official from the UK’s Foreign and Commonwealth Office affirmed the latter's intention to sign a bilateral trade agreement with Vietnam after it leaves the European Union.
(Source: Vietnam Business News, The Voice of Vietnam)
In the first seven months of 2017, Vietnam has attracted new multi-billion dollar projects worth more than USD 22 billion in FDI, compared to USD 24.4 billion in the year of 2016. PwC affirmed that Vietnam has surpassed Thailand and Malaysia to become the most attractive destination for investment in ASEAN.
According to Foreign Investment Agency (Ministry of Planning and Investment), there are 94 foreign investors in Vietnam in the first half of the year. Manufacturing/ processing and electricity distribution are two sectors that attract most FDI with total capital of USD 10.83 billion and USD 5.25 billion respectively. New outstanding projects this year include a USD 4 billion agreement between BRG Group and Sumitomo Group to develop a smart city, additional USD 1 billion from Formosa into its existing Ha Tinh Steel project, USD 2.5-billion expansion of Samsung Display and two thermal power plants which are worth more than USD 2 billion each. It’s also worth noting that Vietnamese and the US businesses have signed a number of business deals up to USD 15 billion, during the visit of Prime Minister Nguyen Xuan Phuc to the United States in May 2017.
The fastest growth projected in Asia, young population and low labor cost are the factors that make Vietnam attractive to foreign investment, according to PwC. Moreover, the rapid divestment of state-owned companies together with Government's permission to establish 100% foreign-owned companies in almost all sectors of the Vietnamese economy make upcoming years the ideal time to enter this promising market.
(Sources: PwC; Ministry of Planning & Investment; Vietnamnet)
The Vietnamese government targets a GDP growth rate of between 6.4% and 6.8% in 2018. This is mainly driven by growth in the manufacturing, construction, trade, banking, and tourism sectors. Other positive trends contributing to this forecast is improving the business environment in Vietnam, especially the Government’s resolve in removing difficulties for firms looking to enter the local market, speedy international economic integration, increasing foreign direct investment and private investments, and better global economic and trade growths outlook for 2018. The Prime Minister has signed a directive making it clear that the government must reorganize the entire bureaucracy, cut unnecessary expenses and prioritize investment capital in 2018.
(Sources: Vietnam News, Vietnam Net)
According to the Director of the Provincial Department of Planning and Investment, the south central province of Binh Dinh sees a surge in both domestic and foreign investments. The province attracted 47 domestic projects, an increase of 12 projects against the same period in 2016 and lured six foreign direct investments projects, a 50% increase against the same period in 2016.
Binh Dinh will continue to create activities to attract more investments and build up database for investment promotions both in Vietnam and other countries such as Japan, South Korea, Singapore, Thailand, U.S.A and the EU.
(Sources: Today, The Star Online, Reuters)
According to Grant Thornton Vietnam survey, Vietnam is ranked second as the most attractive investment destination in South East Asia following Myanmar. The following are the critical investment obstacles in Vietnam - corruption, national budget constraints, poor management standards, infrastructure bottlenecks and a lack of competitiveness in small and medium enterprises.
Vietnam, however, still poses a positive outlook for foreign investors on accounts of its human resources, low labor costs and growing middle class consumption.
(Sources: Vietnam News, Hanoi Times)
During a business meeting with delegation led by Senior Vice President of the U.S.- ASEAN Business Council (UABC) Michael Michalak, Vietnam is viewed as an attractive business destination for foreign investment even with the abolition of Trans-Pacific Partnership.
The U.S. companies are interested in investing in thermo and wind power, animal feed manufacturing and distribution, chemicals, agriculture insurance, micro-finance, information technology, movies and start-ups in Vietnam.
(Sources: Vietnam Economic Times, Embassy of the Socialist Republic of Vietnam in the U.S.A)
A report released by PricewaterhouseCooper (PWC) predicts that Vietnam will become the 20th largest economy in the world by 2050, exceeding Thailand, Canada, Italy, with an average annual GDP growth rate of 5%. Vietnam’s current position is at 32nd and could climb up to 29th in 2030 and to 20th in 2050. However PwC is aware that with the current volatile world economy situations such as U.K. Brexit and the U.S. new presidency, there will be more disruptions to the global economy until 2050. Thus Vietnam will need to diversify and develop a more stable economic to achieve continuous success as an emerging economy.
(Sources: Vietnam Net Bridge, Vietnam News, VN Express)
2016 has been a great year for Vietnam, with a growth of 6.2% which is due to increase in exports and decrease in imports resulted from the weak domestic demand. However, Vietnam will face a greater challenge in 2017 as the government is targeting a GDP growth rate of 6.7%.
Many economists are not confident with the new target being set as they feel it will be too ambitious. In 2017, capital flowing into Vietnam may change the trade direction due to an increase in prime interest rate by the FED and the setback due to the U.S. abolition of the Transpacific Partnership (TPP) agreement.
(Sources: VietNamNet Bridge, Vietnam Briefing)
Vietnam's economy is forecast to grow 6.2% in 2016, helped by a manufacturing and building boom, according to the General Statistics Office in Vietnam. While this is lower than 2015's 6.7%, it is still one of the fastest growing economies in the world.
According to the GSO, other than an unfavourable global economy, other factors that have contributed to the contraction in Vietnam’s economy include adverse weather and a marine environment disaster:
Industries that saw a slowdown include mining and agriculture, while sectors that expanded include construction and services, which grew by a sizzling 7.6% and 7% respectively.
(Sources: VoA News, Reuters)
During The Economist‘s ‘Vietnam Summit 2016’, Vietnam’s deputy prime minister and minister of foreign affairs discussed the challenges the country faces as it transitions from a largely agricultural country to an industrialized nation. Vietnam’s goal is to reduce the agricultural labour force from 70% to 40% of the total workforce. This meant creating 1.5 million new jobs every year, which will be difficult as unemployment will likely increase during the process.
Vietnam intends to follow a new growth model and will pay more attention to domestic demand and markets to stimulate production and consumption. This is not a detour from Vietnam’s export-driven growth of the last decade, as trade continues to be an important factor in Vietnam’s economy and a key driver of growth.
(Sources: AEC News Today, Vietnam News)
In 2015, Vietnam and EU signed a Free Trade Agreement (FTA), which is presently awaiting ratification. The agreement is one of the most ambitious and comprehensive FTAs that the EU has ever concluded with a developing country. The FTA will significantly reduce tariffs both sides:
The agreement shows Vietnam's dynamic approach in pursuing international integration for the good of its citizens and will help Vietnam to integrate successfully as a market economy into the global economy.
(Sources: Vietnamnet Bridge, Government Offices of Sweden)
Per capita income in Vietnam has gone from around USD 100 in the 1980s to about USD 2,100 in 2015. Using the 2011 Purchasing Power Parity (PPP) line of USD 1.90, the number of people living in extreme poverty has dropped from about 50% in the early 1990s to 3% in 2012.
With reforms, the Southeast Asian nation could achieve upper-middle income status by 2035 with per capita income of more than USD 7,000, in range of Malaysia or South Korea in the mid-2000s. Reforms include improving productivity and private-sector competitiveness, promoting equity and social inclusion and improving public sector effectiveness.
Knight Frank, in its Wealth Report 2016, reports that Vietnam now has about 12,000 millionaires with USD 1 million or more in net assets, a number which has increased by 354% in 10 years, from 2005 to 2015.
(Sources: The World Bank, Thanh Nien News)
Matercard has released its Mastercard Index™ of Consumer Confidence (H1 2016). Between June and July 2016, 8,746 respondents, aged 18 to 64 in various markets, were asked to give a six-month outlook on five economic factors including the economy, employment prospects, regular income prospects, the stock market and their quality of life. The Index is calculated on a scale of 0 to 100, with zero as the most pessimistic, 100 as the most optimistic and 50 as neutral.
After its recent elections in May, Philippines also saw a large improvement of 12.9 points to put it in extremely optimistic territory at 95.2 points which its highest level since the survey series on the Philippines began in 1995.
Vietnam (94.9, +0.7) is in extremely optimistic territory, posting an increase in overall confidence, with consumers expressing optimism about economic prospects over the next six months.
Indonesia (61.8, -14.7) recorded the largest decrease in confidence levels of all markets surveyed. While all five components saw declines, Employment (-26.9) and the Economy (-22.5) registered particularly large drops.
Singapore saw a -10.7 drop to 33.6. Three of the components fell by more than 10 points: Quality of Life (-14.5), Regular Income (-12.0) and Employment (-11.0).
Thailand continues its two year slide since H1 2014 with confidence in the Economy (-11.3) registering the largest decline among the five components in this survey.
Malaysia (41.4) halted its two year slide with a 9.5 points improvement with increases across all five components and a more than 10 points gain in outlook on the Stock market (+12.4) and Quality of Life (+11.4).
The Vietnamese government has released an action plan for socioeconomic development for the period 2016-2020, which calls for concrete measures to improve macroeconomic stability by restructuring the economic growth model, promote a more conducive business climate, encourage a highly competitive industrial sector and heighten financial security. Some of the key steps the country will take include reviewing and updating state mechanisms and policies toward a better business environment and greater business freedom, administrative reforms for transactions involving land, investments, construction and the environment.
The Vietnamese government will supervise the granting of investment licenses to foreign investors and will work towards dismantling obstacles to the entry of foreign players to make Vietnam a more attractive investment destination. The action plan also covers ways to improving productivity, inflation control, tax reforms, among others.
(Source: Port Calls Asia)
The economy grew 5.5% on an annual basis over the first half of the year. The Nikkei Vietnam Manufacturing Purchasing Managers’ Index for June was 52.6, pretty much unchanged from May’s 52.7, momentum being sustained by continued output growth fueled by substantive increase of new orders from both home and abroad. Industrial output rose 7.4% over the same month in 2015, below the 7.8% rise in May, deceleration due to larger contraction in mining and quarrying and a softer expansion in the utilities component. Inflation Rate was 2.40 while Core Inflation Rate increased 1.88% over the same month in 2015. Consumer Price Index was 102.52. Both Import and Export figures increased over those in May. All this helped offset the negative effect of underperforming agricultural sector. Focus Economics’ panelists see the economy rising to 6.4% in 2016.
(Source: Focus Economics)