Vietnam’s star glows ever brighter
Once an economic backwater, the Southeast Asian nation has undergone a transformation over the past decade, yet challenges remain to sustain the growth momentum
Facing a number of critical economic challenges just a decade ago, from severe inflation to the devaluation of its currency, Vietnam has slowly risen from the depths of the global financial crisis to become one of the most dynamic economies in the world.
In 2018 alone, the Southeast Asian country recorded an impressive GDP growth of 7.1%, the second quickest pace of expansion in Asia, falling just behind India but more rapid than China. Some economic forecasts predict that the country will grow at a rate somewhere between 6%-6.5% in the medium term.
With the growing trade tension and tit-for-tat tariffs between the United States and China, Vietnam has found itself in an advantageous position to benefit from trade diversion. Having been the manufacturing hub for major companies such as Samsung for several years, the country is being widely viewed as the next key location for global exports. Vietnam is already the second-largest electronics exporter within ASEAN, placed behind Malaysia, exporting US$80 billion worth of electronics goods in 2018.
Foreign direct investment (FDI) continues to be a bright spot for the country as well, receiving inflows amounting to around US$14.1 billion in 2017, according to the ASEAN Investment Report 2018. Japan and South Korea are the major sources of FDI for Vietnam, followed by Singapore and China. In fact, this May 2018 South Korea’s conglomerate SK Group agreed to pay US$1 billion for a 6.1% stake in Vingroup, one of the biggest private companies in Vietnam.
But despite these undoubted achievements, the country has some hurdles to overcome, including the need for government-led reforms to combat the country’s debt-laden domestic banking sector. Though the sector is expected to implement Basel II in 2020, the Vietnamese banking system needs to address the system’s capital buffers.
These topics among others will be the main focus of The Asset’s event in Hanoi, Vietnam, which takes place today. To see live coverage from the event please visit our twitter page by going to @TheAssetMag.
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11 Jun 2019