Vietnam can be one of many few nations worldwide to report optimistic financial progress in 2020 regardless of a worldwide collapse in commerce, journey and funding brought on by the Covid-19 pandemic.
The Worldwide Financial Fund predicted this week that Vietnam’s gross home product (GDP) will develop by 2.4% in 2020, following a 2.6% year-over-year financial increase within the third quarter. There have been a number of essential push components behind Vietnam’s relative financial success.
In June, Vietnam ratified a free-trade settlement with the European Union, representing solely the second Southeast Asian state to take action. Final week, Hanoi performed host to a regional summit the place pen was put to paper on the Regional Complete Financial Partnership, the world’s largest, Asia-centric commerce pact which Vietnam is now a member.
Vietnam’s world commerce is already brisk. Exports grew by 4.1% throughout the first three quarters of the yr, in contrast with the identical interval final yr, while its exports to america rose by 23% over the identical interval, based on the Ministry of Business and Commerce.
Vietnam’s relative financial success is considerably stunning contemplating that the Communist Occasion-led authorities has constantly maintained that it gained’t put financial restoration forward of public well being.
So far, Vietnam has recorded lower than 1,300 Covid-19 circumstances and 35 deaths. Authorities responded shortly and effectively when a second-wave broke out within the coastal metropolis of Danang in late July, following a calming of strict lockdown restrictions imposed in February.
“We’ve performed a very good job in containing the virus, paving the best way for reviving financial actions,” Prime Minister Nguyen Xuan Phuc stated earlier than the Nationwide Meeting, the nation’s rubber-stamp lawmaking physique, in mid-October.
Phuc even engaged in just a little gloating. “This proves our efforts have paid off given the truth that many economies in Southeast Asia have attained unfavourable progress as a result of affect of the novel coronavirus pandemic,” he additionally stated final month.
He’ll seemingly skip over the actual fact, nevertheless, that Vietnam now gained’t be capable to obtain its financial “five-year plan” of 6.5-7% progress between 2016 and 2020, which is able to now common out at lower than 6%.
Vietnam is just not solely the envy of its Covid-hit Southeast Asian neighbors, all of which is able to face extreme financial contractions this yr and solely marginal recoveries in 2021, but it surely has additionally earned worldwide plaudits for its resilience.
The Lowy Institute’s Asia Energy Index printed final month discovered that Vietnam’s worldwide picture was one of many Asia-Pacific’s finest improvers this yr, with its rating on diplomatic affect gaining six proportion factors.
“The nation registered the biggest enchancment in relative energy of any [Asian] nation – gaining 1.3 factors in 2020,” the report said.
The Lowy Institute additionally discovered earlier this yr that Vietnam had the third-highest enchancment in worldwide popularity due to its dealing with of the Covid-19 pandemic, trailing solely Taiwan and New Zealand.
The uptick in Vietnam’s worldwide picture is concomitant with a noticeable optimistic shift in media protection of the Communist Occasion’s governance, drowning out earlier studies that targeted on its persistent assaults on journalists, activists and social media customers.
In an article printed by International Coverage in Might, the previous Vietnam-based journalist Invoice Hayton famous that one purpose why “Vietnam’s illness management mechanisms have been so efficient, and the explanation why they’re unlikely to be copied, is that they’re the identical mechanisms that facilitate and shield the nation’s one-party rule.”
Reuters reported this week that Hanoi is as soon as once more threatening to shut down Fb within the nation because of its obvious unwillingness to censor sufficient content material crucial of the Communist Occasion, regardless of Fb’s guarantees earlier this yr to take action.
In some methods, Vietnam had benefits over its Southeast Asian neighbors. Very similar to China, its GDP progress is pushed by manufacturing and exports, that are simpler to keep up throughout a pandemic than sectors reliant on home consumption.
The service sector accounted for 45% of Vietnam’s GDP final yr however grew by simply 3.2% within the first quarter of 2020, down from 6.5% in the identical interval final yr.
Vietnam’s financial system can be much less dependent than different Southeast Asian states on tourism, which accounted for 9% of its GDP in 2018, in contrast with 32% for Cambodia and 20% for Thailand. It has thus confronted much less stress as a result of collapse of worldwide journey.
Vietnam additionally went into 2020 on the again of two years of strong international direct funding flows after the US-China commerce battle prompted many international producers to maneuver their operations to Vietnam, the place commerce hyperlinks to the US are extra steady and fewer tariffed.
Nevertheless, the IMF in its report this week famous that Hanoi’s “decisive steps to comprise the well being and financial fallout from Covid-19” have been a main purpose for optimistic financial progress this yr, a recognition of the Occasion’s fast and competent response, which has additionally been carried out with uncharacteristic transparency.
The IMF expects that restoration to hold over strongly into 2021 with progress of 6.5% “as normalization of home and international financial exercise continues,” it said in its report.
Within the first 9 months of the yr, Vietnam recorded $21.2 billion in new international funding tasks and abroad capital injections, equal to round 80% of the funding it acquired over the identical interval final yr, a bumper yr for funding.
Most of the investments made this yr gained’t start operations till 2021 or later, which additionally factors to a wholesome financial restoration.
Virtually one-fifth of the complete international capital funding this yr got here from a $4 billion funding from Singapore’s Delta Offshore Vitality for a brand new liquefied pure gas-fired energy plant in Bac Lieu province, which gained’t be accomplished till 2024.
As a part of Hanoi’s ambition to shift from low-valued added manufacturing to higher-end tech manufacturing, Vietnam has additionally seen this yr key funding tasks from worldwide electronics corporations.
Japan’s Furukawa Automotive Techniques invested in a brand new plant to fabricate electrical wires for automobiles final month, whereas in September Apple’s native associate invested $1 billion in three new manufacturing tasks.
Earlier within the yr, Apple introduced that its new line of over-ear headphones can be produced in Vietnam.
Smartphones, electronics and computer systems topped Vietnam’s exports in worth and share within the first six months of the yr, based on a latest briefing from Dezan Shira & Associates. Electronics exports to the US have been up greater than quarter within the first 9 months in contrast with the identical interval in 2019.
A political shift within the US may present extra good financial information for Vietnam. Outgoing US President Donald Trump has maintained principally cordial relations with Vietnam, although unpredictable outbursts and threats have put Hanoi on a again foot.
Trump’s threats to impose sanctions on Vietnam due to its massive commerce surplus with the US caught many in Hanoi off-guard. To ease these tensions, the Vietnamese authorities has signed a number of less-than-economically-prudent offers to import extra US items.
Simply months after handpicking Hanoi to be the host of his peace-talks with North Korean chief Kim Jong-un in early 2019, Trump derided Vietnam because the “worst abuser” of US commerce. In October, the US opened an investigation into attainable Vietnamese forex manipulation.
Hanoi will seemingly discover a extra dependable and reliable associate in President-elect Joe Biden, who is just not anticipated to be as obsessed as Trump with decreasing Vietnam’s commerce surplus with the US.
And whereas a Biden administration is predicted to place larger precedence on human rights points, most analysts count on Vietnam to get a relative move from Washington, simply because it did when Biden was vice chairman below the Barack Obama administration.
In January, across the identical time that Biden is to be inaugurated in Washington, 1000’s of Communist Occasion delegates from throughout Vietnam will converge in Hanoi for the occasion’s Nationwide Congress, which takes place each 5 years
Some Vietnam-watchers count on Prime Minister Phuc to turn into the Communist Occasion’s subsequent general-secretary, a transfer that may elevate his financial reformist wing of the occasion, though Phuc is not at all a liberal or political reformer.
In what seems now to be a two horse-race, his important challenger is the top of Communist Occasion’s Secretariat Tran Quoc Vuong, a loyalist of present Occasion chief Nguyen Phu Trong and his extra conservative wing which is seen to be extra skeptical about fast-paced financial reform.
Ought to Phuc take the Occasion chief function, this will likely additionally open the best way for one more economic-minded official to turn into prime minister, the nominal head of presidency.
Whether or not there’s continuity or change to each US-Vietnam relations and Vietnam’s home politics is a matter of intrigue, however what is for certain is that the nation’s financial system will seemingly once more be the envy of the area in 2021.