News / Asia

Vietnam's Economy a Rising Star After Global Slump

Vietnam's economy is bustling, having bounced back from the global downturn due in large part to the government's stimulus package.

The Communist Party has set a target of 8 percent average growth a year over the next five years. The Ministry of Planning and Investment expects growth of 7.5 percent in 2011, up from 6.5 percent this year.

Vietnam's economy has weathered the worst of the global downturn, according to Danny Armstrong, Vietnam director for Australia's Commonwealth Bank.

"If you consider what we've just come through - the worst global financial circumstances in 80 years - the Vietnamese economy last year grew at 5.3 percent when most economies - most developed economies were in reverse - I would suggest the outlook for growth is pretty bright," said Armstrong.

Economic stimulus plan

The government introduced an $8.5 billion stimulus package to reduce the damage from the global financial crisis in 2008. And monetary authorities have depreciated the currency, the dong, which makes exports more competitive overseas.

The stimulus package played a key role in preventing a recession, said Ayumi Konishi, country director for the Asian Development Bank. But Konishi believes it is time to begin reducing the support.

"The government should be able to phase out the first round of this stimulus package," said Konishi. "That should really do what was intended to do. The important thing is the stimulus package also increasingly includes large portion of the infrastructure support or the infrastructure investment."

Weak infrastructure

Many in business say the government needs to focus on improving its infrastructure. Roads, ports and power plants can not keep up with rising demand.

And that problem is a big one for business, said the Commonwealth Bank's Danny Armstrong.

"I guess the key complaint has been a lack of reliability of electricity over the last year or two. There's been a lot of comment about that in the media; still requirements there to improve port facilities. Roads … certainly in Ho Chi Minh City, if you have a look at traffic on the roads, the road infrastructure is growing a bit so, [but] infrastructure still has some way to go," he said.

Vietnam is working on the problems. Thirty new coal-fired power plants are expected to start operating soon, and there are plans to build more.

Currency devaluation poses risks

But some of the government's actions lead to other worries, and economists say the country still faces economic challenges, including inflation and concerns over corruption and government controls.  The decision to depreciate the dong has prompted worries about inflation. And while it was intended to boost exports, a weaker currency raises prices for imports.

And like other emerging economies, Vietnam has seen capital rapidly flowing into its markets from slower-growing countries.

Real estate prices, for instance, have risen rapidly in the past year, adding to concerns of bubble.

Nagesh Kumar, the chief economist at the United Nations Economic and Social Commission for Asia and the Pacific, says the inflows reflect rising real estate prices elsewhere in Asia including China, India and Indonesia.

"This is an issue which is affecting most of the Asian emerging economies. This is because of the crisis there were injections of liquidity all across the world and that is now finding its way to Asian economies because they are doing so well. Because of these capital flows the property prices and stock prices are going up," said Kumar.

Vietnam's Ministry of Construction says this year real estate accounted for almost 22 percent of all foreign direct investment in the country.

Foreign investment

Vietnam benefits from rising costs in China, a dynamic which forces some companies to shift their operations, analyst Armstrong points out.

"If you don't want to have all your eggs in the China basket, then think about Vietnam as an alternative, that has a cheap but young and trainable workforce in a relative sense, has political stability, has relatively favorable investment conditions and a welcome mat out for foreign investment," he said.  

Overall foreign investment is recovering slowly after dropping during the global slowdown. For the first nine months of the year, foreign direct investment was 12 percent lower than it was a year ago, at $11 billion, well under the government's target for 2010 of $22 billion. Vietnam's main investors are from Taiwan, South Korea, Japan, Malaysia and Singapore, as well as the United States and Europe.

Some foreign investors are worried because the international credit ratings agency Fitch downgraded Vietnam's rating. Fitch blamed inconsistent state policies, external finances, and weak domestic banks for the downgrade.

Also foreign investors, in regional surveys, have expressed concern over corruption and intellectual property rights in Vietnam. In addition, they say that Vietnam's complex business laws undermine its attraction to investors.

You May Like

Analysis: China Raises Hong Kong Rhetoric to Tiananmen Level

A front-page commentary in The People’s Daily called the current demonstrations 'chaos,' the same word Party officials used 25 years ago to describe the Tiananmen Square protests More

US Airstrikes Anger Syrian Civilians Fleeing Their Homes

Pentagon officials say they have seen no credible evidence of civilian deaths caused by US airstrikes against Islamic State militants More

Child Sexual Exploitation to Worsen in SE Asia

Southeast Asia’s planned economic integration is a key step for boosting the region’s productivity, but carries downsides as well More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
The Legacy of Jimmy Carter: The Preacher from Plainsi
X
October 01, 2014 10:45 AM
It is common in the United States to see tourists flock to sites associated with America's presidents. Some are privately owned and others are run by the National Park Service or the National Archives -- but most have helped draw business and people into the towns and cities where they are located. As VOA’s Kane Farabaugh reports, there is one particular presidential hometown that is unique in what it has to offer those who make the trip.
Video

Video The Legacy of Jimmy Carter: The Preacher from Plains

It is common in the United States to see tourists flock to sites associated with America's presidents. Some are privately owned and others are run by the National Park Service or the National Archives -- but most have helped draw business and people into the towns and cities where they are located. As VOA’s Kane Farabaugh reports, there is one particular presidential hometown that is unique in what it has to offer those who make the trip.
Video

Video Hong Kong Protests Draw New Supporters on National Holiday

On the 65th anniversary of the founding of Communist China, Hong Kong protesters are hoping to stage the largest pro-democracy demonstration since the 1989 Tiananmen protests. VOA's Brian Padden visited one of the protest sites mid-day, when the atmosphere was calm and where the supporters were enthusiastic about joining what they are calling the umbrella revolution.
Video

Video India's PM Continues First US Visit

India's prime minister is on his first visit to Washington, to strengthen political and economic ties between the world's oldest and the world biggest democracies. He came to the U.S. capital from New York, the first stop on his five-day visit to the country that denied him an entry visa in the past. From Washington, Zlatica Hoke reports Modi seemed most focused on attracting foreign investment and trade to increase job opportunities for his people.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid