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

Israelis Quietly Expand Enclave in Palestinian District of Jerusalem

Estimated 500 settlers, armed or protected by paramilitary police, live in Silwan among 50,000 Palestinians More

Video US, Iran Face Similar Challenges in Syrian Fight Against IS

Both Washington, Tehran back fighters battling Islamic State militants in Iraq -- but in Syria they support opposing sides in country’s civil war More

China Boosts Efforts to Help Afghan, Regional Stability

Observers say China’s increased regional involvement are due to concerns that Afghan instability and the presence of anti-China militants in Pakistani border areas could fuel Xinjiang troubles 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.
China Political Meeting Seeks to Improve Rule of Lawi
X
William Ide
October 20, 2014 10:23 AM
China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Nigeria Agrees to Cease-Fire With Boko Haram

Islamist militant group Boko Haram and the Nigerian government have agreed to a cease-fire. The Nigerian government issued an order Friday, telling all military chiefs "to comply with the cease-fire agreement in all theaters of operations. Why now and the significance of the agreement are questions on some people’s minds. VOA's Mariama Diallo reports.
Video

Video Kobani Fighting Sends 400,000 Refugees to Turkey

The offensive by Islamic State militants against the northern Syrian city of Kobani has caused hundreds of thousands of residents to flee to Turkey. They receive help from Turkish authorities and individuals, but say much more is needed. VOA’s Scott Bobb reports from the town of Suruc a few kilometers from the border.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.
Video

Video Syrian Defector Leaks Shocking Photos of Torture Victims

Shocking photographs purporting to show Syrian torture victims are on display at the U.S. Holocaust Memorial Museum in Washington. The museum says the graphic images are among thousands of photographs recently smuggled out of Syria by a military policeman-turned-defector. As VOA reporter Julie Taboh reports, the museum says the photos provide further evidence of atrocities committed by the government of Syrian President Bashar al-Assad against its own people.
Video

Video Drought-Stricken California Considers Upgrading Water System

A three-year drought in California is causing a water shortage that is being felt on farms and cities throughout the state. As VOA's Mike O’Sullivan reports, water experts, consumers and farmers say California needs to make changes to cope with an uncertain future.
Video

Video TechShop Puts High-tech Dreams Within Reach

Square, a business app and card reader, makes it possible to do credit card transactions through cell phones. But what made Square possible? VOA’s Adrianna Zhang and Enming Liu have the answer.

All About America

AppleAndroid