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

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

1855 Slave Brochure Starkly Details Sale of Black Americans

Document lists entire families that were up for sale in New Orleans, offering graphic insight into the slavery trade More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries 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.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs