in Southeast Asia.3
Examples include the
construction and expansion of 39 ports, an improved network of expressways across the country − including the expressway linking North and South Vietnam that is currently under development – and the new Long Thanh International Airport, on which construction began at the end of 2020.
Infrastructure investments in sanitation and dramatic changes to the national energy mix are also laying the groundwork for long- term prosperity. Within two years, Vietnam smashed its targets for the installation of solar-powered generation which, alongside advances in wind power, means 10% of its energy generation is now renewable. Privatisations and other supply-side reforms have continued apace since the distant memory of the default by state-owned shipbuilder Vinashin in 2010.
Vietnam also has a sound legal system and strong rule of law, including strengthened consumer protection laws. The ease of doing business has also improved, with the country rising from 99th position in 2013 to 70th in 2020, according to the World Bank’s annual global ranking.4
In January 2021, the
Organisation for Economic Co-operation and Development praised Vietnam for providing a business environment “conducive to business growth” that has “constantly improved”.5
Fiscal and monetary levers have been managed prudently. The State Bank of Vietnam has focused on reducing its external borrowing and its domestic credit growth,6
Cat Lai Port in Ho Chi Minh City is one of the largest container terminals in Vietnam
a discipline rewarded by the main
credit rating agencies continuing to classify Vietnam as ‘stable’. “The government has recognised the challenge of high debt to GDP,” comments Quang. “For the past five years it has focused on reducing the deficit and external borrowing to get this down – we are close to 50%, which is very welcome to foreign investors.”
Currency interventions have kept the dong within a narrow band, which has allowed reserves to be accumulated while maintaining macroeconomic stability.7 Vietnam also enjoys low inflation and interest rates, and an increasingly vibrant domestic capital market.
We have a very stable political environment Huynh Buu Quang,
Chief Country Officer for Vietnam, Deutsche Bank
A wealth of natural and human resources The ability to sustain a high annual growth rate over three decades is − like the FDI − underpinned by a wealth of natural resources (including ebony, teak, oil and fish). A young, upwardly mobile workforce (55% of all Vietnamese are under 35 years old) supports robust domestic demand – and output. The population is the third largest in ASEAN and 15th largest in the world and, at 96.5 million, exceeds that of Myanmar, Malaysia, Laos and Singapore combined. Furthermore, Vietnam itself sits at the gateway to an even greater market: China’s 1.4 billion people.
Structural changes to the economy, such as the movement of workers from agriculture into manufacturing – and from the countryside to towns and cities – have also fuelled productivity growth. Pre-pandemic,
10
roughly one million people were moving to urban areas annually and, with 66% of the population still living in rural areas,8 growth driver has some way to play out.
this
“From an ASEAN perspective,” adds Deutsche Bank’s Burkhard Ziegenhorn, Head of Global Transaction Banking and Corporate Bank Coverage for ASEAN, “Vietnam is the fastest-growing economy, with a very young population that started off from a low base in terms of GDP per capita.”
He reports that the fastest-growing corporates in the ASEAN portfolio are those in sectors that cater for this upwardly mobile consumer group. In other words, there is a hungry, fast- moving consumer goods market in Vietnam’s growing middle class, with high demand for telecommunications, mobile payments and banking solutions that can cater to an unbanked and youthful population; while energy, engineering and infrastructure projects are also needed for a country with a growing urban population and ambitious targets for green growth.
Images: Alamy
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