REGIONAL FOCUS: VIETNAM
system, market size, business dynamism, and innovative capability.10
Vietnam is the fastest- growing ASEAN economy, with a very young population Burkhard Ziegenhorn,
Head of Global Transaction Banking and Corporate Bank Coverage for ASEAN, Deutsche Bank
Ziegenhorn adds that more supply chains are shifting into Vietnam as many Asian companies expand and diversify their production hubs. One high-profile example is Foxconn moving some iPad and MacBook assembly work from China to Vietnam at the request of Apple.9
This rerouting
of supply chains brings opportunities for Deutsche Bank to work with local banks and corporates. Demand for supply chain finance support continues to rise. “Our strong supply chain financing platform enabled us to win a few mandates from large multinational companies,” Quang says. Domestic producers are venturing forth with exports as well; Quang and Ziegenhorn report that “a small group of Vietnamese local corporates are setting up sales and production overseas – these include a local car manufacturer and food producer.”
Superfast connectivity and the highest adoption rate of the internet in the region is helping innovation, as is the trend of Western-educated Vietnamese returning with fresh ideas. One recent example of such entrepreneurship is the free-rice- dispensing ATMs developed by Vietnamese corporates to alleviate pandemic-related hunger, an initiative which has received government blessing. Such domestic business innovation is also being replicated abroad, with several firms setting up operations in Europe.
With such solid growth fundamentals, the World Economic Forum (WEF) currently ranks Vietnam 67th in the world for competitiveness, just ahead of India and Brazil. The WEF recognised the country’s improvements to its institutions, infrastructure, information and communication technology adoption, skills, product and labour markets, financial
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Weathering the storm Vietnam’s success in curbing the Covid-19 outbreak and its rise in the region’s manufacturing supply chain allowed its economy to rebound to pre-pandemic levels very quickly. “It is one of the few places in the ASEAN region that has got the virus under control so far,” reflects Ziegenhorn. Analysis by the International Monetary Fund ascribes the lessons of the 2003 SARS crisis as the root reason for the country managing the virus so successfully to date. Vietnam’s rapid introduction of aggressive and cost-effective containment measures, and its depoliticised ‘whole-of-society-fight’ public health control measures, were also considered key reasons behind its containment of the virus.11
The pandemic has inevitably impacted tourism, airlines and related sectors, but others have been more resilient, resulting in a positive GDP growth of 2.9% in 2020. Vietnam also fared better than its peers in private consumption, which did not contract, but rose slightly by 0.6% in 2020. Supported by base effects, retail sales growth accelerated to 35% year-on-year in April 2021, from 4.9% in Q1 2021 and 1.8% growth in 2020, while investment growth also rose.
There is also improvement in investment data. FDI growth accelerated to +7.7% year-on-year in April 2021, compared to +5.7% in Q1 2021 and -2.8% in 2020, while exports surged by 44.9% in April 2021, as opposed to 25% in Q1 2021 and 8.1% in 2020. Deutsche Bank’s Singapore-based Chief Economist Juliana Lee noted12
that “Vietnam remains one of the
favourite destinations for the China-plus-one strategy for global manufacturers, and its success in curbing Covid-19 infections further improved investor confidence.”
In a world of high uncertainty amid sustained pressure from the Covid-19 pandemic, Vietnam’s socio-political stability continues to contribute to its attractiveness for FDI investors. Investor appetite and FDI decisions can − like viruses − develop in unanticipated ways. However, as the view of the post- pandemic landscape becomes a little clearer, Quang believes that “the future looks bright”. He adds that “the consensus on GDP growth for 2021 is now 7.3%, fuelled by a rebound in goods exports”. This is slightly weaker than Deutsche Bank Research forecasts of 7.5% in 2021 (7.2% in 2022), but well above the pre- Covid five-year average growth rate of 6.8% .
The nation’s scorecard on curbing Covid-19, weathering the economic storm and laying the groundwork for Vietnam’s continued economic advancement suggests that the heirs of Lac Long Quan are doing him proud.
Sources 1
See
https://bit.ly/3dCTU6m at
oecd-ilibrary.org 2 See
https://reut.rs/3kdSMHt at
reuters.com 3 See
https://bit.ly/3bwnQxZ at
ukabc.org.uk
4
See
https://bit.ly/3qMTaPB and
https://bit.ly/3pJjrx5 at
worldbank.org
5 See endnote 1
6 See
https://bit.ly/3um18Bt at
imf.org 7 See endnote 6
8 See
https://bit.ly/3aMK4gp at
bangkok.unesco.org 9 See
https://reut.rs/2MhTB5A at
reuters.com 10 See
https://bit.ly/2ZHLFgM at
weforum.org 11 See
https://bit.ly/3pJkA7R at
imf.org
12
Asia Macro Insight, Balancing Risks to Rates, Deutsche Bank Research
Figure 1: Vietnam’s GDP to rebound back to the pre-Covid-19 trend 1,100
1,000
900
800 Mar 18 Mar 19 Pre-Covid-19 trend Real gross domestic product (seasonally adjusted) Sources: CEIC, Deutsche Bank Research Mar 20 Mar 21
11
Vietnamese dong (trn)
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