Keeping coronavirus at bay, Vietnam revs up economy to race ahead of rivals
07/01/2021 06:40
* More growth in view for one of few countries to expand in
2020
* Strict virus controls a boost for investment appeal vs
peers
* Two free trade deals in 2020; manufacturers lured from
China
* Vietnam funds cite ease in attracting foreign investment
By James Pearson
HANOI, Jan 7 (Reuters) - Vietnam's success in curbing the
coronavirus so far, while its Southeast Asia neighbours
struggle, is helping the country power ahead in economic growth
and attracting funds, foreign investors, experts and analysts
say.
Its strength in containing the pandemic saw it build on the
foundations of two free trade agreements signed in 2020, also
outpacing peers in luring manufacturers moving production out of
China because of the Beijing-Washington trade war. Vietnam was
one of the world's few countries to record growth last year -
well down on 2019, but still a 2.9% expansion.
Vietnam watchers expect the country to ride high as long as
it keeps the virus - resurgent in many countries - at bay.
Thanks to rigorously targeted testing, a centralised quarantine
programme and early border closures, Vietnam's coronavirus tally
stands at just over 1,500 cases and 35 deaths to date - far
fewer than any comparable country given its population of nearly
98 million.
"The successful management of the pandemic to date has
already enabled the country to capture a larger share of global
trade and FDI (foreign direct investment) during 2020," said
Carolyn Turk, the World Bank's country director in Vietnam.
Parliament has set an economic growth target of 6% for this
year, but Prime Minister Nguyen Xuan Phuc, looking to extend his
term or rise up the Communist Party of Vietnam's ranks, said
last month that Vietnam would target 6.5%.
At WHA Group, a Thai logistics firm which has expanded its
industrial estate business in Vietnam, chairwoman Jareeporn
Jarukornsakul said investors who had wanted to relocate
operations to Thailand from China had not been able to do so
because the coronavirus had spread in Thailand.
While infrastructure and regulatory issues are worse in
Vietnam than in Thailand, she said, "Costs are cheap in Vietnam
and its government is very quick with investment, allowing
provinces to issue their own regulations and investment
incentives."
Still, there is much work to be done, even if the country
does retain its prowess in handling the coronavirus: Vietnam
suffers from a lack of highly-skilled labour, its dated
bureaucracy is in need of digitisation and there is an
over-reliance on polluting coal imports to fuel development.
But the cocktail of positives flowing through the economy
currently has left foreign-invested asset managers in Vietnam
able to raise significant amounts, for example, with some
reporting oversubscribed funds.
On Monday, Ho Chi Minh City-based Mekong Capital said it had
raised $246 million for its largest-ever fund - nearly 25% more
than the original target of $200 million.
Dominic Scriven, chairman of Vietnamese asset manager Dragon
Capital said a combination of the country's trade deals, more
cash in the economy and political stability had underpinned
better-than-expected interest across three new funds launched by
his firm.
"We were very pleasantly surprised by the market uptake,"
said Scriven.
PULLING AHEAD
That extra cash, along with savings accounts offering
declining interest rates after three cuts in the central bank's
policy rate since March, has created a surge in local stock
market investors.
The number of new investors has increased so much that the
benchmark Ho Chi Minh City Stock Exchange has been forced to
halt afternoon trading in order to process the surge.
urn:newsml:reuters.com:*:nL4N2JG23G
Development was also boosted by the two free trade deals
signed last year: the Regional Comprehensive Economic
Partnership (RCEP), the world's largest trading block, and an
agreement with Britain modelled on the EU-Vietnam Free Trade
Agreement (EVFTA), which Vietnam ratified in June.
Hanoi also has bilateral trade deals with both South Korea
and Japan, its largest sources of foreign direct investment, and
is a signatory to the 11-country Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP).
The trade deal push has given it an advantage over some of
its regional competitors. The EVFTA in particular has "put
Vietnam clearly on the map", said Sven Schneider, Chief
Executive of the EU-Malaysian Chamber of Commerce.
"Malaysia, on the other hand, is only waking up to this
missed opportunity now," said Schneider.
WHA Group's Jareeporn also said the EVFTA had given Vietnam
an advantage. "If an industry needs cheap labour, it's
definitely going to Vietnam," Jareeporn said.
In the short term, Vietnam is well placed to pull ahead of
its regional rivals in 2021, just as it holds a massive
Communist Party meeting to select a new leadership later this
month.
"It's safe, the government functions smoothly, and in face
of impediments like COVID the country rises to the challenge
without hesitation and wins," Chad Ovel, partner at Mekong
Capital, said.
"Vietnam has clearly earned its position as the most
attractive investment destination in Southeast Asia."
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GRAPHIC-Vietnam has fewest cases among Asia's top FDI recipients
https://graphics.reuters.com/HEALTH-CORONAVIRUS/qzjvqdlelpx/
INTERACTIVE GRAPHIC-GDP growth of largest FDI recipients in
Southeast Asia https://graphics.reuters.com/HEALTH-CORONAVIRUS/xklvyjraqpg/
INTERACTIVE GRAPHIC-Foreign direct investment inflows into
Vietnam 2012-20 https://graphics.reuters.com/HEALTH-CORONAVIRUS/yzdvxjenyvx/
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(Reporting by James Pearson; Additional reporting by Phuong
Nguyen and Khanh Vu in Hanoi, Liz Lee in Kuala Lumpur and Chayut
Setboonsarng and Orathai Sriring in Bangkok; Editing by Kenneth
Maxwell)
((james.pearson@reuters.com; +84-24-3825-9623;))