Vietnam Begins 2011 with Critical Political Decisions


Photo Courtesy of Vietnomics

Below are some excerpts the winter 2010 Vietnomics update.   

Summary

Vietnam ended 2010 facing internal challenges and a chorus of foreign analysts raising questions about whether the government has the will and the wherewithal to handle them.   Fortunately, the answers will begin coming in January (though not necessarily to the satisfaction of the international business community) when the ruling Communist Party holds its 11th Congress and chooses leadership and direction for the next several years.  The meeting follows a decade of robust economic growth that attracted increasing attention from multinational corporations and investors.  However, the country faces high inflation, a large trade imbalance, lack of confidence in its currency, still unresolved financial problems in one of its biggest state-owned companies, and downgraded bond ratings.  Americans interested in this frontier market need to pay close attention as the party lays the foundation for Vietnam’s economic development over the next decade.   

What to Anticipate in Vietnam Early in 2011

The Communist Party Congress will be held January 11-19 to ratify policy direction.  Of the nearly 100 million people in Vietnam, about 3.6 million are party members, and 1,400 party delegates will be in Hanoi to elect a Central Committee of about 150 – which in turn will elect the Politburo, the ruling elite, of about 17 members.  The Politburo assigns the key posts of party general secretary, president and prime minister.  Candidates for prime minister include:

  • Nguyen Tan Dung, 61, prime minister since 2006, a native of Vietnam’s southernmost province
  • Truong Tan Sang, 61, also a southerner and with a background as mayor of Ho Chi Minh City
  • Nguyen Phu Trong, 66, of Hanoi, and chairman of the increasingly vocal National Assembly

The Congress also will approve a five-year socio-economic strategy and a longer-term vision to 2020.  For Vietnam to continue to attract international attention as a leading frontier market, the leadership will need to address three central categories:  

Economic growth – Short-term concerns are monetary policy, inflation, currency stability, and balance of payments; for the long term, the biggest concern is infrastructure – especially transportation and energy.

Social infrastructure – Vietnam’s two primary social challenges are health care and education.  With one of the world’s most attractive demographic profiles, the country needs to improve its workforce training and education at all levels.

Environmental sustainability – With its economic progress emulating China, Vietnam faces similar environmental concerns (especially water and air pollution), plus high vulnerability to climate change.  

Conflicting Signals in the Fourth Quarter

Events at the end of 2010 reinforced the perception that Vietnam is at a crossroads.  A symbol of progress was Intel’s opening of its long-awaited $1 billion chip facility that will employ 4,000 — the first major high tech foreign investment in Vietnam.  Also, GE has completed its $61 million wind turbine factory in Haiphong and is supporting Vietnam’s oil and gas industry, aviation, and health care.  However, concerns about Vietnam’s currency strength and banking system led Standard & Poor’s to cut the country’s ratings after Moody’s and Fitch did so earlier in the year.  The downgrades were largely driven by failure of one of Vietnam’s largest state-owned companies, shipbuilder Vinashin, to make loan payments to international investors.  

Key Data

2010 vs.2009 from Vietnam government statistical reports

  •  Gross Domestic Product – $101.6 billion, up 6.8%
  • Consumer Prices – up 9.2%
  • Exports –$71.6 billion, up 25.4%
  • Imports — $84.0 billion, up 20.1%
  • International Visitors – 5,049,900, up 34.8%
  • Foreign Investment — $18.6 billion, down 17.8%
  • Private Sector Production — $36.5 billion, up 14.7%
  • Stocks — Closed at 484.7, down 2%

This information was provided by Jeff Browne, president of Vietnomics, who also has a blog.

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