UK envoy says growth is on the right path but Hanoi cannot afford to become complacent
Saturday July 07, 2007
UMESH PANDEY
Bangkok Post
Vietnam is gradually becoming a powerhouse in Southeast Asia and is likely to take a more active position in trade negotiations between various regions and the 10-member Asean grouping, a British diplomat says.
"No longer will Vietnam be content to bump along with the Asean backwaters of Burma, Laos and Cambodia. Their sights are set on closing the gap between themselves and the Asean founding members," Robert Gordon, the British ambassador to Vietnam, said at a recent luncheon talk in Bangkok.
"We can expect Vietnam to take what some would otherwise see as a surprisingly forward position on issues such as the new EU-Asean free trade agreement."
Hanoi's growing confidence has resulted in part from membership in the World Trade Organisation (WTO), making the country more attractive for investment at a time when Thailand is struggling to draw foreign capital.
Vietnam's challenge, Mr Gordon says, is that the investment choices are still quite limited.
"Rather than fret about attracting more capital to Vietnam, the authorities are now worried that too much portfolio investment is chasing too few stocks," he said, pointing to the 100% gain in the country's equity markets last year.
However, he believes that some constraints will ease after more Vietnamese state enterprises are listed on the local bourses, expanding the investment choices. As well, authorities are now putting in place a unitary supervision system for all financial markets, which will help ease burdens as well as investor concerns.
Foreign direct investment (FDI) into Vietnam is expected to reach $20 billion this year, double the figure of 2004. FDI rose 50% in 2005 and 60% last year.
"These are staggering figures, much higher than China's in per capita terms," he said, adding that the gains were coming at the expense of some other Asean nations.
However, the country's reliance on FDI to spur growth has its drawbacks as Vietnam lacks the type of huge foreign-exchange reserve cushion that China enjoys.
Vietnam's current reserves are only $15 billion, compared with more than $1 trillion in China and $72 billion in Thailand. The country's trade deficit as of June 30 was $4 billion and could top $7 billion for fiscal 2007.
The deficit reflects high imports of capital goods, but Mr Gordon cautioned that Vietnam's inflation rate of 6-7% also needed to be watched closely.
As for political development in the Communist country, he said there appeared to be no great enthusiasm among the population for western-style democracy. In any case, he said, the issue was not democracy or the lack of it but rather corruption and how some people are using their power and position to make money from the system. He said the government had taken notice and was tackling the issue.
Commenting on the implications of WTO membership on the opening up of various industries, he predicted greater resistance in the future as the government has not clearly affirmed the extent of its commitments to the WTO yet.
"We can expect resistance and foot-dragging when sectors come to be opened up to international competition," he said.
Vietnam has been using the Chinese model to open up its economy and the approach has worked so far, Mr Gordon says, but Vietnam cannot out-compete China because it is far smaller and cannot benefit from the economies of scale that its neighbour exploits so successfully.
"The medium-term challenge is to try to differentiate itself from China and this will require some far-reaching changes in both behaviour and mindset."
Mr Gordon identified several key changes the country needs to make:
In any case, Mr Gordon believes that Vietnam should not be complacent about its achievements.
Vietnam has some competitive advantages over China in software development as it does not carry the baggage of the Chinese language or characters, and this field should be encouraged, especially among younger people, he says.
In areas where Vietnam cannot compete with China, he said, it should join with its big neighbour and also try to increase the savings rate to reduce vulnerability to external shocks.
"No longer will Vietnam be content to bump along with the Asean backwaters of Burma, Laos and Cambodia. Their sights are set on closing the gap between themselves and the Asean founding members," Robert Gordon, the British ambassador to Vietnam, said at a recent luncheon talk in Bangkok.
"We can expect Vietnam to take what some would otherwise see as a surprisingly forward position on issues such as the new EU-Asean free trade agreement."
Hanoi's growing confidence has resulted in part from membership in the World Trade Organisation (WTO), making the country more attractive for investment at a time when Thailand is struggling to draw foreign capital.
Vietnam's challenge, Mr Gordon says, is that the investment choices are still quite limited.
"Rather than fret about attracting more capital to Vietnam, the authorities are now worried that too much portfolio investment is chasing too few stocks," he said, pointing to the 100% gain in the country's equity markets last year.
However, he believes that some constraints will ease after more Vietnamese state enterprises are listed on the local bourses, expanding the investment choices. As well, authorities are now putting in place a unitary supervision system for all financial markets, which will help ease burdens as well as investor concerns.
Foreign direct investment (FDI) into Vietnam is expected to reach $20 billion this year, double the figure of 2004. FDI rose 50% in 2005 and 60% last year.
"These are staggering figures, much higher than China's in per capita terms," he said, adding that the gains were coming at the expense of some other Asean nations.
However, the country's reliance on FDI to spur growth has its drawbacks as Vietnam lacks the type of huge foreign-exchange reserve cushion that China enjoys.
Vietnam's current reserves are only $15 billion, compared with more than $1 trillion in China and $72 billion in Thailand. The country's trade deficit as of June 30 was $4 billion and could top $7 billion for fiscal 2007.
The deficit reflects high imports of capital goods, but Mr Gordon cautioned that Vietnam's inflation rate of 6-7% also needed to be watched closely.
As for political development in the Communist country, he said there appeared to be no great enthusiasm among the population for western-style democracy. In any case, he said, the issue was not democracy or the lack of it but rather corruption and how some people are using their power and position to make money from the system. He said the government had taken notice and was tackling the issue.
Commenting on the implications of WTO membership on the opening up of various industries, he predicted greater resistance in the future as the government has not clearly affirmed the extent of its commitments to the WTO yet.
"We can expect resistance and foot-dragging when sectors come to be opened up to international competition," he said.
Vietnam has been using the Chinese model to open up its economy and the approach has worked so far, Mr Gordon says, but Vietnam cannot out-compete China because it is far smaller and cannot benefit from the economies of scale that its neighbour exploits so successfully.
"The medium-term challenge is to try to differentiate itself from China and this will require some far-reaching changes in both behaviour and mindset."
Mr Gordon identified several key changes the country needs to make:
- Improvement of quality of economic governance, speedier disbursements and commitments to foreign investors.
- Restructuring of state enterprises. Vietnam has 1,700 of them and aims to privatise many by 2010.
- The government should welcome back the diaspora who are an important source of capital and entrepreneurial drive.
- Vietnam should focus on sectors and goods in which it has some competitive advantage over China, such as agriculture.
In any case, Mr Gordon believes that Vietnam should not be complacent about its achievements.
Vietnam has some competitive advantages over China in software development as it does not carry the baggage of the Chinese language or characters, and this field should be encouraged, especially among younger people, he says.
In areas where Vietnam cannot compete with China, he said, it should join with its big neighbour and also try to increase the savings rate to reduce vulnerability to external shocks.
2 comments:
Why would the Vietcong want to go the way of Cambodia and Loa when the dictator in Cambodia and Loa were installed by the Vietcong in the first place! What more for the Vietcong is that the dictator in Cambodia and Loa allowed the Vietcong to rape and to pillage Cambodian natural resources! There are ton and ton of cashew nut, rice, wood, rubber,… exported from Cambodia at dirt cheap price to be processed in Vietname!
Here is another thing that I don't understand! Why the Vietcong money (Dong) is so dirt cheaper than Cambodian money (Riel)? I begin to think that the Vietcong are playing the same dirty trick as China that is to devalue their currency to attract more businesses and to increase their export! Cambodia can't compete with the Vietcong due to Vietcong cheap currency and this make Cambodia imports everything from Vietname!
Cambodia will die economically in the long run unless Cambodia can come up with some other scheme!
I want to see the Vietcong achieve greatness without the use of Cambodia and Loa for a free ride and let see if the Vietcong can get that far!
Hun Moch, Hun MainG, Hun Momis do you steal remember to read Englidh?
Read it to you dump father how your father best friend(SiC)(Best master by us) think about him! "backwater"
You your brain to help your father Hun Houch, don't just go arount give people trouble!
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