Entrepreneurs, experts gaze into crystal ball, see good prospects for Viet Nam

A new year has come bringing with it, as usual, many new opportunities and challenges. Many entrepreneurs and researchers believe Viet Nam will enjoy good growth this year, and they see good prospects for many sectors. Some of them talk about this and more with Viet Nam News.

Pham Thanh Hung, deputy chairman of property developer Cen Group and a shark investor on Shark Tank Viet Nam

Pham Thanh Hung – Deputy chairman of property developer Cen Group and a shark investor on Shark Tank Viet Nam

I think this is going to be a very different year for Viet Nam’s economy. Since becoming a member of the World Trade Organisation (WTO) in 2006, we have opened the market to many sectors including retail and consumer goods and met our WTO commitments.

This year is Viet Nam’s deadline to fulfil all of its commitments to the WTO, and so the economy will see a big transition. There will be a lot of business models brought into the country from abroad. The coming of big players from around the world will also change the Vietnamese market. This is a big opportunity but comes with a lot of pressures. When we open the market, opportunities will come together with challenges.

I think in general Viet Nam’s economy will continue to experience strong growth, but the question we should look at is who will be the biggest contributor to that strong growth: Will it be the FDI sector whose disbursement reached a new record last year or dynamic Vietnamese start-ups? But I hope Vietnamese start-ups will take advantage of this opportunity to move up faster so that they will not be left behind again. This is the second opening up of the Vietnamese economy after the first in the 1980s. The second opening 30 years later will be a comprehensive and thorough one so much bigger and stronger than the first.

Le Hong Lien, head of institutional research at Maybank Kim Eng Securities Limited

Le Hong Lien – head of institutional research at Maybank Kim Eng Securities Limited

Viet Nam ended 2017 on a very encouraging note, which we believe provided a crucially positive platform heading into 2018 for both the economy and the capital market.

Three main drivers of 2017, namely growth, low inflation and strong balance of payments, will likely extend their momentum while two areas that have been lagging behind appear to stand a high chance to improve this year. In our base scenario we project that GDP growth will likely stay at an uplifted level of 6.5 per cent thanks to an expected moderate recovery of the mining sector, which retreated 4.1 per cent in 2016 and 7.1 per cent in 2017.

A stronger recovery by the mining sector and higher growth of the manufacturing and service sectors than our fairly conservative forecasts will help elevate GDP growth above our estimation of 6.5 per cent.

We remain relatively comfortable with low inflationary pressure despite some concerns voiced recently about recovery in commodity prices as core inflation has been steadily muted at 1.3-1.4 per cent.

Last but not least strong interest from foreign investors in the form of both FDI and FII, coupled with robust exports, would allow the State Bank of Viet Nam more room to stabilise the forex market, further boosting investors’ confidence in Viet Nam.

A continuing positive macro outlook including an unchanged accommodative monetary stance and higher fiscal revenues from SOE divestment and IPOs to spend on key infrastructure projects are key to upholding liquidity and sentiment, which in turn results in our optimistic view about the market in 2018.

While the valuation of the Viet Nam market is no longer cheap, historically we think it is still justified by improved macros, healthier fiscal stance and better corporate earnings quality among other efforts by the State Securities Commission and two stock exchanges to upgrade the Viet Nam market to emerging status.

Chidu Narayanan, Economist for Asia at Standard Chartered Bank

The banking sector will be backed by a strong economic growth rate this year which we forecast at 6.8 per cent. It is very comforting that non-performing loans have come down. Those are the good signs but Viet Nam should have an eye out for credit growth. It was 18.5 per cent last year and will be at a similar level this year. The risk is that it could be even higher this year, especially as policy is very competitive. But there is a comfort that the banking sector’s credit rating has been recently upgraded to positive outlook by rating agencies.

Inflation this year will not be a big concern. We expect average inflation of 4 per cent in 2018, slightly higher than the 3.5 per cent in 2017. We think it will rise in the first half of the year, peak in July before flattening out in the second half. Four per cent is slightly high but not very concerning. We do not think that will be significantly high for the State Bank of Viet Nam to consider tightening its monetary policy.

We expect the central bank will keep the interest rate on hold this year. Although we anticipate the risk of a hike in policy rate reversing the rate cut they did last year in case credit growth starts to be extremely strong.

We have been very optimistic about Viet Nam’s growth for the past few years and we remain optimistic that growth will stay strong in 2018 as well. The biggest driver of growth is the activity in the manufacturing sector. Last year it grew 44.4 per cent. We project it will register double-digit growth again this year, particularly boosted by electronics manufacturing thanks to robust global demand.

Another big driver is strong FDI inflows, which we project will be US$15 billion in 2018, slightly less than in 2017 but extremely high nevertheless.

Looking at the export outlook, we think exports could be growing at 20 per cent, again supported by electronics exports, which account for one-third of total exports and have been increasing at a pace of 30 per cent every year.

Nguyen Anh Duc, permanent deputy general director of Saigon Co.op

Viet Nam’s retail market has seen the very high growth rate in recent years. Many independent international organisations have rated Viet Nam as one of the most attractive retail markets in the world, especially in the modern retail segment because it currently accounts for only 20 per cent of total retail sales in Viet Nam.

That is why investors are focusing on expanding in the Vietnamese market. Earlier we saw retail activities being concentrated in big cities and centrally run cities. However, retailers are now tending to expand to outlying districts, rural areas and remote provinces.

The entry of foreign retailers into Viet Nam’s retail market will offer new options for customers. In addition, foreign retailers with their deep experience, also create a driving force for Vietnamese retailers to improve themselves. But the penetration of the Vietnamese market by foreign retailers also means that the market is divided up into small pieces. This requires retailers to have flexible strategies, serve customers more diligently and provide them with more practical value.

Now in the retail sector, there is a dynamic rise in non-store and e-commerce models and those based on technology 4.0. Therefore, Saigon Co.op and other retailers must follow this trend to better meet customers’ demand and make it convenient for shoppers.

Truong Huu Thong, President of Thong Thuan Co., Ltd

I think Viet Nam’s economy will be very good this year. Firstly, the economy is stable, and interest rates and exchange rates are also stable. Secondly, the world economy is also stable, with most markets like the EU, US and Japan forecast to have good growth, and so demand will increase.

The market for fisheries products will be very good this year. From my company, for instance, right at the beginning of this year many international buyers have wanted to place orders while there were very few in the same period in previous years.

The fisheries sector has an export target of US$8.5 billion this year. I think it will surely surpass the target and earn around $9 billion from exports this year, with shrimp exports expected to reach $4.5-4.7 billion.

Raw materials are supplied by aquaculture.

I think aquaculture will be good this year despite unfavourable weather conditions since farmers know how to improve their techniques and adapt to climate change.

Last year farmers earned handsome profits from aquaculture, so they will continue to expand their farming this year. I think aquaculture will develop strongly this year.

With this momentum, I think fisheries exports will top $10 billion by 2020, surpassing the target set by the Government.

Pham The Truong, Country General Manager of Microsoft Viet Nam

Viet Nam’s economy has performed well in the second half of 2017. The GDP growth target of 6.7 per cent is well within reach, as are the 12 targets for socio-economic development. This is a result of various driving forces such as rapid growth in industrial output, growth in exports and FDI and an increase in retail and consumer services compared to 2016.

In 2018 I am positive the economy will continue to be on the rise. This growth will be supported by a stable political environment, growing reform momentum, an improving business environment, and the manufacturing sector benefiting from multinationals relocating to Viet Nam for lower production costs.

Like other emerging economies throughout the Asia Pacific, Viet Nam has steadily grown over the years due to relatively cheap labour in agriculture and export-focused manufacturing. This has made us a stronger economy, but to grow further and faster, it is essential to building better technological capabilities as we enter the 4th Industrial Revolution.

In the race for digital transformation, developed and emerging economies are facing the same challenge of how to upskill workers digitally. We see this as an opportunity for emerging countries like Viet Nam to catch up with developed countries by bridging the digital skill gap.

Some might see digital disruption as a threat, but at Microsoft, we believe digital transformation means economic transformation. In fact, according to our Digital Transformation Study in 2017, 80 per cent of Asian business leaders said they need to transform into a digital business to enable future growth, but yet only 29 per cent said they have a full digital strategy in place.

As Microsoft is one of the leading technology companies in the world, we are excited to be part of our customers’ digital transformation as well as Viet Nam’s economic transformation journey.

Toshio Kazama, Managing Director of Phu My 3 Specialised Industrial Park in Ba Ria – Vung Tau Province

The Vietnamese economy in 2018 will be supported by a gradual recovery in the global economy and will maintain a high growth rate. Because of the ASEAN Economic Community (AEC) that was established at the end of 2015, import duties on finished vehicles within ASEAN will be eliminated from 2018. There is also the possibility that imports may increase rapidly due to the improvement in the income levels in Viet Nam.

In addition, Viet Nam reached final agreement on its FTA with the EU in 2015, and it is expected to come into effect after 2018. It is expected that the economic effect will increase, such as an increase in both trade with and investment from the EU.

On the other hand, we believe it is important to further enhance the competitiveness of domestic products in Viet Nam. For example, the Vietnamese automobile industry has a weak point that the supporting industry such as automotive parts production has not grown and the local procurement rate is low.

Even outside automobiles, Viet Nam is a major manufacturing base for products such as fashion brands, but raw yarn can hardly be procured domestically. Enabling local procurement of raw materials and obtaining high-value-added manufacturing technology in Viet Nam will make current growth more long term. For that purpose, I think it is necessary to promote investment in infrastructure and revitalise logistics bases such as international harbours.

With regard to the environment, in past Japan experienced and overcame pollution problems during the course of high economic growth. For example, air pollution, water sludge, noise and so on. Therefore excellent environmental technologies for promoting sustainable economic development in harmony with the environment are available in plenty in Japan.

This technology can also be used in Viet Nam. This year is the 45th anniversary of diplomatic relations between Viet Nam and Japan. We are hoping that economic, technology, people-to-people and cultural exchanges between Viet Nam and Japan will become more and more active. — VNS