Viet Nam shows 'seemingly limitless promise'

Friday, Jul 01, 2022 22:29

Dr Moritz Kraemer

Dr Moritz Kraemer, the former Global Chief Ratings Officer of Sovereign Ratings Group at S&P Global and currently the Chief Economist, Head of Research of the Landesbank Baden Wuerttemberg (“LBBW”) bank, shared his view of the country and the current global situation with Vietnam News Agency.

The pandemic remains unpredictable, and the world is experiencing strong and unusual economic and political changes, could you share your views on the situation?

Yes, the world is in turmoil. A terrifying war in Europe could escalate to the unspeakable any day. The pandemic is still a lingering threat that keeps the world economy, and especially some countries in Asia, at bay. The old model of globalisation is severely tested as erstwhile reliable supply chains are ruptured and seem to refuse to heal.

Moreover, as if that was not enough, inflation appears to be getting out of hand in much of the advanced economies as commodity prices soar and labour becomes increasingly scarce.

Investors have thrown in the towel, and financial markets have sold off in an unrivalled act of capitulation. The myth of a harmonious global world order based on a uniform endorsement of capitalism, free trade and democracy is debunked, as geopolitical experts, not economists, dominate the news screens. The only consolation seems to be that things cannot get much worse from here. Or so we hope.

Considered a country that benefits from the world’s fluctuations, what do you think of Viet Nam’s advantage compared to other countries?

Yet, the night is darkest just before dawn, and there are reasons for cautious confidence, if not optimism. However, one needs to look judiciously. Globally operating companies, under margin pressure from all of the above complications, look carefully in their search for reliability and resourcefulness. International companies will progressively search out new locations in their quest to diversify sources of supply after they have become painfully aware of the risk of putting most of their eggs into one basket. A place more and more of them seem to find to fit that bill is Viet Nam, a country that offers political and monetary stability, economic openness, an industrious workforce and still competitive labour cost.

According to economists, Viet Nam will outgrow some Asian countries going forward. Let’s look at the investment pours into Viet Nam: net FDI inflows have averaged 5 per cent of GDP annually, by far the highest ratio in the region.

Accordingly, the industrialisation process has been supercharged. The share of manufacturing in GDP has risen to over 17 per cent, from about 13 per cent a decade ago. Investment is attracted by the still plentiful and relatively cheap labour, making Viet Nam an exporting powerhouse.

In your opinion, what are the lessons for Viet Nam in economic development to ensure sustainable success?

Right now, Viet Nam is still full of promise. The recent ratings upgrade by S&P Global makes it likely that the country will be the next “rising star”, referring to the achievement of its first investment-grade rating in the next few years. I believe that sustained success demands that the country’s leaders remain vigilant in planning economic and human development strategies. The investors now moving to Viet Nam might otherwise move on to looking for greener pastures or the next Viet Nam. By applying appropriate measures, Viet Nam will remain an attractive destination for foreign investors. VNS

Jens Ruebbert, LBBW’s Managing Director, Regional Head for the Asia Pacific region: “In many ways, HCM City resembles Shanghai twenty years ago. A place of seemingly limitless promise. By applying a suitable population policy, Viet Nam managed to avoid the labour crunch and have an abundant workforce.

Jens Ruebbert

However, Viet Nam’s dynamic population will lead to other challenges. The Global Footprint Network, an environmental think tank, estimates that the ecological footprint of the average Vietnamese is higher than the country’s available biocapacity per person - an indication showing the population’s impact on the environment.

This also underlines the urgent need for Viet Nam to safeguard a sustainable path towards prosperity and to upgrade the population’s skill level, speeding up the climb up the value chain. Korea and Singapore may have a few lessons to share in this respect.”

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