Vietnam Facing Economic Crisis?
Image Credit: Christian Haugen

Vietnam Facing Economic Crisis?

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With the streetlights warming to a low glow outside as dusk turns to dark, Trang Hoang Yen is still running t-shirts through a sewing machine as most of her staff leave for home.

“Normally we have a lot more workers, but the past year has been very hard for our sector,” she says, stopping work for a few minutes to talk.

Trang Hoang Yen's small factory, on a side street in Ho Chi Minh City, has seen better days. Down from 30 to 14 staff year-on-year, she says the company’s input costs “have gone up, and production costs have doubled.”

Inflation in Vietnam hit 23 percent in August, although it has since dropped off a little to just under 20 percent. The Vietnamese government has responded with a number of countermeasures in an attempt to cool an economy in danger of overheating, although some analysts say the lid is already bubbling off the pot. Vietnam's foreign exchange reserves are on the slide, and the country faces a trade deficit of $10 billion in 2012, according to the government.

So, will the reforms, including credit restrictions and interest rate hikes, be enough to cool things? Some analysts think not.

In comments delivered at a donor conference in Hanoi on December 6, International Monetary Fund resident representative Sanjay Kalra was clear on the issue, saying, “The authorities need to move rapidly and decisively to ensure financial sector soundness while re-establishing macroeconomic stability.”

Other remarks delivered at the forum focused on the need for reform of the banking sector, privatization of state-owned enterprises and the curbing of corruption. Vietnam was ranked 112 out of 182 countries surveyed in the latest Transparency International global graft index, published last month.

Some donors spoke about Vietnam’s poor record on human rights and freedom of expression, with lawyers, writers, bloggers, activists, journalists and protesting civilians regularly being arrested and jailed. Norwegian Ambassador Stale Torstein Risa told Vietnamese Prime Minister Nguyen Tan Dung that loosening political restrictions in the one-party state could contribute to a sounder economy.

Vietnam now seems to be at an economic watershed, perhaps reminiscent of the 1980s, when it introduced its much remarked upon doi moi ‘opening-up' of the country's economy to foreign investment, following China down the authoritarian-liberalization political economy path. Normalization of relations with the United States in 1995 brightened Vietnam’s “rising star” status, culminating in Hanoi joining the World Trade Organization in 2007.

Speaking at a November 28 Hanoi business lunch for Irish investors in Vietnam, Deputy Minister for Planning and Investment Cao Viet Sinh said there are 13,450 investment projects in Vietnam, adding that the government hoped to attract more in the coming years.

Brands such as Intel, Honda and Nike have all opened large plants in Vietnam, whose attractiveness for investing companies is partly rooted in its cheap labor force, estimated to be the second-lowest in Asia after Cambodia by the European Chamber of Commerce in Vietnam, and thus a major pull for investors in labor intensive sectors such as clothing and footwear.

Comments
46
March 8, 2013 at 05:25

The crisis of economic in Vietnam is a sign to wake people who are living in Vietnamto know that economic in communist is depend on the liberalism countries . Communist is never open to their people but the most is cheating.

Tom F
December 10, 2012 at 08:23

Not sure how you can compare IMF's take on Vietnam as comparable to the euro crisis. If anything, they're the complete opposite, IMF is saying Vietnam needs to get more competitive (ie modernising its economy), but with an overheating economy already, is cheap credit from the IMF is the answer?
Personally, I am not sure anyone trusts the IMF anymore, in a sea of fish, the IMF (as a banker) ranks somewhere between a shark and a killer whale.

Tom F
December 10, 2012 at 08:16

What I see at the coal face in Vietnam is not much different to what other developing countries went through, and interestingly, the same generalisation from media and commentators about corruption, cronyism, disparity between rich and poor, inflation, and the banker's favourite – 'poor investment' decisions. Then there is the usual human rights guff. But, is it as corrupt as say South Korea in the early years? Are poor investment decisions worst than China's, etc….
As a visitor though, I can't help but think that it has alot going for it. Its location and weather makes it ideal as a trading hub, financial hub and food bowl of asia, and in the age where the world is turning to a low carbon emission economy, where the battle fronts are fought by bankers, and where frugality is the new black, Vietnam has it in spades.
What it does need is less distraction, mostly from China, but I can see that it will never be left alone, it appears, even from posters here that there appears to be quite a few axe to grinds between Chinese and Vietnamese. Personally, I'm of the view China is doing Asia a disservice with its aggressive assertions on territories and politics, where its efforts is much better served by adopting a leadership position, where it is the bearer of peace. A good starting point would be Hong Kong and Taiwan, IMO, once Hong Kong and Taiwan trusts China, Vietnam, Singapore and the rest of Asia will follow.

Industrial Policy
February 28, 2012 at 18:40

One of the best reasons to work in IT, is arguably the money. Information technology is known as a career that pays fairly well, across many areas.

huyhoang
December 27, 2011 at 23:04

A government is legitimate only when it has the consent of the governed.
Does CPC or VCP fall into this definition?

Whores by any other name
December 19, 2011 at 14:49

Vietnam is one of the most corrupt countries in SE Asia today.
The banksters are front men for the government,the wealth of the nouvue
rich is sickening. Bentley only parking, cell phones for $15,000
and their is such a gulf between rich and poor. They send their children to
good schools abroad and the weekly allowances are $2000 a week.

This is why the new boom will bust with fake real estate and bubbles.
Land in Vietnam is worthless crap selling for the prices of Moscow and
Paris.

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