Just over a year ago, Vietnamese bureaucrat Phung Quoc Hien issued a rare warning, arguing “any changes in the global economy would have huge impacts on developing countries like Vietnam, Laos, Cambodia and Myanmar.”
As head of the Vietnamese National Assembly’s Committee for Finance and Budget, Hien’s comments were worth heeding and delivered as China’s stock markets and its currency, the yuan, went into a tailspin amid collapsing commodity prices and escalating debt.
It was important on many levels. Economic forecasts like this are unusual from Vietnam; it is still a secretive one-party, communist state and these comments were well thought-out, not without foundation, and are proving quite accurate.
In recent weeks, Cambodia has announced that foreign direct investment (FDI) from Vietnam has collapsed to zero in the first six months of this year. It was a shocking result and, rubbing insult into the trade wounds, the Cambodian government announced soon after that all foreign investment was down 43 percent for the same period.
Mey Kalyan, senior adviser to the Supreme National Economic Council, told the Khmer Times that the latest data raised concerns that falling investment was the beginning of a larger trend.
“Of course, it will make us concerned. Due to this, we have to carefully monitor the declining trend in order to know exactly what’s happening. From the look of things, it’s not good.”
Vietnamese trade delegations have since embarked on an intense regional tour designed to shore up trade. In the process a series of further warnings have been issued.
Laos was told by the Vietnamese that Hanoi was reviewing the “implementation of cooperation agreements in the fields of energy, mineral resources and industry, in order to make timely adjustments to those agreements.”
Like Hien’s initial comments the Vietnamese review was buried in a rather drab piece of reporting which followed the tour, led by Deputy Prime Minister Trịnh Đình Dũng and his Lao counterpart Sonsay Siphandone.
The official Vietnamese press also reported that the two sides discussed measures to remove difficulties for Vietnamese investment in Laos, a common thread in talks with Cambodia and Myanmar as well.
A 72-strong delegation, headed by Nguyen Thi Kim Ngan, Chairwoman of the Vietnamese National Assembly, toured Cambodia for a round of talks but behind the official pleasantries and backslapping Phnom Penh was asked to “support and protect” Vietnamese companies in Cambodia.
It was similar to the line trotted out a month ago in Myanmar by Prime Minister Nguyen Xuan Phuc, who urged State Counselor Aung San Suu Kyi to create the best possible conditions for Vietnamese businesses in the country, particularly in real estate, banking, telecommunications, aviation, mining, tourism, and agriculture.
It was an ambitious agenda for the Vietnamese, but one that masks a redefining and shoring up of its trade ties with its neighbors, which is occurring because the regional economic outlook is grim and it is a plight that is being widely blamed on a global economic slowdown, particularly in China.
China has long been the engine of economic growth across the region. But the days of 20 percent annual export growth enjoyed by ASEAN countries ended with last year’s stock market rout.
It is not uncommon for major stock market corrections to take 18 months to two years before the full impact is felt in the general economy.
And Hien’s warning was delivered 15 months ago during a workshop for delegates from Vietnam, Cambodia, Laos, and Myanmar that was designed to “share experiences in financial management” and help all four countries to meet appropriate legislative requirements.
That could matter over the short term. There are concerns the current economic malaise will match the 1997/98 Asian Financial Crisis or the 2008 Global Financial Crisis.
In both financial crises, Vietnam, Cambodia, Laos, and Myanmar escaped relatively well. Twenty years ago their economies were far less developed, while eight years ago the financial calamity was largely worn by the United States.
This time around, all four countries have much more to lose and the epicenter in China is much closer to home.
Luke Hunt can be followed on twitter @lukeanthonyhunt