VIETNAM S ECONOMY A SWOT ANALYSIS The 15th Annual Conference on Pacific Basin Finance, Economics, Accounting and Management Vu Thanh Tu Anh Fulbright Economics Teaching Program Email: anhvt@fetp.vnn.vn
SUMMARY Vietnam is a small, developing, transition, and integrated economy in a fast changing world Vietnam s growth in the last 2 decade is impressive but relies mostly on quantitative expansion The competitiveness of the nation and the firm is relatively weak compared to major competitors Biggest opportunities emerge from integration Biggest challenges come from competition Biggest threat is backwardness
GDP,, Exports, and FDI US$ Billlion 40 35 30 25 20 Mini Bang Doi Moi FDI Law Boom AFTA Asian Financial Crisis Enterprise Law BTA WTO 12 10 8 6 15 10 5 0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 % Exports 4 FDI - registered GDP growth rate 2 0 Source: General Statistical Office, Vietnam Statistical Yearbook, various years,
Strengths of the Economy Economic, political, and social stability Stable and fast growing economy High export growth Large inflows of foreign capital Dynamic domestic private sector Abundant and young labor force Widening domestic market size
GDP growth (%) 15 10 5 0-5 1990 1992 1994 1996 1998 2000 2002 2004 2006-10 Việt Nam ASEAN
GDP growth (cont) 15 10 5 0-5 1990 1992 1994 1996 1998 2000 2002 2004 2006-10 -15 Nước Transition chuyển countries đổi Việt Vietnam Nam
Export Growth (2000-06) 06) 18.84% 17.84% 7.60% Trung China Quốc Vietnam Việt Nam ASEAN Source: Economist Intelligence Unit (EIU)
Attraction of FDI (% GDP, 2000-06) 06) 4.01 3.17 2.93 2.14 2.56 3.39 China Malaysia Thailand Vietnam World ASEAN Source: Economist Intelligence Unit (EIU)
VN-Index (2006-2007) 2007) APEC WTO
New business registration Businesses ('000) 60 50 40 30 20 10 0 Enterprise Law Law implemented 2000 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07F Source: Vietnam Chamber of Commerce and Industry, Ministry of Planning & Investment
Industrial output by sector (2006) 32% 30% 38% Dân doanh (23.9%) Nước ngoài (18.8%) Nhà nước (9.1%) Private Foreign State
Abundant and young labor force % of pop 12 9 Half the population is age 20 or less under 24 6 3 0 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90+ Source: General Statistical Office
Real demand growth (%, 2001-06) 06) 10% 8% 8.6% 9.2% 6% 4.8% 4% 2% 0% ASEAN Vietnam Việt Nam Trung China Quốc Source: Economist Intelligence Unit (EIU)
Weaknesses of the economy Poor infrastructure Incomplete market institutions Inefficient administration Weak business environment Inadequate education and training Inefficient use of capital Weak competitiveness
Inefficient use of capital Countries Investment GDP Growth ICOR (%GDP) (%) Vietnam ('00-'06) 38.3 7.5 5.1 China ('91-'03) 39.1 9.5 4.1 Taiwan ('81-90) 21.9 8.0 2.7 South Korea ('81-90) 29.6 9.2 3.2 Japan ('61-'70) 32.6 10.2 3.2
Ease of Doing Business (2007) Ease of Doing Business - Rank 160 140 126 135 143 120 100 93 104 80 60 40 20 0 18 25 1 Singapore Thailand Malaysia China Vietnam Philippines Indonesia Cambodia
Low quality of education and training Countries Education and Human Capital Index English Proficiency Index High-tech Proficiency Index Singapore 6.81 8.33 7.83 China 5.73 3.62 4.37 Malaysia 5.59 4.00 5.50 Philiphine 4.53 5.40 5.00 Thailand 4.04 2.82 3.27 Vietnam 3.79 2.62 2.50 Indonesia 3.44 3.00 2.50
Labor Productivity Growth 2002-2005 GDP/capita (PPP, 2005) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Hongkong Singapore Taiwan Thailand Malaysia Philippines Indonesia China Vietnam 0 1 2 3 4 5 6 7 8 9 10 Growth rate (%) Source: Economist Intelligence Unit (EIU)
Capital Productivity, 2001-2005 GDP/capita (PPP, 2005) 40,000 Singapore 35,000 Hongkong 30,000 25,000 Taiwan 20,000 15,000 Malaysia Thailand 10,000 Philippines Indonesia China 5,000 Vietnam 0 0.12 0.17 0.22 0.27 0.32 Incremental GDP growth due to 1% of GDP increase in invt Source: Economist Intelligence Unit (EIU)
Total Factor Productivity Growth, 2002-2005 GDP/capita (PPP, 2005) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Hongkong Taiwan Singapore Thailand Malaysia Vietnam Philippines China Indonesia 0 1 2 3 4 5 6 Growth rate (%) Source: Economist Intelligence Unit (EIU)
Vietnam's Exports by Product, 2002 Export Market Share, 2002 (%) 1.0 0.8 0.6 0.4 0.2 0.0 Electricity & lights Agriculture produces Telecom Foodstuff Info. tech Coal Plastic Engines Textile Leather Oil & gas Sportwares & children prods Construction & repairs -0.2-0.2-0.1 0 0.1 0.2 0.3 0.4 Change in Market Share, 1997-2002 (%) Source: Michael Porter, 2005
Business Competitiveness ( 01-06) 06) 2002 2003 2004 2005 2006 GDP 2005 (PPP) Singapore 10 6 12 6 11 28.100 Malaysia 25 24 23 23 20 11.201 Indonesia 66 50 53 59 35 4.458 Thailand 33 33 35 35 37 8.319 China 39 46 48 54 64 7.204 Philippines 64 72 71 66 72 4.923 Vietnam 61 56 78 77 82 3.025 Cambodia 107 107 2.399 No. of countries 79 97 100 113 121
New opportunities New opportunities come mainly from the deeper integration MFN, fairer treatment Access to and better allocation of resources Domestic private sector development Economic reform promotion
Exports to the US 9,000 8,000 Pre BTA Post BTA 7,000 6,000 41% 5,000 58% 4,000 55% 3,000 2,000 171% 80% 164% 8% 7% 18% 1,000 0 2% 1764% 29% 31% 21% 28% 3% 38% 2000 2001 2002 2003 2004 2005 2006 Primary Products Clothing Other Manufactures
Some Challenges More competition More vulnarable to external shocks Transaction costs of policy and institutional changes Unequal distribution of costs and benefits of integration
Thank you for your attention! BON APETIT!