Bloomberg Considers Vietnam as “New Tiger” in Asia

After several disappointing years, Bloomberg said that Vietnam’s economy is continuously emerging in Asia, with the advantage of a young workforce and impressive growth.

According to the news, the large corporations as Samsung, Intel have poured money into the factories in Vietnam leading Southeast Asian countries to emerge as new tiger in Asia. After renovation in the 1980s, Vietnam’s economy has grown rapidly, exceeding 7% before leveling off in recent years due to the increase in bad debt from the state sector.

According to PricewaterhouseCoopers LLP accounting firm, from now to 2050, Vietnam has become one of the largest growing economies in the world. Vietnam not only has the advantage of cheaper labor costs than China’s, but also become an ideal destination for Japanese corporations.

Mr. Vikram Nehru – senior research specialist on Southeast Asia of Carnegie Endowment commented: “Vietnam is possible to become the fastest growing economy in Asia. Just solve problems in state sector, the country can afford to develop strongly”.

Bloomberg also outlined a series of indicators showing that Vietnam’s economy is growing rapidly. In 2014, Vietnam has become one of  the largest export customers to the US market in ASEAN, surpassing competitors having a long tradition as Thailand, Malaysia.

Disbursement of foreign direct investment has also increased for 14 years, particularly in 2014 reached 12.35 billion US dollars, an increase of 7.4% compared to 2013 and higher than the $ 2.4 billion of 2000. Operation of Samsung in Vietnam is so strong that the government has allowed the group to have a separate air transportation port in Noi Bai International Airport.

Not only that, many other large companies are moving factories from China to Vietnam. Japan Kyocera Document Solutions Company which specialized in producing printer machine is making plan to increase 4 times of quantity, hence, increasing production up to 2 million units from now to May 3rd 2018. The company also said that the rest of this company will be transfered from China to Hai Phong and make plan to build a new factory here. This move also leads Vietnam to become the largest printer manufacturers for this business.

Frederic Neumann, HSBC Holdings Professionals recognizes Vietnam’s market is the market geting the most benefits when China was less competitive due to rising costs and the appreciation of the domestic currency. “Vietnam has emerged as the first alternative market for China and could benefit from this,” he said. Specifically, Bloomberg data also showed that the yuan rose 13% in the four years prior to 2014. According to the news agency, yuan rose strongest among 24 emerging economies.

This year, the VN-Index was up to 5.5% while the indices of the market such as Indonesia, Malaysia, Thailand only increased 4.1%, 2.4% and 2.2% respectively.

In addition, growth in GDP of Vietnam during 2014-2050 is expected to reach 5.3%. According to PwC, the growth ranks at the second position only after Nigeria. In contrast, China’s GDP growth is forecasted to drop below 4%.

According to Bloomberg, the new labor force is a strong support for Vietnam’s economy, compared to China. According to the United Nations, by 2012, 13% of China’s population has more than 60 years old, while only 9% of Vietnam at that age. By 2013, more than 40% of Vietnam’s population, equivalent to 90 million people, aged between 15 and 49.

In addition, cheap labor is also a big advantage for Vietnam. The average monthly wage in the country in 2013 was 197 USD, compared to Thailand (391 USD), China (613 USD). This difference will continues to widen. According to estimates by the Economist Intelligence Unit, from now to 2019, labor costs per hour of production in China will be higher than 177% compared to Vietnam when the figure was 147% in 2012.

“I still remember a few years ago, pair of shoes I bought in China manufactured in Vietnam,” John Hawksworth, expert of PwC said..

However, the bad debt and labor productivity are still the weakness of the economy that Bloomberg called “tiger-second”. While banks are still struggling to deal with subprime loans, the government itself is also confronted with the problem of state and enterprises with inffective operation. Not only that, the issues of infrastructure, corruption still exist. Vietnam ranks 119 out of 175 countries on the index chart of corruption in 2014. Besides, the pressure from the competition for the manufacturing contracts with the large corporations from neighboring countries such as the Philippines, Malaysia also create many difficulties to Vietnam.

“Knowing that a lot of potential but not sure that Vietnam took advantage of all to develop,” said John Hawksworth.

If looking at from other aspects, many experts believe that most of the operations shifted from China to Vietnam has low value. In contrast, China is aspiring to raise the value of their production chain.

According to Karel Eloot, director of Shanghai branch of McKinsey & Co, the labor productivity of Vietnam is very low and may be the largest obstacle to the economic development of this country.

Not only that, according to a expert of ING Groep NV, Tim Condon,Vietnam is also believe to become the star of the Mekong region (including Cambodia, Laos, Myanmar, Thailand, Vietnam and Yunnan province of China). Thailand used to be seen as a “tiger” before the Asian financial crisis of 1997-1998, but the last two years, exports have declined strongly. In contrast, Vietnam’s exports in 2014 increased up to 14%.

ANZ Bank forecasts Vietnam’s GDP from 2014 to 2015 will increase by 6.5% due to the increase in retail sales, industrial production and the recovery of the construction industry.