Vietnamese Economy 2012-2013:

Perspectives and Challenges

Le Dang Doanh
Fri, May 31
st
2013
Population: 88.48 million (2012)
GDP: US$ billion 136 (2012)
GDP Growth rate: 5.03%/year (2012)
GDP/capita: US$ 1540 (2012)
GDP/capita(PPP): ~US$ 3549
Export: US$ billion 114,6 (+18.3%)(2012)
Import: US$ billion 114.3 ( +7,1%) (2012)
CPI: 6.81% to the end of December, annual average 9,2% ( 2012)
3
Longest Growth Declining Period
Since Doi Moi (renewal)
5.1
5.8
5.8
4.8
5.3
5.8
5.0
4.9
3
4
5
6
7
8
9
10
Collapse of
the Soviet Union
East Asia
Financial Crisis
Global Financial
Crisis
????
Real GDP Growth rate (in %)
Economic Indicators and Implementation
2010 2011 2012
Target Reality Target Reality Target Reality
Annual GDP Growth
6,50% 6,78% 7-7,5% 5,89% 6-6,5% 5,03%
CPI
7% 11,75% 7% 18,58% 10% 6,81%
Budget Overspending
6,2% 5,6% 5,3% 4,9% 4,8% 4,8%
Import deficit (% of
export)
17,3% 18% 9,9% 11-12% -
Export Growth
6% 25,5% 10% 33% 13% 18,3%
Social Total Capital
Investment in Developing
(% GDP)
41% 41,9% 40% 34,6% 33,5% 33,5%
Social Capital Investment Declines
(2012: 33,5%, 2013: ~30%)
Social Capital Investment/GDP
Contribution of factors to
economic growth 1991-2009 (%)
Capital Labor TFP
Vietnamese Competitiveness Indicator
(2008-2012)
Indi.
Rank
1
2
3
4
5
6
7
Institutions
Infrastructure
Macroeconomic
environment
Health and
primary
education
Higher
education and
training
Goods market
efficiency
Labor market
efficiency
Financial market
development
Technological
readiness
Market size
Business
sophistication
Innovation
Vietnam ASEAN (excl. VN) Singapore
Competitiveness is low and declining
WEF: rating according to 12 GCI pillars, 1-7 (7 is the best)
89
95
106
64
96
91
51
88
98
32
100
81
Rating/144
country
8
Corruption Perceptions Index in Region
Sociological Survey on Corruption
(20.11.2012)
Official
Business
Individual
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STATISTICS TABLE ENVIRONMENTAL INDICATORS
IN VIETNAM
Aggregate Level
Quality
Rating
Country
Rating
Trend
Rating
National
Ranking
Environmental quality indicator 50,6 79 4,2 73
Health Impact 51,6 91 20,4 31
Air Quality 31,0 123 -12,1 125
Risk of infection 66,4 77 24,2 36
Water Quality 42,5 80 45,2 5
Ecosystem Vitality 50,2 62 -9,0 112
Weighted PCI Indicator 2012
Good
Fairly
Good
Average
Fairly Low
Corporates Business Effectiveness over time
Regional
ranking
Corporate
Increased
Investment
Average
Capital
Size
Corporate
Increased
Labor
Average
Labor Size
(Number)
Profit
Reporting
Corporate
Loss
Reporting
Corporate
Expansion
Intending
Corporate
Year
Lowest
Medium
Highest
CPI 5.2013: -0,06%, +6,36%
over the same period 2012
Inflation by Product Group
Price Controlled Groups (%) Adjusted by Market Groups (%)
Building Equipment and Houses(%)
Transportation
Education
Medicine and Pharmaceutical
Beverage & Cigarette
Garment
Household Appliances
Culture & Entertainment
Real Estate Price Growth Rate 3.4-4 Times
Greater than GDP/capita Growth Rate 2000-2010,
Real Estate Price = 26 times Income
1
2.9
1
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Tc tng GDP-PPP/u ngi Tc tng gi t
Growth Rate of Real Estate Prices and GR of GDP/capita
GDP-PPP/Capita Growth Rate Real Estate Price Growth Rate
Real Estate Value Declines Significantly since 2011
Figure 5: Secondary Price Change (Quarterly)
Six key indicators 2013
and Governments measures
Gross Domestic Product (GDP) increases by 5,5%.
Export increases by 10%.
Trade deficit ratio is approximately 8%.
State budget overspending does not exceed 4,8% GDP.
Consumer Product Index (CPI) increases by 8%.
Total social capital investment in developing is around 30% GDP.
Credit is expected to increase 12%.
Government has implemented NQ 01 and NQ 02 with measures to tackle
bad debt, banking, real estate, supporting businesses.
Project to restructure economy, corporations and public investment
will continue to be implemented.
Some issues of Vietnamese economy 2013
Indonesia and Myanmar is developing, reforming intensively and attracting FDI.
Investors have new priorities.
Vietnams economy faces many challenges: Confidence declines significantly because
business condition is worsening and policies change too frequently: business banks do
not trust each other.
Banks and businesses bad debt: 10% 15%? 400 thousands billions Dong or ~18
billions USD. Freezing credit is a dangerous decease the whole economy: mobilized
capital +15%, credit +6%.
Banking system faces many issues: liquidity, cross ownership, real property. Interest rate
is still high.
State economic group, corporations owe 1.3 millions billions VND, accounted for 70%
of overall bad debt?
Over 1 million billion VND of real estate property stagnates.
Small and Medium Enterprises is in difficulties, even in agriculture, in Mekong Delta.
Corruption, group interest, tenure mindset, institutional reform had acknowledged
difficulties but there has not proper solution.
Economic situation 4 months of 2013: already too tough
Some initial positive changes:
Inflation is controlled.
Industrys growth is improved. Inventories decreased.
FDI export increases, domestic decreases.
FDI increases significantly, especially The Middle of VN.
Shortcoming:
Retails revenues increase 11.7% (Inflation 6.61%), transported goods
5.9%/10%(2012), investment from budget 4.9%
Restructure, bad debt settlement, restructure state enterprises, public reinvestment are
still slow.
Institutional reform is very slow, Many decisions lack reality.
Private businesses continue to be in difficulties, to bankrupt, to close, some of which
are medium and big enterprises.
Budget income is very low, overspending can increase.
Recently issued policies
05.15 State Bank issued 11/2013 circular to instruct the implementation of
NQ02 about support package 30,000 bil. VND, 70% for people eligible for
support, 30% for social house building enterprises. There are many
questions about The asking-granting mechanism for people to get loans,
effectiveness of this support package.
05.17 State Bank will save 10.000 bil. VND for coffee replanting project in
Tay Nguyen, 5000 bil. of which for Agribank.
53/CP-2013 decree about Asset Management Company (VAMC) belonging
to State Bank: chartered capital 500 bil., issues 5 years special bonds to buy
bad debt according to market price or book value (net provision). Hoping
that there will be movement in bad debt settlement.
Private business bankrupted 2012;
72,000 corporates is sick
Private enterprises
bankrupted in 2012
Quarter 1 Quarter 2
Quarter 4/2012 Quarter 3
23
Not Much Area to Loosen Fiscal Policy
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GOV Defintion
IMF Definition
0
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20
30
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e
Domestic Debt (% of GDP)
Public and Publicly Guaranteed
External Debt (% of GDP)
Fiscal Deficit to GDP ratio (in %) Public Debt to GDP ratio (in %)
Source: Financial Ministry and International Monetary Fund (IMF)
Vietnams public debt compared
to other countries in the region
Vietnams public debt 2011 (Vu Quang Viet)
Bil. Dong Bil. USD
Compared to
GDP
Public Debt by Vietnams definition 1,391,478 66.8 55%
Governments debt 1,085,353 52.1 43%
Debt guaranteed by government 292,210 14.0 12%
Local governments debt 13,915 0.7 1%
Public Debt by International definition 2,683,878 128.9 106%
Public Debt by Vietnams definition 1,391,478 66.8 55%
State enterprises debt 1,292,400 62.1 51%
Credit growth (%/year) 2001-2012
(April 2013 + 1,4%)
Interest rate and revenues
Interest rate overnight (%)
Transaction revenues (bil. VND)
Source: State Bank
The Financial Indicators
Of State-owned Enterprises
Unit: 1.000 billion dong
Source: Ministry of Finance
Unit Investment Trust
Cross ownership, interbank lending
and investment trusts
Bank A
Stock vouchers
of Bank A
possess
Inter bank lending
lending
invest
Bank B
Private
Investor
Stock
Real Estate
Capital contribution
Stock
Real Estate
Capital
contribution
possess
invest
possess
possess
possess
Source: Author
Unit Investment Trust
Capital
Management
Company
High-tech exports rose sharply (by FDI)
High technology export (USD billion)
Mobiles and accessories
Computers and electric devices
Export proportion (%)
High Tech
Crude Oil
Mobile and accessories export (% total)
Electric devices and accessories export (% total)
Change in exports (value, volume, unit price)
Export proportion (%)
High Tech
Crude Oil
Garment
Shoes & Leather
Agricultural Products
Value
Price
Weight
Note: Goods include crude oil, coal, rice, coffee
and rubber
The Trade Balance in The Market
Corruption Threatens the Survival of the Regime
General Secretary Nguyen Phu Trong, "the Politburo, the Secretariat
from many courses have made a large number of defects, especially not
prevented and overcome corruption, negative effects on the part of
officials, party members.
There is no clear direction to focus, nor do a full assessment of the
situation to take prompt corrective measures to resolute some negative
impacts (like the palm for social right and status, the escape of the
offense ...) and a number of case of assignment and promotion of staff are
not exact.
Some limitations and weaknesses have not been clarified clearly about
the substantive level, specific address, and those who will be responsible
for, such as the palm for social right and status, and the benefit of
groups ..."
Converting growth model
34
Increased input
Economic
Growth
Economic
Reconstruction
Priority
Of current
Growth model
Priority
of target
growth
model
Intermediate
target
State
investment
State
business
Banks
Capital
Labor
Source
Increased efficiency
Technological
Progress
Technical
Efficiency
Allocative
Efficiency
35
Analysis of general
environmental & industry
IMPACTS FROM GENERAL ENVIRONMENT AND INDUSTRY
National /
international
Economy
INDUSTRY
Government and
Policy
ENVIRONMENT
INDUSTRY
Suppliers
Competitors
Customers
New factors
Natural
environment
Residential
structure
Social Structure
PEST (+En+Cul)
SWOT
Ensure "true"factors
36
Four Models of Economic Recovery
Model V: quick down-quick up thanks to timely measures
and the economy is not seriously ill.
Model U: fast down, then slow growth in such a time before
quick recovery.
Model W: Down-up-down-back up. The problem in the
economy can not be solved basically.
Model L: bottom down and long has not been restored (like
the Japanese economy).
Vietnam ?
Opportunities for Consulting Firms
Providing market information, introducing new market segments,
new customers, new opportunities.
Providing SWOT analysis and opportunities for business
development.
Building plans for business restructuring, including debt
restructuring, developing a roadmap for implementation of the human
resource, and redundant workers.
Providing analysis of the risks of the business, helping businesses
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Applying information technology to reduce costs, enhance
communication, and to ensure effective monitoring.