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Economic experts worry about unusual investment movements from China

Economic experts worry about unusual investment movements from China

Friday 17, 01 2020
Recent investment and import-export shifts, especially in interactions with key trade and investment partners, the US and China, put Vietnam facing significant challenges.

That is the comment of Nguyen Anh Duong, Head of Macroeconomics, Central Institute for Economic Management (CIEM) at a seminar to get expert opinions on socio-economic situation held by The National Assembly's Economic Committee on the morning of October 4.

Emphasizing that 2020 is the final year to achieve the goals for the 2016-2020 period, Chairman of the Economic Committee, Vu Hong Thanh, suggested issues that need to be discussed. For example, additional assessments of difficulties, advantages, ability to accomplish goals, clarifying the quality of growth, and addressing the internal problems of the economy that have not been handled for many years, such as restructuring the economy, renewing the growth model, disbursing public investment and ODA capital.

At the seminar, there were many remarkable results of the socio-economic situation mentioned by Duong and others, such as the impressive growth, exceeding all expectations (Q3 increased by 7.31%). Generally, for the first 9 months of the year, GDP increased by 6.98%, significantly higher than the whole year's growth target of 6.8% and exceeded all forecasts of Vietnam's economic growth.

In the context of the uncertain world economy, the increased protectionism and the US-China trade war with complicated movements, Vietnam's import and export activities still grew, experts from CIEM emphasized.

The highlight is that the non-state economic sector still shows the vitality and promotes an increasingly positive role for the economy. Investment of this sector accounted for 45.3% of total social investment in the first 9 months, up 16.3%.

In the context of slow disbursement of public investment and a decline in the FDI sector, the increase in activities of the non-state economic sector has contributed positively to economic growth as well as confidence in the investment – trade environment, Duong acknowledged.

The report of the Ministry of Planning and Investment stated that 2019 growth gradually reduced dependence on mining and credit growth, but Mr. Duong said that the economic growth in the first 9 months showed the risks on the return to the economic growth model based on mineral exploitation and export and the slow growth of the agro-forestry-fishery sector.

What is even more worrying is that, according to CIEM experts, the unusual shift of investment from China with a newly registered capital of more than US $ 2 billion in the first nine months of the year (just lower than South Korea), accompanied by an increase in imports from this country could lead Vietnam to become a "landing ground" for Chinese businesses to evade US tariff and other measures in the US-China trade war.

The above investment shift itself, according to Duong's assessment, can exacerbate the competition and crowd out of FDI enterprises to domestic enterprises, which have existed for many years. Vietnam does not distinguish investment partners, but the main challenge is to balance the investment project screening requirements with the reduction of unnecessary policy costs for investment activities.

Also referring to trade relations with China, former Deputy Minister of Planning and Investment Dang Huy Dong commented: "We are too small for them but that does not mean that we will lose provided that we know the rules. The issue here is to create a clean trade environment, as well as fair and healthy competition ".

Looking from the bleak spots of the economy, Dau Anh Tuan, Head of the VCCI Legal Department, said that the solutions to reforming the business environment were still coping, not yet stemming from the motivation of reform itself.

The Law on Supporting Small and Medium Enterprises has been in force for almost 3 years, but there has been almost no actual impact, Tuan said.

In 2020, according to Tuan, the business environment will still contain many risks and may be more difficult than in 2019. Mr. Tuan said that hundreds of businesses have reported to VCCI about the problems raised by the unbalanced law, the lack of synchronization, and the roundabout regulation.

“Ho Chi Minh City has 70 commercial housing projects that are stuck because of the irrationalities in the Housing Law, the Planning Law, and the Investment Law. The legal framework for new business models such as Airbnb or Nextflick (VOD) is also incomplete, etc.” Tuan said.

Economic experts worry about unusual investment movements from China

With the 12-billion-USD scale, Vietnam's digital economy leads Southeast Asia

Description The digital economy in Vietnam reach 12 billion USD in 2019 and will rise to 43 billion USD by 2025, including e-commerce, online travel, online media, and technological ride-hailing

According to the latest report on "Southeast Asia Digital Economy" in 2019 (e-Conomy Southeast Asia 2019) published by Google, Temasek and new partner Bain & Company, the digital economy in Vietnam reached 12 billion USD in 2019, leading the region in growth speed with Indonesia.

In a statement released by Google Vietnam, Vietnam and Indonesia are two breakthrough markets in the trend of developing a digital economy compared to the rest of the region. The report shows that Vietnam's digital economy will reach 12 billion USD in 2019 and rise to 43 billion USD by 2025, including e-commerce, online travel, online media, and technological ride-hailing.

The report also said the region's digital economy has just reached a new milestone, reaching the 100 billion USD threshold for the first time this year, which is an increase of 72 billion USD from last year. The digital economy in Malaysia, Philippines, Singapore, and Thailand is growing at 20 to 30% annually.

Meanwhile, the two leading representatives in the region, Indonesia and Vietnam, have growth rates exceeding 40% a year.

In 2019, Vietnam has 61 million Internet users, and the average Vietnamese spends 3 hours and 12 minutes using the Internet on mobile devices such as smartphones.

According to regional averages, usage is concentrated in the group of social media and communications applications (52%), video watching apps (20%) and games (11%), and working apps.

According to Google, with the two "leaders" Hanoi and Ho Chi Minh City among the 7 major cities developing the digital economy of the region, Vietnam has become the 3rd largest source of investment in the region with 600 million USD invested from 2018 to the first half of 2019.

Especially, the number of investment deals is less but the value is higher in 2019. A number of investment deals in MoMo, Sendo, Topica from international investors contribute to making Vietnam become a destination for foreign investors.

According to Google, the Southeast Asia's Internet technology industry is booming, and it's a sign of the fundamental changes in the way people shop, eat and move. E-commerce is currently the industry accounting for the largest proportion and fastest growth.

More than 150 million people in Southeast Asia are currently buying things they need online, making the value of the e-commerce industry reach 35 billion USD, compared to just 5 billion USD in 2015, and it is on track to reach 150 billion USD by 2025.

Notably, technology-based ride-hailing apps are also growing strongly, with 40 million people ordering cars, ordering food and using other services on demand, compared to only 8 million in 2015.

Vietnam economy heavily depending on China

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