Vietnam is becoming the great hope among those involved in Asian trade, as neighbouring economies continue to flounder.
Speakers at GTR Asia Trade Finance Week in Singapore singled out the Mekong Delta country as one in transformation and voiced hopes that its rapid improvement would continue apace.
Rajiv Biswas, chief economist for Asia Pacific at IHS, said that the Vietnamese government had successfully pursued a policy of “export transformation” since 2011. The government has made the country more open to foreign direct investment, leading to the establishment of production plants by the likes of Cisco and Samsung in the country over recent years.
Exports as a whole rose by 13.6% – bucking the regional trend of declining foreign sales – with the share of electronics exports growing by 9% year on year. In 2014, such exports added US$33bn to the Vietnamese economy.
Previously, there were concerned that the Vietnamese economy was too reliant on commodities. But reforms made in recent years have helped address that imbalance, with the government keen to pursue similarly progressive trade strategy going forward.
Vietnam is one of the country’s involved in the negotiations for the Trans-Pacific Partnership (TPP), a 12 nation Asia Pacific free trade agreement. Stephen Capon, Asia Pacific manager at insurer Ace said that his company is one of the most active in lobbying the US government over the deal, and that he “had it on good knowledge” that the agreement would be inked soon.
“It’s been a very difficult past few years for Indonesia,” Miguel Chanco, Economist Intelligence Unit.
Santosh Pokharel of the Asian Development Bank (ADB) told the conference that Vietnam would stand to benefit more than any of the other 12 member nations. The country has a vibrant textiles sector, the primary market for which is the US. The TPP would lead to a removal of tariff barriers to entering the US, therefore acting as a major boon to the sector.
Vietnam is also involved in a range of other free trade agreement negotiations, including the Asean-backed Regional Comprehensive Economic Plan, which involves China. It also reached an agreement in principle with the EU over a free trade agreement that would give it tariff-free entry to the European market.
The parallels to be drawn with neighbouring Indonesia are few, with traders fretting over a new round of regulations, and the continued downturn led by tumbling commodity prices.
“It’s been a very difficult past few years for Indonesia,” said Miguel Chanco, Asia Economist at the Economist Intelligence Unit. “Its economy was growing by 6.9% in 2010, but that fell to below 5% last year.”
Canco blamed the Chinese slowdown and a series of “policy missteps” for Indonesia’s woes. In an effort to control the amount of currency and minerals leaving the country, its government has introduced mandatory letter of credit rules for many of the primary exports, as well as forcing producers to manufacture smelting plants if they wish to sell minerals overseas.
This, said Brahim Zerouki – commodity trading director at PetroIndo Utama – has resulted in the closure of thousands of small mining companies, with the loss of 150,000 jobs in the country.