By Brett Davis

Vietnam has always been a fighter, punched above its weight in critical moments. Anyone with even a passing familiarity with the country knows of the recent history of occupation, conflict, crushing poverty, followed by the not-insignificant economic miracle of the last three decades or so that have transformed the country into a burgeoning Southeast Asian tiger.

The latest opponent it has taken on is, of course, a highly infectious disease that has swept the globe, taking millions of lives and causing economic devastation in its wake. Yet, and perhaps not surprisingly, Vietnam and its people responded with unity, discipline and sense of purpose that saw it lauded internationally as a model of how to respond in such a crisis.

First, a quick recap on the numbers we all know: Vietnam had 2.9% GDP growth in 2020, the second-highest in Asia; exports were up 6.5% to over $280 billion, while FDI was down 25% it was still $28.5 billion, and 2021 GDP growth is forecast to be anywhere between 6% and 8% depending on where you get your numbers (we said it’s not easy being in the prediction business).

However, while downtown Ho Chi Minh City and Hanoi may seem almost like nothing is amiss, visit cities like Nha Trang and Da Nang where the hard-hit tourism industry is so crucial and it becomes clear the story of how Vietnam bounces back from Covid-19 will be more nuanced.


There is broad consensus that Vietnam’s handling of Covid-19 within its borders contributed to its solid economic performance and has positioned it well going forward. Yet this is not to overlook the factors that had the economy roaring along pre-pandemic.

Some of those factors were completely outside of the country’s control, namely the growing trade tensions between China and the United States. Everyone [C] Vietnam spoke to mentioned this as a net benefit for Vietnam as companies more actively pursued a ‘China plus 1’ strategy.

VinaCapital Chief Investment Officer Andy Ho noted the pandemic acted as a catalyst for FDI moving to Vietnam. “Because of Covid people realized the global supply chain is really the China supply chain, and there was even more of a need to diversify away from one location for their manufacturing,” he said, “so there was this momentum, or FDI, and Covid added another facet and accelerated it.”

In more general terms, the exemplary way Vietnam handled the pandemic showed the world, and more importantly, investors, that when they set their mind to it the authorities here can, well, get shit done. This produced that most ephemeral but valuable commodity: confidence.

“So, there was what was happening in the world before Covid, and then into Covid global investors with a sense of confidence, and you know, this is not such a bad decision to move to Vietnam because not only are you diversifying, the government was able to prove they can manage well and manufacturing activities can continue, so all that is positive,” Ho said.

Dragon Capital Chairman Dominic Scriven expressed a similar sentiment and saw additional positives in monetary and fiscal policy. “The economy is firing on some well-known cylinders, FDI, trade, the middle class, but it also has some slightly revved up engines like much easier money, a more coherent approach to infrastructure,” he said.

“Backdrop that with the approach to the pandemic and the high degree of confidence that the public appears to show, and international friends also begin to show, and we have a relatively interesting prospect of a rapid recovery if not acceleration,” Scriven said.

“The extremely impressive risk management approach taken by Vietnam to issues like pandemics was way ahead… and affirming the prescience of that risk management thinking should lead people to have greater confidence and be more interest rates and have higher confidence in the quality of products,” Scriven said.

Slashing interest rates and spending on infrastructure are the largest levers the government could pull to stimulate the economy. While there was not a lot of room to move on monetary policy, some fiscal spending to create jobs and much-needed infrastructure has benefits in the short and long term.


HSBC Vietnam Chief Executive Officer Tim Evans said Vietnam spends more on infrastructure as a percentage of GDP than most of its Southeast Asian neighbours, albeit from a much lower base. This, he said, indicates a willingness on the behalf of authorities to spend, the question is just where it is needed most.

“There is clearly a need for infrastructure, and I would say there is a greater need in the south,” he said. “The areas they really need to focus on are around port space.”

As a way of illustrating the need to expand the capacity of Vietnam’s ports, he drew a comparison between all of the country’s ports against just the single Chinese port of Shanghai. Vietnam currently has the capacity to move 16 million containers a year, he said, while Shanghai alone does 30 million.

“The big concern is if even two or three per cent of Chinese manufacturing comes to Vietnam, they just don’t currently have the capacity to ship it out because the ports are already operating at over 100 per cent,” Evans said.

“If Vietnam wants to continue to develop as an export-oriented economy, which it does, given they have signed all these new free trade agreements, then trying to bring more FDI with a focus on manufacturing and production for exports, there needs to be a significant amount of investment that takes place in port infrastructure and port access infrastructure or you will just have bottlenecks of trucks trying to get to these ports.”

Evans did sound a warning that further reforms need to be made to create genuine Public Private Partnership arrangements to incentivize genuine private sector investment in long term infrastructure programs. “The situation where I win, you lose does not bring investors into your country until there is upside for them,” he said. “The proof is in the pudding, you have a law but no one is investing in these things from the private sector, so perhaps it is not as good as you anticipate.”

Greater outflows of public spending in the third and fourth quarter of 2020 was something noted by Grant Thorn ton Vietnam founder and senior board advisor Ken Atkinson, a trend he said he hoped would continue. Vietnam was not in a position to make direct payments to people as the US has done, so public spending on infrastructure was the best way to boost employment and make Vietnam more attractive to investors in the medium to long term.

Another key area Atkinson identified that Vietnam can take advantage of is to evolve the type of manufacturing done in the country. “The challenge for the government is the implementation of its declared strategy of focusing on higher added-value investment using modern technology,” he said.

One of the major hurdles, Atkinson acknowledged, would be creating a workforce with the capability to fill more technical roles. “There is a gap, undoubtedly, and it’s a gap the government has recognized it needs to fill,” he said. “So, there will be more focus on training and getting workers workplace-ready, and that will come from both the public and private sectors.”

“As incomes rise education is already a significant focus for most Vietnamese families for their children, but that is not to say it should not also expand into higher education or for students that don’t get into university so they can go into some kind of technical training or apprenticeships.”

Apart from moving up the manufacturing value chain, Atkinson said he sees the services sector as a real driver of growth in the next few years as Vietnam continues to integrate into the global economy and become more compliant with international standards of practice.

“We still see tremendous growth potential in banking, financial services, insurance, education if you want to include that in services, and there is certainly going to be growth in advisory and consulting as we move to an IFRS environment from 2025 as there is a tremendous amount of work to do in those areas,” he said.

“We see listed companies implementing enterprise risk management programs, and internal audit programs, so there will be tremendous growth in those areas as companies want to stay competitive internationally and locally and to improve productivity and efficiency.”


While there is much to be optimistic about Vietnam’s outlook at the macro and international level, it cannot be forgotten that the pandemic caused real pain domestically. Anyone who drove or walked around downtown Ho Chi Minh city saw the shuttered shops and restaurants, the ‘for rent signs’ all-too-frequently on display.

In Focus Mekong Research Managing Director Ralf Matthaes said there were five sectors domestically that were particularly impacted: tourism, hospitality, international education, communications and personal care products.

“Education took a huge hit because a lot of people tiered down to lower-level schools and you had almost zero people coming in,” he said. “Communications providers also because of WhatsApp and Viber etcetera, so that revenue stream is gone, and personal care prod – ucts took a real hit because people are going out less,” he said. “What we are seeing is they are not anywhere near the growth levels that they were.”

All that said, Matthaes said he sees Viet – nam’s response to the pandemic putting it in the driver’s seat going forward for several reasons. “Vietnam was one of the fastest-growing economies in the world in 2019 before the pandemic hit, so there is no real reason to believe they cannot pick up the pieces because it did such a good job on Covid, and the US-China trade war benefits Vietnam more than any other country,” he said.

“If we can distribute the vaccine along with other countries, then we will be so far ahead than other countries because they are still digging themselves out of the snowstorm, we didn’t even have a snowstorm, it just rained here.”

There was another factor that everyone [C] Vietnam spoke to pointed to as the country’s not-so-secret weapon in fight – ing back from the body blow delivered by the pandemic, and that is the people of Vietnam. The inherent entrepreneurial spirit, the creativity, the willingness to roll up sleeves and get the job done.

HSBC’s Evans looked to parallels in other countries that had overcome strife to emerge as economic powerhouses, particularly Germany, Japan and South Korea. “There is something about a nation that has had to fight to achieve what it wants, the fact that maybe your parent’s generation had to go through a period of having absolutely nothing and having to strive, and I see a level of striving here, there is something that drives that ambition for a better future.” [ C ]

“There is something about a nation that has had to fight to achieve what it wants”

Tim Evans CEO, HSBC Vietnam

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