taking stock: coverage external economic environment recent economic developments in vietnam special...
TRANSCRIPT
Taking Stock: Coverage
External economic environment
Recent economic developments in Vietnam
Special topic 1: Trade facilitation, competitiveness, and growth in Vietnam
Special topic 2: Corruption and economic growth in Vietnam
Special topic 3: Poverty and inequality in Vietnam
External economic environment
Q1-12
Q2-12
Q3-12
Q4-12
Q1-13
Q2-13
Q3-13
-4
-2
0
2
4
6
United States Euro AreaJapan
perc
ent
Despite gradual recovery, EAP to remain global growth leader
Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-134
6
8
10
Developing East Asia Developing countries (all)
Risks to the global economy
• Less-than-orderly tapering of QE in the US• Prolonged fiscal deadlock in the US• A sharper than expected slowdown of
investment in China
• Stronger than projected recovery of global economy
• Japan successful in reflating and reviving its economy
Macro stability in Vietnam has improved…1-
Oct
-09
26-N
ov-0
921
-Jan-
1018
-Mar
-10
13-M
ay-1
08-
Jul-1
02-
Sep-
1028
-Oct
-10
23-D
ec-1
017
-Feb
-11
14-A
pr-1
19-
Jun-
114-
Aug-
1129
-Sep
-11
24-N
ov-1
119
-Jan-
1215
-Mar
-12
10-M
ay-1
25-
Jul-1
230
-Aug
-12
25-O
ct-1
220
-Dec
-12
14-F
eb-1
311
-Apr
-13
6-Ju
n-13
1-Au
g-13
26-S
ep-1
3
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
550.0
600.0
CDS spread , 5 years (basis points)
Source: Bloomberg
Oct-09
Jan-10
Apr-10Jul-1
0
Oct-10
Jan-11
Apr-11Jul-1
1
Oct-11
Jan-12
Apr-12Jul-1
2
Oct-12
Jan-13
Apr-13Jul-1
3
Oct-13
0
10
20
30
40Year-on-Year Inflation (%)
HeadlineFoodCore
State Bank of Vietnam
…growth however stagnant at modest levels
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20134.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
Vietnam
Constraints to growth
• Growth remains stagnant at modest levels– Short run:
• Subdued private sector confidence• Shrinking fiscal space
– Long-term: • Evaluating the role of the state in a market economy• Structural constraints – SOE and banking sector issues • Declining competitiveness and productivity growth• Tight supply of market-oriented technical skills
Short-term constraints to growth
• Subdued private sector confidence– Sharp drop in private investment rate, from 15%
from 2007-10 to 11.5% in 2013– The Provincial Competitiveness Index indicates
firms less likely to invest or expand production– PMI has mostly been in –ve territory– Subdued HH consumption growth: 5.1% in 2009-
12, compared to 8.9% in previous 4 years
Short-term growth: Global situation has important implications
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20134.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
World Average
East Asia Average
Vietnam
ST growth constraints: Shrinking fiscal space
• Crucial fiscal policy choices: balance between supporting growth and sustainability– Low debt distress, but fiscal expansion is
stretching limits of this assessment• Even a small increase in pace of spending will lead to a
rapid deterioration in debt dynamics.
– Consolidation of capital spending welcome move– Greater fiscal transparency needed
Longer-term growth: getting the business climate right
Starting a business
Dealing with construction permits
Registering property
Getting credit
Protecting investors
Paying taxes
Trading across borders
Enforcing contracts
Resolving insolvency
Getting electricity
Vietnam ASEAN-4, average
LT growth: getting SOE reforms right
1992-98
1998-00
2000-02
2003 2004 2005 2006 2007 2008-11
2012 20130
200
400
600
800
1000
0
1000
2000
3000
4000
5000
127
461506
621
856813
359
116 117
13 43
Number of firms equitized in the year Cummulative number of equitized firms
LT growth: getting SOE reforms right
• Relatively slow SOE reforms on account of:– Lack of clarity of state ownership plans
• Top-down approach, lacking policy and implementation coordination
• Restructuring targets not kept realistic
– Unclear, and fragmented regulatory framework– Limited underlying financial and operational
analysis for divesture– Weak market conditions lately
LT Growth: Getting banking reforms right
• Banking sector fragilities remain– High NPL ratios (financial disclosure &
transparency big concerns)– Loan classification not per international stds– State retains a big share in banks– Regulations on bankruptcy, insolvency, creditor
rights need attention– VAMC an important step: its organizational and
financial capacity needs bolstering
Medium-term outlook and risks• Medium-term outlook is favorable on balance, albeit with
considerable downside risks
• Downside risks– Forex reserves still low– Weak private sector demand vulnerable to further bad news– Possibility, though diminished, of departure from prudent macro
policies– Structural reforms could further slow down– Banking sector highly fragile with weak financial position
2012 2013 (p) 2014 (p) 2015 (p)
GDP Growth (%) 5.2 5.3 5.4 5.5
Special topic 1: Trade facilitation, competitiveness and growth in VN
• Impressive gains in leveraging benefits of global integration• However, export growth mostly low tech
Special topic 1: Trade facilitation, competitiveness and growth in VN
• Attention needed in the three pillars of trade facilitation and competitiveness– Transport infrastructure and logistics– Regulatory procedures for trade– Supply chain organization
• Adopt dual-track approach– Long run: Upgrade tech &move up value chain– Short run: Get more value addition in existing
exports
Special topic 2: Corruption and growth
• Corruption long seen as a serious problem• A few troubling cross-country comparisons
0
25
50
75
100
Global Integrity Assessment ofAnti-Corruption & Rule of Law
Vietnam
0
25
50
75
100
Enterprises Saying They Paid Bribes Overall (%, WBES)
Vietnam
Special topic 2: Corruption and growth
-0.3
-0.1
0.1
0.3
0.11
0.03
-0.20
Fir
m's
op
era
tio
na
l eff
icie
ncy
co
mp
ared
to
2 y
ea
rs
befo
re
-1=
mu
ch
wo
rse
+1
=m
uch
bett
er
Vietnamese firms that paid bribes have done worse!Need for: administrative reforms and greater transparency
Special topic 3: Poverty and inequality
Special topic 3: Poverty and inequality
• Poverty remains concentrated among ethnic minorities. HOWEVER,– Even ethnic minority poverty has improved
significantly– The situations of the 53 ethnic minority groups are
diverse– Observed pathways out of poverty for ethnic
minorities are similar to rest of population
Thank you!