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Contents

1. Introduction ...................................................................................................................... 2

a. Vietnam .......................................................................................................................... 2

b. Demographic of Vietnam ............................................................................................. 2

c. Geographic of Vietnam................................................................................................. 3

2. Political risks in Vietnam ................................................................................................. 3

3. Economic Risks in Vietnam ............................................................................................. 5

4. Export opportunities in Vietnam .................................................................................... 6

5. Conclusion ......................................................................................................................... 8
1. Introduction

The Association of Southeast Asian Nations (more commonly known as ASEAN) is a


political and economic organization aimed primarily at promoting economic growth and
regional stability among its members. There are currently 10 member states: Indonesia,
Malaysia, Philippines, Singapore, Thailand, Brunei, Laos, Myanmar, Cambodia and Vietnam.
ASEAN was founded half a century ago in 1967 by the five South-East Asian nations of
Indonesia, Malaysia, Philippines, Singapore and Thailand. This was during the polarized
atmosphere of the Cold War, and the alliance aimed to promote stability in the region. Over
time, the group expanded to include its current 10 members.

a. Vietnam

Vietnam or officially the Socialist Republic of Vietnam is one of the ASEAN members. The
name Vietnam is a variation of Nam Việt, a name that can be traced back to the Triệu
Dynasty of the 2nd century BC. The word Việt originated as a shortened form of Bách Việt, a
group of people then living in southern China and Vietnam.

In 1802, Nguyễn Phúc Ánh established the Nguyễn dynasty, and in the second year, he asked
the Qing Emperor Jiaqing to confer him the title 'King of Nam Viet/Nanyue', but the Grand
Secretariat of Qing dynasty pointed out that the name Nam Viet/Nanyue includes regions of
Guangxi and Guangdong in China.

Between 1804 and 1813, the name was used officially by Emperor Gia Long. It was revived
in the early 20th century by Phan Bội Châu's History of the Loss of Vietnam, and later by the
Vietnamese Nationalist Party. The country was usually called Annam until 1945, when both
the imperial government in Huế and the Viet Minh government in Hanoi adopted Vietnam.

b. Demographic of Vietnam

On the eastern tip of the Indo-China peninsula in south east Asia, Vietnam is one of the larger
and more densely populated countries in the region. Confirmed population figures are hard to
obtain, but an estimate puts the Vietnam population in 2018 at 96.49 million, up from the
2012 estimate of 91.5 million and this figure would make the country the 14th most populous
on the planet.
In comparison, Vietnam has a small surface area, and at 331,210 square kilometres (128,565
square miles), this is only the world’s 65th largest in terms of land mass alone.Those two sets
of figures would suggest a densely populated landscape and that is the case to an extent. For
every square kilometre of land, there is an average of 280.6 people. That number converts to
723 per square mile and overall, this becomes the 46th most densely populated country on
earth.

The CIA World Factbook has also produced some interesting figures in relation to life
expectancy and these stand at relatively healthy levels. The organisation claims that in 2011,
those figures stood at 71.33 years overall, which could be divided between males at 68.52
years and females at 74.33 years.

This is arguably one of the most diverse countries on earth when it comes to ethnicity splits
and in fact, the Vietnamese government recognises no less than 54 ethnic groups within the
country. The list is therefore far too numerous to replicate in full but the Kinh group are by
far the most numerous and account for over 87% of the overall population of Vietnam.

c. Geographic of Vietnam

Vietnam located in Southeast Asia on the east side of Indochina Peninsula, and bordered by
Laos and Cambodia to west, China to the north, the Gulf of Thailand to the south. the Gulf of
Tonkin and the South China Sea to the east, Vietnam is long and thin, with an area of
331,210 square kilometres (310,070 square kilometres land; 21,140 square kilometres water;
127,330 square miles), which is slightly larger than New Mexico. Vietnam shares land
boundaries with Cambodia (1,228 kilometres), China (1,281 kilometres), and Laos (2,130
kilometres) for a total of 4,639 kilometres. Vietnam’s coastline along the Gulf of Tonkin, the
South China Sea, and the Gulf of Thailand measures 3,444 kilometres (excluding islands).
The Vietnamese refer to the South China Sea as the East Sea.

2. Political risks in Vietnam

Vietnam is a one-party state ruled by the Communist Party of Vietnam (CPV) which provides
strategic direction and decides all major policy issues. The country is led by the so-called
“four royal pillars”: CPV General Secretary, State President, Prime Minister and National
Assembly Chair. Policy, which includes promoting stability, retaining the political status quo,
domestic economic development and international integration, is made on a consensus basis
by the Politburo. Regional security, especially in relation to the South China Sea, is a major
foreign-policy priority for the CPV.

Party leaders and the leaders of the government, are selected every 5 years at the National
Party Congress. The most recent Congress was held in January 2016 and in May 2016 a
national election was held to elect the 500 Deputies who make up the National Assembly,
Vietnam’s legislative body.

Corruption, lack of accountability and transparency, and burdensome bureaucracy all impact
the effectiveness of the government in formulating and implementing policy. Economic
reform and the restructuring of inefficient state enterprises are vulnerable to being
undermined by entrenched interests and conservative elements in the government more
focused on security. While the government stimulus package has boosted the economy, there
are questions over how the budget deficit can be financed, how inflationary pressure can be
contained, and how the crowding out of private investment can be avoided. Hanoi has
embarked on a plan to trim bureaucratic procedures in government, and how that scheme
plays out will be something to watch.

Investors frequently list poor infrastructure as one of the biggest barriers in Vietnam, and the
government’s ability to coordinate swift, efficient development in this area is being keenly
observed.

Corruption is endemic in Vietnam at all levels of government, and acts as a major barrier to
foreign investment. The authorities had announced aggressive plans to fight corruption, and
encouraged the media to act as a watchdog, but these efforts lost steam after several
journalists were detained for reporting on major corruption scandals. Progress on corruption
will remain a key determinant of investment attractiveness. Vietnam’s rank in corruption
perceptions rankings. A strong improvement or decline would influence investors.

Vietnam is one of the more politically stable countries in South East Asia. Its leadership does
not welcome dissent. Internal conflict is rare although in 2016 and 2017 there were a small
number of high-profile protests including in relation to an environment disaster in Central
Vietnam. Land rights also continue to be a source of social unrest. There are strict restrictions
on freedom of speech which can affect internet usage, particularly the use of social media and
personal blogs, access to which can be blocked without notice. Mainstream media outlets
remain fully under the control and direction of the Communist Party so many people follow
independent bloggers for their news updates. Many bloggers suffer harassment, arrest and
imprisonment for criticising the Communist Party.

Vietnam has seen a rising number of strikes, protests and land disputes, often affecting
foreign businesses. Disturbances have erupted in rural areas due to state expropriations of
land and the corruption of local officials. But there remains no evidence for now that wider
unrest is likely, or that there is any imminent risk of the regime being challenged from below.
Any sign that a broader national protest movement is emerging out of local disputes. So far,
this seems unlikely.

Territorial disputes in the South China Sea. This issue is highly charged in Vietnam, where
suspicion of China runs high. Any move by China to assert sovereignty over disputed islands
in the South China Sea, or perceived weakness by Vietnam on this issue, could galvanise
broad based support for demonstrations.

3. Economic Risks in Vietnam

Since the 2000s, the Vietnamese economy has been experiencing dynamic economic growth,
driven by international trade and foreign investment. The country experienced a growth rate
of 6.3% in 2017 and is expected to maintain a similar progression in 2018 and 2019. Exports
constitute a significant contribution to Vietnam's GDP and certain sectors, such as industrial
production, textile, electronics and seafood production have been growing rapidly. Vietnam
has been going through an economic renovation since 1986. In 1992, the Amended
Constitution recognized the role of private sector in the economy, and in 2001 the U.S.-
Vietnam Trade Bilateral Agreement (US-BTA) was signed. Since then, the government has
been launching reforms in all key sectors of the economy and privatising public companies.
Currently, Vietnam is speeding up its privatization drive as it copes a budget deficit and
growing public debt, as it focuses on investing more money to developing the nation’s
infrastructure. Altogether, the government has said they intend to sell stakes in at least 533
companies by 2020 through direct sales or IPOs.

Through FDI, Vietnam now produces high-value technology assets. Vietnamese foreign trade
continues to benefit from the relocation of Chinese factories. Inflation reached 4% in 2018, a
relatively low rate for the country. Controlled inflation and improved access to credit
sustained the consumption of Vietnamese households. However, the banking system is
fragile, which hampers business investment. The tourism sector has been growing rapidly,
showing an increase of 29.7% in foreign visitors during the first two months of 2018 over the
same period in 2017 (Vietnam National Administration of Tourism). Industrial production
decreased, reaching 6.4% in 2017, compared to 7.5% in the previous year. In order to ensure
sustained growth, the Government has launched several major projects since 2011:
infrastructure development, training the young people and modernising institutions. To reach
these objectives, still on the agenda in 2018, the country will have to continue to reform
public companies, while the gap between large private enterprises benefiting from FDI and
unprofitable state enterprises has been growing wider.

In 2017, public finances remained fragile while the public deficit was still high. However, it
should be reduced as the privatisation programme continues. Despite a large public debt
(which, in 2017 was estimated to be 62.3% of GDP - CIA World Factbook; 61.5% according
to IMF), the country's external accounts have improved as the exports have risen.
Nevertheless, foreign exchange reserves remain insufficient and only covered two months of
imports in 2017. Lastly, Chinese activity in the South China Sea remains a concern for Hanoi,
which has been deepening its relations with the Philippines and Japan.

Vietnam's future prospects remain positive. Alongside its skilled and inexpensive workforce,
the country has solid potential in terms of agriculture and natural resources, and its
development strategy is based on the opening and diversification of its economy. The
unemployment rate is particularly low. It reached 2.3% in 2017 and it is expected to remain
the same in 2018 and 2019.

4. Export opportunities in Vietnam

Vietnam has made rapid economic progress since launching its first major economic reforms
in 1986. It continues to develop from a low-cost labour economy to a higher value, high-
quality enterprise marketplace. Vietnam is forecast to be one of the top 10 fastest growing
economies in the next few decades.

Vietnam is one of the most vibrant economies in Asia with a large market for capital goods
and a growing domestic market for consumer goods. It has an ambitious programme of major
infrastructure developments including new urban railway networks, a new international hub
airport and expansion of regional airports.

Continued strong economic growth, ongoing reform, and a large population of 93 million –
half of which are under the age of thirty – have combined to create a dynamic and quickly
evolving commercial environment in Vietnam. Sales of equipment, technologies and
consulting and management services associated with growth in Vietnam’s industrial and
export sectors and implementation of major infrastructure projects continue to be a major
source of commercial activity and interest for foreign firms and governments. In terms of
infrastructure, the Asian Development Bank (ADB) released figures in April 2017 that mark
Vietnam’s public and private infrastructure investment as the highest in Southeast Asia,
accounting for an average of 5.7 percent of the country’s gross domestic product (GDP).

Per capita GDP was estimated to be $2,546 in 2018 ($7,463 PPP). The government’s stated
goal is to increase this to at least $18,000 by 2035. With disposable income levels in major
urban areas four to five times the national average, significant opportunities in the consumer
and services sectors are fast emerging.

Telecommunications, information technology, power generation, transportation infrastructure


construction, environmental project management and technology, aviation, defense, and
education will continue to offer the most promising opportunities for foreign companies over
the short term as infrastructure needs continue to expand with Vietnam’s pursuit of rapid
economic development. Healthcare will also be a growing sector as the government expands
programs and an increasingly wealthy population spends more on medical treatment.

The Government of Vietnam (GVN) plays a significant role in the economy, with state-
owned enterprises (SOEs) making up 35 percent of GDP. The GVN strategy to “equitize”
(partially privatize) SOEs in all sectors of the economy is slowly moving forward. While the
GVN will maintain majority ownership in the largest and most sensitive sectors of the
economy – including energy, telecommunications, aviation, and banking – the equitization
process could present opportunities for foreign companies.

Key agricultural inputs to production such as hardwood lumber, cotton, hides, skins, and feed
ingredients will also continue to play a key role in helping fuel Vietnam’s export led
manufacturing strategy and, as noted earlier, are responsible for agricultural products
accounting for nearly half of total exports to Vietnam. Demand continues to also grow for
consumption of products such as meat, dairy, and fresh and dried fruits.

5. Conclusion

The remarkable performance of Vietnam’s economy has interested investors looking for new
opportunities in Asia. While the country’s GDP has expanded by more than 5% annually in
recent years, foreign direct investment (FDI) has been lured by its labour, production costs
and tax advantages. A substantial portion of the FDI actually targets the export-processing
opportunities in the country. This has not only caused a surge in Vietnam’s external trade, but
has also stimulated the demand for various producer and professional services. Improved
income has likewise facilitated consumer spending. All these factors have made Vietnam a
lucrative market among emerging Asian countries.

Political risks assessment is very important for any foreign organization who wants to make
investments internationally. Political risks are the problems which can be faced by the foreign
investors due to the changes than can be happen in the host country's government policies,
rules, laws and regulations. These risks can lead to lose of investment which are made by
foreign organizations is political risks are not been assessed properly.

Economic risk can be described as the likelihood that an investment will be affected by
macroeconomic conditions such as government regulation, exchange rates, or political
stability, most commonly one in a foreign country. In other words, while financing a project,
the risk that the output of the project will not produce adequate revenues for covering
operating costs and repaying the debt obligations. Economic risk is one of the reasons for
international investing carrying higher risk as compared to domestic investing. Bondholders
and shareholders generally put up with the risk undertaken by international companies.
Investors dealing in sale and purchase foreign government bonds are also exposed.

Therefore it is important for any foreign companies or government to consider the political
risk and economical risk before engaging in exporting activities with any country. It will give
them indication on what product or services that should be exported to the chosen country.
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