Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Each Thursday, Asia House Advisory’s COVID-19 monitoring service examines the impact of economic measures taken by individual governments across Asia and the Middle East. This week, we look at Vietnam’s response to the COVID-19 pandemic.
Vietnam has recorded only 328 cases and zero deaths from COVID-19 – a success story in containing the outbreak. The government implemented strict public health measures early and mobilised the entire nation to quash the virus, framed in Vietnam as a “common foreign enemy”.
Vietnam has been widely touted as a global success story, effectively implementing a ‘low-cost’ model that has contained the spread of the virus. This is attributed to a four-part cost-effective strategy: strategic testing, stringent contact tracing through apps, a national lockdown, and an effective public communication campaign.
Prime Minister Nguyen Xuan Phuc called the fight against COVID-19 the “Spring General Offensive of 2020”, and has focused public messages around Vietnam’s strengths, rather than criticising China’s handling of the crisis. Strong central-local government policy coordination helped boost containment efforts. In the eyes of public – always a matter of concern for the government – it has come out of this crisis stronger than at the start.
The International Monetary Fund has reissued a predicted a growth rate of 2.7 per cent in Vietnam this year, following the impact from COVID-19. Vietnam is performing well above its neighbours. However, it reported GDP growth of 3.8 per cent in Q1 of this year – a 10 year low – due to the global impact of COVID-19 and the resulting national lockdowns. The government’s current economic strategy has two key aims: promoting its domestic market, and repositioning Vietnam to take advantage of a shifting global supply chain. As part of this, a host of relief measures for the domestic market have been issued, including providing quick-access loans for wage payments and freezing certain business obligations. The government is exploring ways to reposition Vietnam to take advantage of a global shift to diversify supply chain efforts from China, particularly in the manufacturing, technology, and textile sectors.
In containing the pandemic and thus reopening its economy earlier than most, Vietnam could come out of this crisis with a first mover advantage compared to regional peers. Businesses can use this to restart operations and prepare for a post-COVID economy. However, the crisis has also brought to light the interdependence of the global economy and the risks of extended supply chains. Vietnam, like many others, has been hit by this – supply chains have been disrupted, especially in terms of imports of raw materials, and a lack of stockpiling of components in the manufacturing of higher-value products.
Growing political and business sentiment for supply chain diversification could make Vietnam a big winner with its growing ability to host mid to high level production on the value chain. But, while it may become an attractive destination for investment into manufacturing, the question remains as to whether global demand will remain robust. Contraction in global demand has already been noted – and may work against the government’s focus on attracting greater foreign investment into the manufacturing sector. While the government is taking strides to attract greater foreign investment, regulatory barriers remain – an issue that investors will take into account when making decisions to diversify into Vietnam.
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