The start of a new decade is a good time to reflect on my 30 years’ association with Vietnam, which began in November 1989.
In 1990 Vietnam’s total foreign trade was less than US$ 5 billion and imports were limited to the value of foreign currency generated from exports, the exchange rate was VND 4,300 to US$1, Per capita income was less than US$ 200 per annum, and foreign exchange reserves were non- existent and there few or no overseas remittances back to Vietnam. There was very small foreign direct investment as the first Foreign Investment law was not promulgated until late 1988.
There were few cars other than official cars, few people had TV’s or refrigerators at home, there were even fewer motor scooters, no taxi’s or golf courses and few private restaurants as private enterprises were not officially allowed until 2000.
Last year we saw foreign trade exceed a record US$ 500 billion with a significant trade surplus, a stable exchange rate at approx. 23,200 VND = US$1; average per capita income of over US$ 2,800 and foreign exchange reserves of over US$ 79 billion. Overseas remittances grew to over US$ 18 billion and FDI commitments hit a 10 year high at US$ 38 billion with almost US$ 20 billion contributed and remitted to Vietnam.
Amazing progress in spite of the challenges faced by most foreign investors.
2020 promises to be another year of records on many fronts, however we do need to recognize the possibility of external shocks beyond Vietnam’s control.
On the trade front, with the broader implementation of the CPTPP and hopefully the ratification of the EU Vietnam Free Trade Agreement and the Regional Economic Cooperation Agreement plus the increase in production from the investment committed in the last 2 years it is difficult to see any significant slowdown in exports or foreign trade. The new trade opportunities will ensure that foreign direct investment will continue at above US$ 30 billion if not getting closer to US$ 40 billion.
With the growth in Vietnamese working overseas and the constantly growing remittances back to families, in Vietnam, it is also hard to see any fall in foreign exchange reserves unless external factors put pressure on the dong. The middle class will continue to grow as will average per capita income and the retail sector will see further continued growth. Inflation may increase but it is safe to assume it will remain below 4% but if the Government strives to increase credit growth above last years’ 12% this will surely put upward pressure on inflation.
The much discussed possible energy shortage is unlikely to materialize, which is good news for manufacturers and we will see a significant increase in roof top solar in factories.
So I continue to be optimistic with a forecast of GDP growth at around 7%.