China’s new charm offensive in Asia – using infrastructure development to garner soft power at the expense of rivals US and Japan – has reached new heights in recent weeks. Multi-billion US dollar deals with strategic partners such as Sri Lanka and Pakistan aside, even countries with reservations about China’s rise have begun taking a more pragmatic view toward using China’s huge foreign exchange reserves to their benefit.
Earlier this month, Indonesian leaders travelled to Beijing seeking to tap financing for power and transport projects, notwithstanding the new administration’s strong emphasis on both national and maritime security. Chinese companies are challenging Japanese bids for high speed rail contracts in Malaysia and Thailand. This week, a team from Indian Railways flew to Beijing to discuss a potential Delhi-Chennai high speed rail link.
Yet in spite of the huge stashes of money available in Beijing, Chinese financing for existing energy projects in Vietnam – an economy with high dependency on China – has been all but frozen as a result of bilateral tensions over the South China Sea, according to research by Asean Confidential, a research service at the Financial Times. Read more
In spite of Mikhail Gorbachev’s warning this month that the world is on the brink of a new Cold War, it is Asia that we should be worrying about, says former Australian Prime Minister Kevin Rudd. The region is home to seven flashpoints which, if they erupt, could end the greatest economic growth story of the 21st century.
“We face this remarkable set of circumstances where global growth will be driven from Asia,” Rudd told beyondbrics in a recent interview in Dubai.“But Asia from a political perspective is a potentially unstable region. So the world [should have] a deep interest in not just the future growth trajectory, but also the political and security circumstances which underpin that equation.” Read more
By Gavin Bowring, Asean Confidential
It might seem odd to think of Cambodia as a haven of political stability. Labour unrest in Cambodia’s garment factories turned violent in January this year, while the country’s opposition party, the Cambodia National Rescue Party (CNRP), has boycotted Parliament for six straight months in protest of last year’s “flawed” general elections.
Nevertheless, in the space of a week, Cambodia has seen thousands of Chinese residents in Vietnam fleeing across the border as a result of escalating tension between China and its southern neighbour, Vietnam. Meanwhile, the recent military coup in Thailand led to implicit suggestions by the lawyer of former prime minister Thaksin Shinawatra that Cambodia might be willing to host his “government-in-exile”, though these suggestions have been denied by Cambodian Prime Minister Hun Sen. Read more
Russia and Vietnam signed a raft of economic agreements on Tuesday that will strengthen their strategic partnership and counter rising Chinese influence in southeast Asia.
The deals, signed during a visit by Vladimir Putin to Vietnam, will see Russia step up involvement in Vietnamese energy markets and help boost security in the country that has been a close Kremlin ally since Soviet times. “Vietnam has been a long-term, trustworthy partner for Russia and the political dialogue between the two countries is at a high level,” Putin told reporters after talks with Truong Tan Sang, his Vietnamese counterpart. Read more
What sort of welcome should we give to the Vietnamese Asset Management Company, due to come into operation today? As beyondbrics wrote in May, its alternative title of ‘bad bank’ may be a big understatement. Now Fitch Ratings has weighed in with a report saying the VAMC is unlikely to solve the problems of Vietnam’s troubled banking system or, therefore, do much to help revive the country’s flagging economy. Read more
On the face of it, positive news from Vietnam: growth for the second quarter was up 5 per cent, following 4.9 per cent in the previous quarter, according to the country’s statistical office.
Time to celebrate? Not quite. Read more
With Vietnam’s economy still struggling and the IMF recently cutting its GDP forecast for this year to 5.2 per cent – anaemic by emerging market standards – the central bank on Friday cut interest rates for the eighth time since 2012.
But economists believe that rate cuts are unlikely to help Vietnam regain its spot as one of Asia’s hottest emerging markets without structural reforms to tackle the bad debts weighing down the banking sector and the wasteful state-owned companies distorting the economy. Read more
By Dominic Scriven of Dragon Capital
It has been a hard time for investors in Vietnam in recent years. Sky high inflation, lax lending to unproductive sectors – especially state-owned enterprises, a depreciating currency and high levels of non-performing loans have caused foreign investors to think twice about buying into the country.
However, on Sunday the Lunar New Year will be ushered in with spectacular fireworks, wonderful flower markets, family banquets and colourful celebrations. The coming Year of the Snake, the 6th animal in the Chinese zodiac, is commonly associated with focus and discipline. Both will be needed if the government intends to carry on its promise of economic reform. Read more
By Jake Maxwell Watts and Nguyen Phuong Linh
In both the developing and industrialised worlds, economic growth rates, like bad news, can be entirely relative. Vietnam’s respectable-sounding GDP growth of 5.08 per cent in 2012 was in fact a painful fall from 5.9 per cent in 2011 and marked its slowest pace in 13 years. Will 2013 be any better? Read more
While some investors have gone sour on Vietnam amid a string of financial upheavals, stock market slides and poor economic data, one group which seems more optimistic than ever is KKR – at least on Vietnam’s manufacturing sector and the market for pungent fish sauce, chilli and soya sauces, instant coffee and noodles.
The US buyout group on Tuesday agreed to invest a further $200m in one of Vietnam’s largest food companies, Masan Consumer. The deal amounts to the biggest single private equity investment in Vietnam and follows KKR’s initial investment of $159m in Masan Consumer in 2011. Read more
As budget negotiations in Congress drag on towards the end of year deadline, questions are being asked about the global ripple of the US falling off the so-called fiscal cliff.
Should Asia investors be losing sleep over it? Read more
Nguyen Tan Dung, Vietnam’s prime minister, must be breathing more easily.
On Monday, he apologised for economic mismanagement and cut his prediction for 2012 GDP growth to the bottom of the 5.2 to 5.7 per cent range initially forecast. Just three days later, a report by Ernst & Young on rapid-growth markets has labelled Vietnam a “rising star”, predicting the east Asian economy will grow by 6 per cent a year for the next quarter century. Read more
By Ben Bland and Nguyen Phuong Linh
After the arrest last week of the founder and chief executive of one of Vietnam’s biggest private banks sent shockwaves through the nation, rumours swirled earlier this week about which tycoons might be next.
In a sign of the feverish atmosphere and the lack of trust in official information in Communist-ruled Vietnam, a number of leading businessmen felt obliged to appear in public to prove that they had not been thrown in jail. Read more
Vietnamese shares bounced back on Friday, with bank stocks leading the way, as investors judged that the authorities were getting a grip on the scandal surrounding Asia Commercial Bank after the arrest on Tuesday of one of its founders.
The Ho Chi Minh Stock Exchange’s VN Index rose nearly 2 per cent, even though the affair brought down another prominent business figure on Thursday when the bank’s chief executive Ly Xuan Hai resigned and joined Nguyen Duc Kien in police detention.
A lot is now riding on the ruling Communist Party’s ability to control events, limit the damage and suppress any disputes over the affair in its own leadership. Read more
Vietnamese investors are still waiting to see the implications of Tuesday’s arrest of millionaire businessman Nguyen Duc Kien. And while they wait, they worry.
After a 4.7 per cent drop on Tuesday, the VN Index lost a further 1.6 per cent on Wednesday, pulled down by plunging shares in the banking sector. Kien’s bank, Asia Commercial Joint Stock Bank, went limit down, falling 6.6 per cent, after the same limit-down loss on Tuesday. With a lot of concern in Ho Chi Minh City and Hanoi about the health of the banks, the market may have further to fall. Read more
Vietnam’s stock market fell nearly 5 per cent on Tuesday on the arrest of banking millionaire Nguyen Duc Kien, one of the best-known men in the country’s business elite.
Shares in Asia Commercial Joint Stock Bank, which he founded, plunged nearly 7 per cent dragging down other banking stocks in its wake, as investors struggled to grasp the implications of the shock news.
There could be more trouble on the way in Vietnamese banking, with the sector under intense financial pressure with credit contracting in response to government efforts to cool an over-heated economy – and bad loans mounting. Read more
By Jonathan Pincus
In Vietnam, a new round of credit loosening by the central bank – made possible by a sharp plunge in inflation – has stirred hopes that the good times aren’t too far away. But restarting growth will not be that easy.
Consumer price inflation fell in May to less than 7 per cent year-on-year from a peak of 23 per cent last August. In response, the State Bank of Vietnam, the central bank, last week announced its fifth rate cut of the year, lowering its refinancing rate to 10 per cent. Earlier in June SBV cut the deposit rate ceiling from 12 to 9 per cent. Read more
By Gwen Robinson and Nguyen Phuong Linh
Lost in the excitement over China’s move to cut rates was Vietnam’s very own cut – of sorts. The central bank announced on Thursday it would cut its dong deposit rate cap by two percentage points to 9 per cent from 11 per cent, effective from June 11. It’s a move that emphasises the drive by policy makers to boost the economy and encourage more bank lending to businesses. Read more
Practising corporate law in an authoritarian, Communist state where rules and regulations change all the time, implementation is uneven and corruption is rife is no easy task. Especially when economic turbulence has restricted the flow of international deals, as it has in Vietnam.
But Allen & Overy, one of the world’s biggest law firms by global revenues, clearly likes a challenge. The firm confirmed this week that it will open offices in Hanoi and Ho Chi Minh City later this year as it seeks to capitalise on long-term growth in Vietnam and the wider region. Read more
Right on cue, Vietnam’s central bank cut interest rates on Friday for the third month in succession.
In line with market expectations, as reported earlier on beyondbrics, the State Bank of Vietnam’s refinancing rate was reduced to 12 per cent from 13 per cent, the discount rate 10 per cent from 11 per cent and the deposit rate cap to 11 per cent from 12 per cent. Read more