Vietnam economy

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

Tight relationship

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