Mr. Dennis Hussey, CEO of ANZ Vietnam, discusses the country's economy and its banking sector.
What do you see as some of the highlights Vietnam’s economy has recorded?
I’ve worked in Vietnam three times since 2000. I’m sure that many books have been written about the incredible transformation of Vietnam since “doi moi”, and from both an economic and social viewpoint the results have been incredible!
What is most impressive to me is that Vietnam’s transformation has come with a balance towards overall society, that the benefits have been seen and felt across the nation. I think that two sets of statistics help to frame the change: GDP per capita, and the change in Vietnam’s trade with the world. In terms of GDP per capita, in 1986 it was $556 and today it is estimated by the IMF at $2,233; an incredible change. Trade has been transformed thanks to the combined political drive to embrace bilateral trade agreements and WTO membership, and the willingness of foreign investors to establish enterprises here.
Annual exports have gone from a low of $537 million in 1997 to around $14.5 billion now, and the composition of these exports has shifted from agricultural/commodities to a mix today that includes high technology items. That evolution shows how the value added and skills base in Vietnam has transformed positively.
Vietnam’s economy has been integrating deeply into the global economy and is also regarded as an economy with great openness. What do you see as the positive and negative impacts of this?
The positives are clearly seen in terms of the impact of foreign investment mentioned earlier. Foreign investors are increasingly drawn to Vietnam because of its skilled labor force and its strong positioning in free trade agreements. Integration into global trade flows has clearly benefited the nation. On the negative side, as we have seen in recent weeks Vietnam competes with other markets, so devaluations by regional markets such as China will impact on Vietnam. This challenge cannot be avoided in integrated markets, so Vietnam needs to continue to develop the productivity of its enterprises to ensure competitiveness and to develop alternative export markets to mitigate weaknesses in certain import markets (for example Europe).
To increase the strength and competitiveness of its economy, Vietnam is implementing drastic restructuring programs focusing on public investment, State-owned enterprises (SOEs), and credit institutions. As a foreign bank, what are your thoughts on this economic restructuring, in particular the restructuring of credit institutions?
A healthy banking sector and strong capital markets are essential to ensuring economic progress and to finance Vietnam’s growth in the future. A lot of progress has been made in strengthening the banking sector and in particular improving governance and oversight at banks in Vietnam. This is a really important achievement by the State Bank of Vietnam and it is critical that the implementation of the many strong banking sector reforms be continued. SOE reform has lagged behind banking sector reform, and more work needs to be done. SOEs “crowd out” other potential lending within the economy, and we have seen in recent years that the lack of finance available to small local businesses is a challenge. Personally, in the coming years I would also like to see Vietnam’s capital markets expand, and here I am also referring to debt instruments, not just the stock markets. The growth of Vietnam’s insurance market and the introduction of private pensions has created a large pool of financial investors who are seeking quality, longer-term debt opportunities. Getting more long-term finance from local debt capital markets will be good for the country and again should free up banks’ lending capacity to fuel growth, including in small local enterprises.
What do you forecast for Vietnam’s economy?
ANZ is optimistic about Vietnam’s prospects for growth this year and in 2016. Many regional economies are very likely to see a sharp contraction in their trade volumes, but we still expect Vietnam to see export growth. Similarly, we are optimistic that GDP growth will exceed 2014 levels and possibly approach 6.5 per cent this year and a similar figure in 2016. There are obviously risks to the global economy from China’s slowdown and from the prospect of US interest rate rises. However, the potential of the TPP being agreed to this September and the recent EU-Vietnam FTA will continue to position Vietnam as a location of choice for export-led investment. Vietnam is emerging as a significant economic and political force in ASEAN and the next few years will strongly determine its leadership in ASEAN. I am optimistic that the forthcoming Party Congress XII and the new leadership that is selected will guide Vietnam strongly over the next five years in continuing to develop the nation and meeting the challenges of the global economy.