As investors are far too painfully aware, Vietnam, which captured the affections of global investors when its growth reached 7.2 percent between 1990 and 2010, has begun to sink into despair.
Having lived on hubris for two decades, the Communist government is now trying to dig its way out by saying it would reform its bloated and inefficient state owned enterprise sector and invite in foreign investors. But it has tried that before and the results were minimal. Although political infighting has crippled both the president and prime minister, they can hardly be cast as reformers in any case.
While other emerging Asian markets have recovered faster than the west in the wake of the global financial crisis, Vietnam’s recovery has been relatively slow and painful, with 2012 growth the lowest in 13 years at 5.0 percent, well below the once-basket case Philippines at 6.6 percent and the 6.2 percent achieved by Indonesia.
The problems for the economy are spelled out in a new, detailed report by Samsung Economic Research Institute which is available only by subscription. Beyond the SERI report, however, public discontent and protest have grown with almost-daily demonstrations of varying magnitude at Communist Party and government offices in Hanoi and Ho Chi Minh City, often about farmland seizures with minimal compensation.
“The slowdown in the Vietnamese economy is not temporary, and is due to structural causes,” according to the SERI report. “Without sweeping reforms, it is unlikely that growth will resume its previous trajectory. This estimate is based mainly on predictions that the contribution from the labor force and capital formation, which drove the economic expansion in the 2000s, will decrease significantly.”
In September 2012, Moody’s downgraded Vietnam’s rating. Its stock market remains at only 40 percent of its pre-crisis value while shares in Indonesia, Thailand and the Philippines have risen to more than 160 percent of their peak.
