Daewoo kalos 2003

By Alain Cany-Country chairman Jardine Matheson Vietnam

Vietnam has seen a stronger recovery than regional countries such as Thailand, Indonesia, and the Philippines as it has a well-developed basic public health system, a strong central government, and a proactive containment strategy for COVID-19 based on comprehensive testing, tracing, and quarantining – on top of experience in handling pandemics like the 2003 SARS outbreak.

The trade dispute between the United States and China has had a cascading effect on Vietnam with its exporters seeing increasing demand for their products, especially in electronics, agriculture, and garments and textiles. The country has emerged as a complimentary investment destination to China for investors benefitting from its “plus one” strategy which has been accelerated by supply chain resilience and trade disputes.

The Vietnamese government in recent years has substantially invested in building the country’s network of ports, airports, and highways, which helps to move goods and materials to factories and finished products to export locations. The government has also been working hard in creating favourable conditions, which have paid off as these have encouraged foreign investors to expand their manufacturing bases more substantially. The government has also signed and ratified several free trade agreements which either will or already have helped lower export tariffs and promote Vietnamese players in the global marketplace.

We have seen not only labour-intensive sectors like textiles and footwear relocating to Vietnam but the more tech-focused companies such as Foxconn, LG, and Samsung choose Vietnam as their manufacturing hubs.

The South Korean tech giant Samsung, with its factories in the northern provinces of Thai Nguyen and Bac Ninh, and in Ho Chi Minh City, and a research and development (R&D) centre under construction in Hanoi – representing altogether $17 billion of investments and 160,000 Vietnamese workers – is a good example for Vietnam’s attraction. The country has become one of the biggest investment destinations for South Korean companies, if not the biggest, outside of their home country.

Several of the world’s largest technology corporations plan to expand their production chains to Vietnam after the pandemic, according to the Ministry of Industry and Trade.

Japan’s Panasonic is planning to move a production line for refrigerators and large-capacity washing machines from Thailand to Vietnam to improve cost efficiency.

Through its key contractor Foxconn, US tech giant Apple expanded production of its AirPods in Vietnam to four million units in the second quarter of 2020, equivalent to 30 per cent of global production. Apple appears to have shifted part of its production from China to Vietnam.

Qualcomm, the world’s biggest supplier of phone chips, offers potential tech transfers. Last June the company launched an R&D centre in Hanoi, its largest in Southeast Asia outside Singapore.

The relocation of companies and factories from China to Vietnam, coupled with the influx of foreign investment, has also pushed the expansion of several industrial zones (IZs) as demand for new factories, warehouses, and industrial land increased dramatically. It is expected that the country’s 260 operating IZs, with another 75 being under construction, will benefit from the rising demand.

One of the country’s largest conglomerates, Vingroup, has jumped onto the industrial land bandwagon by announcing a plan to pour over $400 million into the development of an IZ in the northern port city of Haiphong, seeking to host suppliers for its automaking business.

Haiphong is one of the biggest industrial hubs in Vietnam with significant projects such as DEEP C IZs. As such, the northeastern province of Quang Ninh is emerging as an industrial coastal province and is expected to provide a large amount of industrial land in the future, with the two economic zones (EZ) of Quang Yen and Van Don becoming a growth engine promoting investment for the province. DEEP C is further developing an industrial complex associated with a seaport in Quang Yen EZ to make full use of geographical advantages and utilise the channel to the Lach Huyen deep-sea port complex.

Warburg Pincus, a leading global private equity firm and Becamex, a pioneering developer of large-scale industrial townships in the southern province of Binh Duong, have used $200 million to develop several IZs across the country, focusing on ready-built factories and built-to-suit solutions.

Other local IZ developers, such as KBC, with its operations in the northern provinces of Bac Ninh, Bac Giang, and Haiphong, and Sonadezi, a company primarily developing IZs in the southern province of Dong Nai, are also investing aggressively to meet the rising demand in several sectors.

Although Vietnam’s infrastructure is expanding rapidly, the development is still far below the needs of the country’s economic and social growth. Additional investments are needed for roads, air, railways, waterways, and urban-public transport. Ports are running at overcapacity, and every day, traffic jams in large cities are the norm; with Ho Chi Minh City and Hanoi needing significant investments in roads and airports.

Additionally, investment in education could raise skill levels of the workforce as part of initiatives to increase productivity. A higher-skilled workforce could attract manufacturers exploring Industry 4.0 technologies and help to move the country up the value chain into more productive and higher-earning areas.

Both the government and the business community are embracing Industry 4.0, with developments such as e-government offering national portals and reforms. E-commerce is now firmly established and fintech is beginning to take off. Health tech and education tech will both be adding further legs to Industry 4.0, and the startup and tech scene is beginning to bloom. The government is aware of these needs and is working to address them with greater progress. As a new leadership is about to come this year, and many expect that it will work closely with the business community, many investors both local and foreign are confident in the progress of the country.

While the pandemic has been developing in a sophisticated manner throughout the world Vietnam has remained a safe place. Noteworthy is that most of the COVID-19 cases in Vietnam are those who returned to Vietnam after being infected from abroad. People like foreign experts, skilled workers, or Vietnamese citizens brought home from foreign countries. On the other hand, the number of confirmed cases due to community transmission is negligible. Whenever Vietnam recorded a new COVID-19 case, the entire political and anti-COVID-19 systems promptly switched into emergency mode to fight the pandemic. As a result, the pandemic hot spots were extinguished in only a short period of time. Such achievements are rarely found in other countries. So, what accounts for this success?

Chemical troops spraying disinfectants at Bach Mai hospital March 2020

Below are some visible reasons for these impressive achievements.

First of all, Vietnam has rapid policy responses to the COVID-19 pandemic. Immediately after the first cases of COVID-19 were reported in Wuhan city, China in late December 2019 and early January 2020, the Vietnamese government mobilized the entire state system and all possible resources to draw up effective plans against the pandemic during the Lunar New Year holiday.  Thanks to such a rapid response, Vietnam was in a positive position to detect and control the very first cases.

Secondly, Vietnam’s policy response is coherent and decisive. Particularly, Vietnam took drastic measures, including detecting infection cases, tracing infected persons, localizing infection areas, quarantining COVID-19 suspected people and patients, and containing the spread of the virus to control the pandemic. In fact, only a few nations in the world applied such drastic and resolute measures from the beginning like Vietnam. These drastic measures gave the epidemic no chance to spread in the community. These measures might stem from the realities that Vietnam remains a poor country with limited resources to contain the pandemic but they have been proven to be very effective.

Thirdly, the Vietnamese health sector is capable and experienced enough to fight and control epidemics. These capabilities and experiences have accumulated since wartime when the country faced many difficult situations. Despite a shortage of almost everything during this time, the health sector still ensured good health for people and soldiers. Back in 2003, Vietnam was also one of the first countries in the world to successfully contain SARS.

Fourthly, authorities at all levels timely and effectively deployed policy solutions issued by the government to tackle the pandemic. This is the first time that all-level authorities have carried out the newly-implemented policy solutions without training and detailed instructions.

Fifthly, the devoted participation of public security forces, especially the armed forces, added more strength in the battle against the COVID-19 pandemic. Most people can not imagine the hardships and risks soldiers have to face when serving people in the quarantine areas. Particularly, soldiers have to leave their shelters and live in makeshift camps in jungles to turn their barracks into quarantine areas for people. Additionally, the soldiers are the ones to ensure that all disease prevention and control regulations issued by the Ministry of Health are observed. They also provide essential services for quarantine areas to make the operation a success.

Sixthly, communication played an important role in suppressing the COVID-19 pandemic. In the early stages of the outbreak, communication was considered an essential strategy in the pandemic resistance. During the pandemic, communication channels not only conveyed the message of Prime Minister Nguyen Xuan Phuc “Fighting the pandemic is like fighting an enemy” to all people but also provided them with transparent and reliable information on the COVID-19 prevention and control measures.

More importantly, during the pandemic, the government developed effective communication strategies to combat distorted and fake information because inaccurate information can make people confused and change their behavior. Furthermore, amid the complicated context of the pandemic, false information also exerted negative effects on the society, including speculation, confusion, fear, and discrimination.

Seventhly, the people’s support and unanimity have created great strength for Vietnam in its fight against the COVID-19. It is obvious that people throughout the country have been united and fully supportive of the government’s decisions and policies. In a short period of time, people and enterprises nationwide have donated nearly VND 2 trillion for the fight against COVID-19.

In brief, all the above reasons are visible. Nevertheless, there have been some other reasons more fundamental and more decisive at the institutional level as well.

First of all, Vietnam has an institutional model with the principal featuring the centralization and unanimity of state power.  Correspondingly, the government has enough power and authority to quickly issue important decisions for the whole system. This is an enormous advantage in the fight against COVID-19 because the state machinery has capable and decisive leaders. In contrast, the decentralized model in some countries reveals a delay in making decisions. It is dangerous that if the government makes decisions just a day late, then the pandemic can spread more widely and be out of control.

Next, collectivism seems to have more of an advantage in the fight against the COVID-19 pandemic than individualism does. All people are aware of the significance of wearing face masks. It not only helps them protect themselves but also lessens the transmission of COVID-19 to other people and the community. For this reason, we can see how Asians in general followed their government’s requirements and wore face masks in crowded public places. In contrast, people in the EU and America gave prominence to individual freedom. Regardless of the outbreak of the pandemic in their community, most people still refused to wear face masks. By the time their government enforced the wearing of face masks, it was too late to contain the pandemic.

Finally, the fight against the COVID-19 pandemic has left a lot of valuable experiences and also a deeper awareness of the advantages and power of the current institutional model in Vietnam.

Translated by Quynh Oanh

VBSP’s credit programmes have helped many needy families and policy beneficiaries move out of poverty in a sustainable manner

One destination, full of affection

Policy credit by the Vietnam Bank for Social Policies (VBSP) has brought a facelift to diverse localities across the country. Ha Tinh province in the north-central region is a shining example.

The family of Nguyen Thi Kim in Duc Thuan ward, Hong Linh town has left poverty behind thanks to credit from VBSP’s local branch office. The family has been a beneficiary of VBSP’s policy credit programme for more than 10 years.

Kim’s family has taken up three loans from the bank with the total amount of more than VND101 million ($4,390) to support their three children to continue their university education.

They have repaid VND78 million ($3,390) so far, with about VND30 million ($1,300) left.

Kim shared that without taking policy credit from VBSP, their family could not have escaped poverty. To raise seven children, the family had to make do with one hectare of arable land, one-third of which it then had to return to the local co-operative.

After getting the first loan from VBSP in 2015, Kim’s family has begun raising pigs and chickens, and doing small trade with agricultural tools.

The bank’s loans helped their three daughters to cover tuition fees at universities. After graduation, they are now helping their parents gradually pay off debts and have extra money to support their youngest sister who is currently studying at university. The mature children also helped their parents repair their home.

Pooling our strength to combat poverty

Ha Tinh is one of 63 provinces nationwide that have benefitted from concessionary policy credit sources the government has authorised VBSP to lend to the poor and other policy beneficiaries. This came in the context that Vietnam has grown into a medium-income nation which has led to a reduction in the volume of financial aid from international organisations earmarked for the poor and underprivileged people.

More and more free trade agreements (FTAs) have helped Vietnam integrate more deeply into the world economy, while simultaneously creating challenges and increasing pressure to ensure social wellbeing in the face of the growing threat from the increasing gap in people’s living standards.

Unless support policies are put in place in a timely manner, the gap between the rich and the poor will widen, and needy people might fall farther behind. Well aware of the situation due to having close contact with the poor and other policy beneficiaries, VBSP has launched diverse concessionary credit programmes in time.

Growing from three such programmes in 2003, until now VBSP has executed 22 programmes, as well as many time raised lending amounts to meet essential demand for economic development and combat adversity.

Growing from three such programmes in 2003, until now VBSP has executed 22 programmes, as well as many time raised lending amounts to meet essential demand for economic development and combat adversity.

Significantly, during the last ten years (2011-2020), the birth of VBSP’s two credit programmes to lend to near-poverty households and those that just moved out of poverty were considered a breakthrough in sustainable poverty alleviation.

These two programmes, paired with other policy credit programmes applied in the previous years, have brought a sharp reduction in the number of needy households.

For instance, the rate of needy households fell to 5.2 per cent in late 2015 compared to 9.45 per cent in 2010. The danger of local households falling back into poverty has proven high, especially in the North-western, Central Highlands, and South-western regions which are plagued by natural disasters and epidemics and locals have little decent agricultural knowledge.

The deployment of these credit programmes has, therefore, pushed up the poverty reduction cause effectively.

As of January 2020, the bank reported about VND34.692 trillion ($1.5 billion) in total outstanding balance earmarked for the poor and other policy beneficiaries.

Notably, the loan structure has improved significantly, with only 16.7 per cent of VBSP’s total balance taken up by the poor, compared to the 40.4 per cent rate spotted in 2010.

Lending volumes to near-poverty households and those who just moved out of poverty rose sharply, touching 15.4 per cent, equal to VND31.856 trillion ($1.39 billion) and 16.8 per cent, equal to VND34.750 trillion ($1.5 billion), respectively.

As of now, VBSP has posted more than VND209 trillion ($9.1 billion) in total outstanding balance and more than 6.5 million policy credit beneficiaries. This provides a firm bedrock for the bank to make further strides in development, and continues to effectively carry out its role as a bank specifically catering to the poor and those in need, realising the target of not letting anyone fall behind during the country’s development.