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Vietnam is currently going through a growth spurt while entering an era with more modern and people-centred considerations rising in prevalence. What role does “soft power” play in GDP growth as well as regional and global success?

Vu Ba Phu, director general of the Vietnam Trade Promotion Agency under the Ministry of Industry and Trade

Vietnam’s soft power stems from not only the promotion of its own values such as the heroic history, rich culture and traditions, and pacifist foreign policy but also the development and optimisation of a range of new positions and advantages.

Amid the difficulties of 2020, the successful dispensing of its dual role as both ASEAN chair and non-permanent member of the United Nations Security Council is testament to the successful application of soft power in Vietnam’s foreign policy. In 2020, the world lauded Vietnam’s rapid response and contributions to regional and international affairs thanks to its ability to grasp opportunities, taking the initiative in coping with dynamic situations and ensuring economic recovery while promoting multilateralism and international solidarity to get through the COVID-19 crisis.

Vietnam not only dived deeper into the global economy and made increasing contributions to shaping the ground rules of international organisations, it also prepared for further comprehensive integration. Possibly the greatest achievements were extending Vietnam’s diplomatic relations to 187 out of 193 member states of the United Nations while completing negotiating and signing new-generation free trade agreements (FTAs), making the country an integral factor in all regional and intra-regional economic links.

With these steps, Vietnam is now one of the most open economies in the world, with the ratio of foreign trade to GDP increasing from 136 per cent in 2010 to approximately 200 per cent in 2019. Amid COVID-19 shutdowns in early 2020, Vietnam was among the very few countries to achieve positive GDP growth of nearly 3 per cent.

Vietnam’s soft power is a combination of many factors and has made significant contributions to increasing its prestige and position in the regional and international arena.

Branding is a strong tool for advocacy among global stakeholders. How is Vietnam globalising its homegrown brands?

In today’s continuously evolving economy, the greater a brand’s recognition in the international market, the more strength it provides to its country. Notably, branding will play a crucial role as Vietnam steps up participation in more and more new-generation FTAs.

Recognising this, the Vietnam Value Programme, launched in 2003, is the government’s unique and long-term trade promotion programme aiming to build Vietnam’s image as a country of high-quality products and services, to increase the pride and attraction of the country and its people, and to boost foreign trade and national competitiveness.

As the programme management agency, the Ministry of Industry and Trade of Vietnam (MoIT) has been actively supporting Vietnamese enterprises to improve their capacity through business development consultancy, establishing information systems, and updating branding knowledge. Promotion and public relations have also received a lot of attention to increase public and international awareness about the programme and Vietnam Value products through various channels.

The MoIT also builds and promotes geographical indications and collective trademarks from across the country in foreign markets, improving competitiveness of businesses based on a reputation for quality, environmentally-friendly production, and professionalism, thereby consolidating the position of Vietnamese brands globally.

Thanks to the support of the programme, many Vietnamese corporations and businesses have become aware of the importance of branding. Enterprises have gradually learned to promote their brands professionally, improving their competitiveness and reaffirming their position in the domestic and foreign markets.

Many outstanding Vietnamese brands have resonated with regional and international consumers and partners. For example, Viettel is in the globe’s top 15 in terms of mobile subscribers and the top 40 in terms of revenue. Meanwhile, Truong Hai Auto Corporation is gradually rising to the top position in the ASEAN region and state-owned Khanh Hoa Salanganes Nest One Member LLC has the largest swiftlet exploitation output. TH Group is the first Vietnamese company to successfully penetrate the Chinese market, the second-largest dairy consumption market in the world.

All these successes by individual brands have been continuously raising Vietnam’s national brand to a stronger global position.

How has COVID-19 impacted Vietnam’s international relations?

The far-reaching impacts of the COVID-19 pandemic have pushed many countries into a health and economic crisis. Despite the unprecedented challenges, Vietnam has been one of the world’s success stories in getting the outbreak under control, maintaining socioeconomic stability, and promoting bilateral and multilateral diplomatic activities. The initial great successes in the fight against the COVID-19 pandemic were due to the successful combination of the nation’s strength, in which soft power played a significant role.

Vietnam has proactively deployed its diplomatic strategy to orchestrate COVID-19 response, committed and stood ready to share information, and donated medical supplies to countries in need. The message of leaving no-one behind is one of the most vivid demonstrations of Vietnam’s wielding of soft power, proving the Vietnamese spirit of solidarity. That humanitarian spirit is also reflected in the help provided to overseas Vietnamese to return or the messages foreigners have posted about how fortunate they feel to be staying in the country during the outbreak.

Its effective anti-pandemic policies, along with the responsibility and dignity Vietnam has shown on the international stage, have been highly appreciated by international friends.

How will this successful use of soft power be turned into economic gains?

With the efforts of the government and the collaboration of the Vietnamese people to prevent and control the pandemic, Vietnam is now well-known as a safe country. This renown makes it easy for Vietnam to draw international investment, events, and tourists, which bring great opportunities for economic development.

Not only that, Vietnam has succeeded in turning the challenges of the COVID-19 crisis into advantages to enhance the image of Vietnamese products and national brands. Vietnam has defied the global trend with its brand value skyrocketing 29 per cent on-year, from $247 billion to $319 billion, ranking 33rd among the world’s top 100 national brands, and being the fastest-growing national brand in 2020.

Soft power is an extremely valuable asset for Vietnam to turn challenges into opportunities. In the midst of difficulties, Vietnam’s use of soft power was not weakened but became stronger than ever. Thanks to strong social consensus, national solidarity, and unity, Vietnam has gained impressive achievements which effectively improved its image in the international arena.

What are Vietnam’s goals for the next decade in terms of building up its soft power capabilities?

Vietnam aspires to achieve comprehensive innovation and extensive international integration, to become a country with modern industries and high average income by 2030, then a developed country with high income by 2045. To reach higher international stature, soft power will play an even more cardinal role, requiring efforts from the entire political system, each enterprise, and each Vietnamese citizen.

Firstly, Vietnam needs to create a systematic and long-term plan to promote soft power. It is also necessary to improve growth quality and labour productivity, and to promote creative industries, thereby improving the competitiveness of the economy as a whole.

At the same time, it is necessary to continue to preserve and promote the diverse and rich values of Vietnamese culture. Concurrently, studies and assessments by experts drawing comments from the community will also pave the way to pick out the unique, remarkable cultural elements for focused investment and development, thereby making great contributions to Vietnam’s socioeconomic development.

Vietnam should also increase its use of soft power in diplomacy. Globalisation is creating ever more complex interdependencies and in this environment, regional and global diplomacy should concentrate on leadership and mediation through softer means.

It will also be necessary to prioritise and focus investment on scientific and technological development to ensure Vietnam’s competitiveness. The creation of high-quality and highly competitive products requires proper appreciation of ICT in building national soft power as well as applying new and innovative technologies in production.

In addition to building and promoting soft power, Vietnam also needs to strengthen its hard power to create synergies, creating “smart power” in the new era to enhance integration and enhance its global strategic and economic position.

The Hanoitimes – Vietnam would be among four economies hardest hit by the Covid-19 outbreak, behind Singapore, Thailand and Hong Kong (China).

The Ministry of Planning and Investment (MPI) has forecast Vietnam’s GDP growth to slow to a 7-year low of 5.96% in 2020, indicating a less optimistic outlook compared to its assessment one week ago, local media reported.

Data: MPI. Chart: Ngoc Thuy.

Previously, the MPI predicted Vietnam’s GDP in 2020 to grow 6.09% in case the Covid-19 (nCoV) is contained by the end of the second quarter, representing a 0.7 percentage points lower than the target set by the National Assembly and nearly one percentage point compared to 2019.

The MPI suggested Vietnam would be among four economies hardest hit by the Covid-19 outbreak, behind Singapore, Thailand and Hong Kong (China).

The latest prediction of the MPI is similar to those of domestic economists.

Pham The Anh, chief economist at the Vietnam Institute for Economic and Policy Research (VEPR), told VnExpress that Vietnam’s economic growth is predicted to be shaved off by one percentage point, while ANZ predicted a decrease of 0.8 percentage points in the first quarter due to the epidemic.

The MPI also estimated Chinese arrivals coming to Vietnam would decline by 2.3 million if the outbreak is controlled by the end of the second quarter, while those from other countries are likely to decrease between 50% and 60%.

“As Chinese tourists spend an average of US$743.6 each, and international tourists of US$1,141, a loss of US$5 billion would be incurred if the epidemic persists to the end of June,” said the MPI in its report.

Preliminary assessment from the Vietnam Tourism Advisory Board (TAB) said the damage in the first quarter could be up to US$7 billion and exceed US$15 billion until the end of the second quarter.

With tourism under pressure from the outbreak, the aviation industry is set to face a similar fate. Before the epidemic, 11 Chinese airlines conducted 240 flights per week to Vietnam, while Vietnam Airlines, Jetstar Pacific and Vietjet operated 72 flight routes to 48 destinations in China with 401 flights per week.

In addition to tourism and aviation, Vietnam’s agricultural sector with high dependence on the Chinese market is facing numerous difficulties.

KB Securities said as consumption in China shrinks due to the outbreak, Chinese imports of goods and products from other countries would be set to decline. Meanwhile, China is Vietnam’s main export market for agricultural products as its imports Vietnamese goods worth nearly US$6 billion, accounting for 35% of Vietnam’s total exports of agricultural products.

In 2019, Vietnam recorded a trade deficit of nearly US$34 billion from China, importing largely phone and electronic parts, and input materials for textile and footwear production. With heavy dependence on input materials from China, Vietnam’s manufacture is set to face a major impact from the outbreak.

A survey conducted by the National Private Economic Development Research Board revealed many enterprises could maintain operation for one more week before running out of input materials.

Cash injection not an answer

Vietnam, however, is not the only country facing pessimistic outlook amid the outbreak of the Covid-19. On the global stage, many countries are using stimulus packages to mitigate the negative impacts. China has rolled out a US$174-billion bailout package, comprised of US$22-billion injection into Chinese markets to prevent the country’s stocks and currency from falling. Other countries also took a slew of measures to shore up their financial markets.

VEPR expert Pham The Anh said in case of Vietnam, monetary easing would not be feasible due to differences in the structure of economic growth.

A stimulus package would not boost the number of Chinese tourists coming to Vietnam, produce more agricultural goods or provide sufficient input materials for local enterprises, Anh added.

In addition, monetary easing would put upward pressure on inflation, which has been on the rise since the end of 2019 due to African swine fever.

Instead of using monetary policy, Anh said Vietnam should find ways to diversify revenues and pursue a more sustainable economic growth model.

Another solution is to waive visa for tourists from European countries and other important markets such as New Zealand, Canada, to relieve pressure from a decline in the number of Chinese tourists.

As many enterprises are facing difficulties, there should be more supports from the banking system and tax reduction for the business community.

The Hanoitimes – Vietnam posted net spending on offshore crude oil of nearly US$1.8 billion in 2019.

Vietnam’s external balance is set to improve by over US$1.5 billion in 2020 as a result of a sharp decline in global oil prices, according to Viet Dragon Securities Company (VDSC).

Crude oil price (USD per barrel).

Crude oil prices crashed by over 30% last Friday because of disagreements between the OPEC and Russia on cuts in production. Meanwhile, Vietnam is a net crude imporer and its net spending on offshore crude oil in 2019 reached nearly US$1.8 billion.

Regarding fiscal policy, VDSC expected no unanticipated changes caused by strained public finances in 2020 because of the weakening of oil revenues and taxes from export/import goods, said the VDSC in its latest report.

In the context of the oil crash accompanied by a global economic slowdown, it is predicted real income gains for consumers will be limited in Vietnam, due to the people’s current preference for saving rather than spending. The clearest impact is the pass-through into slowing inflation which may ease pressure on the State Bank of Vietnam, the country’s central bank, and present a window of opportunity to implement policy accommodation.

As a result, the circumstance may lead to the SBV’s decision to lower interest rates in the second half of the second quarter.

In the past, the plunge in crude oil prices has led to significant real income shifts from exporting to importing countries. Although that is a zero-sum game between oil exporting and importing countries, the economic models of the World Bank showed that declines in crude oil prices likely result in a net positive effect for global activity over the medium term.

The losses of oil-exporting countries are entirely offset by stronger growth in oil-importing ones via rising consumption, lower inflation and widening policy room that would lower macroeconomic vulnerabilities.

However, in reality, the impact varies among oil-importing countries in different periods and the economic effects are dependent on at least three critical aspects of the oil price decline, including 1) Underlying drivers of the oil price decline, 2) Persistence of the oil price decline and 3) The extent of price pass-through.

The explanation for the present plunge in crude oil prices hints that both supply- and demand-side effects are dominant.

Energy prices dropped by 10% since the beginning of the year as the Covid-19 outbreak has darkened the outlook of global demand. Besides Italy, France and Japan, more and more countries are expected to suffer technical recessions in the first half of 2020. Crude oil producers are hurt further due to a significant shift of OPEC policies that have been unable to curb supply.

The last three plunges in crude oil prices were due to the unwinding of geopolitical risks in Middle East in 1980s, global finance collapse in 2008 and technology-driven surprises in the production of unconventional oil in 2014. The current drop in crude oil prices is highly sensitive to the effort of containing the epidemic and the deals of big oil exporters. Whether the drop is temporary or not is important to assess its impact on saving real income gains or translating into higher spending to lift economic activity.

The third factor is related to the price pass-through that determines how much of the decline in oil prices translates into a drop in gasoline and petroleum prices at the retail level. The benefits depend on the specifics of the subsidy and pricing regimes.

In Vietnam, there are administrative controls on energy prices in which taxes and fees account for nearly half of retail prices. This somehow limits the positive impacts from lower energy prices on customers’ income and consumption. In 2014-2016, for example, gasoline prices in Vietnam decreased by approximately 40% while global crude oil prices declined by 70%.