Brian Spencer
Going back home to the UK for the holidays really brought home to me how very differently my home and adopted countries have fared during the pandemic. When I tell them, old friends can scarcely believe how successful Việt Nam has been in averting the disastrous consequences most of the western world’s nations have experienced. It truly has been a wonder how well both the health and economic fallout have been contained.
Naturally, Việt Nam has not been entirely untouched. The global nature of this scourge wrought huge disruption on trade, supply chains and tourism, dealing a heavy blow to Việt Nam’s previously blistering growth rates and leading to the death of a great many businesses. Yet overall, decisive action to close borders and enact containment measures paid off handsomely. Many in the west marvel that the country is still expected to record (according to Asian Development Bank forecasts) 2.3 per cent growth for 2020. This puts it among a handful of countries in positive territory. In this harshest of all tests, that is a real triumph.
And it looks like Việt Nam will truly be back with a vengeance in 2021 and posting the kind of growth figures that have brought it to global attention in recent years. Assuming all continues to go well with fighting the virus, experts are saying we can expect to see economic growth of 6-7 per cent this year – and many even believe that to be a modest projection.
Free trade foundations
Excellent foundations for a stunning comeback have been laid. First, in March, we entered the Comprehensive and Progressive Agreement for Trans-Pacific Partnership; then in August, the EU-Việt Nam Free Trade Agreement was finally inked in a deal that will lift close to 99 per cent of customs duties and which is predicted to boost trade with the bloc by almost half over the next four years.
November then brought the Regional Comprehensive Economic Partnership, which is expected to turbocharge exports across the Asia-Pacific region when it comes into force in Q2. The year has really been a festival of free trade agreements, despite it all, and along with many others, I believe that the new Biden administration can only bode well for relations with the US.
Officials have also been working tirelessly to update Việt Nam’s labour and investment regulations and the improvements to the business environment coming into effect from the first quarter will only make the country more and more attractive to foreign investors. It is difficult to overstate how rapidly responsible investing has shot up the international agenda as a result of the crisis, and these formal reassurances really do count. There is also a significant cutting of red tape in the offing that will really help businesses of all kinds to flourish.
Big players will benefit, certainly, but I also think we are set for a boom for small to medium-sized enterprises (SME) and even in micro-commerce from household businesses being free from certain regulatory requirements. Grassroots entrepreneurialism very much feeds the dynamic business culture here and the time is ripe for innovation to flourish. The world may be very much changed, and some businesses have sadly fallen, but this sets the stage for new and better things to grow. Entrepreneurial women have long been a force to be reckoned with in Việt Nam and I’m especially looking forward to seeing how they can further fuel growth.
Deal-making and diversification
From a personal perspective, I’m particularly delighted to hear that merger and acquisition activity is predicted to bounce back to pre-pandemic levels by 2022, after falling by roughly half in 2020. That might seem like a brutal drop, but compared to the state many M&A markets internationally have been plunged into, I would say things have held up very well. At S&P Investments, we’ve certainly not slowed down in our advisory work. Indeed, our hands have been very much full as an appreciation of the value of impartial, experienced guidance continues to take hold in the business community.
When I again compare the UK to my adopted home, it is the diversity of Vietnamese productivity which really strikes me. While a services-orientated economy will naturally be devastated by lockdowns, a diversified one like Việt Nam’s has so many in which to thrive.
Our prowess in technology manufacture may be well known internationally, but our textiles and agricultural sectors are still not as widely understood as they soon will be. Previously, when I’ve told friends that Italian coffee brands are looking at production here I don’t know that they’ve really believed me. The EVFTA means that they, and the world, will be smelling the metaphorical coffee very rapidly indeed.
Nor should we forget tourism. It has been unavoidable that the battle with COVID-19 has caused the sector great pain, but there will be even greater appetite – both domestic and foreign – unleashed once the pandemic is finally at an end. We are luckily not as dependent on near neighbours on international tourism but will be equally poised to profit from global hunger to see the world once real freedoms have been returned.
All in all, as we turn a fresh page on a new year I’m filled with optimism – and even more full of gladness that I decided to make the big move over here when so many friends and colleagues thought I was a little mad to do so. 2021 is set to be the (re)start of some very great things for Việt Nam.
* Brian Spence is managing partner of S&P Investments. He has more than 35 years of experience in the UK financial services industry as an investment manager, financial planner and M&A specialist. He is a regular contributor to the UK financial press and has a deep understanding of the financial services community. Brian’s column will reflect on all the challenges and opportunities within the Vietnamese market, bringing a fresh perspective to today’s hottest issues. The columnist’s email address is brian@sandpinvestments.com.