IN many ways, the Indochina region comprising Vietnam,
Cambodia, Laos, and Myanmar is akin to an emerging giant.
Racked by decades of civil war,
military rule and socialism, the region has, for the longest time, been a
political and economic outcast; its instability a bane to foreign investors and
economic progress.
But these countries, led by
Vietnam, have been quietly plotting a return to the world stage. Vietnam's
gross domestic product (GDP), for instance, grew 8% annually between 1990 and
1997, and then 7% between 2000 and 2005, making it one of the fastest growing
economies in the world.
The low base, of course, is one
reason for this. Yet, Indochina remains on the margins of our imagination,
drowned out by the din of its powerhouse neighbours China and India, and the
ever-pressing woes of debt in the United States and Europe.
Nonetheless, if one is to be
ahead of the curve, the region is worth another look. Reforms and
liberalisation are taking shape, and Indochina is on the cusp of change.
Just this week in Naypyidaw,
Myanmar's new capital city, Thai Prime Minister Yingluck Shinawatra concluded
the fourth Greater Mekong Subregion summit with a proposal for the countries in
the pact to expand their economic cooperation.
Established in 1992 with the
help of the Asian Development Bank, the sub-region consists of China, Cambodia,
Laos, Myanmar, Vietnam, and Thailand countries that share the Mekong river. Its
purpose is to enhance economic integration.
A 10-year strategic framework
for 2012 to 2022 was also endorsed at the summit, setting out eight broad areas
for cooperation such as economic corridor development, infrastructure linkages,
energy, agriculture, and environment.
On the other hand, the region
has just as many things holding it back political patronage, rampant
corruption, and in some places, a stubbornly high inflation rate.
StarBizWeek takes a look at how
four countries in Indochina are faring, and what they have been doing to get
ahead.
Myanmar
Probably the most significant
event that took place in Myanmar this year was Hillary Clinton's visit. Last
month, she became the first US Secretary of State to make a trip to the hermit
kingdom in more than 50 years.
The former British colony fell
into the hands of the military junta in 1962, leading to a kind of “lost
period” for Myanmar. It was the largest exporter of rice and second-richest
nation in South-East Asia under the British, before the repressive regime threw
the once-thriving nation into disrepair.
Its healthcare system is ranked
one of the worst in the world, and its GDP is growing at some 3% the lowest in
the region.
With a reputation of entrenched
human right violations, child labour and human trafficking, it has earned the
ire and sanctions of the United States, European Union (EU) and Canada.
A scheme called the Burmese Way
to Socialism to rationalise all industries except agriculture was introduced in
the 1960s to disastrous results. It further impoverished the country, prompting
the United Nations to designate Myanmar a “Least Developed Country” in 1987.
But the junta had a change of heart,
and in 2003, they drew up a roadmap for democracy. As part of the plan, Myanmar
held a general election in November last year, and despite claims of fraud by
international observers, a civilian government was voted into office.
Although the heavy sanctions
imposed by the West are unlikely to be dropped anytime soon, the Wall Street
Journal recently wrote that the country and its 54 million population could
present opportunities for US businessmen.
Another report by the Wall Street
Journal notes that Myanmar's tycoons, who had received lucrative contracts in
return for their backing of the regime, are recasting themselves as eager
supporters of reform.
One of the businessmen,
construction and mining magnate Zaw Zaw, is lobbying for the United States and
EU to drop sanctions and allow Myanmar to compete in the global economy,
instead of relying on China.
The new civilian government has
also bared its teeth, so far breaking up cartels, holding discussions with the
opposition and even blocking a US$3.6bil Beijing-backed hydropower project that
would have benefited Myanmar businessmen.
Laos
The communist Lao People's
Democratic Republic, with a population of some 7 million, launched its stock
exchange in January.
The Lao Securities Exchange
which was a US$20mil venture with Korea Exchange, the fourth largest bourse
operator in Asia has a few companies slated for listing next year including a
brewery, the national airlines, a telecommunications provider, and a cassava
and tapioca firm, according to Reuters.
Malls, cafes with Wifi and
other modern amenities are mushrooming in Vientiane, its capital, signs of
growing affluence in the former French colony.
Laos' GDP expanded by some 6%
between 1988 and 2006, and nearly 8% since then. Some forecasts have pegged its
growth this year at between 8.1% and 8.6% one of Asia's highest.
Though its US$7.5bil economy is
relatively small, this figure has more than doubled from 2006, along with GDP
per capita. The main drivers include hydropower production, copper and gold
mining, tourism, and domestic consumption.
Together, mining and hydropower
bring in 80% of FDI and fuel half of GDP. The other half comes from agriculture
such as rice, its mainstay, as well as corn, cotton, and potatoes. Agriculture
also makes up a large portion of employment.
Laos' myriad waterways has
enabled the construction of dozens of new dams, and it aspires to be the
“Battery of Southeast Asia” with the capacity to supply 8% of its power by
2025.
For now, the bulk of Laos' FDI
comes from China, Thailand and Vietnam, but its economy continues to encumbered
by poor regulation, an unskilled workforce, and close ties between business and
the political elite none of which are favourable terms to Western firms.
Cambodia
Despite the devastation brought
on by its deadliest floods in over a decade, Cambodian Prime Minister Hun Sen
said last week that the Cambodian economy could still grow 7% this year. In
contrast, the International Monetary Fund revised down its growth projection
for the country to 6% from 6.7%.
The floods in August and
September had killed almost 250 people and ravaged 10% of Cambodia's rice
fields, its major export.
Hun Sen, who has been in power
for over 25 years and is the longest serving head of state in Southeast Asia,
acknowledged that although the agriculture sector would see zero growth, the
economy could still get a boost from its garment exports, construction industry
and tourism, its fastest growing industry.
Those who have visited Cambodia
and its infamous Killing Fields would remember it as the country where the
violent Khmer Rouge regime took root.
But the country has bounced
back, its GDP growing by more than 7% between 2001 and 2010.
Its 15 million population, more
than half of which is below 21 years of age, is one of the world's poorest, a
situation that led to it becoming a substantial recipient of aid money. The
Asian Development Bank and even China are among its benefactors. China also
happens to be one of Cambodia's largest sources of FDI.
The much-awaited catalyst for
Cambodia's economy was the discovery of oil and gas deposits in its territorial
waters in 2005. When commercial extraction gets underway in 2013, a substantial
amount of oil money is expected to flow into its coffers.
With a huge labour force, its
main challenge is to spur the private sector so that there are enough jobs to
fill. Besides that, it has the usual teething problems that can be expected in
an emerging nation like corruption in government and political instability.
Vietnam
Vietnam is in quite a different
place from its neighbours. The poster boy for emerging Asia, it enjoyed steady
economic growth since the 1990s and a “gold rush” period before the recession
of 2008.
By some estimates, Vietnam
could be the fastest-growing of the world's emerging economies by 2025. Its
growth story began with the Doi Moi (renovation) reforms where, in 1986, free
market policies were introduced with the aim of creating a socialist-oriented
free market economy.
The reforms encouraged private
ownership in its industries, and at its peak, Vietnam had the highest FDI per
capita of any country.
Today, it is the world's
largest exporter of cashew nuts and black pepper with one third of global
share, and the second largest exporter or rice behind Thailand. Rich with
natural resources, it is also a top three exporter of oil in Southeast Asia.
Poverty and unemployment have
been reduced significantly, no easy feat for a country of some 90 million
people. But after this growth spurt, observers say Vietnam is starting to lose
its lustre.
Its total FDI received in 2011,
a lot of which goes into manufacturing and education, will almost certainly be
lower than last year. For the first 11 months, Vietnam obtained US$12.7bil in
FDI, down 20% from the same period last year.
Furthermore, its trade and
budget deficit is made worse by the low value its currency, the dong, which has
slid 8% to the US dollar this year. In 2010, it was devalued three times.
Another perennial problem is
inflation, which has stubbornly remained near 20%. The latest figures show that
inflation slowed for a third month in November to 19.83%.
A bank-backed analyst who had
spent some time in Vietnam tells StarBizWeek that because Vietnam is a
socialist state, its workers are always on strike. “The labour unions are
strong, and because wages can't rise fast enough to keep up with inflation,
there are protests. But productivity suffers as a result.”
While there, the analyst also
witnessed the Vietnamese stock exchange plunge 80% to 200 points from 1,000
points. High inflation and interest rates had led to a heavy selldown by
foreigners, which then sparked mass panic among domestic shareholders.
Moreover, the country is bogged
down by red tape and corruption. “In China the corruption is at the top. In
Vietnam, the whole supply chain is corrupt. Paying the boss is not good enough
- the subordinates expect kickbacks too,” the analyst says.
That aside, Vietnam is on the
path to reform, beginning with the divestment of its state-owned enterprises
(SOE), which are similar to Malaysia's government-linked corporations.
In four years, its more than
2,000 SOEs, many of them major corporations, will be pared down to just 692.
Some of them include big players in the shipping, mining, and oil and gas
industries. However, the government will retain controlling stakes of about 70%
in these companies.
The banking sector is also
poised for a round of consolidation. After years of skyrocketing credit growth,
its banks are saddled with huge amounts of bad debt, which foreign observers
suggest could be at least 10% of their assets, AFP reported.
Vietnam has about 100 banks
either state-owned, private or foreign but many are cash-strapped. According to
its central bank, loans have reached 244% of GDP in September.
To fix this, the government
plans to halve the number of banks by 2015 and create about two or three
regional champions.
JOHN LOH
The Star
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.
No comments:
Post a Comment