Vietnam needs new drivers of growth to consolidate

Vietnam needs new drivers of growth to consolidate post-Covid-19 recovery

While Vietnam’s economy has been seriously impacted by Covid-19, it remains resilient and is poised to bounce back, according to a new World Bank report.

According to the latest Taking Stock report, titled “What will be the new normal for Vietnam? The economic impact of Covid-19”, released on 30 July 2020, although the Vietnamese economy suffered from Covid-19 in the first half of 2020, prospects remain positive for both the short and medium term. If the world situation gradually improves, economic activity should rebound in the second semester of 2020 so that the economy will grow at around 2.8 percent for the entire year, and by 6.8 percent in 2021. With less favorable external conditions, the economy will expand by only 1.5 percent in 2020 and 4.5 percent in 2021.

The main challenge for Vietnam will be finding new drivers of growth to consolidate the expected recovery. The country’s traditional sources of growth–foreign demand and private consumption–are unlikely to return to their pre-crisis levels soon, amid continued uncertainties both at home and abroad. Covid-19 has also caused a surge in inequality as the pandemic affects businesses and people differently as, for example, workers in the service sector has seen a bigger decline in their income than farmers.

“To adapt to the new normal, policymakers must find new ways to compensate for the weakening of the traditional drivers of growth while managing rising inequality,” said Stefanie Stallmeister, World Bank Acting Country Director for Vietnam.

“However, by being ahead of the curve of the Covid-19 crisis, Vietnam has the unique opportunity to increase its footprint on the global economy and become a leader in tomorrow’s digital world.”

The report suggests three complementary measures for the government to act today so that the country can avoid the Covid-19 economic trap and return to its historical trajectory of rapid and inclusive growth. First, it should consider removing mobility restrictions on international travel, gradually and carefully to balance with safety concerns, as Vietnam’s economy is dependent on foreign visitors and investments. The second measure is to accelerate the execution of the existing public investment program to enhance domestic demand. However, the effective implementation of this action will require significant improvements in the allocation of resources and financial management. Indeed, the authorities will need to ensure that their resources are directed to the projects with the biggest positive impact on the economy and jobs, while minimizing technical and financial losses during implementation. Third, it should provide targeted support to the private sector, particularly to the hardest-hit industries such as tourism and manufacturing exports, through a combination of financial assistance and smart incentives.

Vietnam can also exploit several global trends, which have been accelerated by Covid-19, to push ahead its domestic agenda. For example, in a new global trading system, Vietnam can consolidate its existing footprint by developing strategic alliances with countries that have also low rate of Covid-19-infections and boosting promotion efforts to attract companies planning to diversify their supply chains. Similarly, Covid-19 presents a unique opportunity to move toward a more “contact-free” economy by promoting digital payments, e-learning, telemedicine and digital data sharing and, by so doing, help respond to the fast-expanding demand for quality services by the middle-class in the country.

Quynh Nguyen

Hana – BIDV partnership

The strategic partnership with Hana Financial Group, Hana Bank is of great significance to BIDV, marking a milestone in BIDV’s development and international integration.

Hana Financial Group is one of the leading groups in Korea, ranking 81st globally. The group continues to improve its professional, distinctive global financial services through the expansion of its global presence. Moving beyond the Korean market, Hana Financial Group is now in a position to become a world-class financial group with an extensive scope of operations, and to possess the largest global network in the Korean financial industry. As of May 2020, Hana Financial Group had had 216 entities and branches in 24 countries around the globe.

KEB Hana Bank (through the merger of Korea Exchange Bank and Hana Bank) is a member of Hana Financial Group. The bank is the third largest bank in Korea by total assets (over KRW 383,113 billion, equivalent to USD325 billion as of 31 March 2020). In February 2020, KEB Hana Bank has changed its brand name to Hana Bank for two goals: increasing customer convenience and enhancing brand value by unifying HFG’s brand name as “Hana”. Hana Bank has 705 branches in Korea, 198 branches in 24 countries, is the best retail bank, the most preferred brand, and the leading bank in foreign capital. This is the biggest M&A deal with a strategic investor in Vietnam's banking industry

The strategic partnership with Hana Financial Group, Hana Bank is of great significance to BIDV. Through the partnership, BIDV receives a long-term technical assistance from Hana Financial Group and Hana Bank, including but not limited to 6 areas: strategic corporate governance; technology and digital banking; retail banking development; diversified asset portfolios; risk management; human resources training and development.

After the partnership, the two sides quickly established a strategic cooperation committee to promote cooperation activities. Hana sent experts to directly participate in BIDV’s governance and management activities. Particularly, Hana Bank headquarters Specifically, the bank sent 01 representative to join the exchange and trade finance in Korea. Board of Directors, 01 to the Board of Management and 10 to work at Hana Bank has officially become 11 departments and centers at BIDV BIDV’s strategic shareholder since headquarters. This demonstrates November 2019, owning 15 percent Hana leadership’s commitment of the Vietnamese lender’s charter and determination to providing comprehensive support in all aspects of operations of BIDV.

BIDV and Hana Bank partner on credit cards for businesses

Hana bank is the first leading bank in Korea to become a strategic shareholder at a Vietnam commercial bank. The cooperation between Hana Bank and BIDV is the strategic relationship between the two leading financial institutions of the two countries in an effort to further promote economic and diplomatic relations between the two countries.