Vietnam: Country Forecast September 2010 Vietnam Editor: Hilary Ewing Editorial closing date: 7th September 2010 Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Five-year forecast summary Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Five-year forecast summary The Economist Intelligence Unit expects the political scene to be broadly stable during the forecast period (2010-14) The Communist Party will stay firmly in control, but there are pockets of organised opposition, and, although still rare, political dissidence will become more common Political effectiveness will remain fairly poor during the forecast period Vietnam’s business environment rankings will see solid improvements in the forecast period There will be progress in nearly all areas of the business environment, underpinned largely by the ruling party’s efforts to push ahead with its economic reform programme Although Vietnam's long-term economic growth prospects remain positive, the early part of the forecast period will be challenging In 2010-11 annual real GDP growth is forecast to average 6.7% Growth will accelerate to around 7.4% a year on average in 2012-14 Real GDP growth (%) Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Five-year forecast summary The forecast for market opportunities is broadly positive However, in most parts of the country opportunities will still be limited mainly to the lower end of the market, while opportunities at the higher end will be restricted to the main urban areas Rising disposable income per head will contribute to strong growth in demand for consumer goods The prospects for long-term economic growth are bright The economy will remain strong, supported by an expanding private sector Our central forecast indicates that annual growth in GDP per head will average 5.8% in 2011-30 Household consumption per head (US$) Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Business environment rankings Methodology Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: The political environment Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Political outlook Highlights The ruling Communist Party of Vietnam will maintain its firm grip on power and will continue to dictate the political agenda in the forecast period (2010-14) However, political stability is not assured Ongoing economic troubles, combined with the government's continued harsh crackdown on dissenters and disputes with various religious groups, could lead to public protests The party is due to hold its next national congress in January 2011, and this means that until then there will be considerable jockeying for position within the current leadership, although it will be largely invisible from the outside There will be major personnel changes in higher echelons of the party, but the organisation's central tenets will remain unchanged and its overriding objective will be to maintain its position of dominance The leadership will claim to be committed to maintaining the momentum of economic and administrative reforms, but actual progress could be limited A widening gap between competing factions within the party means that consensus on key reforms could become increasingly difficult to establish Vietnam will continue to make strides in strengthening its ties with the West, particularly the US, but it will also maintain close relations with China The government will continue to pursue bilateral and multilateral free-trade agreements More from ViewsWire… Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Demographics Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Demographic outlook Vietnam's population is forecast to continue to grow steadily, by around 1% a year, during the forecast period (2010-14), and as a result the population will reach 92.2m by 2014, up from 87.1m in 2009 According to the General Statistics Office (the national data provider), the total fertility rate, at 2.03 children per woman, is below the replacement level of 2.33 children per woman A large workforce and a low dependency ratio will prove advantageous in the forecast period and beyond as new employment opportunities are generated There are growing concerns over the country's sex ratio at birth The preference for male children has increased the incidence of gender-based abortions, and, although the government will maintain the ban on such abortions, reducing their incidence will be difficult Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: The business environment forecast Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Map Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Comparative GDP, 2009 Gross domestic product (US$ bn; market exchange rates) Country Forecast September 2010 Gross domestic product per head (US$; market exchange rates) © The Economist Intelligence Unit Limited 2010 Vietnam: Basic data Land area Population Climate 330,363 sq km 85.2m (2007, General Statistics Office estimate) Tropical monsoon; north cool and damp in winter (November-April), hot and rainy in summer; south more equable; centre most subject to typhoons The rains are highly unpredictable Weather in Hanoi Hottest month, June, 26-33°C; coldest month, January, 13-20°C; wettest month, August, 343 mm average rainfall; driest month, January, 18 mm average rainfall Weather in Ho Chi Minh City Hottest month, April, 24-35°C; coldest month, January, 21-32°C; wettest month, September, 335 mm average rainfall; driest month, February, mm average rainfall Language Currency Time Public holidays Vietnamese (spoken by about 90% of the population); English (increasingly favoured as a second language); some French; a little Russian and German; minority languages such as Hmong, Thai, Khmer in remoter rural areas Dong (D) hours ahead of GMT January 1st (New Year’s Day); February 14th-18th (Tet, Lunar New Year); April 30th (Liberation of Saigon); May 1st (Labour Day); September 2nd (National Day) Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Business environment rankings: Methodology Outline of the model The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by Country Forecasts using a standard analytical framework It is designed to reflect the main criteria used by companies to formulate their global business strategies, and is based not only on historical conditions but also on expectations about conditions prevailing over the next five years This allows the Economist Intelligence Unit to utilise the regularity, depth and detail of its forecasting work to generate a unique set of forward-looking business environment rankings on a regional and global basis The business rankings model examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure Each category contains a number of indicators that are assessed by the Economist Intelligence Unit for the last five years and the next five years The number of indicators in each category varies from five (foreign trade and exchange regimes) to 16 (infrastructure), and there are 91 indicators in total Almost half of the indicators are based on quantitative data (eg, GDP growth), and are mostly drawn from national and international statistical sources for the historical period (2005-09) and from Economist Intelligence Unit assessments for the forecast period (2010-14) The other indicators are qualitative in nature (eg, quality of the financial regulatory system), and are drawn from a range of data sources and business surveys adjusted by the Economist Intelligence Unit, for 200509 All forecasts for the qualitative indicators covering 2010-14 are based on Economist Intelligence Unit assessments The main sources used in the business rankings model include CIA, World Factbook; Economist Intelligence Unit, Country Risk Service, Country Finance, Country Commerce; Freedom House, Annual Survey of Political Rights and Civil Liberties; Heritage Foundation, Index of Economic Freedom; IMF, Annual Report on Foreign Exchange Restrictions; International Institute for Management Development, World Competitiveness Yearbook; International Labour Organisation, International Labour Statistics Yearbook; UN, Human Development Report; US Social Security Administration, Social Security Programs Throughout the World; World Bank, World Development Report; World Development Indicators; World Economic Forum, Global Competitiveness Report Back to Rankings Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Business environment rankings: Methodology Calculating the rankings The rankings are calculated in several stages First, each of the 91 indicators is scored on a scale from (very bad for business) to (very good for business) The aggregate category scores are derived on the basis of simple or weighted averages of the indicator scores within a given category These are then adjusted, on the basis of a linear transformation, to produce index values on a 1-10 scale An arithmetic average of the ten category index values is then calculated to yield the aggregate business environment score for each country, again on a 1-10 scale The use of equal weights for the categories to derive the overall score reflects in part the theoretical uncertainty about the relative importance of the primary determinants of investment Surveys of foreign direct investors' intentions yield widely differing results on the relative importance of different factors Weighted scores for individual categories based on correlation coefficients of recent foreign direct investment inflows not in any case produce overall results that are significantly different to those derived from a system based on equal weights For most quantitative indicators the data are arrayed in ascending or descending order and split into five bands (quintiles) The countries falling in the first quintile are assigned scores of 5, those falling in the second quintile score and so on The cut-off points between bands are based on the average of the raw indicator values for the top and bottom countries in adjacent quintiles The 2005-09 ranges are then used to derive 2010-14 scores This allows for intertemporal as well as cross-country comparisons of the indicator and category scores Measurement and grading issues The indices and rankings attempt to measure the average quality of the business environment over the entire historical or forecast period, not simply at the start or at the end of the period Thus in the forecast we assign an average grade to elements of the business environment over 2010-14, not to the likely situation in 2014 only The scores based on quantitative data are usually calculated on the basis of the numeric average for an indicator over the period In some cases, the "average" is represented, as an approximation, by the recorded value at the mid-point of the period (2007 or 2012) In only a few cases is the relevant variable appropriately measured by the value at the start of the period (eg, educational attainments) For one indicator (the natural resources endowment), the score remains constant for both the historical and forecast periods Back to Rankings Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Indicator scores in the business rankings model Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam a Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 ... the country' s first nuclear power plant Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: The economic forecast Country Forecast September 2010 © The Economist. .. agreements More from ViewsWire… Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: Demographics Country Forecast September 2010 © The Economist Intelligence Unit... will be difficult Country Forecast September 2010 © The Economist Intelligence Unit Limited 2010 Vietnam: The business environment forecast Country Forecast September 2010 © The Economist Intelligence