EU optimistic about Vietnam's economy
Source: 04-JUN-2008 Intellasia | 02/Jun/2008 Thoi Bao Kinh Te Vietnam
Jun 4, 2008 - 7:00:00 AM All time high inflows of foreign direct investment (FDI) into Vietnam demonstrates that the country remains an attractive business environment, said Sean Doyle, head of the European Commission (EC) Delegation to Vietnam at a recent press release presenting the annual assessment by the EC Delegation to Vietnam and the EU Member States' Trade Counselors on the performance of the Vietnamese economy and selected sectors.

Sean Doyle said that since the end of 2006, with the entry into the World Trade Organisation (WTO), the economic reforms in Vietnam have attracted special attentions of investors. As a result, a huge amount of foreign investment has flowed into Vietnam. This also means that the country has to quickly deal with such huge amount of FDI otherwise inflation would further increase.

That means inflation is partly attributed to such huge inflow of FDI?

FDI inflows have recently presented certain impacts on inflation in Vietnam. However, such huge inflows of FDI cannot be considered to be a negative issue or a serious issue as people think. Many countries in the world have feel something envy when Vietnam attracts such large amount of FDI.

However, that a large ratio of FDI inflows into Vietnam could not be disbursed immediately is also a factor causing inflation. Nevertheless, it is noted that inflation is an expense for the growth and development.

Vietnam's trade deficit is also a condition for Vietnamese economy's development because Vietnam must import equipment to serve production, export.

Recently, many foreign organisations have had pessimistic assessments on Vietnam's economy. What do you think about this?

Inflation in Vietnam in May climbed up to 25%. Merrill Lynch of the US has downgraded Vietnam's economic stability and even released a report warning of a possible monetary crisis.

However, in my opinions, many regional countries have fallen into the same position. I believed that the Vietnamese government has recognised this issue and has practised proper macro-economic policies for it. We must wait and see results of these policies.

I'd like to note that Vietnam is a key food export country, hence, the country has in fact kept its firm foothold during the recent food crisis. Therefore, we should not compared Vietnam to other regional countries that are themselves victims in that food crisis.

Another factor is that people often feel exciting or worrying about movements of an issue without waiting for its results. I believe that Vietnam has made great efforts and has quick adaptation capacity. Vietnam's footwear dumping suit in the US is a typical example. In this case, although Vietnam is levied a high price dumping duty, the country has made proper adjustments in production. In fact, the country's footwear export has sharply increased, a wonderful success.

Vietnam's expected growth of 7% in 2008, although being lower than last year, is still higher than many other countries in the world. Additionally, Vietnam's seafood export to Europe last year rose by 25% against a year earlier, demonstrating that the country is on the right track.

Do you agree with Morgan Stanley's assessments that Vietnam would repeat the financial-monetary crisis of Asia in 1997?

Over the last six months, sometimes dong has been stronger than the US dollar. On two, three recent days, dong has been weaker than the greenback. However, in my opinion this has not yet exactly demonstrated anything within only two or three days. In fact, the Vietnamese government is applying a flexible interest rate policy when allowing banks to flexibly levy lending and deposit interest rates. This is also a normal policy that other governments apply to assist foreign trade.

In the Eastern Asia's financial crisis in 1997, the highest currency depreciation was up to 50%, which was far more unstable than Vietnam now. Nevertheless, the countries that were victims of the crisis could overcome the crisis.

There is no reason to worry that Vietnam would repeat the financial crisis in 2007 because competitors of Vietnam now have to face up with more difficulties than Vietnam. The US's economic situation as well as changes of the greenback has recently made Vietnam have flexible changes to movements of the economy.

Will EU continue promoting investments into Vietnam this year?

FDI of EU in Vietnam is the second largest, following Japan.

Furthermore, EU and its member countries are also one of the largest ODA partners for Vietnam over the last years. Disbursing over US$5 billion worth of ODA including loans and non-refundable aids has demonstrated special attentions of the international community to Vietnam.

However, EU will listen opinions of the business community as well as measures on economic stabilisation of the Vietnamese government.

At an unofficial mid-term Consultative Group (CG) meeting to be held in Sapa by early June, sponsors will listen, discuss ways to support Vietnam and adapt to new movements of Vietnam. Because Vietnam has changed and developed much, the country will soon become a country with high per capital income and average income in the world.

Therefore, assistance of EU in such traditional sectors as education and training, infrastructure and others may require some changes because Vietnam has been able to well take over these sectors.

That Vietnam has policies on improving the business environment is an attractive investment message for EU.

What worries EU's companies most when they do business in Vietnam?

Red tape and corruption are the biggest barriers for EU's investors. Another important issue is that Vietnam should further open the banking sector as well as ensure transparency of the government's activities, ensuring the sustainable economic development.