Highlights of socio-economic events in Vietnam in 2014

12-Jan-2015 Intellasia | Vietnamnet | 6:00 AM Print This Post

The search for flight MH370, China’s illegal deployment of its oil rig in Vietnam’s waters, the VN Index’s record fall, the risk of loss of budget revenue owing to the fall of oil prices, and the rescue of 12 workers in a collapsed tunnel were some of the most eventful incidents of 2014.

1. China’s infringement on Vietnam’s continental shelf

On May 1, China moved its HD-981 oil rig deep into the continental shelf of Vietnam, pushing the relationship between Vietnam and China to its most intense peak of the last 20 years. For two and a half months, China mobilised 140 vessels, including military ships and fighter aircraft, to escort the oil rig. They used water cannons and big ships to crash into Vietnamese vessels on duty. On May 26, Chinese ships rammed Vietnamese fishing boats in the exclusive economic zone of Vietnam, hindering the rescue of 10 fishermen in the sea.

Vietnamese people throughout the country took to the streets to oppose China’s brazen infringement of sovereignty. “Vietnam does not exchange sovereignty with illusory friendship”, prime minister Nguyen Tan Dung said about Vietnam’s strong views on this issue at international forums.

Several demonstrations occurred, incited by some people, which turned into disorder and mess in mid-May in some southern provinces, including Binh Duong, Dong Nai, HCM City and Ha Tinh in central region, affecting Vietnam’s efforts of decades to improve the investment environment. Nearly 930 businesses were burned and damaged, with total losses of more than VND3.12 trillion and $8.88 million. FDI in these provinces declined. International visitors to Vietnam fell by nearly 10 percent in May and continued to decline by 20 percent in June, to the lowest level since the beginning of the year.

China moved its oil rig out of Vietnam’s continental shelf on July 16, but more than ever the world’s trust of China’s responsibilities in the South China Sea (Bien Dong Sea or East Sea) has been hit hard.

2. Vietnam-Index plummets to 13-year low

Highlights of socio-economic events in Vietnam in 2014

The panic of investors about the country’s economic outlook after China anchored its illegal oil rig in Vietnam’s waters was the major factor leading to the record fall of the Vietnam-Index. On May 8, the VN Index dropped by nearly 33 points, and 70 percent of all blue-chips fell to the bottom, including many oil and gas shares. Investors fled the stock market and many of them lost 20-30 percent of account value in the session. The Securities Commission Chair Vu Bang had to speak to assure investors. The stock market went up in the next few sessions and then fluctuated significantly when extremist demonstrations against China took place. As a result, the HCM City stock exchange lost 90 points in May, losing nearly everything it had gained from the beginning of the year.

Recovery only began in the third quarter when cash flow from investment funds flocked to the stock market with the expectations of loosening room for foreign investors, followed by the lowering of interest rates and the securities trading firms loosening margin services. After reaching a new height (VN Index reaching 640.75 points) on September 3, the stock market was challenged after the policy that would allow more ownership room for foreign investors was delayed and after concerns about the business situation of oil and gas firms after global oil prices fell. Ending the trading session on December 18, the VN Index reached 528.45 points, only 14 points higher than the first day of the year.

3. Oil prices drop by half

Crude oil prices fell from $110/barrel in early July to $50/barrel by the end of the year, a reminder of the same scenario of 2008, when oil prices dropped from over $140/barrel to nearly $40 nearly a half year later. However, the reasons were not the same.

In Vietnam, petrol prices fell 12 consecutive times, from VND25,640 dong per litre at the end of July to VND17,880 on April 22, equivalent to a reduction of nearly 30%. The price of gasoline currently is the lowest in the past three years, causing the Consumer Price Index to fall significantly.

However, Vietnam is now on a risk of losing tens of trillions of dong, as crude oil exports are contributing to 30 percent of the budget revenue. According to the government’s calculations, if the oil price is under $100 per barrel, if the price falls by $1/barrel, the budget will lose VND1 trillion. minister of Planning and Investment Bui Quang Vinh said that, if the selling price falls below production costs, the slash of the output of crude oil may cause a GDP decrease of 0.8 percent to 1.2%. The production cost of a barrel of oil in Vietnam is fluctuating between $30-$70. The oil and gas industry may have to change its strategy if the price falls below $50 per barrel.

4. Several major building projects are completed

Highlights of socio-economic events in Vietnam in 2014

The new National Assembly House.

The New National Assembly House hosted the first National Assembly session in October. Built over five years at a cost of VND6.8 trillion, this is the first large-scale central headquarters built since the unification of the country (1975). This is also the greatest building constructed by Vietnamese contractors.

Nhat Tan Bridge, the longest cable-stayed bridge across the Red River, with a total investment of VND13.6 trillion, was completed in October. The 8.3 km long with 4-lane bridge is connected to Vo Nguyen Giap Highway to become the most beautiful urban highway in North Vietnam. The bridge is also considered a symbol of solidarity and cooperation between Vietnam and Japan.

Not far from Nhat Tan Bridge is Vietnam’s longest highway named Noi Bai – Lao Cai which was opened to traffic on September 21, shortening by half the time to travel from Hanoi to Lao Cai. Built over seven years with an investment of nearly $1.5 billion, the 245 km route is expected to remove the socio-economic gap between the Red River Delta and the Northwest highlands.

5. One national school examination; textbook reform

In early September, the Ministry of Education and Training announced plans for examination reform, of which the most important would be one national examination used for high school graduation, which would also provide data for university entrance. This exam would replace the current two separate exams.

In late November, the draft resolution on innovation of curricula and textbooks was approved by the National Assembly. Under the resolution, Vietnam would use a unified education programme but a variety of textbooks. The State encouraged organisations and individuals to join in compiling textbooks. Textbooks would be selected on the basis of evaluation results of the Independent National Council. Schools, parents and students would be engaged in selection of textbooks.

From the 2018-2019 school year, the education sector will apply the new general education programme and new textbooks.

6. Vietnam welcomes new wave of foreign investment

Highlights of socio-economic events in Vietnam in 2014

In a wave of investment of multinational hi-tech groups in Vietnam in 2014, the most notable event was Microsoft’s removal of its phone production line from China to Vietnam soon after its merger with Nokia. Samsung – with an ambition to turn Vietnam into its global production base – also opened a $1 billion phone screen factory in Bac Ninh, and invested $1.4 billion in HCM City high-tech park. It also increased investment capital to $3 billion in its Thai Nguyen high-tech project. The total investment capital of Samsung contributed one-third of total foreign investment in the country in 2014.

The consumer market, especially fast food, was an attractive destination for foreign investors in the year. McDonald’s after opening its first store in HCM City opened two more stores within half a year. While restricting its development in the US, Starbucks set foot in HCM City and opened three stores in Hanoi. The presence of investors with billions of dollars from Thailand also helped the burgeoning retail sector become more active with the acquisition of Metro, Family Mart and frantic investment in the field of alcohol and soft drinks.

Vietnam’s stable investment environment and consumer market with more than 90 million people is attractive for foreign investors, particularly in the context of world instability. Experts said that Vietnam is witnessing a third huge investment wave, after the two peaks in the 1991-1997 and 2005-2008 periods.

7. Equitisation of State-owned enterprises

The goal of equitising 432 SOEs before the deadline of 2015 led to a busy year in 2014 for transformation of the state sector. After 11 months, 80 SOEs were privatised, exceeding the figure of the entire 2013.

Along with offering of shares in the transport sector, the most notable IPOs were those of the Vietnam Textile Garment Corporation (Vinatex), Ca Mau Fertiliser and Vietnam Airlines, with earnings of VND1.1-VND1.5 trillion each.

Another notable event during the restructuring of State-owned enterprises in 2014 was the separation of MobiFone from the Vietnam Post and Telecommunications Group (VNPT). This was considered the first and important step to equitise MobiFone, which contributed about 60-70 percent of VNPT’s profit, while helping increase competition in the telecommunications market, which has been a controversial issue for many years.

However, besides the positive sign in terms of quantity, the equitisation of SOEs in 2014 was said to be ineffective as many equitised businesses are still operating under an old management model.

8. The search for MH370

Highlights of socio-economic events in Vietnam in 2014

On March 8, the Boeing 777-200 of Malaysia Airlines MH370 on the journey from Kuala Lumpur to Beijing (China) suddenly disappeared when it was about to enter the HCM City flight information area.

Along with Malaysia, Vietnam mobilised the largest ever human resources and equipment for the search and rescue in the air, at sea and on land. Vietnam was among the most active countries participating in the search, including the Philippines, Singapore, the US, and China.

In eight days, 11 aircraft, 10 naval vessels, and many fishing boats of Vietnam made 55 trips scanning each square metre of an area of 100,000 square meters on the sea. Vietnam also licensed ships of China, Malaysia, Singapore, and the Philippines to search in its territorial waters, but no traces of the plane were detected.

Half a month later, Malaysia Airlines announced that the MH370 crashed in the Indian Ocean and none of the 239 people on board survived. However, no convincing evidence has been given and the search has continued so far without results.

9. The most catastrophic aviation accident in 20 years

On the morning of July 7, a helicopter Mi171 of Regiment 916, Division 371, of the Air Defense and Air Force carrying 21 soldiers and officers crashed in Yen Binh commune, Thach That district, Hanoi. Only one of the 21 soldiers survived, with serious injuries.

The pilot had tried to prevent the aircraft from hitting people’s houses to avoid further losses. Lt. Gen. Vo Van Tuan, deputy Chief of the Army, said the accident was due to “technical problems, not destruction from the outside.”

Major general Le Ma Luong, former director of the Museum of Military History of Vietnam, said the accident was very tragic and a huge loss to the Vietnam People’s Army. The accident had the highest number of fatalities of all aviation incidents in the last 20 years in Vietnam.

10. The rescue of 12 workers in a hydropower tunnel

On the morning of December 16, hundreds of cubic meters of rock and soil in the Da Dang hydropower tunnel suddenly collapsed, separating the tunnel section where more than 30 workers were working and blocked the escape route of 12 people. The position was 70 m down from the hill and surrounded by large rocks. The Ministry of Construction said the incident was very serious.

One-half day after the incident, the rescue force drilled a hole of about 3 cm to transfer oxygen, porridge, and milk to sustain the 12 workers trapped inside.

Sappers of the Military Zone 7, miners from Quang Ninh, and HCM City policemen took turns around the clock to dig into the tunnel. The struggling for the life of the victims was counted by seconds but they could only dig with shovels because the tunnel could have collapsed at any time.

Deputy prime minister Hoang Trung Hai was at the scene to instruct the rescue. The order to dig another branch on the left was implemented urgently. The fourth day after the incident, the miracle happened when soldiers discovered the light at the end of the tunnel. The 12 workers were taken out in safety to the joy of thousands of people.

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Category: Economy, Vietnam

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