In the context of assessing the Great Game rules, special attention should be given to South-East Asia (SEA) or the ASEAN region, which plays an important role in the global economic and political discourse. Recently, there is an increasing number of positive forecasts about prospects for its development. Despite the diversity of the region countries, they complement each inharmony, reinforcing further regional integration and building widespread economic ties.
ASEAN АS А REGIONAL INTEGRATOR
Over the past few decades, the region has shown exponential growth, integrating systematically, including through the ASEAN Economic Community established in 2015.
On average, the share of intraregional flows in ASEAN is 79% and is the highest in Asia. About 72% of trade, 80% of capital flows, and 85% of people are intraregional.
By 2040, the working-age population there may increase by 18%. Wages are on average 50% lower than in mainland China, making the ASEAN region attractive as an alternative location for labor-intensive industries.
The average per capita income in the region countries is about $ 4,400, the market has a great potential for growth as the middle class is expected to increase to 200 million people by 2025.
Based on the World Bank and Asia Development Bank forecasts for 2021-2022, the region economy will return to its pre-pandemic growth rate as vaccination comes on line.
The ability to transcend the crisis effects and increase the pace of regional integration amidst reshaping of traditional supply chains will be crucial for the ASEAN economy long-term recovery.
Combatting the pandemic remains a top priority. Although the per capita mortality rate in the region remains relatively low, its impact is being experienced.
ASEAN remains vulnerable to security challenges ranging from internal and intraregional conflicts to conventional threats including international terrorism and organized crime, as well as a health crisis. Reduction in tension in the South China Sea is very important to ensure peace, stability and security.
A critical issue is climate change that has a negative impact on the economy and security.
Following a McKinsey November 2020 report, the Southeast Asian countries expect a sharp temperature and humidity increase by 2050 that will have social and economic consequences.
According to the Asia Development Bank, the climate change will be globally experienced in the Southeast Asia and can reduce the region's GDP by 11% by the end of the century due to affecting key sectors such as agriculture, tourism, and fishing.
ASEAN countries are striving to reshape their economies through attracting investment and innovating in labor-intensive manufacturing, green and renewable energy, and infrastructure. A high-quality infrastructure, professional training level and labor productivity are becoming the most critical factors for improving competitiveness. Together with the new wave of industrial and logistics technologies, they encourage the countries to flexibly adjust their priorities and develop new professional skills to compete successfully in the more knowledge-intensive sectors of the global economy.
This is dictated not so much by the need to mix the pandemic effects but by the desire to adapt to the new economic environment and security architecture, as well as to solve the climate challenge.
VIETNAM – ONE OF THE ASEAN GROWTH POINTS
Located in the heart of the Southeast Asia, opposite the South China Sea, and surrounded by the ASEAN countries, Vietnam has been at the strategic position in the region which determines the growing interest from coastal and extra-regional powers in collaborating with it in various formats.
Vietnam is a fast-growing Asia with a high share of regional flows, a concentration of skilled labor, and historical and cultural diversity.
In 2020, the country was among the top ten countries in the world showing the highest GDP growth. It is expected to return in 2021 to 6.8-7% growth rate and this momentum will continue in the coming years.
Based on S&P Global forecasts, Vietnam's economy in 2021 will grow by 10.9% (in 2020 – by 2.91%), which is a record not just for Southeast Asia.
In the first quarter of 2021, the GDP growth made 4.48%, which is 0.8% more than that of the preceding year.
A valuable contribution to expanding Vietnam's foreign trade is made by the free trade zone agreement signed in 2015 with the Eurasian Economic Union.
FOREIGN INVESTMENT AS ECONOMY GROWTH DRIVER
In Vietnam, the legal regime and guarantees for foreign investors are enshrined in the country's constitution since the 80s of the 20th century.
Despite the coronacrisis, in 2020 Hanoi attracted $28.53 billion from 112 countries, foreign investors were focused on 19 industries, primarily manufacturing, with investing $13.6 billion (47.7% of the total).
Western companies from China continue to migrate to the country in search of a "safe haven" given the shifts in global chains, which is also partly supported by the China–U.S. trade and technological confrontation.
Encouraged by the economic boom in Japan and relocation of labor-intensive industries to South Korea, Taiwan, Singapore and Hong Kong, Vietnam is seeking to replicate the experience of these four Asian "tigers". This is indicated by the economic strategy which had been communicated by the 13th Congress of the Communist Party. It suggests that Japanese and South Korean companies may prefer Vietnam in addressing the issue of relocating their production facilities from China after coronavirus outbreak.
Vietnam is becoming a recognized center for producing labor-intensive and knowledge-intensive export goods based on foreign investment (mainly in Haiphong and Ho Chi Minh City), most of which comes from South Korea and Japan. New industrial centers contribute not only to the economic growth of the country but to the integration processes in the region as a whole.
Experts believe that the 2021 may be a breakthrough for relations between Vietnam and the European Union which is a significant investment partner.
According to a study made by the European Chamber of Commerce (EuroCham) in Vietnam, the Old World companies are optimistic about Hanoi. A third of the surveyed companies are about to increase the number of employees in the country and 57% will not at least reduce them. About 30% expect to increase investment, and 43% expect to increase sales and revenue.
Among the reasons for this optimism explained by experts is the EU-Vietnam Free Trade Agreement (EVFTA) being effective since August 2020 and which has already benefited 70% of the surveyed companies. At the same time, 33% of respondents are not happy with state administrative barriers, although noting that the government quickly and adequately responds to foreign business signals.
At the same time, the Vietnamese government shall limit foreign investment which is the result of a long-standing desire to balance interests between China, U.S., as well as Europe, and ASEAN. This step fits into the overall strategy of not being over-dependent upon one partner.
The Ministry of Planning and Investment is developing the details of the law enforcement to implement the recently adopted Investment Law. As per Industries Catalog, 25 industries are simply closed to foreign investment, and 59 more are subject to restrictions. These might include media, fishing industry, security, shipbuilding and ship recycling, consulting, notarial activities, public opinion polls, funeral services, etc.
In addition, Vietnam now strictly regulates the maximum share of foreign investors in the authorized capital of commercial companies, forms of investment, land use and, labor recruitment, the use of natural resources, real estate, etc.
This fact, however, does not reduce the enthusiasm of investors. For example, the Singapore company Vulpes Investment Management, which until recently had planned to invest up to $8 million in Myanmar, this year intends to come with its money to Vietnam.
The warehouse real estate giant, the Singapore company GLP, is creating a joint venture in Vietnam and will invest $1.5 billion.
GLP is Asia's largest warehouse operator, managing 64 million square meters of logistics real estate worldwide. Together with Vietnamese SEA Logistic Partners, there is a plan to develop 335,000 square meters of land around Hanoi and Ho Chi Minh City.
THE UNITED STATES – AN IMPORTANT TRADING PARTNER
For many years, the United States has remained Vietnam's largest export market. After diplomatic relations were established in 1995, the bilateral trade turnover increased from $450 million to $75.7 billion by the end of 2020, and this year it is expected to reach $80 billion.
Vietnam has achieved such results thanks to the export promotion for both traditional goods (textiles, shoes and seafood) and new ones – electronics and components.
The U.S. National Retail Federation (NRF) believes that Vietnam has become an important U.S. ally in countering China's influence in the region, and new tariffs on imports from Vietnam could hurt American companies and result in higher costs for American consumers.
To justify the bilateral trade imbalance, the American business states that many companies have relocated their business to Vietnam from China, and introducing new tariffs will not only make this relocation pointless, but also provoke contrary processes.
According to the American Chamber of Commerce in Hanoi, Vietnam has also become one of the fastest growing markets for the United States in such segments as agriculture, aircraft building, energy, technology, etc.
In the list of the largest countries exporting to the US market, Vietnam moved from the 6th place in 2015 to the 2nd place in 2020. And this is despite the fact that Vietnam's exports account for only 2.7% of US imports.
DIGITAL ECONOMY – THE KEY TO THE COUNTRY'S DEVELOPMENT
Vietnam is striving to keep up with the development of the digital industry, having elaborated a relevant five-year plan.
The total revenue of the information and communications industry in 2019 approached $135 billion, which is 2.5 times more than 2015 outcomes. The industry contributed more than $4.3 billion to the national budget, which is 1.6 times more than in 2015. In the ITU Global Cybersecurity Index, Vietnam's ranking rose from 100th in 2017 to 50th in 2019.
The plan key points for the upcoming 5 years are connecting each house to the network, providing each resident with a smartphone and fiber-optic Internet, developing cloud infrastructure, as well as such modern attributes as artificial intelligence, the Internet of Things, big data, and blockchain. In addition, there is a plan to introduce digital government and provision of online services while ensuring cybersecurity.
Vietnam is increasingly involved in the global digital supply and production chains.
At the end of 2020, the Vietnamese government issued a license allowing Taiwan's Foxconn (one of the Apple's largest suppliers) to produce MacBooks and iPads at its factory in Vietnam on $270 million. Foxconn Technology has already invested about $1.5 billion in the country.
The Vietnamese are no longer satisfied with the role of the assembly hub, therefore the "Made in Vietnam" brand will also apply to 5G products, providing companies that develop key technologies, as well as innovative start-ups, with the most-favored-nation treatment. Although preparations for the commercial launch of 5G networks in Vietnam are still underway, the technology is already being implemented in industrial parks to accelerate production processes and attract new investment.
In 2020, for the first time in Vietnam, the Yen Fong 1 Industrial Park (Bak Nin Province) was connected to the 5G network. At the same time, the decision to introduce the 5G network for business needs was adopted in October 2019 thus demonstrating the promptness of the Vietnamese authorities not typical for Asians.
To increase the population's access to financial services, especially in rural areas, a two-year pilot project has been launched to introduce the "mobile money" system which implies the widespread e-wallets implementing for purchases and transfers.
According to the World Bank, in 2018, about 69% of the Vietnamese population had never used banking services.
THE COMMUNIST PARTY OF VIETNAM AS AN EFFECTIVE MANAGER AND DEVELOPMENT GUARANTOR
The Vietnam's current success was largely supported by the political and economic reforms that took place in the 1980s and were guided by the Communist Party of Vietnam (CPV).
Compared to the total foreign trade volume of approximately $3 billion in 1986 with $1.5 billion deficit, it has grown to more than $517 billion (more than 172 times) with a surplus of $11 billion. The trade surplus in 2020 (for 11 months) increased to $20.01 billion with a trade turnover of $540 billion. Following the World Bank report, the GDP per capita in 2018 increased 2.7 times compared to 2002 (in 2019 it was $ 2,750).
This led the major part of the population – 45 million out of 98 million of the total number – to escape poverty.
The next five-year plan (2016-2020) and the ten-year social and economic development plan (2011-2020) have been successfully completed. The results achieved have laid the base to transform Vietnam into a modern industrialized country with a high middle income by 2030, and a developed country by 2045.
According to the CPV, in 2021-2025, the economic growth rate should increase to 6.5-7% based on promoted reforms and the introduction of high technologies. The new ten-year plan of social and economic development, among other things, provides for increasing the contribution of the private sector to the economy (now 42%). There is a plan to increase GDP per capita from $2,750 to $4,000–$5,000 by 2025, which almost means doubling the revenue.
The political sphere predicts that with the support of friendly countries such as India and Japan, Vietnam will be able to maintain a balance in relations with Beijing and Washington.
At the international level, Vietnam, while advocating for multilateralism and foreign policy diversification, has successfully presided over ASEAN, and played an important role in coordinating joint efforts to contain the pandemic. Hanoi has successfully implemented the role of a UNSC non-permanent member, organized a UN-ASEAN meeting on conflicts prevention and resolving regional. A notable achievement was the completion of negotiations and the signing of a Regional Comprehensive Economic Partnership in 2020 and a Free Trade Agreement with the EU in 2019.
VIETNAM AT THE FOREFRONT OF THE FIGHT AGAINST THE PANDEMIC IN ASEAN
Vietnam is considered a model for countering the coronavirus pandemic. Neighboring China, it has been pursuing an effective policy, remaining for a long time (if not taking into account the July 2020 coronavirus outbreak in Da Nang) an "island of safety" in Southeast Asia and in the world in general.
As of February 2021, the country confirmed 2,420 cases, of which 1,804 people recovered and 35 died.
Obviously, the country's leaders are consistent in their decisions and are careful with its economy, which demonstrates the flexibility in adjusting under the influence of external factors.
Government aid packages to the economy (the first in the amount of 3.5% of GDP, the second – 10% of GDP) did not aim solely at stimulating the economy, but also at laying the groundwork for the post-epidemic development of the country, offering effective measures to stimulate domestic demand.
Following the 2019 outcomes, Vietnam's GDP amounted to $340.6 billion.
NEW LEADERS – THE SAME COURSE
In early April, the National Assembly of Vietnam elected Pham Minh Chinh as the new country's Prime Minister.
In previous, the new leader of the Vietnamese government had chaired the Central Organization Committee under the CPV, served in ministry of Public Security. He takes interest in environmental issues, has a reputation not only as a technocrat, but as an effective leader and manager as well.
The Prime Minister Chinh's tasks and priorities are set out in the 13th CPV Congress resolution. The principal attention will be given to digital transformation, digital economy development, science and high technologies, creating favorable conditions for businesses and manufacturing enterprises growth.
National defense and security, sovereignty and territorial integrity, and public order remain the most important tasks given the current uncertain and unstable situation in the South China Sea.
The key challenge for the new Prime Minister is to create a solid foundation in the next five years, on which Vietnam can transform into a modern state with a developed economy in alliance with South Korea, Japan, India, the United States and other countries. A solid basis for this is provided by launched in 2021 new five-year plan (2021-2025) and the ten-year strategy for economic and social development (2021-2030).
Obviously, the new Vietnam's leadership will consolidate and multiply the progress made earlier in political, economic, social development and security, and implement the goals and objectives of plans and strategies. Given the new Prime Minister's track record and competence, it can be stated that Vietnam is fully prepared to meet the ambitious challenges of the new era.
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