Six global trends that will shape Vietnam’s future: HSBC

Vietnam is recovering strongly and there are signs that the economy is shifting from survival to growth mode, said CEO of HSBC Vietnam Tim Evans, stressing the need for the country to effectively navigate global megatrends that will shape its future and ensure that it reaches its full potential.

Vietnam is an example with a high coverage rate. (Photo: VNA)

The first trend is climate change. According to Evans, climate change is both an opportunity and a challenge for a country like Vietnam. As a nation with an extensive coastline and one of the world’s most important rice producers, the prospect of rising sea levels and falling crop yields is a threat to its well-being and prosperity.

The Mekong Delta is on the front line of climate change. If action is not taken now, Asia could face between US$2.8 trillion and US$4.7 trillion in lost annual GDP by 2050, accounting for two thirds of the world’s loss caused by climate change, he said, adding that the negative impacts of climate change could reduce Vietnam’s national income by up to 3.5 % by 2050.

He emphasised the importance for Vietnam to work hard to reduce its dependence on coal both as a source of power generation and as a major export. Coal currently accounts for about a third of the country’s operating energy mix but the government has recently committed to cutting it to less than 10 % by 2045 and boosting renewables to more than half from today’s 12 %.

The second trend is digitalisation, as the COVID-19 pandemic has accelerated the shift towards a seamless digital world and has triggered changes in consumers’ behaviour that are likely to have lasting effects.

According to Evans, one of the most powerful effects of the digital revolution is the way that it has levelled the global playing field, allowing countries like Vietnam to compete with more advanced economies. Companies like VNG, MoMo, and VNPay – all unicorns founded in the country – are world-class competitors, but if the nation is to continue to build on their success, it needs to continue to invest in building a thriving digital ecosystem that drives innovation.

Regarding vaccine equity, recent events have shown that unless every country and community can obtain vaccines quickly and fairly, no one will be able to return to normal, and a truly global economic recovery will not be possible.

Vietnam has been a model in this regard. Almost 80 % of the population has already been vaccinated, one of the highest rates in the world. The Ministry of Health has set a target to complete the vaccination campaign for children aged 5 to 11 in the second quarter of this year.

This is a significant achievement considering the position the nation was in 12 months ago. There is an opportunity to use this expertise to help neighbouring countries to reach herd immunity. Unless they can achieve similar rates, Southeast Asia’s regional recovery will fail to reach its full potential. A prime example is Thailand, a major hub for tourists en route to Vietnam, where the rates are still high.

Strengthening global cooperation in vaccine research and development would help countries that struggle to compete with richer nations to obtain affordable vaccines and key medical supplies, he said.

The fourth trend is trade, Evans said, noting that trade still offers the shortest and most direct route back to economic growth.

So far, Vietnam has signed 15 free trade agreements (FTAs) – including the recent Regional Comprehensive Economic Partnership which has been in force since the beginning of this year – making it one of the most open economies globally. These FTAs are expected to play a major role in boosting economic growth this year. Since the nation has fully opened its borders for international travel since March, the government wants to ensure that the country returns to its pre-pandemic growth cadence. This strategic goal can be achieved with the aid of Vietnam’s FTAs and other bilateral agreements.

The ratification of these agreements will open up a world of opportunities for Vietnamese corporates. Challenges remain as the country will need to embark on further domestic reforms to ensure it can remain competitive. The country will also need to continue to work with other Asian nations to facilitate cross-regional investment flows and dismantle non-tariff barriers if the region is to reach its full trade potential, he said.

Regarding geopolitics, the HSBC Vietnam leader said that the ongoing geopolitical tensions are expected to continue to inject unwelcome uncertainty into the global economy. Vietnam’s openness and principled stand on settling international disputes by peaceful means and in accordance with international law is a valuable voice in a confused international environment.

The inclination to withdraw within one’s own borders at times of turmoil and uncertainty is natural but misguided. The biggest issues can only be overcome with greater collaboration.

Finally, for inequality and an inclusive recovery, Evans stressed that the impact of the pandemic has been profound, leaving a legacy of increased inequality and elevated debt. It hit the poorest and most vulnerable the hardest, pushing millions more into poverty and entrenching inequality.

It is imperative that low-income developing countries are given the vaccines and support they need to recover. This is also an opportunity to build community resilience to minimise the impact of natural disasters and prevent future crises, he added.

VNA