OCTOBER 2019 IN FOCUS: VIETNAM Discover the Boundless Allure of the Kok Xin Land of Rising Dragon Analyst Chee Hok Yean Regional President HVS.com HVS Singapore | 137 Market Street, #04-02 Grace Global Raffles, Singapore 048943 VIETNAM IN FOCUS: VIETNAM 2019| PAGE 1 VIETNAM Ten Leading Provinces QUANG NINH Capital: Ha Long UNESCO world heritage site: Ha Long Bay Famous Islands: Bai Tu Long Bay, Co To, Van Don HANOI Capital: Hanoi THUA THIEN HUE Capital: Hue UNESCO world heritage site: QUANG NAM Imperial City of Hue Capital: Tam Ky UNESCO world heritage site: Hoi An, My Son Famous Island: Cham Island DA NANG Capital: Da nang KHANH HOA Capital: Nha Trang Famous Islands: Cam Ranh BINH THUAN Bay, Nha Phu Bay, Nha Trang Bay, Van Phong Bay Capital: Phan Thiet Famous Town: Mui Ne HO CHI MINH CITY Famous Island: Capital: Ho Chi Minh Phu Quy KIEN GIANG Capital: Rach Gia Famous Island: Phu Quoc BA RIA VUNG TAU Capital: Ba Ria Largest City: Vung Tau Famous Island: Con Dao IN FOCUS: VIETNAM 2019 | PAGE 2 COUNTRY OVERVIEW Vietnam is a coastal country located on the In 2018, Vietnam’s real GDP grew by 7.1%, from eastern edge of the Indochina Peninsula by the 2017’s growth of 6.8%. Looking ahead, healthy Pacific Coast of the Southeast Asian Region. It domestic demand supported by strong private boasts 3,260 kilometres of coastline, which does credit growth and rapid income growth will not include the few offshore islands along its partly offset dimmer external demand coastline. The country shares border with China conditions. to the north, and Laos and Cambodia to the west, equating to about 4550 kilometres of border. It is Underpinned by robust arrivals from South surrounded by the East Sea in the east and Korea and China, Vietnam’s tourism sector have Southeast, and the bay of Thailand in the achieved a double-digit growth for the third Southwest. Vietnam is home to more than 95.5 consecutive year to reach a record high of 15.5 million people, making it the world’s 15th most million in 2018, up 20% year-on-year (y-o-y) in populous country. The Doi Moi (economic international visitor arrivals (IVA). reforms) initiated in 1986 and accession to the World Trade Organisation in 2007 has led to Under Vietnam’s Socio-Economic Development giant leaps in Vietnam’s economy. Strategy (2011-2020), the government seeks to focus on several key priorities for the year of According to the World Travel & Tourism 2019, including macroeconomic stability, Council (WTTC) Travel and Tourism Economic quality and pace of economic growth, inflation Impact 2018 report, the direct and total control, productivity, trade, investment, and contribution of Travel & Tourism to Vietnam’s increasing the economy’s competitiveness. Gross Domestic Product (GDP) was 5.9% and 9.4% respectively, making tourism one of the key supporting industries for the economy. IN FOCUS: VIETNAM 2019 | PAGE 3 MACRO-OVERVIEW FIGURE 1: ECONOMIC OUTLOOK Actual Forecast 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Real GDP growth (% change p.a.) 6.0 6.7 6.2 6.8 7.1 6.9 6.5 6.3 6.3 6.9 GPD per head (USD at PPP) 5,546 5,915 6,296 6,773 7,440 5,080 8,650 9,260 9,850 10,560 Consumer Price Index (av; %) 4.1 0.6 2.7 3.5 3.5 2.6 3.1 3.2 3.8 3.9 Budget Balance (% of GDP) -4.1 -4.4 -4.3 -3.5 -3.7 -3.5 -3.5 -3.7 -4.2 -4.3 Current-account Balance (% of GDP) 5.0 0.5 4.1 2.8 2.4 1.7 2.3 2.5 3.3 3.9 Lending Interest Rate (%) 8.7 7.1 7.0 7.1 7.6 7.5 6.7 7.4 7.9 8.0 Population (mn) 92.5 93.6 94.6 95.5 95.5 96.5 97.3 98.2 99.0 99.7 Exchange Rate (av; VND:USD) 21,189 21,909 22,355 22,705 23,012 23,230 23,254 23,464 23,441 23,320 Recorded Unemployment (%) 3.4 3.4 3.2 3.2 2.5 3.3 3.3 3.5 3.4 3.1 Net Foreign Direct Investment (USD bn) 8.1 10.7 11.6 13.6 13.4 15.9 16.7 17.5 16.5 14.6 Source: Economist Intelligence Unit, September 2019 Vietnam’s growth momentum remained Foreign Direct Investment robust in 2018 despite being a turbulent year globally. According to the World Bank, global Vietnam’s foreign direct investment is expected economic growth is projected to lower for the to register stronger inflows, anchored by the next two years (2.6% in 2019 and 2.7% in country’s participation in several major free- 2020), gradually rising to 2.8% in 2021. trade agreements, the implementation of the Driven by the escalating trade tensions Association of Southeast Asian Nations (ASEAN) between US and China as well as rising Economic Community and several ASEAN-led production costs in China, Vietnam will bilateral deals. This is coupled with the recent remain as one of the low-cost alternatives for entry as one of the eleven countries that will export manufacturing and fastest-growing benefit from the Comprehensive and Progressive Southeast Asia economies. Agreement for Trans-Pacific Partnership. Economic Performance and Outlook Interest Rates Vietnam’s economy ended 2018 stronger than SBV is anticipated to follow a pro-active and expected, recording a 7.1% real GDP growth for flexible monetary policy in order to control the year. The growth was supported by the inflation and support economic growth in 2019. export-focused manufacturing and processing Amidst higher inflation and stronger external sectors. Moving forward, the Economist sector growth, EIU expects SBV to raise interest Intelligence Unit (EIU) forecasts Vietnam’s rates from 2021. economy growth to soften to 6.9% in 2019. This is due to weaker global demand and rising trade protectionism. Currency Exchange Outlook Inflation EIU expects Vietnamese dong to continue the Vietnam’s inflation rate remained at 3.5% in pattern of annual average of depreciation against 2018 and is expected to subdue in the following the dollar in the near term due to the loosening two years. This is being driven by a downward of monetary policy by the US Federal Reserve trend in global oil prices. EIU expects inflation to and a slowdown in the US economy. The gradual moderate to an annual average of 3.3% in the tightening of monetary policy by The State Bank next five years. of Vietnam (SBV) will support the currency to appreciate. IN FOCUS: VIETNAM 2019 | PAGE 4 INFRASTRUCTURE DEVELOPMENTS According to the World Economic Forum (WEF)’s Global Competitiveness Report 2017-2018, Vietnam ranked 75th out of 140 economies in terms of infrastructure development, 22th for airport connectivity, 107th for road connectivity and 109th for quality of roads. In 2017, the Vietnamese government has approved to invest VND30 trillion (USD1.32) billion to develop tourism and transport infrastructure at major tourist destinations. These various key projects will be highlighted below: Air Infrastructure Vietnam currently has 22 airports in operation with a combined annual capacity of approximately 77.5 million passengers, including the recently opened Van Don International Airport (Quang Ninh). Under the national aviation development plan until 2020, with a vision to 2030, Vietnam will spend USD3.7 billion to develop 23 airports with a design capacity of 144 million passengers by 2020 and another USD15.4 billion to develop 28 airports with a design capacity of 308 million passengers by 2030, including 10 to 13 international airports. Key airport development projects include upgrading and expanding Noi Bai Airport (Hanoi) and Tan Son Nhat International Airport (HCMC). Some other airports to be upgraded under the plan include Cat Bi International Airport (Hai Phong), Chu Lai International Airport (Quang Nam), Phu Bai Airport (Thua Thien Hue), Phu Cat Airport (Binh Dinh), Vinh International Airport (Nghe An) and Tho Xuan Airport (Thanh Hoa). Most of these plans are expected to be completed by Q3 2019. Below highlights the project details of four main international airports: Sapa Airport Lai Chau Airport Da Nang International Airport Cost: Approximately VND9.9 trillion (USD430 million) Plan: Construction of third terminal Noi Bai International Airport Expected Timeline: Slated to Cost: More than VND126.6 trillion complete in 2019 (USD5.5 billion) Annual Capacity: 30 million Plan: Expansion of airport passengers Expected Timeline: 2019 - 2050 Annual Capacity: 20-25 million by 2020, Quang Tri Airport 50 million after 2030, 80 million passengers by 2050 Tan Son Nhat International Airport Cost: More than Long Thanh International Airport Railway & Road VND11.42 trillion Cost: More than VND124.3 trillion (USD496 million) (USD5.4 billion) Seaport Plan: Construction of Plan: Proposed new airport third terminal Expected Timeline: First phase slated to Expected Timeline: complete in 2025. Next two phases to be in Construction to start in 2030-2035 and 2040-2050. Q3 2020 and slated to Annual Capacity: 100 million passengers complete in Q2 2022 Annual Capacity: 20 An Giang Airport million passengers New Airport Phan Thiet Airport Domestic Airport International Airport Source: Civil Aviation Authority of Vietnam, HVS Research IN FOCUS: VIETNAM 2019 | PAGE 5 INFRASTRUCTURE DEVELOPMENTS Rail Infrastructure Based on Current Status and Development Strategy for Vietnam’s Railway Transport up to 2020, vision to 2050, there are plans to renovate and upgrade seven existing railways. In addition, several railway lines have been proposed for construction in Vietnam including the North-South Express Railway, HCMC-Can Tho Express Railway, HCMC-Vung Tau Express Railway, Lao Cai-Ha Noi-Hai Phong Railway, Ha Noi-Dong Dang Railway, Hai Phong-Lach Huyen Railway, Di An-Loc Ninh Railway and Da Lat-Thap Cham Express Railway.