By Don Lam
CEO and Founding Partner for VinaCapital
Member of YPO since 2010
In 2016, Vietnam will mark the 30th anniversary of the launch of the Đổi Mới reforms, which marked the beginning of Vietnam’s efforts to reform and transform its economy. At the time, the country was still recovering from decades of conflict, was insular, and overly dependent on long-time allies such as the Soviet Union. In just one generation, Vietnam has become one of the fastest growing economies in the world, and trade has played a starring role in that transformation.
In a few short years, Vietnam has become a manufacturing hub, particularly for the electronics industry and the apparel and footwear industry, with most of the products exported to markets around the world. Foreign direct investment in Vietnam continues to be robust, with billions of dollars being invested by companies from Korea, Japan, Thailand, the United States and other countries, with the majority going towards manufacturing. Vietnam’s agricultural products are also in demand around the world, and the country is one of the world’s top exporters of rice, coffee, fish and shrimp, and a range of other agricultural products.
Trends in Vietnam’s GDP per capita and exports, 1986 – 2016
It was just about a year ago that negotiations around the landmark TPP were successfully concluded, and there was great fanfare about the benefits it is expected to bring to Vietnam. Since then, the political situation in the US has evolved in a way that makes passage unlikely this year – if ever. Likewise, Vietnam’s free trade agreement with the EU is a far-reaching pact that is expected to go into effect in 2018, but Brexit has called into question the whole concept of the EU; will other nations follow the UK’s example?
Another multilateral pact, the Regional Comprehensive Economic Partnership (RCEP), encompasses ASEAN’s ten members plus six other countries including India and China, and remains under negotiation nearly five years since it was first proposed; Singapore Prime Minister Lee recently said that talks were progressing rather slowly. None of this would be happening had Vietnam’s government not made a concerted effort to open up the country and build relationships with countries around the world.
In 2007, Vietnam joined the World Trade Organization, marking the start of its integration into the global economy. Since then, the country has negotiated and/or entered into 16 free trade agreements, on both a bi- and multilateral basis. Recent agreements include those with Korea, the Russian Federation, the ASEAN Economic Community (AEC), the EU, and of course the Trans-Pacific Partnership (TPP).
What does all of this mean to Vietnam? Clearly the possible failure of TPP would be disappointing. Meanwhile the effects of Brexit remain to be seen. Regardless of what happens, there is no chance that Vietnam’s growth will be stopped – trade has become the cornerstone for its economy, and I would expect the government to enter into bilateral agreements with those TPP members with which it does not currently have agreements, and will negotiate a separate agreement with the UK at the appropriate time. But all of these developments point to the extreme difficulty of negotiating, let alone eventually ratifying multinational agreements, and the future of large economic communities could be called into question.
The progress made by ASEAN nations over the past two decades has been nothing short of breathtaking, and trade has been and will continue to be a critical part of the region’s ongoing development. Trade encompasses so much more than simply producing and selling goods – it is a catalyst for progress, for greater exposure to and integration with the world, and ultimately for improving peoples’ lives. It is a multi-faceted topic, and that is why I am excited to be a part of the panel discussion at this year’s Insights ASEAN Summit.
Don Lam, a founding partner of VinaCapital, has more than 20 years of experience in Vietnam. He has overseen VinaCapital’s growth from manager of a single USD10 million fund in 2003 into a leading investment management and real estate development firm in Southeast Asia, with a diversified portfolio of USD1.5 billion in assets under management. Additionally, Lam set up the VinaCapital Foundation whose mission is to empower the children and youth of Vietnam by providing opportunities for growth through health and education projects. He also is the vice-chairman, Global Agenda Council on ASEAN for the World Economic Forum.