- Prime Minister Nguyen Xuan Phuc speaks in interview in Hanoi
- Vietnam has sought closer economic, military ties with U.S.
Vietnam’s government will use a combination of trade deals and domestic reforms to survive the fallout from a U.S.-China trade war, according to Prime Minister Nguyen Xuan Phuc.
“This trade war between the U.S. and China will surely affect Vietnam,” the premier said in an interview with Bloomberg Television’s Haslinda Amin at the Government Office in Hanoi on Monday. “We are seeking new ways to grow,” he added. “We want to maintain good relations with both the U.S. and China.”
Vietnam’s economy is particularly sensitive to disruptions in global supply chains as trade amounts to about twice its gross domestic product — more than any country in Asia apart from Singapore. About a quarter of Vietnam’s total trade is with China, which is facing potential tariffs on all of its exports to the U.S. in an escalating trade war with President Donald Trump.
Phuc said it’s important for Vietnam to maintain macroeconomic stability, export growth and living standards for the country’s 96 million people. He repeatedly said Vietnam was “resilient” in the face of global challenges and would seek more trade agreements beyond the 12 it has already completed.
“We will have to rely on our internal strength and get our house in order so we can overcome any obstacles and maintain momentum and growth,” Phuc said.
Sales abroad as a percentage of gross domestic product largest in Vietnam
Source: World Bank Note: Data as of 2017
In written comments distributed as an addendum to the interview, Phuc said Vietnam would strive to make its economy more competitive and “closely watch the development of international markets to manage our currency with active and flexible monetary policies in combination with strict fiscal policies.”
Vietnam’s GDP expanded 7.1 percent in the first six months of the year, the second-fastest among major Asian economies behind India. Still, the government has said growth may slow in the second half and it’s seeking to keep inflation under control, with steps including subsidizing fuel and freezing electricity prices.
Moody’s Investors Service upgraded Vietnam’s credit score last month, citing its strong growth potential buoyed by healthier banks, stable debt levels and more efficient use of capital. The Vietnamese dong is among the most stable currencies in Asia this year, compared to large declines in others like the Indian rupee and the Indonesian rupiah.
Vietnam emerged as a manufacturing and export powerhouse after introducing market-oriented “doi moi” reforms in the 1980s, selling everything from shoes to smartphones. Exports surged to a record $215 billion last year, with U.S. customers accounting for about $42 billion of that — more than double compared with five years ago.
While Vietnam’s one-party political system provides government stability, it also has been criticized for human-rights abuses and silencing dissent. This week it denied entry to two human rights officials who were invited to participate in a World Economic Forum event. The foreign ministry didn’t reply to a request for comment.
Vietnam also risks coming under attack for a trade surplus with the U.S. that reached $39 billion last year, the sixth-largest after Japan, Canada, Germany, Mexico and China. So far, Vietnam has managed to escape Trump’s ire.
“I told Trump I agree with him that we need to balance our trade, but what we shipped to the U.S. is actually benefiting American buyers and the investment inflow from the U.S. to Vietnam is also very positive,” Phuc said.
Vietnam has sought stronger economic and military ties with the U.S. to counter China’s growing power and aggressiveness over disputed territory. A Pew opinion poll released last year found just 10 percent of Vietnamese view China favorably, compared with 84 percent for the U.S. — the biggest differential of the 36 nations surveyed.
In June, thousands of demonstrators from Hanoi to Ho Chi Minh City rallied against a proposed law establishing special economic-zones over fears it would favor Chinese investors, with some protesters reportedly throwing Molotov cocktails and setting motorbikes on fire. Consideration of the law, which would grant 99-year leases in economic zones, has now been delayed to the National Assembly’s spring session.
Vietnam rejects China’s claims to more than 80 percent of the disputed South China Sea, and the two countries have clashed over oil exploration. In April, Vietnam Oil and Gas Group, known as PetroVietnam, said the tensions were harming oil and gas exploration, as well as efforts to attract foreign investment to offshore fields.
In the written remarks, Phuc said the government was working to ensure investors can conduct normal business activities and “all economic activities in the waters under our sovereignty, sovereign rights and jurisdiction is completely legal and protected by law.”
Featured image credit: Maika Elan/Bloomberg