Mekong Economics: The way Vietnam copes with the Covid-19 pandemic signals the world that it no longer a developing country!

After some initial success in the fight against Covid-19, Vietnam is now starting to reopen its economy.
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Vietnam's strained efforts against Covid-19 seem to pay off. With only 270 cases of infection and no deaths related to Covid-19, Vietnam is easing the epidemic rules in most provinces, allowing some businesses to reopen. again.

There is some skepticism about the low number of people infected with the virus in Vietnam: By April 21, the prevalence of virus testing in Vietnam was about 1,881 per million, compared with about 7,500 in Singapore.

However, Vietnam's approach has won praise from international agencies such as the U.S. Centers for Disease Control and Prevention and the World Health Organization and is different from nearby Singapore and Indonesia, where movement restriction orders are being extended as Covid-19 positive cases continue to spike.

"Vietnam has had to deal with SARS, bird flu and various financial crises," said Fred Burke, managing director at law firm Baker McKenzie Ho Chi Minh City, advising the government on foreign investment rules. "They have learned that they need to act quickly and thoroughly. This country has qualified to recover again."

Winner of the trade war

Vietnam has been a favorite country for foreign investors who are seeking an alternative manufacturing center for China after escalating trade tensions between the United States and the second-largest economy. this world.

The goal of the Vietnamese Government today is to take that momentum as a foundation. According to the Ministry of Planning and Investment, committed to foreign direct investment rose 7.2% last year, with $ 24.6 billion flowing into manufacturing. That helped boost economic growth to 7.02%, the second fastest growth rate since 2007.

According to Vu Tu Thanh, Deputy Regional Executive Director of the US-ASEAN Business Council, China is considered by many foreign companies to have an aging and increasingly expensive population. On the contrary, the impact from viruses on China makes Vietnam look more attractive to businesses.

Risks remain

Japan - Vietnam's second largest investor in the first quarter with an investment of $ 848 million - announced earlier this month that it has earmarked $ 2.2 billion for the stimulus package to encourage Manufacturers move factories out of China. According to Mr. Fred Burke, Vietnam will certainly benefit.

Strictly speaking, Vietnam has not completely escaped from Covid-19. Deputy Prime Minister Vu Duc Dam, Head of the National Steering Committee for Disease Prevention and Control Covid-19, warned Friday that Vietnam still has a high risk of outbreaks.

Vietnam must also prepare for a sustained decline in global demand. According to World Bank data, Vietnam relies heavily on exports - accounting for more than 100% of GDP. In the first quarter, growth slowed to 3.82%. The International Monetary Fund (IMF) expects this rate could weaken to 2.7% for the whole year.

Relaxing the restrictions does not mean life will return to normal.

"For new businesses, the blockade order has not been fully relaxed," said Gareth Leather, an economist at Capital Economics Ltd. in London. "Moreover, people will not return to their pre-crisis habits. The fear of being infected with the virus causes people to continue to conduct social isolation for a while longer."

The Vietnamese government believes that tight action to deal with the virus will be able to reduce "collisions" from Covid-19 to the economy. Adam McCarty, chief economist of Mekong Economics in Hanoi, said that while factories wait for global demand to come back, the country's domestic economy will begin to revive.

"The way Vietnam handles this virus is signaling to the rest of the world that this is no longer a developing country," he said. "They have shown that Vietnam has a profound sophistication in how to handle problems."

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