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Economic Report Vietnam 2015 Presented by Vu Thi Diep and Marc van der Linden Netherlands Embassy Hanoi | 2 February 2016 Content Vietnams Economy Bilateral Trade and Investment Vietnams Economy 3 GDP Growth 2015 GDP

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Economic Report Vietnam 2015

Presented by Vu Thi Diep and Marc van der Linden

Netherlands Embassy Hanoi | 2 February 2016

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Content

Vietnam’s Economy
Bilateral Trade and Investment

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Vietnam’s Economy

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GDP Growth 2015

4,75% 4,80% 5,05% 5,44% 4,76% 5,00% 5,54% 6,04% 4,96% 5,25% 6,19% 6,96%

Q1; 6,12% Q2; 6,47% Q3; 6,81% Q4; 7,01%

4% 5% 5% 6% 6% 7% 7% 8% Q1 Q2 Q3 Q4

Quarterly GDP Growth

2012 2013 2014 2015 7,3% 7,8% 8,4% 8,2% 8,5% 6,2% 5,3% 6,8% 5,9% 5,0% 5,4% 6,0% 6,7% 6,7% 4% 5% 5% 6% 6% 7% 7% 8% 8% 9% 9%

Yearly GDP Growth GDP growth for 2015 was 6.6% with a Q4 growth of 7.01%. Highest growth sectors: industry and construction (+9.64%; 33.3% of GDP), services (+6.17%; 39.7% of GDP) and agro-fisheries (+2.41%; 17% of GDP)

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3,20% 7,80% 8,30% 7,40% 8,90% 22,90% 6,90% 11,80% 18,60% 9,21% 6,60% 4,09% 2,05% 3,00% 0% 5% 10% 15% 20% 25%

Consumer Price Index (CPI) per Year

15,95% 12,20% 9,96% 5,44% 6,91% 6,73% 6,83% 6,04% 4,83% 4,77% 3,62% 2,56% 0.74% 0,86% 0,74% 0,50% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Quarter 1 Quarter 2 Quarter 3 Quarter 4

Consumer Price Index per Quarter

2012 2013 2014 2015

Inflation 2015

Inflation increase for 2015 remained low at 2.05%. Continuing low oil prices have kept average inflation figures low through significantly lower transportation costs which has direct and indirect effects on inflation.

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2015

Newly Registered FDI 2013 projects, USD 15.6 bn New and Additionally Financed FDI, USD 22.7 bn Disbursed FDI, USD 14.5 bn

4,55 6,84 12 21,35 64,01 21,5 18,6 14,7 16,3 14,3 15,6 15,6 2,9 3,3 4,1 8 11,6 10 11 11 10,46 11,5 12,3 14,5 811 970 987 1544 1171 839 833 1091 1287 1275 1588 2013 500 1000 1500 2000 2500 10 20 30 40 50 60 70 Number of projects authorised USD billion Registered (USD bln.) Disbursed (USD bln.) Number of projects

Foreign Direct Investment (FDI)

+0%

In value

+12.5%

2015 has seen exceptional growth in FDI registrations, but not so much in value. More smaller projects. The value of disbursed FDI has shown an increase of near 18%, growing steadily since 2012.

+17.9%

Source: FIA/MPI

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2015

Export USD 162.4 bn Import USD 165.6bn Trade Deficit of which Foreign USD17.1bn surplus and Domestic USD20.3bn deficit (Gov.target <5% exports) 7

26,5 32,4 39,8 48,6 62,7 57,1 72,2 96,9 114,6 132,2 150,0 162,4 31,97 36,76 44,89 62,76 80,71 69,95 84,84 106,75 114,35 131,31 148 165,6 58,5 69,2 84,7 111,3 143,4 127,0 157,1 203,7 229,0 263,5 298,0 328,0 50 100 150 200 250 300 350 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Export (USD bn) Import (USD bn) Trade volume (USD bn)

+12% + 8.1%

Export and import (USD bn.)

3.2bn

USD

The biggest trade deficit comes from China (USD 32.3bn, increased 12.5%yoy), followed by Korea (USD 18.7bn) and ASEAN members (USD 5.5bn)

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Export and import

Foreign

71%

Foreign

59%

Import Export

Top 5 export destinations Top 5 export items Domestic/Foreign Invested

1. USA: US$ 33.5bn. (+17%) 2. EU: US$ 30.9bn. (+10.7%) 3. ASEAN: US$ 18.3bn. (-4.2%) 4. China: US$ 17bn. (+14%) 5. Japan: US$ 14.1bn. (-4%) 1. Telephones and accessories +23% 2. Computers and components: 38% 3. Footwear: +16.2% 4. Textiles and garments: 8.2% 5. Machinery and spare parts: 8% Domestic sector: USD 47.3bn (-3.5%) FDI sector: USD 115.1bn (+18.5%)

Top 5 import destinations Top 5 import items Domestic/Foreign Invested

1. China: US$36.8bn. (+18.1%) (trade deficit $24.3 billion,) 2. Korea: US$ 20.9bn. (+32.4%) 3. ASEAN: US$17.6bn. (+3.3%) 4. Japan: US$ 10.9bn. (+19%) 5. EU: US$ 8.1bn. (+23.3%) 1. Machinery and spare parts: USD27.6bn. (+23.1%) 2. Electronics, computers : USD23.3bn. (+24.2%) 3. Telephones and spare parts: USD10.6bn. (+25.4%) 4. Automotive: USD6bn (+59%) 5. Fabrics and footwear materials: USD5bn. (+7.5%) Domestic sector: USD 67.6bn (+6.3%) FDI sector: USD 98bn (+16.4%)

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9 Futher integration into the world economy through trade agreements Economic reform is still high on the agenda’s Uncertain political outlook for 2016 Vietnam’s fiscal health has a worrisome outlook Limited progress improving business climate and tackling corruption 2015 has been an important year in terms of reaching positive outcomes in trade agreements (TPP and EVFTA) and the start of the AEC. Full implementation of these agreements require significant reforms still and for the AEC an important challenge lies in harmonisation of the different member economies. Economic reform has not seen the much needed steps in

2015. various stakeholders like

WB, IMF, international business community and VCCI, have stressed this at various for a (Vietnam Business Forum, Vietnam Development Partners Forum) and in reports (WB Taking Stock). Consolidation of the achievements in the past is not enough. In the 12th national congress of the communist party a new leadership has been chosen. Outgoing PM Dung has not been elected for a new top leadership position and the new leadership has a profile of being more restrictive on economic integration into the world economy. Impact

n Vietnams achievements in

recent trade agreements and pace for required reforms therein remains unpredictable. The fiscal balance, on average, for last 4 years is set at around

5,2%. While public debt has

grown from 50,8% of GDP in 2012 to a forecasted 64,0% of GDP in 2015. an average annual increase of 4,4%. Take in mind that the MoF definition does not include the financial position of Vietnams SOE sector. The actual public debt is anticipated to be higher than the official MoF figure Vietnam has risen 3 places in World Bank’s Doing Business 2016 report (90/189) on ‘ease of doing business’, compared to 2015 and is ranked fifth in comparison with ASEAN peers. Singapore (1), Malaysia (18), Thailand (49) and Brunei (84) have a better score. Vietnam’s score in Global Corruption Perception Index (31/100, ranking 112 globally) remains unchanged for four consecutive years (2012- 2015).

In 2015 Vietnam has shown promise of robust growth and further intergration into the world economy, but underlying lack of reform and fiscal performance do require attention to realise this promise. Changes in the political leadership add uncertainty to the mix.

Other Economic Issues

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Bilateral Trade and Investment

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Top 10 Investors in Vietnam 2015

Newly registered FDI (USD million) Cumulative FDI as of 2015 (USD billion) No Country Registered FDI Projects No Country Registered FDI Projects 1 Korea 2678.5 702 1 Korea 44.9 4944 2 Malaysia 2447.5 27 2 Japan 38.4 2883 3 Japan 1284.9 299 3 Singapore 34.7 1526 4 Taiwan 940.4 110 4 Taiwan 30.7 2475 5 Samoa 1314.1 24 5 British Virgin Islands 19.2 620 6 UK 1265.7 30 6 Hongkong 15.7 972 7 Singapore 1035.0 130 7 Malaysia 13.4 523 8 BritishVirginIslands 697.8 52 8 USA 10.8 780 9 China 665.5 169 9 China 9.9 1284 10 Turkey 660.3 2 10 Netherlands 8.1 253 12 Netherlands 279.3 24

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Newly registered FDI 2015 (USD million) Cumulative FDI as of 2015 (USD billion) No Country Registered FDI (mn.) Projects No Country Registered FDI Projects 1 UK 1265.7 30 1 Netherlands 8.1 253 2 Netherlands 279.3 24 2 UK 4.7 239 3 France 84.1 27 3 France 3.4 440 4 Switzerland 75.2 9 4 Switzerland 1.9 110 5 Germany 46.8 18 5 Luxembourg 1.9 39 6 Italia 11.5 7 6 Germany 1.5 260 7 Denmark 10.9 6 7 Cyprus 0.96 13 8 Luxembourg 7.2 6 8 Denmark 0.7 115 9 Ireland 4.8 5 9 Belgium 0.5 62 10 Spain 2.6 10 10 Italy 0.3 67

Top 10 EU Investors in Vietnam 2015

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3213 691 734 1453 1261 404 412 495 240 176 5705 4762 4649 2851 2953 2302 2181 1180 937 585 1000 2000 3000 4000 5000 6000 7000 8000 9000 Germany Netherlands UK Italia France Spain Austria Belgium Sweden Poland USD million Export to VN Import from VN Total trade

Market share

13.2%

Trade | Main EU Trading Partners

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130150 230 320 400 430 317 481 704 678 504 691 387 400 490 600 700 976 1.017 1.546 2.476 2.937 3.348 4.762 517 550 720 920 1.100 1.406 1.334 2.027 3.180 3.615 3.852 5.453 1000 2000 3000 4000 5000 6000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Export to Vietnam Export to the Netherlands Total trade

Trade | Bilateral Trade (USD million) 2015 vs. 2014

USD 4,762M USD 691M

Export VN to NL

+42%

Export NL to Vietnam

+37%

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Trade | Bilateral Trade

309 514 534 801 1143 Cashew nuts Textile Footwear Telephones and spare parts Computers and spare parts

USD million

205 52 41 37 35 Machinery tools and spare parts Automobile accessorises and spare parts Chemical products Milk and dairy products Steel products