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BUSINESS MONITOR INTERNATIONAL COUNTRY RISK, INDUSTRY AND COMPANY INTELLIGENCE ON GLOBAL MARKETS Terry Alexander - Head of Country Risk and Capital Markets Business Monitor International Terry Alexander heads Business Monitor International’s (BMI) Country Risk team of economists who produce intra-daily political risk, economic and financial markets analysis and forecasts covering over 175 countries. BMI’s research is relied upon by corporate strategists, treasurers, and researchers at 400 of the Fortune 500 companies. Dear Reader, As Head of Country Risk at Business Monitor International (BMI), I would like to personally welcome you as one of our valued customers, and thank you for deciding to purchase the Vietnam Business Forecast Report. The Vietnam Business Forecast Report is used by corporate strategists, treasurers, and researchers for medium-term risk management, business development and budgetary planning. Given our forecasting record over 25 years, I am confident that you and your colleagues will also benefit from the report, which features in-depth political risk and macroeconomic analysis, plus BMI’s proprietary business environment ratings, and 5 and 10-year macroeconomic and industry forecasts. This makes for a highly authoritative, holistic country view. The Vietnam Business Forecast Report draws on the expertise of my highly skilled team of economists, backed by a network of in-country public and private sector sources. That network of informed opinion also includes our own customers, and we welcome any feedback from you to help optimise the value of our research. Please send any comments you have to [email protected] com You may also be interested to learn that BMI publishes a range of Industry Forecast Reports on Vietnam, covering Oil and Gas, Telecommunications, Pharmaceuticals & Healthcare, Food & Drink, Autos, Infrastructure, Real Estate and many other strategic sectors (further details at http://store. businessmonitor. com/countries/asia/). And for those with regional responsibilities, we publish Business Forecast Reports, and Industry Forecast Reports, on a total of 17 Asian countries (further details at www. businessmonitor. com/bfr/asia). We look forward to serving your strategic information needs on Vietnam, helping you and your company to navigate through the global downturn, and also to benefit from the recovery years. Best Regards, Terry Alexander Head of Country Risk Business Monitor International 4 2006 84. 4 60. 9 974,266. 2 724 8. 2 16. 8 4. 8 13,000. 0 1. 3 6. 6 7. 5 8. 2 11. 2 4. 6 16,051 15,987. 37 21,180. 90 39. 8 42. 6 -2. -2. 8 -0. 2 -0. 3 13. 4 3. 8 20,202. 5 33. 2 45. 0 4. 8 24,223. 0 34. 1 44. 4 23. 5 -9. 8 -7. 0 -9. 8 -10. 9 23. 9 3. 6 26,964. 1 30. 0 39. 1 -11. 3 -15. 1 -10. 4 -12. 8 58. 9 75. 5 48. 6 62. 7 56. 1 67. 3 -11. 2 -12. 2 -7. 7 -9. 0 15. 0 2. 7 29,194. 7 34. 1 47. 4 23,368. 66 24,472. 00 28,500. 00 16,075. 77 16,431. 20 17,900. 00 16,018 17,480 19,000 19,000 19,000. 00 26,980. 00 63. 4 75. 3 -11. 9 -13. 0 -7. 9 -8. 2 16. 0 2. 6 31,616. 3 32. 9 45. 4 -0. 6 -4. 9 1. 7 8. 0 12. 0 15. 0 9. 0 15. 0 8. 2 8. 5 7. 0 12. 0 10. 0 12. 0 6. 0 18,500 18,750. 00 25,345. 00 71. 0 82. 8 -11. 8 -13. 2 -7. 4 -6. 9 17. 6 2. 34,245. 1 31. 7 43. 8 8. 3 23. 0 7. 0 9. 0 6. 5 12. 6 19. 9 7. 3 7. 0 6. 0 -3. 1 -3. 6 -7. 2 -5. 7 -5. 6 -35,827. 0 -53,657. 0 -117,857. 0 -104,501. 4 -113,990. 3 -124,055. 1 -5. 4 6. 0 6. 0 8. 0 12. 0 6. 0 18,500 18,250. 00 24,420. 00 79. 6 91. 1 -11. 6 -13. 1 -6. 7 -5. 4 19. 2 2. 5 37,098. 4 30. 0 42. 4 4. 6 5. 0 5. 5 5. 5 5. 0 4. 5 16. 7 14. 9 6. 8 10. 0 12. 0 14. 0 8. 5 6. 2 5. 1 4. 4 5. 5 6. 0 6. 8 14. 0 4. 0 -136,404. 1 -5. 3 6. 0 6. 0 8. 0 10. 0 4. 0 18,000 17,750. 00 22,860. 00 89. 1 100. 2 -11. 1 -12. 9 -5. 8 -4. 2 21. 7 2. 6 40,195. 3 29. 0 40. 9 835 1,035 974 1,077 1,195 1,350 1,492 1,144,014. 1,478,695. 0 1,628,770. 2 1,825,074. 8 2,053,254. 8 2,288,454. 8 2,562,685. 6 71. 1 89. 8 85. 7 96. 1 108. 1 123. 7 138. 5 154. 4 2,855,652. 5 1,640 6. 9 14. 0 4. 0 -148,650. 6 -5. 2 5. 0 5. 5 8. 0 10. 0 5. 0 17,500 17,250. 00 21,875. 00 99. 8 110. 2 -10. 4 -12. 4 -4. 7 -3. 1 24. 6 2. 7 43,556. 3 28. 2 39. 5 85. 6 86. 8 88. 0 89. 2 90. 4 91. 6 92. 8 94. 1 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f vietnam Q1 2010 TABLE: VIETNAM – MACROECONOMIC DATA AND FORECASTS Population, mn [5] Nominal GDP, US$bn [6] Nominal GDP, VNDbn [6] GDP per capita, US$ [6] Real GDP growth, % change y-o-y [6] Industrial production index, % y-o-y, ave [1,7] Unemployment, % of labour force, eop [7] Budget balance, VNDbn [8] Budget balance, % of GDP [8] Consumer prices, % y-o-y, eop [2,7] Consumer prices, % y-o-y, ave [2,7] Central Bank policy rate, % [9] www. businessmonitor. com Lending rate, %, eop [5] Real Lending Rate, %, eop [3,10] Exchange rate VND/US$, eop [11] Exchange rate VND/US$, ave [11] Exchange rate VND/EUR, eop [11] Exports, US$bn [12] Imports, US$bn [12] Trade balance, US$bn [12] Balance of goods and services, US$bn [4,12] Current account, US$bn [12] Current account, % of GDP [12] Foreign reserves ex gold, US$bn [12] Import cover, months g&s [12] Total external debt stock, US$mn [13] Total external debt stock, % of GDP [13] Business Monitor international ltd Total external debt stock % of XGS [13] Notes: e BMI estimates. f BMI forecasts. 1 at 1994 prices; 2 Base year 2000; 3 Real rate strips out the effects of inflation; 4 Includes Investment Income flows up until 2004; Sources: 5 IMF; 6 IMF (General Statistics Office); 7 General Statistics Office; 8 ADB, Ministry of Finance; 9 State Bank of Vietnam; 10 IMF/BMI; 11 BMI; 12 Asian Development Bank, State Bank of Vietnam; 13 World Bank ietnam Q1 2010 Contents executive Summary ........................................................................................................................... 7 Double-Dip expected ahead Of 2011 national Congress Chapter 1: Political Outlook............................................................................................... 9 SWOt analysis...................................................................................................................................................... Bmi Political Risk Ratings ............................................................................................................................... 10 Domestic Politics ............................................................................................................................. 11 China Relations Lead the internal Power Struggle Vietnam’s relations with China have come to the forefront of an internal power struggle within the Communist Party of Vietnam, pitting economic reformers centred around Prime Minister Nguyen Tan Dung against more conservative Politburo members with links to China. aBLe: POLitiCaL OveRvieW .......................................................................................................................... 11 Chapter 2: economic Outlook .......................................................................................... 15 SWOt analysis................................................................................................................................................... 15 Bmi economic Risk Ratings ............................................................................................................................ 6 economic activity ............................................................................................................................ 17 Double-Dip now Our Core Scenario With Vietnam’s balance of payments yet again approaching breaking point, we expect a sharp tightening of fiscal and monetary policy in 2010, which will see real GDP growth dip to 4. 4% from an expected 5. 1% in 2009. taBLe: eCOnOmiC aCtivitY............................................................................................................................. 17 Balance Of Payments ...................................................................................................................... 19 Crisis time again? A widening trade deficit and falling foreign exchange reserves have brought the issue of Vietnam’s balance of payments position and exchange-rate regime to a head. taBLe: CURRent aCCOUnt............................................................................................................................. 19 monetary Policy ............................................................................................................................... 1 SBv to Raise Rates to 12% in 2010 We are expecting a sharper tightening of monetary policy in 2010 as the government yet again confronts adverse balance-of-payments and inflation dynamics through a tightening of fiscal and monetary policy. taBLe: mOnetaRY POLiCY .............................................................................................................................. 21 Fiscal Policy ..................................................................................................................................... 23 Sharp tightening expected in 2010 We believe a tightening of fiscal policy will be needed in 2010 as part of an effort to rein in the widening trade deficit. taBLe: FiSCaL POLiCY ..................................................................................................................................... 23 investment Climate ......................................................................................................................... 25 HCmC Stock market Becoming a Regional Player We view the successful listing of Eximbank as a strong indication of the increasing depth of the Vietnamese stock market. Chapter 3: 10-Year Forecast ............................................................................................ 27 the vietnamese economy to 2019 ................................................................................................ 27 Rebalancing needed to maintain High Growth We remain positive about Vietnam’s growth prospects over the next 10 years, in spite of the adjustment of our average GDP growth projection over 2013-2019 from 8. 0% to 6. 9%. taBLe: LOnG-teRm maCROeCOnOmiC FOReCaStS ..................................................................................... 7 Business Monitor international ltd www. businessmonitor. com 5 vietnam Q1 2010 Chapter 4: Special Report ................................................................................................ 31 the World’s Fiscal Conundrum ....................................................................................................... 31 taBLe: WORLD GOveRnment eXPenDitURe inDiCatORS ......................................................................... 32 taBLe: WORLD GOveRnment RevenUe inDiCatORS ................................................................................. 3 taBLe: WORLD FiSCaL BaLanCe inDiCatORS ............................................................................................. 34 Chapter 5: Business environment ................................................................................... 37 SWOt analysis.................................................................................................................................................... 37 Bmi Business environment Risk Ratings ....................................................................................................... 8 Business environment Outlook....................................................................................................... 39 taBLe: Bmi BUSineSS anD OPeRatiOnaL RiSK RatinGS .......................................................................... 40 institutions ............................................................................. ......................................................... 41 taBLe: Bmi LeGaL FRameWORK RatinGS ................................................................................................... 42 nfrastructure .................................................................................................................................. 43 taBLe: LaBOUR FORCe QUaLitY .................................................................................................................... 45 market Orientation ......................................................................................................................... 46 taBLe: aSia, annUaL FDi inFLOWS ............................................................................................................... 8 taBLe: Bmi tRaDe RatinGS ........................................................................................................................... 49 taBLe: vietnam tOP eXPORt DeStinatiOnS ............................................................................................... 50 Operational Risk ............................................................................................................................. 51 Chapter 6: Key Sectors ..................................................................................................... 3 agribusiness .................................................................................................................................... 53 taBLe: vietnam RiCe PRODUCtiOn, COnSUmPtiOn & tRaDe .................................................................. 54 Defence ............................................................................................................................................ 56 taBLe: vietnam’S aRmeD FORCeS, 2005-2013 ........................................................................................... 7 Chapter 7: Bmi Global assumptions ............................................................................... 61 Global Outlook ................................................................................................................................. 61 taBLe: GLOBaL & ReGiOnaL ReaL GDP GROWtH ......................................................................................... 61 taBLe: GLOBaL aSSUmPtiOnS ....................................................................................................................... 2 taBLe: DeveLOPeD maRKet eXCHanGe RateS .......................................................................................... 63 taBLe: emeRGinG maRKet eXCHanGe RateS ............................................................................................ 63 6 www. businessmonitor. com Business Monitor international ltd c h a p t e r 1 Political Outlook executive Summary Double-Dip expected ahead Of 2011 national Congress WebelieveVietnamwillneedtotightenfiscalandmonetarypolicysharplyin2010inorderto ringthebalanceofpaymentsbacktoasustainablelevel. Withexternaldemandstillweak,we areforecastingrealGDPgrowthdroppingto4. 4%in2010fromanexpected5. 1%in2009. The co-existenceofslowingeconomicgrowthandincreasinginflationwillinevitablyraisedebateabout economicpolicyattheCommunistPartyofVietnam’s(CPV)NationalCongress,scheduledfor January2011. Webelievethepoliticalimpetusisstillbehindcontinuedeconomicreform,butthat Vietnamwillhavetoloweritseconomicgrowthtargetsandadjustitseconomicpolicymixinorder toavoidfurthermacroeconomicturbulence. Vietnam’srelationswithChinahavecometotheforefrontofaninternalpowerstrugglewithinthe CommunistPartyofVietnam,pittingeconomicreformerscentredaroundPrimeMinisterNguyen TanDungagainstmoreconservativePolitburomemberswithlinkstoChina. Withthetwofactionsseekingtostrengthentheirpositionsaheadofthe2011NationalCongress,webelievethe reformistswillmaintaintheupperhand. ThesensitivepowerbalancewithinthePolitburowilllimit thescopeforafurtherrapprochementbetweenVietnamandUS,withbilateraltiesalsostrained byHanoi’ssuppressionofCatholicactivists. Whilesuccessfulinboostingdomesticdemandandbringingaboutarecoveryingrowthfrom3. % year-on-year(y-o-y)inQ109to4. 4%and5. 2%inQ209andQ309,Vietnam’ssizeablefiscaland monetarystimuluspackageimplementedover2009hasalsoledtoawideningtradedeficitthrough ahighdegreeofimportleakage. WithVietnam’sforeignexchangereservesbelowthreemonths’ worthofimports,weexpectVietnamtodepreciatethedongtowardsVND19,000/US$,raiseinterest ratesby500bpsto12. 00%andtightenfiscalpolicyin2010inordertoavoidabalance-of-payments crisis. Vietnam is making headway in improving its dilapidated infrastructure with construction on a numberofports,powerplantsandroadprojectscommencedin2009. Nonetheless,itwilltake anumberofyears,ifnotdecades,untilVietnam’sinfrastructureratingof37. 2comesanywhere nearthe68. 0Chinascores. Ontheeconomicreformfront,thegovernment’sprivatisationprocess isgainingpaceagainwiththelistingofVietcombank,VietinBank and eximbankin2009. We arealsoexpectingimprovementsinthebusinessenvironmentfromtheVietnam-JapanEconomic PartnershipagreementandafreetradeagreementcurrentlyundernegotiationwiththeEuropean Union. Business Monitor international ltd www. businessmonitor. com 7 vietnam Q1 2010 2009 XXXXXXXXXXX QX 8 www. usinessmonitor. com Business Monitor international ltd chapter 1 Political Outlook SWOt analysis Strengths TheCommunistPartygovernmentappearscommittedtomarket-orientedreforms,althoughspecific economicpolicieswillundoubtedlybediscussedatthe2011NationalCongress. Theone-party systemisgenerallyconducivetoshort-termpoliticalstability. RelationswiththeUSaregenerallyimproving,andWashingtonseesHanoiasapotentialgeopoliticalallyinSouthEastAsia. Weaknesses CorruptionamonggovernmentofficialsposesamajorthreattothelegitimacyoftherulingCommunistParty. Thereisincreasing(albeitstilllimited)publicdissatisfactionwiththeleadership’stightcontrolover politicaldissent. Opportunities Thegovernmentrecognisesthethreatthatcorruptionposestoitslegitimacy,andhasactedto clampdownoncorruptionamongpartyofficials. Vietnamhasallowedlegislatorstobecomemorevocalincriticisinggovernmentpolicies. Thisis openingupopportunitiesformorechecksandbalanceswithintheone-partysystem. threats Theslowdowningrowthin2009and2010islikelytoweighonpublicacceptanceoftheone-party system, and street demonstrations to protest economic conditions could develop into a full-on challengeofundemocracticrule. AlthoughstrongdomesticcontrolwillensurelittlechangetoVietnam’spoliticalsceneinthenext fewyears,overthelongerterm,theone-party-statewillprobablybeunsustainable. RelationswithChinahavedeterioratedoverthepastyearduetoBeijing’smoreassertivestance overdisputedislandsintheSouthChinaSeaanddomesticcriticismofalargeChineseinvestmentinabauxiteminingprojectinthecentralhighlands,whichcouldpotentiallycausewidescale environmentaldamage. Business Monitor international ltd www. businessmonitor. com 9 vietnam Q1 2010 2009 XXXXXXXXXXX QX Bmi Political Risk Ratings Vietnam’s short-term political risk (STPR) rating of 80. 6 reflects a largely stable political system, kept in place largely by the ruling Communist Party of Vietnam (CPV)’s monopoly on power. While public expressions of discontent have so far been limited, slower growth and high inflation pose a threat to stability in the near term. However, we see one-party rule as inherently unsustainable in the longer term, and thus accord Vietnam a rating of 52. 8 in our long-term political risk (LTPR) ratings, due mainly to a score of 27. 6 in the characteristics of polity rating. Singapore Hong Kong China Taiwan Vietnam Laos Malaysia South Korea North Korea Indonesia Sri Lanka India Bangladesh Philippines Thailand Cambodia Myanmar Pakistan Regional average 74. 4 South Korea Hong Kong Malaysia Singapore India Taiwan China Sri Lanka Thailand Philippines North Korea Pakistan Indonesia Vietnam Cambodia Bangladesh Laos Myanmar Regional average 60. 2 S-T Political 97. 3 86. 7 83. 5 81. 9 80. 6 80. 2 80. 2 77. 1 76. 9 75. 8 72. 9 72. 5 69. 8 67. 9 65. 4 64. 8 56. 5 49. 6 Global average 67. 3 L-T Political 81. 2 76. 9 74. 2 71. 6 70. 5 66. 4 64. 4 62. 7 57. 8 57. 0 55. 1 54. 4 53. 6 52. 8 51. 9 50. 4 43. 31. 3 Global average 63. 2 Rank Trend 1 = 2 = 3 = 4 = 5 + 6 = 7 8 = 9 = 10 + 12 = 13 14 = 15 = 16 = 17 = 18 + 19 = Emerging Markets average 64. 5 Rank Trend 1 2 = 3 = 4 = 5 + 7 = 8 = 9 = 10 = 11 = 12 = 13 = 14 = 15 = 16 = 17 = 18 = 19 = Emerging Markets average 59. 3 10 www. businessmonitor. com Business Monitor international ltd POLitiCaL OUtLOOK Domestic Politics China Relations Lead the internal Power Struggle Faced with ever-increasing internet penetration and an army of bloggers, the Communist Party of Vietnam (CPV) has in recent years sought to improve its means of monitoring and controlling public opinion. Nonetheless, hardliners within the Politburo are now arguing that increasingly unruly expressions of dissent against public policy on the internet is evidence of Prime Minister Nguyen Tan Dung’s reformist agenda getting out of control, thus necessitating a policy redirection. Indeed, this is becoming a key theme ahead of the CPV’s next National Congress, scheduled for early 2011, which threatens to pit economic reformers against more conservative hardliners in the quest for political nominations. The rapid economic growth seen in recent years has undermined the base for political dissidents in Vietnam as the general public has seen little reason to oust a regime that has delivered tangible material gains for the majority of the population. Nonetheless, the CPV has become notably unnerved by an increasing mass of political opinion driven by the easy access to internet and online forums that a majority of the Vietnamese population now enjoys. Vietnamese authorities have estimated that 21mn Vietnamese use the internet, and there are reportedly between one and four million blogs, covering a wide area of topics. To police this immense body of content, the government regulates internet content and usage through a variety of technical and legal means, but users are constantly TABLE: POLITICAL OVERVIEw System of Government Head of State Head of Government Last Election Composition Of Current Government Key Figures Single-Party Socialist Republic President Nguyen Minh Triet (serving first five-year term) Prime Minister Nguyen Tan Dung (serving first five-year term) Parliamentary – May 2007 Communist Party Congress – April 2006 Communist Party of Vietnam The 14-person Communist Party Politburo, lected by the 160-person party central committee at the national party congress, acts as the de facto highest decision-making body and comprises the top leadership of the CPV. Its most important members are: Party General Secretary Nong Duc Manh, State President Nguyen Minh Triet, Prime Minister Nguyen Tan Dung and General Minister of Public Security Le Hong Anh. Deputy Prime Minister – Nguyen Sinh Hung, Foreign Minister – Pham Gia Khiem, Minister of Planning and Investment – Vo Hong Phuc, Vice President – Truong My Hoa, Central Bank Governor – Nguyen Van Giau. Communist Party of Vietnam (CPV): Founded in Hong Kong in 1930, the CPV has been in power in North Vietnam since independence in 1954 and in the South since the end of the American War in 1975. Divisions exist within the party between a younger, more reform-minded faction originating from Southern Vietnam and an older generation, originating from the North, more aligned to traditionally communist ideology. Presidential and Parliamentary – May 2012 CPV Congress – Spring 2011 Ongoing Disputes Key Relations/ Treaties BMI Short-Term Political Risk Rating BMI Structural Political Risk Rating Source: BMI BMI VIEw Vietnam’s relations with China have come to the forefront of an internal power struggle within the Communist Party of Vietnam, pitting economic reformers centred around Prime Minister Nguyen Tan Dung against more conservative Politburo members with links to China. With the two factions seeking to strengthen their positions ahead of the 2011 National Congress, we believe the reformists will maintain the upper hand. Other Key Posts Main Political Parties (number of seats in parliament) Next Election Ongoing dispute with China, Malaysia, the Philippines and Taiwan over Spratly Islands in South China Sea ASEAN and WTO Member, Temporary seat (2008-2009) on the United Nations Security Council 80. 6 52. 8 Business Monitor international ltd www. businessmonitor. com 11 vietnam Q1 2010 2009 XXXXXXXXXXX QX seeking and finding means to circumvent these measures, in spite of the heavy penalties handed down by the authorities. China Dominating internet Discussion The most inflammatory subject on Vietnamese blogs over the past year has been Hanoi’s relationship with China, which has been tested by ongoing disputes over the Paracel and Spratly islands in the South China Sea, a controversial Chinese-financed bauxite mining project in the central highlands and a severely skewed trade relationship. A number of journalists and bloggers have criticised Beijing’s – and the Vietnamese government’s – conduct in the above-mentioned disputes, a criticism that has fallen on fertile ground as the Vietnamese public is highly sensitive to any perceived encroachment of Vietnam’s sovereignty by its northern neighbour. With the regime in Hanoi fearful of China’s sensitivity to any criticism and aware of the need to maintain a working relationship with Beijing, the authorities have stepped in to stem any perceived instigation of anti-Chinese public opinion. This has seen the arrest of journalists and bloggers who have published articles and blogposts critical of China, on the basis that the criticism threatens efforts by the two governments to reform the economic relationship between the two countries. This has so far been characterised by a heavily skewed trade flow with an avalanche of cheap Chinese goods flooding the Vietnamese market, driving local competitors out of business, with little but commodities such as coal and rubber going the other way. The massive trade deficit with China – which amounted to US$11. 1bn in 2008, roughly 12% of GDP – has been a subject of dispute between Chinese and Vietnamese leaders in recent years, and thus a point of discussion during Prime Minister Nguyen Tan Dung’s visit to China in April 2009. The perceived solution to achieve a ore mutually beneficial economic relationship has been to promote increased Chinese investment in Vietnam. This does indeed make economic sense as investment from Vietnam’s traditional sources of foreign direct investment – Malaysia, Singapore, South Korea and Taiwan – is likely to be less forthcoming over the next few years as foreign investment partners rebuild their balance sheets and pare back their expansion plans. Indeed, foreign direct investment pledges have dropped 85. 7% yo-y in the first three quarters of 2009 to US$7. 6bn. The crux is that with a manufacturing sector equally, if not more, competitive than Vietnam’s, the Chinese interest in investing in Vietnam has thus almost exclusively been directed towards the extractive industry, with the aim of securing resources to fuel the Chinese industrial behemoth. This has fuelled allegations in the case of the bauxite mining project in Lam Dong province that China is merely exploiting Vietnam’s natural resources, while causing considerable environmental damage in the central highlands, which are both scenic and the centre of Vietnam’s coffee industry. Add to this the propensity of Chinese investors to bring their own workers rather than to employ locals, and the severe public backlash against the investment plans comes as no surprise. With technical solutions failing adequately to prevent the posting of inflammatory content on the internet, the government has turned to incarcerating a number of bloggers and journalists to deter the voicing of critical opinion. No Sea Change Likely Map – South China Sea Source: BMI 12 www. businessmonitor. com Business Monitor international ltd POLitiCaL OUtLOOK Political Jockeying ahead Of 2011 Congress The ability to control domestic dissent has become a key issue ahead of the CPV’s 11th National Congress, scheduled for early 2011, at which key appointments and policy decisions are to be made. The increasing leeway of opinion expressed in new media has reportedly become a sticking point for more conservative forces within the CPV to argue that Prime Minister Dung has gone too far in his policy of economic liberalisation and increased openness towards the US and North East Asian countries such as Japan and South Korea at the expense of Hanoi’s relationship with its ideological brethren in Beijing. This could lay the ground for a serious confrontation at, or before, the 11th National Congress. We continue to expect Nguyen to maintain his authority within the Politburo as a younger, less ideological generation of CPV members is strongly supportive of continued economic reform. However, he is likely to face continued opposition from a more conservative faction within the Politburo, which believes that his agenda of increased economic liberalisation is putting the CPV’s monopoly on public opinion – and, by extension, political power – at risk. Members of this faction are said to be at the forefront of the reaction against bloggers, since the General Department II (GDII), an intelligence unit led by Vice Defence Minister Nguyen Chi Vinh, has been instrumental in tracking and punishing political dissent on the internet. It has been alleged that hardliners have also used the technology at the command of GDII to monitor ideological opponents within the CPV, thus gaining an upper hand in the behind-the-scenes jostling for promotions that characterises the CPV and other power structures. While there is thus a risk that the internal power struggle could intensify ahead of the National Congress, we see no major risks to policy direction. Hence, we maintain our 90 out of 100 rating for Vietnam in the policy continuity sub-category of our shortterm political risk ratings. With inflation currently in low single digits and the conflict with China over the Paracel and Spratly islands contained, Vietnam scores a high 80 out of 100 in our short-term political risk rating. A low characteristics of polity rating (27. 6 out of 100) brings Vietnam’s long-term political risk rating down to 52. , reflecting our view that one-party rule is unsustainable in the longer term. Business Monitor international ltd www. businessmonitor. com 13 vietnam Q1 2010 2009 XXXXXXXXXXX QX 14 www. businessmonitor. com Business Monitor international ltd chapter 1 2 economic Outlook Political Outlook SWOt analysis Strengths Vietnamhasbeenoneofthefastest-growingeconomiesinAsiainrecentyears,withGDPgrowth averaging7. 6%annuallybetween2000and2007. TheeconomicboomhasliftedmanyVietnameseoutofpoverty,withtheo In case you have a similar assignment feel free to ask for homework help. 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