|Tim Evans, CEO of HSBC Vietnam |
Climate change is both an opportunity and a challenge for a country like Vietnam. As a nation with an extensive coastline and one of the world’s most important rice producers, the prospect of rising sea levels and falling crop yields is a threat to its well-being and prosperity.
The Mekong Delta is on the front line of climate change. If action is not taken now, Asia could face between $2.8 trillion and $4.7 trillion in lost annual GDP by 2050. The World Bank in particular has warned that Vietnam is one of the top five countries likely to be adversely affected by climate change. The negative impacts of climate change could reduce the country’s national income by up to 3.5 per cent by 2050.
Building a climate-friendly, low-carbon society will need capital, innovation, and a global commitment to shared goals. Although tackling climate change is a severe challenge that the country is facing, it is also a huge opportunity. Industries such as information technology, biomedicine, new materials, and renewable energy are emerging as more sustainable drivers of economic growth.
Vietnam will have to work hard to reduce its dependence on coal both as a source of power generation and as a major export. Coal currently accounts for about a third of the country’s operating energy mix but the government has recently committed to cutting it to less than 10 per cent by 2045 and boosting renewables to more than half from today’s 12 per cent.
The pandemic has accelerated the shift towards a seamless digital world and has triggered changes in consumers’ behaviour that are likely to have lasting effects.
The digital transformation will continue to drive the rapid integration of industry and technology while reducing transaction costs, facilitating participation in global value chains, and improving market access and reach.
One of the most powerful effects of the digital revolution is the way that it has levelled the global playing field, allowing countries like Vietnam to compete with more advanced economies. Companies like VNG, MoMo, and VNPay – all unicorns founded in the country – are world-class competitors, but if the nation is to continue to build on their success, it needs to continue to invest in building a thriving digital ecosystem that drives innovation.
Protecting data security and privacy is critical, particularly as the metaverse continues to develop and grow. Countries need to work regionally and globally on creating a unified data policy and approach.
Recent events have shown that unless every country and community can obtain vaccines quickly and fairly, no one will be able to return to normal, and a truly global economic recovery will not be possible.
An Economist Intelligence Unit report indicates that rich countries have administered 100 times as many coronavirus vaccines as poor countries. The delays in inoculating the world will come with a high price tag. The report forecasts that countries that have not yet vaccinated 60 per cent of their population will register GDP losses totalling $2.3 trillion by 2025. Emerging economies will shoulder around two-thirds of these losses, further delaying economic convergence with more advanced economies.
Vietnam has been a model in this regard. Almost 80 per cent of the population has already been vaccinated, one of the highest rates in the world. The Ministry of Health has set a target to complete the vaccination campaign for children aged 5 to 11 in the second quarter of this year.
This is a significant achievement considering the position the nation was in 12 months ago. There is an opportunity to use this expertise to help neighbouring countries to reach herd immunity. Unless they can achieve similar rates, Southeast Asia’s regional recovery will fail to reach its full potential. A prime example is Thailand, a major hub for tourists en route to Vietnam, where the rates are still high.
Strengthening global cooperation in vaccine research and development would help countries that struggle to compete with richer nations to obtain affordable vaccines and key medical supplies.
Trade still offers the shortest and most direct route back to economic growth.
Global trade has already recovered to pre-pandemic levels, and trading patterns are expected to continue to normalise even if rising interest rates have a negative impact on consumption.
So far, Vietnam has signed 15 free trade agreements (FTA) – including the recent Regional Comprehensive Economic Partnership which has been in force since the beginning of this year – making it one of the most open economies globally. These FTAs are expected to play a major role in boosting economic growth this year. Since the nation has fully opened its borders for international travel since March, the government wants to ensure that the country returns to its pre-pandemic growth cadence. This strategic goal can be achieved with the aid of Vietnam’s FTAs and other bilateral agreements.
The ratification of these agreements will open up a world of opportunities for Vietnamese corporates. That said, challenges remain as the country will need to embark on further domestic reforms to ensure it can remain competitive. The country will also need to continue to work with other Asian nations to facilitate cross-regional investment flows and dismantle non-tariff barriers if the region is to reach its full trade potential.
The ongoing geopolitical tensions are expected to continue to inject unwelcome uncertainty into the global economy. Vietnam’s openness and principled stand on settling international disputes by peaceful means and in accordance with international law is a valuable voice in a confused international environment.
The inclination to withdraw within one’s own borders at times of turmoil and uncertainty is natural but misguided. The biggest issues can only be overcome with greater collaboration.
The success of national economies, particularly in Asia, is dependent on connectivity. The foundation of the region’s prosperity is cooperation and any serious attempt at decoupling will inevitably make everyone poorer and less secure. Beyond narrow strategic interests, global challenges are exacerbated by isolationism.
Inequality and an inclusive recovery
The impact of the pandemic has been profound, leaving a legacy of increased inequality and elevated debt. It hit the poorest and most vulnerable the hardest, pushing millions more into poverty and entrenching inequality.
The Asian Development Bank estimates that the pandemic has forced as many as 80 million Asians into extreme poverty since 2020. Progress has also stalled in areas such as hunger alleviation and improving health and education, where earlier achievements across the region had been significant, albeit uneven.
It is imperative that low-income developing countries are given the vaccines and support they need to recover. This is also an opportunity to build community resilience to minimise the impact of natural disasters and prevent future crises.