Vietnam Country Risk

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Student name and ID:
- Nguyen Thu Giang : 1371770
- Le Thai Huong : 1371778
- Dao Thi Tuyet Nhung : 1371783
- Dinh Ngoc Dzung : 1371767

Class: MBA Troy 5
Instructor: Dr. Anald Krishnamoorthy

INTERNATIONAL FINANCE
FIN 6633

Hanoi, December 2012

RESEARCH PAPER
VIETNAM COUNTRY RISKS OVERVIEW

INDEX

| |
A. INTRODUCTION| |
B. VIETNAM COUNTRY RISKS ANALYSIS| |
1. Political Risks| |
2. Financial Risks| |
3. Geographical Risks 4. Environment and Social Risks 5. Attractiveness of Vietnam| | 6. SWOT Analysis| |
C. RECOMMENDATION FOR INVESTORS IN VIETNAM| |
D. REFERENCES| |

A. INTRODUCTION
Vietnam is a transition economy moving from a centrally planned to a market economy. This implies large structural reforms. It is accompanied by a major investment effort in order to increase production, improve infrastructures and enhance productivity and competitiveness. In parallel, Vietnam has adopted a strategy aiming at private sector development and a further integration into international trade. The rapid economic development has resulted in an acceleration of urbanization and industrialization, while Vietnam became also a major exporter of agricultural commodities (rice, coffee…), offering large and attractive opportunities for international companies. Vietnam’s strategy will be pursued, as indicated by the Socioeconomic Development Strategy for 2011-2020 adopted in January 2011. However, Vietnam has registered a visible slowdown in economic growth over the past few years, and is confronted with more difficult cyclical and structural challenges. Over the short-term, a tighter monetary policy and likely step-by-step depreciation of the Vietnamese Dong are going to constrain demand and weigh on the price advantage of imported products. In parallel, the banking sector is weak and may have to go through substantial changes. No major economic or financial shock is expected, however. The overall political Risk Rating is somewhat poorer, notwithstanding the smooth transition to a new leadership decided in Jan.2011. Indeed, considerable progress still needs to be done on legal and regulatory framework, and great care should be exercised when coming to contractual details and arbitration clauses.

B. VIETNAM COUNTRY RISKS ANALYSIS
1. POLITICAL RISKS
Vietnam has weathered the global economic crisis relatively well, but the country is still seen as a risky and relatively opaque investment destination. While economic and government reform has been going on for many years, its pace is very gradual and opposition to privatization remains strong. The difficult economic conditions that will exist over the next few years create a challenging environment for economic reform. Political tensions have arisen between Vietnam and China in 2011 after a series of confrontations linked to disputes over oil-rich islands in the South China Sea. According to AMB Country Risk Report (2012), Vietnam has high levels of risk across all three categories of risk assessed. A.M. Best considers the majority of countries in Southeast Asia to be categorized as CRT-3 or CRT-4. The exceptions are Vietnam, the sole CRT-5, and Singapore the sole CRT-1. Vietnam Political Risk Level (2012)

Source: AMB Country Risk Report
Corruption
In Vietnam, corruption has become serious problem comes from widely sources, of which the lack of transparency in the governance is an important one. A weak legal framework also creates good environments for corruption. Nowadays, in Vietnam many people have laundered and become rich thanks to the non-clearness of the land law. In addition, in Vietnam there are no strong and independent agencies and organizations and a self-motivated civil society, to supervise and to fight against corruption. Corruption has occurred in any field. It makes the business environment worse off, it damages the image of the country....
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