Economic Context in the Greater Region and the World

Vietnam is party to several regional and global organizations. Ever since doi moi (“Renovation”) in 1986, institutions encouraging regional economic and financial cooperation between South Asian countries have played a major role in Vietnamese development. Below, we will examine some of various organizations and partnerships that Vietnam is a part of.

East Asia Summit (EAS)

Since 2005, the East Asia Summit encourages cooperation in several fields from energy to education. Concerning the economy and finance, the last summit in Brunei reaffirmed the common will to increase cooperation in economy and finance with more “liberal initiatives.” Myanmar will organize the 9th edition of the East Asia Summit in November, 2014.

Regional Comprehensive Economic Partnership (RCEP)

The Regional Comprehensive Economic Partnership aims to gather 10 ASEAN members and six non-ASEAN members to improve economic cooperation in the region. Today, RCEP totals 46% of the global population and generated 24% of the global GDP in 2012.

RCEP plans to standardize Free-Trade Agreement (FTA) rules to simplify its implementation by companies. Also, the establishment of common incentives serves to “democratize” the use of tax incentives for both large and small enterprises. According to Kohei Shiino, deputy director of JETRO (Japan External Trade Organization) Singapore, RCEP will “bring about big advantages for Vietnam’s garment and textile industry.” For example, the ASEAN-Japan tax incentives on exporting Vietnam-made goods in Japan only concern products with ASEAN or Japan origins. However, 33% of Vietnamese apparel materials cannot benefit from tax incentives due to their Chinese origins. The implementation of common incentives should help to avoid similar situations in the future.

Looking forward, the fifth round of negotiations in December in New Delhi, this economic partnership seems to have a bright future ahead of it. The Asian Development Bank argues that RCEP will increase revenues by 664 billion dollars in 2025 – which would equal 0.6% of the global GDP due to goods, services, assets and labor exchanges between these countries.

However, Vietnam will have to face the challenge of joining RCEP, while being an active member of the Trans-Pacific Partnership (TPP). The potential conflict between the TPP – led by the United States and RCEP, driven by China–(both wanting to shape economic partnerships with Southeast Asia countries) could put Hanoi in a difficult position. Indeed, both political and security implications in the context of an economic partnership can be conflicting between China’s and United States’ interests. Concerning the future role of Vietnam, ASEAN observers consider a potential split of Asian countries in two sides: Singapore, Malaysia and Vietnam would tend to turn to TPP whereas other ASEAN countries would strengthen trading relations with China through RCEP.

On a smaller scale, Vietnam has to consider China’s predominance in the trade balance between the two countries. Although crude oil and coal are exported to China, Vietnamese industries abundantly import Chinese goods as raw material, machinery and equipment, steel, chemicals, and oil and fabrics. (This situation is probably due to the differing economies in North and South Vietnam.)

Asia-Pacific Economic Cooperation (APEC)

Created in 1989, the Asia-Pacific Economic Cooperation includes 21 countries in the Pacific region and congregates 40% of the global GDP. Since the establishment of APEC, average trade barriers have dropped from 16.9% to 5.5% in 2004.

Looking at numbers, Vietnam takes advantage of being a member of such a organization: from 1998 to 2006, capital flows of APEC members towards Vietnam reached $49.5 billion with 6,527 projects in operation. Moreover, 10 APEC members are part of the top 15 investors in Vietnam. As a consequence, Vietnam will be able to rely on future solid financial and economic partnerships to accelerate its integration into the world economy.

Association of Southeast Asian Nations (ASEAN)

Since July 1995, Vietnam has taken part in the Association of Southeast Asian Nation with nine other states. The effective growth of trade between ASEAN and Vietnam reflects the success of the partnership. According to Louis Taylor, CEO of the Standard Chartered Bank in Vietnam, Laos and Cambodia, “ASEAN is the third-largest export market for Vietnam, accounting for more than 10 per cent of the country’s total exports … [and] the second-largest supplier to the country, accounting for 20 per cent of the nation’s total imports.” In 2010, Vietnam hosted summits concerning ASEAN solidarity and connectivity and expressed “its desire to fulfill the goal of building the ASEAN Community by 2015.” Although increasing regional economic cooperation will generate changes in Vietnam’s economy, one-to-one treaties and agreements with neighboring countries also impact the market.

In March 2014, on the occasion of a visit of the Vice President of Myanmar Nyan Tun in Vietnam, the two countries concluded a bilateral agreement on a common objective in trade. Vietnam remains the ninth-largest foreign investor with $370 million invested in Myanmar, let alone the 18 Vietnamese companies registered in Myanmar. Moreover, in 2012, the trade volume amounted to $66 million. Both sides want to reach $500 million in trade by 2015, thanks to cooperation in agro-forestry, fisheries, banking, telecommunications, transport, oil and gas and tourism.

Bilateral Trade Agreements 
Vietnam is also working on increasing economic partnership with individual nations such as South Korea. On October 2
nd, President Park Geun-hye met Nguyen Phu Trong, the general secretary of the Communist Party of Vietnam during his state visit in Korea. Both sides agreed on signing a free trade agreement before the end of the year and improve cooperation in building transportation infrastructure in Vietnam.

Additionally, in 2012, India and Vietnam announced their common objective to reach $7 billion bilateral trade in 2015 and $15 billion by 2020. The Indian government expressed its wish to facilitate the access of Indian banks to the Vietnamese market, in order to develop trade and investment between both countries. The implementation of India-ASEAN free trade agreement by Vietnam and India helped both countries to reach $4 billion in bilateral trade in 2012.

Moreover, Vietnam appears to be the land of opportunities for Japanese small and medium enterprises (SME): a survey from business associations in the East Asian country show that 50% of Japanese SMEs planning investment abroad consider coming to Vietnam. Therefore, it should come as no surprise that the Japan External Trade Organization in Ho Chi Minh City welcomed 2,400 Japanese investors considering investment opportunities in Vietnam between April 2011 and January 2012.

The Takeaway and Key Milestones

We can observe several trends in regards to trade in Vietnam: the first general trend is the expansion of the range of products concerned by free trade agreements. The second phenomenon is the common will of improving existing trade conditions between countries. Finally, Vietnam actively tries to develop its trading partnerships with neighboring countries and is moving to increase cooperation on many subjects as well as to deepen economic relationships with a wide range of current and potential partners.

For foreign investors, the Vietnamese market should also become more attractive to Thai retailers with the upcoming ASEAN Economic Community in 2015. Meanwhile, the Vietnamese retail market is expected to grow 12% in 2014. The major news is that the TPP could be finalized later this year—if so then expect relations between the US and Vietnam to become even closer. [Update: as of February, 2015, the TPP has still not been finalized but the US has announced that it intends to be Vietnam’s number one trading partner after the TPP becomes finalized.]

Thanks to Louis Boulay, who contributed to this week’s post.


Credit: Louis Boulay

Credit: Louis Boulay

Credit: Louis Boulay

Credit: Louis Boulay

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Yoon, Suthichai. “TPP vs. RCEP: A New Washington-Beijing Tug-of-war?” The Nation. The Nation, 6 Dec. 2012. Web. 20 Oct. 2014.

Uncharted Territory

Ebola-VientianeIn 1976 Ebola virus (EBOV or EVD) was discovered in a village in Central Africa near a river from which the virus takes its name. Prior to this year, EBOV had only been present in Africa—but that all changed as infected people in Africa headed west and brought the virus with them. Today, Ebola has reached the developed world and cases continue to grow exponentially in West Africa. According to the WHO, “the average EVD case fatality rate is around 50%.”

As of October 17, there have been 9216 confirmed cases and 4555 deaths according to the WHO and roughly every 21 days the resource requirements necessary to defeat Ebola double. Currently, the organization leading the fight against EBOV, Medicins San Frontieres (MSF), has reached their capacity to provide care for patients in West Africa. On the other side of the Atlantic there are about 1,000 people under some level of supervision or quarantine in the US.

Prime Minister Cameron has called Ebola, the “biggest health threat to our world in a generation.” Global awareness has been raised—but it still hasn’t translated into much action.The UN trust fund specifically for battling Ebola has only received $100,000 out of $20 million pledged. Yes, the US is prepared to dispatch up to 3,000 soldiers to affected areas in West Africa and Cuba has sent more than 450 medical personnel to help with the Ebola outbreak there but more resources need to be diverted to West Africa to get a leg up on the disease.

The current efforts haven’t been particularly reassuring consider that the UN has admitted that it has “botched” the initial response to the Ebola threat. And once the virus arrived in the US, the way that Texas Health Presbyterian Hospital handled Thomas Duncan’s case can be summed up in a series of missteps. There is simply too much misinformation, hubris, and dogma present in how the danger of Ebola has been communicated to the public.

Unclear Events

Let’s take a look at how information regarding the American EBOV cases came out recently:

Story #1: ABC News – 10/15 – 10:30AM

“The level of risk to people around her would be extremely low,” said Dr. Tom Frieden, director of the Centers for Disease Control and Prevention.

Frieden says the health care worker traveled to Ohio before she knew that the first nurse had been diagnosed. She was undergoing self-monitoring at the time.

The unidentified nurse flew to Cleveland on Friday, the same day a colleague, nurse Nina Pham, was hospitalized. Pham’s diagnosis with Ebola was disclosed on Sunday.

The airplane’s crew said she had no symptoms of Ebola during her return flight on Monday. But Tuesday morning she developed a fever and on Tuesday night tested positive for Ebola.

Story #2: NBC – 10/15 – 4:30PM

Dr. Thomas Frieden, director of the Centers for Disease Control and Prevention, told reporters that the nurse had a temperature of 99.5 degrees before she got on the plane on Monday.

Because of that reading, and because she had treated Thomas Eric Duncan, the first Ebola patient diagnosed in the United States, the nurse should not have been on the plane, he said.

“She should not have traveled on a commercial airline,” Frieden said.

Story #3: WFAA ABC – 10/15 – 9:19PM

It was later confirmed that the CDC gave Vinson permission to get on the plane because she was showing no other symptoms of the virus, and her temperature didn’t reach the threshold of 100.4 degrees.

“She wasn’t bleeding or vomiting,” Frieden said. “The level of risk around her would be extremely low, but because of the extra margin of safety, we will be contacting [all those who were on the flight].”

Story #4: The Blaze – 10/16 – 12:24AM

In a letter to employees, Frontier Airlines CEO Dave Siegel said he “was notified by the CDC that the passenger may have been symptomatic earlier than initially suspected; including the possibility of possessing symptoms while onboard the flight,”

The CDC had previously said that the nurse “exhibited no signs or symptoms of illness” while on the flight, but said they still wanted individuals who were on the flight to contact them. In a statement, Frontier had echoed that and said their crew didn’t observe any signs of illness from the patient.

Story #5: Reuters – 10/16 – 6:07PM

An Ebola-infected Texas nurse who traveled to Ohio over the weekend to plan for her wedding may have been ill as early as Friday[10/10], a spokesman for the U.S. Centers for Disease Control and Prevention said on Thursday.

Dr. Christopher Braden told a news conference in Ohio that the CDC may include people who were on a flight Amber Joy Vinson took to Cleveland from Dallas on Friday in its investigation of possible contacts.

Vinson went to a bridal shop in Akron on Saturday but otherwise spent the weekend mainly with family before taking a return flight to Dallas on Monday, the day before she was diagnosed with Ebola, according to county health official

Dr. Marguerite Erme, medical director for Summit County, told the news conference that people who visited Coming Attractions Bridal & Formal Inc in Akron from noon to 3:30 p.m. on Saturday should contact health officials.

Eight people who had confirmed contact with Vinson during her Ohio visit in Summit and Cuyahoga counties are in voluntary quarantine and have not shown symptoms of the virus, county health officials said.

Uncertain Direction Ahead

Of course, more people have died than has been officially reported due to the challenges of obtaining accurate data in the field and the scale of the outbreak. For example, there is an overwhelming flow of patients to newly established care centers as soon as they open and the untold economic effects will surely linger long after the outbreak reaches equilibrium. Co-discoverer of EBOV Peter Piot: “The three countries that are affected are being totally destabilized, not only in terms of people who are killed by Ebola — their families, the orphans that now are coming up because the parents died — but the economy has come to a standstill[.]”

In Vietnam, the extent of Ebola on the radar here was when a few rumors were spread by locals in August an attempt to raise awareness. Upon arrival at Wattay International Airport, debarking passengers are presented with an Ebola information card as they pass through a manned kiosk. While the Noi Bai (Hanoi) airport also has a kiosk, it was not manned when arriving late last month. It’s worth noting that airport officials have tightened restrictions since then.

However, all is not bleak: Liberian-American Patrick Sawyer didn’t infect anyone else on his flight to Nigeria despite having clear visible signs of the disease. Also, Thomas Duncan’s family seem to have not been infected–although the real “all-clear” threshold is 42 days instead of 21. Furthermore, the UN recently officially declared the outbreak in Senegal over and Nigeria has managed to stop the spread of Ebola beyond the few outliers that broke protocol. These are real successes and lucky breaks.

The upcoming Flu season will be a true test of healthcare systems in the US and other nations as the fear of Ebola continues to rise and more infected people span out of currently affected areas. Travel plans, daily habits, and business activities will all be altered as people attempt to minimize exposure to anyone who might be infected. Let’s hope that the mishandling of the initial cases will serve as a wake up call to governments, health organizations, and people so that a more proactive approach to combat Ebola can take shape.

Additional Resources:

An up-to-date timeline of how the Ebola virus has spread around the world.

A recent Johns Hopkins Symposium discussing what is known and unknown about Ebola.


Startup Israel–2014 Competition

On October 6, 2014, Hub.IT hosted an information session about Startup Israel–2014 Competition, an initiative organized by the Embassy of Israel in Vietnam in collaboration with Ministry of Science and Technology and Business Studies and Assistance Center (BSA). The information session was an opportunity for startup teams to ask Ambassador H.E Ms. Meirav Eilon Shahar questions about the competition as well as to learn more details about the application requirements.

During the event, Ambassador H.E Ms. Meirav Eilon Shahar (who has been Ambassador to Vietnam for about two years) explained that the competition launched about a month ago and it’s the first program of its kind that the Israeli Embassy in Hanoi is promoting. According to Hub.IT, approximately 30 startups were represented in the audience. The competition’s deadline was recently extended to accommodate an influx of new candidates.

The competition specifically seeks Vietnamese seed stage companies. The interesting feature of this competition is that the startups get to choose what to send to the review panel—so they need to determine the best way to present their startup’s idea, team, product, competitive advantage, etc.

The winners will be announced in mid-November and they will travel to Israel in December to take part is what has been termed a “study tour.” The exact details are unknown but suffice to say the Vietnamese entrepreneurs will meet similar startups, visit with incubators, take in lessons learned and connect with businesses in Israel, which already has a global outlook for its startup community.

Originally, the plan was to send startup founders for a few months to work with startup companies in Israel but that was deemed unrealistic due to the time commitment required. So, the project had to be adapted to the Vietnamese reality of being busy with managing a startup. Now, one representative from each team from each sector will go to Israel for primarily networking, learning from adaptation, and knowledge exchange. Ultimately, the organizational partners want to see the results of this first “class.” Maybe the results will be too limited so the project can be tweaked in the future or additional resources (except financial) can be added, such as tutoring.

The hope for the project is that the Vietnamese founders have the study tour to learn about the ecosystem and to make connections with Israeli founders. One of the big lessons learned is that startups involve failure—but despite failing one should try to improve for the next time.

According to a handout that was distributed to the participants:

“The competition brings together Vietnamese startups throughout the country to compete for the opportunity to take part in an intense startup study in Israel.

Only four representatives from four winning teams selected from the shortlist of 8 teams will go to Israel for the startup study tour in December 2014.

In order to eligible to apply for the competition, applicants need to meet the following criteria:

Age of submitting founder: 20-40

Sectors: Web/Mobile/Agriculture/Life Science

Stage of Startup: Seed Stage

Participants are responsible for reserving their intellectual property rights to the submitted products.

At least one member of the founding team of the startup should be fluent in English.”

Israeli Vietnamese Connection

The purpose of this project is to share experience with Vietnamese entrepreneurs and to expose Vietnamese startups to the Israeli startup scene. The startup scene in Israel is privately-led by businesses—although at a time it was largely government directed. The Israeli market is small; its population is approximately 8 million so everything has to be exported globally; this outward focus is true for all Israeli businesses. So in a sense, Israeli startups need to have a global view even from the onset whereas American startups can focus on the available 300+ million population. Indeed, even the VC presence is difficult in Israel but it was harder before; Israel in the 1980s was very different than today’s Israel—it improved over time, developed competition, and leveraged a strong teamwork ethic to foster innovation.

Israel is currently experiencing a debate over whether exit events by local startups and the resulting outflow of human capital is taking away innovation. Is it better to keep innovation in Israel at the expense of a potential exit? Startups in Israel simply go to US and maybe Japan. However, traditional entrepreneurs come to Vietnam as part of delegations and invest as small businesses.

Ambassador H.E Ms. Meirav Eilon Shahar revealed that the Minister of the Ministry of Science and Technology was in Israel last week for five days. During this time, the first joint committee was formed and Minister Nguyen Quan met with Israel’s chief scientist to learn more about the Israeli startup sector and the unique ecosystem in Israel. As a result, Israel and Vietnam signed a Memorandum of Understanding (MOU) to increase collaboration between the two nations in the fields of science and technology. In Vietnam, the Israeli Embassy in Hanoi is concentrating in private sector because government support is currently limited for startups.

A Winning Formula

Flexible criteria was purposely selected to be as inclusive as possible in order to spur creativity for the Vietnamese entrepreneurs who might connect with Israeli startup. What is important for startups to remember is to have the right product/market fit. It may be that the most important life experience is to go to another environment than one’s home country—in this instance for Vietnamese entrepreneurs to go abroad. Bobby Liu, founder of Hub.IT, explained, “I realized that we are only a few years behind Singapore, which started its accelerator in 2012. Being successful requires a lot of confidence. We have no choice but to explore since Vietnam may not have a suitable environment. Go somewhere else to explore: that’s what entrepreneurs do.”

Failure is a part of startups; entrepreneurs need to see and learn how to improve for the next time. It’s a long term haul—not a short-term win. One industry that Israel has focused on to grow and “own” is Homeland Security; in fact, Israel will be hosting the Israel Homeland Security convention next month which features information on cyber security, emergency preparedness, and law enforcement.

Considering there is no signup form, the challenge for startups is to submit an application that best portrays the product to the judging panel. So, 10 page proposals are out and the idea should be optimally refined to a single sentence of explanation (with supporting information). Hopefully, better judgment prevails here.

Interested parties can apply as outlined below (via handout):

An application in both English and Vietnamese includes general information about the startup and thorough business plans in PDF.

A video clip in English, no more than 2-3 minutes long, explaining why their company should be picked to go to Israel.

After screening of applications and video clips, 8 finalists will have interviews (in English) with a board of judges including representatives from the Embassy, the Ministry, and BSA. The final interview stage consists of presentation and Q&A session with judges.

Applications needs to be sent by email only to the following address:

For more information, please contact Ms. Phan Thuy Trang; Mobile: 0914 551 528; Email: or visit the Embassy Homepage or the Embassy’s Facebook page.

The deadline for submission is October 15, 2014 and only shortlisted candidates will be contacted.

Ongoing Events in Hong Kong

The images coming out of Hong Kong over the past week have been increasingly troubling as tensions rise between protesters and authorities—and the political, economic, and social impacts remain unclear as the Occupy Central movement builds. Ultimately, it boils down to competing narratives: one where the protestors are “rabble rousers” who are perverting the spirit of the Basic Law in Hong Kong. Of course, the protesters and their supporters see the situation as fighting for their ability to freely choose an elected leader without interference from Beijing—at least on the face of the movement—but there is, no doubt, underlying economic pressures that have influenced the course of events to lead to a potentially transformative event like Occupy Central.

At the forefront of this movement to retain autonomy from China (and to express their grievances) is the youth of Hong Kong. Each day, more people are joining the ranks of fresh faces on the ground, thereby disrupting daily school, work, and livelihoods. On one hand, stability is important—especially in terms of Foreign Direct Investment (FDI)—and let’s face it: Hong Kong relies on financial operations and markets flowing smoothly in order to prosper. At the same time, a segment of people in Hong Kong wish to express themselves—but at what cost?

On The Ground in Hong Kong

Below is a first-hand account of what things are like in and around the tense atmosphere. Please note that GKTA Group Limited does not endorse, condone, or support the following views unless otherwise noted.

“This week is usually really important for Hong Kong shopkeepers, because people from continental China are on holidays for national day and go to Hong Kong for shopping–those sales represent an important part of the turnover in the season.

Actually, [Friday], I was in Causeway Bay, which is a shopping quarter – the place where the riots took place – there were only tourists from continental China inside shops. But students and demonstrators from [the] Occupy [Central movement] were still blocking the streets.

I was in a shop – which was unexpectedly calm for a sales period – and we got blocked inside because of the arrival of those men wearing masks and the beginning of riots between “pro” and “anti[.]” Here, it is said that these “anti”-guys come from the Triads funded by the government.

In two minutes, the ambiance changed dramatically from a friendly atmosphere to a strained and electric one. But tourists didn’t seem to be frightened, and two blocks further, families were quietly going shopping.

However, some people seem really exhausted here, especially shopkeepers and people supporting Beijing, and even in my subway station far from the center of the city, people are fighting. I cannot speak a word of Cantonese so it is quite hard for me to understand discussions.

Besides, we need to take into account inequalities in Hong Kong: 50.000 people are literally living in cages and 50.000 people are living in subdivided flats with the same indecent comfort.

And this “great” movement for democracy comes from students from rich and well-off classes but is not followed by the part of population with tough living conditions whose first priority is not democracy.

Concerning the impact on the economy, usually, people go out of work and then join demonstrations and sittings. However, the whole central quarter is blocked and lot of people work at home. The major part of banks and companies are paralyzed because of barricades and closed subway stations in the business district, but for the moment, it is just impacting shopkeepers.

Plus, as everything is free during demonstrations (drinks, food, umbrellas, masks), shops around don’t really take advantage of it. I don’t know who pay[s] for all that stuff; [the] gossip [is] that it is funded by billionaires supporting the Occupy movement, but these are just rumors.”

The Global and Local Response

Nationalism for many countries in this region involves simply showing that one’s side is more vocal, animated, and devoted to its cause—which can result in ugly protests and political fervor. The response to the Hong Kong protests from the world (largely) has been to support the growing student and citizen movement in Hong Kong. Across Facebook, users in Vietnam and other countries are sharing links of the media coverage of the events as they unfold. Perhaps the Vietnamese are taking a deeper interest in China (as opposed to other Southeast Asian nations) because of the recent events in the South China Sea; the Vietnamese and Chinese histories have been intertwined for approximately 2,000 years.

Every nation acts in its own self-interest; the Chinese have shown that they are long-term and strategic thinkers who are adept at influencing external factors to achieve their aims. There are two clear ways the situation can play out: either the protestors become tired and go home, or Beijing gives in to the protestor’s demands. If Beijing gives in then it would set a precedent—a bad one from the government’s perspective, and a good one for supporters of Occupy Central.

If we look at the recent controversy over HD-981, the $1 billion oil rig owned and operated by China National Offshore Oil Corporation (CNOOC), the rig was moved out of the way when an incoming typhoon threatened the rig—not because Beijing had realized it had caused a major disturbance with its southern neighbor. Beijing was most likely testing uncharted territory by moving the rig into the Exclusive Economic Zone (EEZ), thereby surprising Hanoi. And it was Vietnam, not China that felt the economic sting due to riots and protests that damaged hundreds of factories back in May.

From an outsider’s perspective, it looks like China is the common denominator for disputes in the region, whether it’s in the South China Sea, or Hong Kong, or in the East China Sea. However, from the Chinese perspective, they believe they had every right to move its HD-981 oil rig within the nine-dash line—and of course, the Chinese position on Hong Kong is clear after reading the recently published white paper and considering the latest statement via the People’s Daily newspaper. It’s a tough situation all around for those involved as they strive to realize their aims and guide the episode’s outcome in their favor.

What about future issues in the region—how might they look like? There is a distinct possibility that the next time China and another country or Special Administrative Region (SAR) differ on principles, it will most likely be the dissenting party that pays the price—not China. However this situation in Hong Kong pans out, the bottom line is that some future investments may flow into Shanghai and Singapore (since they look more stable than Hong Kong at this point) as a result of this episode of social unrest. Beijing has a distinct advantage going forward: time–in the sense that as events continue to develop, the Occupy Central protesters and their opinions may become more fragmented as Beijing remains steadfast in its stance.

Thanks to Lina Skoglund for sharing her views and photos, and to Louis Boulay for contributing to this post.