EAE LN 4 S 2 Vietnam Laos Cambodia

EAE <LN 4 S 2 - Vietnam Laos Cambodia Myanmar> 13. 10. 24 East Asian Economy: Supplements. Each South East Asian Economies G 2 * Some parts of this note are borrowed from the references for teaching purpose only. Semester: Fall 2013 Time: Thursday 2 -5 pm Professor: Yoo Soo Hong Classroom: 423 Mobile: 010 -4001 -8060 E-mail: yshong 123@gmail. com Home P. : http: //yoosoohong. weebly. com 1

Vietnam 2

The Vietnamese transition • Reforms started already in the late 1970 s, through ‘fence breaking’ and experiments in agriculture and industry. • In 1986 the CPV launched the doi moi (reform): from central planning to market economy • The reform process was accelerated in the late 1980 s by the collapse of Soviet Union • By the early 1990 s ‘price mattered’ but the government maintained a prudent step-by-step attitude

Vietnam’s Outperformance Relative to Other Transitional (Ex -Socialist) Economies Source: WB. WDI 2010

A New Fifth Dragon: Lights and Shadows • Growth is sustained and less unbalanced than in China. • Poverty reduction has been outstanding. • Inequality has increased, so far not dramatically, but risks are high. • The WTO accession presents many opportunities and many challenges. • The government is still in command of many economic leverages. • Financial liberalization has been resisted; the booming stock market may become a vehicle of destabilization. • SOEs are problem area.

The Vietnamese Economy: Facts • Vietnam has a small economy with GDP amounting to around 90 billions USD and GDP per capita of around 1000 USD. • Vietnam has a large population of 86 millions and young population structure. • More than 60% of the population live in rural areas and work mainly in agriculture. • Vietnam has maintained a relatively high economic growth over the last two decades. • High economic growth has led to a substantial improvement in living standard and poverty reduction.

• Agriculture plays an importance role in the economy. The manufacturing sector is dominated by agriculture-related and labor-intensive activities. • Most of Vietnam’s exports are natural-resource based (crude oil and agricultural products such as coffee), and labor-intensive products (leather, textile and garments). • Most of Vietnam’s imports are capital goods and production inputs, ranging from petroleum, iron and steel, fertilizers, plastics and chemical, electronic parts and products and materials for textile and garments. • Vietnam’s exports have been largely directed toward the EU and US, and Japan, while the country’s imports have been largely sourced from China, ASEAN and other East Asian countries.

• Economic reforms conducted over the last two decades have transformed Vietnam from a centrally-planned economy to an open-market economy. • The integration with the regional and world economy has been recently accelerated with the recent acquisition of WTO membership and the participation in the regional FTAs. • The investment regimes have been liberalized through the simplification of administration procedures and deregulation, a greater autonomy for domestic and foreign investors. Foreign investments are allowed take different forms of investment, ranging from direct investment, acquisition and merging, and portfolio investment. • Trade and investment liberalization have contributed to the overall economic growth.

Achievement in Development Eradicate extreme poverty and hunger -At the national level, the goal of halving poverty has been realized, affirming the result of extraordinary efforts to reduce poverty in Vietnam. Year: 993 2002 2006 2008 2010 Poverty rate (%): 58. 1 28. 9 16. 0 14. 5 1423 Achieving universal primary education -Vietnam has achieved universal primary education. Literacy and schooling proportions continue to increase. Enrollment in primary education School Year: Net enrollment rate in primary education (%) 2006 -7 96. 8 2007 -8 96. 1 2008 -9 97. 0

Major Economic Indicator-Vietnam 2007 2008 2009 2010 e 2011 f GDP (100 million dollar) 711 903 932 1, 036 1, 093 GDP per capita (dollar) 830 1, 008 1, 070 1, 180 1, 230 Economic growth (%) 8. 5 6. 2 5. 3 6. 8 6. 4 Unemployment rate (%) 4. 6 4. 7 4. 6 4. 4 4. 1 Consumer price inflation (%) 8. 3 23. 1 7. 0 9. 0 16. 9 Exchange rate (D/dollar) 16, 078 16, 444 17, 800 19, 146 21, 108 Current account balance (million dollar) -6, 953 -10, 706 -6, 117 -5, 623 -6, 122 Export (million dollar) 48, 561 62, 685 57, 096 71, 893 90, 334 Import (million dollar) 58, 999 75, 468 65, 403 79, 548 98, 531 Foreign reserve (million dollar) 20, 732 21, 143 16, 027 . . Debt balance/GDP (%) 34. 1 30. 5 29. 4. 30. 0 31. 7 Source: Korea Eximbank Overseas Economic Research Institute. 2010 World Country Review 10

Growth Rate of GDP of ASEAN 6

Ratio of Fiscal Balance % Sanjay Kalra. 2012. “Vietnam: Economic Development and Outlook”.

Vietnam’s Recent Economic Performance 13

The Problem of Productivity § The increasing role of factors, instead of productivity characterizes the recent growth. Source: Vietnam Development Report 2012.

Industrial Parks and Economic Zones Source: Vietnam Development Report 2012.

Economic Performance of SOEs and Rest Enterprises Source: Vietnam Development Report 2012.

Inflation Monthly 2008 -2010 17

Inflation Compared Sanjay Kalra. 2012. “Vietnam: Economic Development and Outlook”.

Successful Industrial Parks Source: Vietnam Development Report 2012.

Trade Indicators A sharply narrower trade deficit reined in the current account deficit to 7. 4% of GDP in 2009 from 11. 8% in 2008. 20

Balance of Trade Deficit 21

Economic Prospects Achieving middle-income status - Under the World Bank’s classification, developing countries graduate from “low income” to “lower middle income” when per capita gross national income reaches $976. In Vietnam it stood at $890 in 2008, according to the World Bank. Selected economic indicators (%) 22

Strength and Weakness Source: ONDO. 2012. March. “Vietnam”.

Development Challenges Fiscal and current account deficits - Shortages of foreign exchange in the formal market, which undermine confidence in the currency, fuel inflation, and hurt investment, should be addressed through a combination of tighter monetary policy and increased exchange-rate flexibility. - It will be important to improve the legal and institutional framework for monetary policy. 24

References ADB. Asian Development Outlook. 2010. GIC. Economic Indicators Vietnam. 2010. Joint Donor Report. 2011. Vietnam Development Report 2012: Market Economy for a Middle. Income Vietnam. Kalra, Sanjay. 2012. “Vietnam: Economic Development and Outlook. ” IMF. 25

Laos Myanmar L Thailand Vietnam a o P D R Cambodia

Basic Facts about Laos § Population (million) : 6. 2 million § Area (sq. km) : 236 800 § Population Growth Rate (percent): 2. 5 § Infant Mortality Rate (per thousand): 70 § Under 5 Mortality Rate (per thousand): 97. 6 § Life Expectancy at Birth(year) § Female : 63 Male : 59 Adult Literacy Rate (percent) Female : 63. 2 Male : 82. 5 Per capita GDP(US$) : 1, 087 27

Eradicate Poverty and Hunger Proportion of population below poverty line 28

Major Economic Indicator-Laos 2007 2008 2009 2010 e 2010 f GDP (100 million dollar) 42 53 56 63 69 GDP per capita (dollar) 694 856 886 984 1, 058 Economic growth (%) 7. 8 7. 6 7. 7 7. 5 Unemployment rate (%) 2. 4 . . Consumer price inflation (%) 4. 5 7. 6 0. 0 5. 7 7. 0 Exchange rate (D/dollar) 9, 603 8, 744 8, 516 8, 259 8, 100 Current account balance (million dollar) 139 116 9. 3 -23. 7 5. 9 Export (million dollar) 923 1, 092 1, 053 1, 369 1, 600 Import (million dollar) 1, 065 1, 405 1, 462 1, 754 2, 100 Foreign reserve (million dollar) 517 614 623 717 . . Debt balance/GDP (%) 101. 2 96. 6 101. 4 92. 1 92. 8 Source: Korea Eximbank Overseas Economic Research Institute. 2010 World Country Review 29

HDI Value Trend 0, 700 Thailand Philippines Indonesia Vietnam 0, 650 0, 600 0, 550 0, 500 0, 450 0, 400 0, 350 0, 300 1980 1995 2000 2005 2010

Incoming FDI to Laos, 2003 -2008 (%) by country by sector Thailand 23. 7 Power generation 53. 9 China 16. 9 Agriculture 11. 4 Vietnam 9. 3 Mining 9. 8 Japan 5. 8 Industry and Handicraft 7. 5 France 5. 7 Services 4. 3 India 4. 8 Trading 3. 8 South Korea 4. 7 Construction 2. 9 Australia 4. 6 Hotel and Restaurant 2. 6 Malaysia 1. 8 Other activities 3. 7 Singapore 1. 4 Others 21. 3 Source: IMF 2009

References Lao DPR. 2011. “MDG Report” (PPT). Andriesse, Edo. 2012. “State Capitalism and vulnerable livelihoods in Lao PDR” (PPT).

Cambodia

Major Economic Indicator-Cambodia 2007 2008 2009 2010 e 2011 f GDP (100 million dollar) 86 112 106 124 159 GDP per capita (dollar) 601 767 716 821 1, 039 Economic growth (%) 10. 2 6. 7 -1. 5 4. 7 5. 1 Unemployment rate (%) 2. 5 3. 5 . . Consumer price inflation (%) 7. 7 25. 0 -0. 7 4. 0 6. 1 Exchange rate (D/dollar) 4, 056. 2 4, 054. 2 4, 139. 3 4, 184. 9 4, 086. 0 Current account balance (million dollar) -488 -1, 051 -866 -994 -1, 553 Export (million dollar) 4, 089 4, 708 4, 302 , 472 6, 289 Import (million dollar) 5, 439 6, 509 5, 876 7, 324 8, 647 Foreign reserve (million dollar) 1, 807 2, 291 2, 744 3, 150 . . Debt balance/GDP (%) 43. 7 37. 6 42. 1 39. 7 32. 8 Source: Korea Eximbank Overseas Economic Research Institute. 2010 World Country Review 34

Recent Facts of Cambodia • GDP doubled in just five years, despite adverse exogenous shocks. • Industry began to contribute over a quarter of total output. • A steady increase in gross national saving. • Record levels of investment in 2007 amounting to $866 million or nearly 10 per cent of GDP. • The political settlement was steadily enhancing its development orientation with the development of institutional frameworks to address social goals. • Economic performance in 2009 was marked by output declines in three of the four sectors that had contributed the most to Cambodia’s structural transformation and had begun to generate domestic value added to serve as a springboard for future growth.

• • The crisis marked a watershed moment for Cambodia. It threatened the reversal not just of growth and development, but of a process of structural transformation that displayed enormous potential for Cambodia to significantly accelerate its development efforts and become part of the Asian inclusive growth story. The Cambodian government responded energetically, actively using the monetary fiscal and sectoral policy instruments at its disposal. Improvement in Cambodia’s export performance in 2010. GDP growth is positive and expected to be around 5 per cent. Gross fixed investment has also improved, projected at 18 per cent of GDP —the bulk of this increase, at the margin, has happened in the private sector. The fiscal position is comfortable, with a reduction in the fiscal deficit projected for 2010. On the external front, the import cover remains satisfactory.

The Crisis and Respond • The government has successfully secured the country from the immediate risks posed by the crisis. • Averted a deterioration in the macroeconomic position, reversed declining private sector confidence • Negated the threat of a medium term reversal in growth and investment. • The crisis reveals some important long term challenges to Cambodia’s endeavor to secure its development transformation, based on the rectangular strategy

After Crisis • Diversification • Domestic market • Socialization of risk and social protection • Looking East and South

Diversification • The structural challenge for Cambodia is to reduce its dependence on a few high performing sectors. • Garments, account for 70 per cent of total exports and 80 per cent of manufactured exports; yet, according to UNIDO this is one of the slowest growing sectors globally. • Studies indicate that Cambodia is potentially competitive in several other activity areas including footwear, agro processing, and light engineering. • Successful diversification will require investments in Human capital and in infrastructure. • There will also be continued need to pay attention to strengthening the regulatory framework and improving institutional arrangements

Looking East and South • Emerging Asian economies such as China and India, and the rapidly growing ASEAN economies offer attractive markets and sources of technology and expertise to Cambodia. • The regional dynamic has not succeeded in providing any significant growth impetus to Cambodia. • International production networks based on the twin processes of fragmentation and agglomeration have taken roots across a diverse range of goods extending from cars to footwear, particularly in Asia. • Cambodia’s participation in regional supply chains would, require a range of business facilitation services, logistic services and access to modern information technologies.

• The medium term challenge: To diversify the Cambodian economy, protect the vulnerable, and continue to build institutions that promote resilience. • The opportunities lie in the strengths of the Cambodian economy: Vast agricultural potential, Demographic dividend of the future Securing macroeconomic fundamentals Enhancing savings and investment Ability to take advantage of the enhanced possibilities afforded by regional and South-South co-operation. - 41

Myanmar Nay Pyi Taw

About Myanmar Name : Republic of the Union of Myanmar Capital: Naypyitaw Major cities: Yangon (Pop-7 m) and Mandalay (Pop-1 m) Area: 676, 578 Sq Km Population: 60 million Government: President elected by Bicameral assembly called Pyidaungsu Hluttaw Administrative States and Divisions: 7 states and 7 Divisions Main Export: Natural gas, beans, pulses, teak, minerals, gems and rice GDP: MMK 36, 146. 72 Ban (2010) Literacy: About 95% in 2010

Major Economic Indicator-Myanmar 2007 2008 2009 2010 e 2011 f GDP (100 million dollar) 202 314 352 430 513 GDP per capita (dollar) 350 533 587 702 821 Economic growth (%) 12. 0 3. 6 5. 1 5. 3 5. 5 Unemployment rate (%) 4. 0 4. 0 Consumer price inflation (%) 32. 9 22. 5 8. 2 7. 3 8. 0 Exchange rate (D/dollar) 1, 290 1, 185 1, 055 970 910 Current account balance (million dollar) 1, 285 1, 208 705 1, 549 1, 058 Export (million dollar) 6, 170 6, 677 6, 862 8, 813 9, 749 Import (million dollar) 2, 964 3, 461 4, 020 4, 296 5, 497 Foreign reserve (million dollar) 1, 783 2, 541 . . . Debt balance/GDP (%) 40. 8 25. 8 24. 4 21. 4 19. 2 Source: Korea Eximbank Overseas Economic Research Institute. 2010 World Country Review 44

International Relations • Rapprochement with the West • High-profile visits of senior Government and National and UN officials • Re-engagement with the international community • Resumption of ODA • Gradual lifting of Sanctions • ASEAN Chairmanship in 2014 • AFTA/AEC in 2015

Development Priorities • Foreign exchange rate unification • Agriculture • Natural resources management • Competitive business sector • Financial/Banking Sector • Education and Health • Legal structures • Infrastructure • Policy formation and implementation • Millennium Development Goals (MDGs)

Development Priorities • • • Education and Health Legal structures Infrastructure, and Policy formation and implementation Millennium Development Goals (MDGs)