Previous Quarterly Editions
Expropriation Risk: 57 57 57 56 ▼ Political Violence Risk: 48 48 48 48 ► Terrorism Risk: 18 18 17 16 ► Exchange Transfer and Trade Sanction Risk: 64 55 55 55 ► Sovereign Default Risk: 47 47 37 37 ►
TREND ►
Government's commitment on climate policy Weakest 1 2 3 4 5 Strongest
Vietnam is currently the 29th largest emitter of carbon, or 0.6% of the global total. The country’s low-lying coastal and two river delta regions have very high vulnerability to rising sea-levels. With most rice grown in the two delta regions, the increasing salination of these areas will undermine food security. Depending on the emissions pathway, between 6 and 12 million people will potentially be affected by coastal flooding by 2070–2100. Increasing salination in the Red River and Mekong River deltas is already affecting agriculture and residents’ livelihoods. Heatwaves, drought, localised flooding, and increasingly erratic tropical cyclones and storm surges are already evident. This is negatively affecting livelihoods and health, particularly for some of the poorer and more marginalised communities of rural Vietnam.
There is scant prospect of a formal political movement developing around climate change and ‘green’ issues in Vietnam, even though there is increasing concern among the population and most of the development partners that remain active in the country. Issues around deteriorating air quality in the main cities of Hanoi and Ho Chi Minh City have also done much to galvanise public concerns around green issues. It is likely that permitted civil society groups and the private sector may
seek to enact climate change-related activities, where allowed by the government to do so. However, the ruling communist party’s intolerance of any rival political formations means this will not get politicised. A Law on Natural Disaster Prevention and Control was passed by the National Assembly in 2013, followed by a Vietnam Climate Public Expenditure and Investment Review two years later.
The country is still a major coal producer and user. However, in early 2020 the government introduced a law that envisaged a ‘cap and trade’ regime, an outright ban on chemicals that harm the ozone, and the introduction of emissions reporting rules for firms. In October 2021, the prime minister formally approved a Green Growth Strategy for 2021-30, with the stated goal of a “green and carbon neutral economy that positively contributes to limiting global warming”.
There are also various initiatives around reforestation and other mitigation efforts, typically in collaboration with local and international non-governmental organisations, as well as some international development partners. Initiatives around greater use of solar power and offshore wind farms are also being enacted.
TREND ▼
Companies relying on the storage of internet data remain concerned about Vietnam’s cyber security legislation that empowers the Ministry of Public Security to decide what constitutes undesirable online content and requires all internet service providers physically to keep all their Vietnam-related data stored on servers located within the country.
Foreign investors have worries about these data localisation requirements, as well as more general and reputational concerns around Hanoi’s intense monitoring and control over all online content. For the government, which has complete hegemony over conventional media, the internet and social media are seen as a potential source of opposition to its rule.
This is in addition to long-held concerns around the general inadequacy of intellectual property protection in Vietnam. However, regarding physical assets, the risk of expropriation is low.
The risk of political violence is low. The ruling communist party has little tolerance for anything resembling open dissent, whether within its own ranks or Vietnam at large. Recent years have seen the party extend the draconian rules for conventional media to include social media; both are closely monitored. The recent military coup in Myanmar, and now active and armed resistance post-coup, will probably increase the tendency among Vietnam’s leadership for tough security.
The most likely source of any public displays of violence, such as riots, would be if China made any provocative moves over its competing territorial claims in the South China Sea (or ‘East Sea’, as it is known in Vietnam), thereby triggering a reaction among those Vietnamese who feel their leadership is not sufficiently hard-line in opposition to Beijing’s strategic ambitions.
The ideological linkages between the Chinese and Vietnamese communist parties do not always sit comfortably with the strong nationalist sentiment that runs through much of Vietnamese, and Chinese, society. However, Vietnam’s highly effective police and security apparatus can be expected to react speedily and firmly to any violence. The same apparatus has ensured high degrees of compliance with pandemic-related lockdown regulations since March 2020.
Often criticised by human rights groups, citing the numbers of political prisoners held on charges related to blogging and other social media posts that criticise the government, Vietnam’s security apparatus has nonetheless been successful in thwarting any acts of terrorism and most forms of violent protest. While anti-government sentiment exists among some of the Vietnamese diaspora, their ability to conduct terrorist acts in Vietnam is virtually nil.
The Vietnamese dong is not freely convertible outside the country, and has held relatively steady against the U.S. dollar over the last few years, despite the impact of COVID-19 on economic activity and export earnings.
In December 2019, Washington placed Hanoi on a watch-list for potential currency manipulation, but in April 2021 announced that Vietnam had been removed from the list, and therefore was no longer subject to the threat of economic sanctions. Hanoi had previously taken this threat of U.S. sanctions seriously, and explored ways to absorb more U.S. exports, in a bid to reduce the scale of its trade surplus with the U.S. In 2019, the U.S. accounted for about 23% of Vietnam’s total exports; greater than China (16%), Japan or South Korea (8% each). In contrast, the U.S. accounted for less than 6% of Vietnam’s total imports.
However, this trade surplus with the United States continues to rise, largely as growing numbers of China-based export-oriented manufacturers relocate to Vietnam, in a bid to side-step China-U.S. trade tensions. In early April, U.S. officials held a virtual meeting with Vietnam’s opposite numbers, raising U.S. concerns pertaining to allegedly illegal timber practices, agriculture and digital trade.
In March 2021, the International Monetary Fund (IMF) released the findings of its latest Article IV negotiations with Vietnam, and broadly gave the country a good bill of health. The IMF estimates Vietnam’s foreign exchange reserves to be around USD114 billion. The government is not a major borrower on the international financial markets, and the IMF estimates its total public and publicly guaranteed debt at around 47% of gross domestic product (GDP). The bulk of Vietnam’s external debt, around 39% of GDP, is owed to multilateral development institutions at below-market terms.
In the first half of 2021, Moody’s revised its outlook from ‘negative’ to ‘positive’ and kept its rating for Vietnam at Ba3, while Fitch revised its outlook for Vietnam from ‘stable’ to ‘positive’ and affirmed its rating of ‘BB’, citing continued strengthening of its external finances. Standard & Poor’s also kept Vietnam at a ‘BB’ rating but upgraded its outlook from stable to positive. There have been no ratings changes for Vietnam since then.
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