Harambe: Vietnam enhances positions in global value chain | Business | Vietnam+ (10/20/23)
The attraction of large foreign direct investment (FDI) inflows from the US and Europe, especially into industries with high added value such as manufacturing, technology and pharmaceuticals, is a positive signal about Vietnam’s economic development and international cooperation as well as the country’s efforts in improving its position on the global value chain, according to Savills Vietnam experts.
Statistics from Savills Vietnam, a property consultancy firm, showed that there were 2,508 FDI projects of EU countries in Vietnam as of June, with total registered capital of 28.91 billion USD. The figure represents a significant increase compared to 18 billion USD in 1,623 projects in 2016.
The Q3 Business Confidence Index (BCI) report of the European Chamber of Commerce in Vietnam (EuroCham) released in mid-October showed that more than two years after its implementation, the European Union -Vietnam Free Trade Agreement (EVFTA) is continuing to have a positive impact on Vietnam’s business landscape. More than 60% of businesses think the deal is beneficial, with the top benefit being tax cuts, followed by improved competitiveness, reduced trade barriers, and expanded partnerships with local firms and increased access to the Vietnamese market.
As for the US market, the recent visit of President Joe Biden along with upgrading their comprehensive cooperative relationship, the interest of investors in this market is expected to increase in the coming time.
According to John Campbell, manager of Industrial Services at Savills Vietnam, although this event only took place about a month ago and will take time to see clear impacts, many US investors have shown their interest in projects in Vietnam.
A Savills Vietnam’s research pointed out that in 2016-2022 period, a sudden increase in the export of electronics and phone reflects an improvement in Vietnam’s position in the global value chain. Specifically, in the period, the export value of electronic, phones and machinery products increased by 193%, 68% and 336% respectively.
Vietnam is focusing on attracting high value-added investments by improving its workforce and infrastructure while creating favourable conditions for small and medium-sized enterprises and support industries, Campbell said, adding that these efforts have been recognised by many large investors and Vietnam have been included in their future development plans.
Vietnam’s BCI in the third quarter of 2023 has increased to 45.1% from 43.5% in the second quarter of this year, according to EuroCham.
The country’s global investment attractiveness remains strong, with 63% of surveyed businesses ranking the country in the top 10 FDI destinations, it said. In particular, 31% ranked Vietnam in the top three investment locations.
EuroCham Chairman Gabor Fluit, however, said that while promising Q3 GDP and FDI growth is seen, issues persist – especially with exports and real estate.
He went on to say that addressing administrative burdens, unclear regulations, and permitting hurdles is crucial to achieving progress.
Campbell suggested that to attract world-leading large companies, it is necessary for industrial park developers in Vietnam to focus on value-added services and incentives in addition to price and rentals such as market entry services, human resources and legal support, management services, sustainability initiatives and working with professional industrial real estate agencies.
https://en.vietnamplus.vn/vietnam-enhances-positions-in-global-value-chain/269943.vnp
Harambe: Zimbabwe’s Plan to Drop US Dollar in 2025 Seen as Non-Starter | Bloomberg (10/19/23)
The US dollar will remain the dominant currency in Zimbabwe even after the government’s December 2025 deadline to stop its use in the economy, the country’s largest independent asset manager said.
Imara Asset Management, which oversees more than $100 million, said the dollarization of the economy is actually accelerating since authorities curbed the local currency’s availability in July to preserve its value. Data from the national statistics agency showed 80% of all economic transactions in Zimbabwe are now done in the greenback, up from 75% earlier this year.
“We are making the bold assumption that the US dollar will remain in place for a good while yet,” wrote John Legat and Shelton Sibanda, the company’s chief executive officer and chief investment officer, wrote in a quarterly note to clients Thursday. “The loss of the use of the US dollar would be a disaster for the economy.”
The Zimbabwe dollar has had a rocky history. The southern African nation abandoned it in 2009 when hyperinflation set in, and turned to the US dollar as the main medium of exchange. The currency was reintroduced in June 2019, outlawing all other legal tenders including the greenback. But again, that policy policy was reversed in April 2020 following the onset of the coronavirus pandemic. The government currently plans to allow the use of the US dollar until December 2025 and no more.
The uncertainty over the next currency regime has forced banks to be cautious on lending beyond 2025. That’s raised borrowing costs for businesses and individuals and also curtailed the availability of funding for long-term investments. Previously, US dollar loans from banks were paid off in the local currency, with lenders suffering losses from the foreign-exchange volatility.
Banks and citizens want a stable currency that stores the value of their money and a stable environment must be created in the medium to long-term, according to Lawrence Nyazema, president of the Bankers Association of Zimbabwe.
“There is nothing wrong with using a mono-currency,” as long as the local unit is stable, said Nyazema. “The use of multi-currencies beyond December 2025 imply that banks can continue lending in the same currencies beyond the period.”
Finance Minister Mthuli Ncube said last week that authorities were “mulling over” the next steps on the currency policy. “We will not do things in a manner that will jeopardize the growth that we have seen so far,” said Ncube.
Zimbabwe’s President Emmerson Mnangagwa has fiercely defended a return to the sole use of the Zimbabwe dollar.
Meanwhile, Imara also cast doubt on the gold-backed digital money, the so-called “ZiG” launched earlier this month. It said there is no proof that the ZiG is either backed by any physical gold or can be converted into gold and is largely a “project” of the central bank.
“Whether the ministry of finance also supports the concept is still relatively unknown,” the Harare-based brokerage said.