A new chapter

Ly Xuan Thu is the only Vietnamese board member of Pan-Asia Risk and Insurance Management Association (PARIMA), which she says gives her the responsibility of developing a local PARIMA chapter. 

“We will establish a risk manager community in Vietnam and organise conferences and seminars here,” she says. “Risk management maturity in Vietnam is the challenge at this early stage. 

“However, most companies have a person in charge of insurance – maybe they take care of both insurance and risk management – so at an operational level, PARIMA can help them understand the benefits that ERM can bring to their company.”

Thu hopes that her work with PARIMA can elevate risk management practices in Vietnam to “international standards”. 

“That will help attract more investors and encourage them to learn more about Vietnam’s economy and opportunities,” she says.

PARIMA is a supporter of StrategicRISK’s upcoming Vietnam Risk Report. 

This will be made available, together with our other country reports, at www.strategic-risk-global.com/asia/asia-risk-report

Is Vietnam teetering on the edge of a trap?

Vietnam has risen out of poverty and reached a low middle-income level. However, it is now encountering macroeconomic instability and structural difficulties that are preventing further sustained growth, says Tran Van Tho, chairman of the Vietnam Asia-Pacific Economic Center.

In an Asian Development Bank Institute (ADBI) working paper, the professor of economics at Waseda University, Tokyo, writes that without drastic reforms, Vietnam may provide an early appearance of what is known as the ‘middle-income trap’. 

This refers to the phenomenon of countries stagnating after reaching the middle-income level and finding themselves unable to advance to the high-income level.

In the ADBI paper The Middle-Income Trap: Issues for Members of the Association of Southeast Asian Nations, Professor Tran points out that middle income is widely defined as ranging from $1,000 (€734) to $12,000, and that the per capita gross national income (GNI) of Vietnam reached $1,000 in 2008. 

He then asks whether low middle-income countries in Asia – Vietnam being a prime example – will continue to grow to the level of high middle-income countries, or will the ‘trap’ appear early, so that the country’s economy stagnates or shows slow growth, with per capita GNI stuck at about $2,000? 

“While the problem for high middle-income countries such as Malaysia and Thailand is in promoting innovation-oriented policy to maintain international competitiveness to avoid the trap, the problem for a low middle-income country such as Vietnam is promoting development of factor markets and ensuring equal competition among economic actors for efficient use of capital, land and other resources,” Tran writes.

“Even though Vietnam is just entering the low level of middle income, the trap may appear soon if the country fails to shift from gradual to drastic reforms of state-owned enterprises and economic groups, factor markets, and policy formulation.”

New reforms are required, Tran asserts, if Vietnam is to avoid a fall into stagnation or slow growth. 

He writes that these should be “characterised by high-quality institutions, which include private ownership of production factors, development of factor markets, corporate governance of SOEs and economic groups, wide participation of stakeholders in policy-making processes, transparency of policy and its implementation, and increasing quality of bureaucrats and technocrats”.