Đề cương môn kinh tế chính trị- Trường Đại học bách khoa - Đại học đà nẵng.

OUTLINE Intro:
Good afternoon, everyone. Our Group 1 is pleased to be here today to discuss an important
topic: global economic uncertainties and their impact on Vietnam's international trading
activities. In this presentation, we will mainly explore two uncertainties which are the
geopolitical tensions and trade war leading to the supply chain disruptions, examine how
these economic instabilities worldwide influence Vietnam's trade dynamics, and how
countries like Vietnam navigate these turbulent waters.
maybe có thể có câu hỏi giao lưu trước hoặc sau phần intro: before we delve into this topic,
can you please tell us what you have known about global economics uncertainties or some
significant events that affect the international market ? Overview I.Definition
Economic uncertainty refers to a situation in which the future economic environment is
challenging to predict, and there is a high degree of risk or unknowns involved. II.Trade war
A trade war occurs when countries impose tariffs or other trade barriers on each other in
response to trade policies or practices perceived as unfair. Here are some key aspects:
1. Causes of Trade war
Trade Imbalances : Countries may perceive that they are importing more than they are
exporting, leading to calls for corrective measures.
Intellectual Property Issues : Disputes over the theft of intellectual property or technology can spark tensions.
Domestic Protectionism : Governments may seek to protect local industries from foreign competition.
2. Impact of Trade war: increase tariff, employment, supply chain disruptions, consumers’ behaviours….
III.Geopolitical tensions
Geopolitical tensions refer to conflicts and rivalries between nations influenced by
geographical, political, economic, and cultural factors.
1. Causes of Geopolitical Tensions
Territorial Disputes : Conflicts over borders and territories, such as those in the South China
Sea or between India and Pakistan.
Resource Competition : Nations may compete for access to natural resources like oil,
minerals, and water, leading to conflicts.
Political Ideologies : Differences in governance systems, such as democracy versus
authoritarianism, can create friction.
Historical Grievances : Past conflicts or colonial histories may fuel ongoing tensions. 2. Impacts
Geopolitical tensions can significantly affect global stability, economies, and international
relations by fluctuating energy prices, raising security concerns and trade disruptions…
**Ultimately, these two uncertainties have led to the supply chain disruption
Trade wars and geopolitical tensions can disrupt supply chains across various industries,
leading to increased costs, delays, and a reevaluation of sourcing strategies: political
instability can affect trade routes and supplier reliability and changes in trade policies can
disrupt established supply chains.
VIETNAM MAIN TRADING PARTNERS
● China: China is Vietnam's largest trading partner, accounting for a significant portion of its imports and exports.
● United States: The United States is another major trading partner for Vietnam, with a
growing bilateral trade relationship.
● European Union (EU): The EU is a significant market for Vietnamese goods, and
Vietnam has signed a free trade agreement with the EU.
● Japan: Japan is a long-standing trading partner of Vietnam, with strong economic ties.
● South Korea: South Korea is another important market for Vietnamese products, and
the two countries have a free trade agreement.
● ASEAN Member States: Vietnam is a member of the Association of Southeast Asian
Nations (ASEAN), and it has free trade agreements with other ASEAN countries.
Notable Trade Agreements
● European Union (EU): The EU-Vietnam Free Trade Agreement (EVFTA) is one of
Vietnam's most significant trade deals, providing preferential market access for both sides.
● United States: The Vietnam Comprehensive Agreement on Trade and Investment
(EVFTA) offers similar benefits to Vietnam's trade relationship with the United States.
● Association of Southeast Asian Nations (ASEAN): Vietnam is a member of
ASEAN and actively participates in regional trade initiatives, such as the ASEAN Free Trade Area (AFTA).
● Other Countries: Vietnam has also signed FTAs with countries such as South Korea,
Japan, China, Chile, and Australia.
III. Impact of Global Economic Uncertainties on VN's international trade
1. Trade volatility:
The economic uncertainties have led Vietnam into trade volatility. The result of these are the
fluctuations in exchange rates of VND, out of all the big countries that affect the instability of
the exchange rate in VietNam, like China or EU, USA has the most impact to this. Since
2022, the FED has continuously raised interest rates and kept effective rates at high levels to
control inflation, causing the USD to appreciate against other currencies. Accordingly, the
State Bank of Vietnam (SBV) has managed relatively stable exchange rates in order to
maintain domestic macro stability, support investments and other economic activities.
In that context, FED has thrice raised its key interest rate within just six months of 2022; with
the interest rate increases announced on June 15 (0.75 percentage points) being the highest
increase over the past 28 years. And the FED is expected to continue to tighten its monetary
policy in the coming time. The USD has appreciated strongly (the DXY index has increased
by about 10% since the beginning of 2022), causing the currencies of many large and
developing economies to depreciate sharply. These developments have adversely affected the
balance of supply and demand of foreign currencies, and the customers’ psychology in the
domestic market, putting pressure on the stability of the exchange rate and the forex market.
In 17/12/2022, SBV had to adjust the exchange rate from +3% to +5% and at the same time
negotiated with the USA government and Department of the Treasury to remove Vietnam
from the Currency manipulators monitoring list. As a consequence of this, VND only lost
4,35% of its value compared to USD. Despite the strong fluctuations in the international
market, the domestic forex market is still stable, the market liquidity has been smooth, and
the legitimate demands for foreign currencies have been fully and promptly met, especially
the demand for foreign currencies to import essential commodities for serving production and
business operations in the context of a sharp increase in energy and commodities’ prices.
But up till April 19 2024, SBV has announced it’s selling US dollar to intervene in the
USD/VNĐ, the greenback price has remained high, which has been directly affecting many
domestic enterprises like seafood import, mechanical or beverage manufacturing companies,
they will have to import materials with the higher costs by 4-5 percent and the international
transportation will cost higher due to the rising of gasoline prices
Exchange rate volatility can also create uncertainty for foreign investors, since a stable
exchange rate is often seen as a sign of economic stability, encouraging foreign direct
investment (FDI), making Vietnam less attractive to foreign investors. They may fear that
their returns could be eroded by unfavorable exchange rate movements.
2. Supply chain disruption :
It is obvious that Vietnam is deeply integrated into global supply chains, specifically
in manufacturing and electronics. Even though this can bring about many benefits and
chances for Vietnam to develop, if there is a problem, Vietnam is also impacted.
Starting in December of 2019, the outbreak of the COVID - 19 pandemic significantly
affects not only the health but also the supply chain in and from Vietnam. Firstly, being an
economy with a high degree of trade openness, Vietnam’s economy has been severely
influenced since many strict measures such as lockdown used to curb the situation have
restricted the import and export ways. As a result, this has led to a disrupted supply chain.
Figure 1 - The growth rate of the EU (EU-27)-Vietnam trade in the first quarter of
2020 is calculated by the author based on data from the General Department of Vietnam
Customs and General Statistics Office of Vietnam. The 2019 growth rate is also calculated on EU-27.
Here is one example of this case. Vietnam is the EU's second-largest ASEAN trading
partner and the largest exporter in Southeast Asia. The country's exports to the EU are mainly
consumer products, such as smartphones, footwear, and apparel, and the EU's exports are
primarily automobile and high-tech products. In the first quarter, Vietnam’s exports to the EU
dropped by 5%. China has long been the leading exporter of fabrics and garment accessories
for Vietnam. However, as China shows no sign of abandoning its zero-Covid approach, many
shipments of fabrics and garment pieces are piling up at its ports, leading Vietnamese
garment firms to delay production and delivery. In general, the disrupted supply chain not
only affected the import that Vietnam gained from China but it also influenced the proportion that Vietnam exported.
In 2020, due to the heavy impact of the COVID-19 pandemic, Vietnam’s textile and
garment industry faced many challenges, including breaking the supply chain of raw
materials. The supply chain, in terms of human resources, was also greatly affected. Orders
dropped significantly when Vietnam implemented social distancing. By the end of 2020, the
entire Vietnam textile and garment industry achieved an export turnover of 35.29 billion
USD, down 10.91% compared to 2019.
More than that, geopolitical tensions can also be a factor leading to the disruptions.
Recently, the Russia-Ukraine conflict has had many negative impacts on the supply chain to and from Vietnam.
Firstly, Ukraine is a major supplier of wheat, corn, and sunflower oil, while Russia is
a leading exporter of fertilizers, metals, and energy. The conflict has severely disrupted the
availability of these commodities on the global market. As a consequence, Vietnam's
agricultural sector, which relies on imported fertilizers and animal feed, has faced shortages
and rising costs. To be more specific, since 2021, the price of raw materials, including wheat,
corn, and soybeans, has surged by 30 to 40 percent, leading to the loss in profits of
Vietnamese firms in the industry at around 50-100 billion VND. The disruption in metal
supplies has also affected Vietnam's manufacturing sector, particularly in industries that
require steel and aluminum for production (ESMA).
Secondly, it is undeniable that the higher logistics costs can also influence the
international trade of Vietnam. The conflict has increased fuel prices and disrupted shipping
routes, leading to higher costs and delays for Vietnamese companies involved in international
trade. Besides, the fact that Vietnam has to find alternative trade routes, which can also
require a larger amount of money.
→ Sanctions and shifts in trade routes and sourcing can make international trade more
difÏcult and costly, making Vietnamese goods less competitive.
3. Market access and export growth: INTRODUCTION
Statistically, Global economic uncertainties can significantly impact market access and
export growth in countries like Vietnam. As a rapidly growing economy with an export-
driven model, Vietnam faces both challenges and opportunities.
1. Trade Policy Shifts and Market Access
● Tariffs and Trade Barriers: Global trade tensions, especially between major
economies like the U.S. and China, have a ripple effect on Vietnam’s export access.
Trade barriers, changing tariffs, or restrictions in key markets can directly limit
Vietnam's ability to expand its reach.Global trade tensions, particularly between large
economies like the U.S. and China, have significant implications for Vietnam's export
market. Since Vietnam relies heavily on its export sector, shifts in trade policies, such
as tariffs, trade barriers, and restrictions imposed by major trading partners, can create
direct challenges to its economic growth.
● For instance, when the U.S. and China impose tariffs on each other’s goods, Vietnam
might see an increase in demand as companies seek alternative suppliers. However,
this can also mean increased scrutiny on Vietnamese exports, as well as indirect
exposure to the consequences of disruptions in the global supply chain. Additionally,
if key markets impose stricter trade barriers or protectionist policies, Vietnam's access
to those markets could be limited, hindering its potential for expansion.
● Free Trade Agreements (FTAs): Vietnam has strategically signed numerous FTAs,
such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), which provide
significant opportunities for market access. However, any disruptions in global trade
environments (e.g., Brexit or policy changes in major economies) could impact the
stability and benefits of these agreements.
Evidence :The U.S.-China trade war, which began in 2018, led to a shift in supply
chains as companies sought alternatives to Chinese manufacturing. Vietnam emerged
as a key beneficiary, with significant increases in exports to the U.S. as businesses
relocated manufacturing there.
Statistics: According to the General Statistics Office of Vietnam, exports from
Vietnam to the U.S. rose by 27.8% in 2019, largely due to shifting trade flows from
China to Vietnam. Vietnam’s electronics and apparel sectors saw particular growth as
companies such as Samsung, LG, and others expanded production in Vietnam during the trade war .
2. Currency Volatility
● Exchange Rate Fluctuations: The global economic environment often leads to
currency volatility, affecting the Vietnamese money (VND). If the VND strengthens
against the U.S. dollar or the euro, Vietnamese products will be more expensive in
global markets, making them less attractive and reducing their demand. Conversely, a
weaker VND can enhance competitiveness but raise import costs, especially for inputs in manufacturing:
- Stronger VND: If the VND appreciates against the USD or the euro,
Vietnamese goods become more expensive in global markets. This could
reduce the attractiveness of Vietnamese products to foreign buyers, potentially
lowering demand for exports. Such a scenario may lead to a decrease in
revenue for Vietnamese exporters, especially in competitive industries like
textiles, electronics, and agriculture, where pricing is a key factor.
- Weaker VND: Conversely, if the VND weakens, Vietnamese goods become
cheaper for international buyers, boosting export competitiveness. However,
this comes with the downside of increasing the cost of imports, especially for
raw materials and machinery that Vietnam relies on for its manufacturing
sector. As a result, the cost of production could rise, impacting profit margins
despite increased export sales.
● Currency Depreciation of Trading Partners: If major trading partners experience
currency depreciation, it might reduce their purchasing power, leading to lower
demand for Vietnamese goods. For example, a significant drop in the Chinese yuan
could affect Vietnam’s exports to China, which is one of its largest trading partners.
● Evidence: The Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) have
improved Vietnam’s access to markets in Europe, Canada, and Japan. This has
boosted export volumes in sectors such as textiles, footwear, and agriculture. ● Statistics:
○ Vietnam’s exports to the European Union grew by 9% in 2021, with an
increase in key products such as footwear, textiles, and agricultural goods after the EVFTA came into effect .
○ The Vietnam Ministry of Industry and Trade reported that the CPTPP
contributed to a 7.2% increase in exports to CPTPP countries in 2021 .
● Example: Vietnamese textile exporters gained preferential access to European
markets, which allowed them to increase their market share, despite the global
uncertainty during the pandemic .
3. Foreign Direct Investment (FDI) and Export Capacity
● FDI Slowdowns: Vietnam’s export growth has been fueled by strong FDI, especially
in sectors like electronics, textiles, and machinery. Global economic uncertainties,
particularly in investor confidence, can slow down FDI inflows. Reduced foreign
investments can limit Vietnam’s capacity to expand its production capabilities, thus
constraining future export growth.
● Relocation of Manufacturing: However, uncertainties in other regions (e.g., trade
tensions, rising costs in China) have also prompted many multinational corporations
to move production to Vietnam, enhancing its export growth. Companies like
Samsung, Nike, and Intel have expanded their operations in Vietnam, contributing
significantly to the country’s exports.
● Evidence: Fluctuations in the value of VND against the USD impact export
competitiveness, especially in the agricultural and manufacturing sectors. Currency
volatility often correlates with global economic uncertainties. ● Statistics:
○ In 2022, the Vietnamese đồng depreciated by nearly 2% against the U.S. dollar due to
rising global inflation and economic instability . This devaluation made Vietnamese
exports more competitive but also increased import costs for inputs.
○ Vietnam’s rice exports rose by 19.3% in value in 2022 due in part to favorable
currency fluctuations that made Vietnamese rice more competitively priced . Conclusion
While global economic uncertainties pose risks for Vietnam’s export-oriented economy, the
country has demonstrated resilience by capitalizing on trade diversification, supply chain
shifts, and strategic policy alignments. However, its continued export growth will depend on
its ability to navigate these uncertainties, diversify export markets, and enhance
competitiveness through innovation and policy adaptation.
4. Strategic responses and adaptations I.
Government and policy responses in Vietnam.
Vietnam has undergone significant economic, social, and political changes over the past few
decades, driven by a mix of government and policy responses aimed at fostering
development, managing crises, and addressing global challenges. Below are key areas where
the Vietnamese government has implemented important policy responses:
1. Economic Policy Responses
Trade and Integration into Global Markets
● Policy: The government has pursued an aggressive strategy of trade liberalization,
entering into free trade agreements (FTAs) such as the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EU-Vietnam
Free Trade Agreement (EVFTA).
● Impact: These agreements have opened new markets for Vietnamese exports,
particularly in Europe and North America, while reducing tariffs on imports,
promoting industrial growth, and expanding Vietnam’s export-driven economy. ● Results:
- High Economic Growth: Vietnam has consistently achieved robust economic
growth, with an average annual GDP growth rate of 6-7% over the last two
decades. This growth has been largely driven by exports, FDI, and increased trade integration.
- Poverty Reduction: Trade liberalization and integration have contributed
significantly to poverty reduction. According to the World Bank, the poverty
rate in Vietnam fell from over 50% in the 1990s to less than 6% by 2021,
lifting millions out of poverty.
2. Health Policy Responses
COVID-19 Pandemic Response
Economic Support: The government also implemented various support measures such as tax
deferrals, financial aid packages, and low-interest loans to help businesses and workers impacted by lockdowns. ⇒Example:
- Export-Oriented Manufacturing: Specific industries that are crucial to
Vietnam’s export economy, such as electronics, textiles, and agriculture,
received targeted support. For example:
+ The government worked with Samsung, Intel, and other major manufacturers
to keep their production facilities operating despite global supply chain challenges.
+ For textile and garment manufacturers, the government supported shifts to
producing medical supplies, such as personal protective equipment (PPE),
which became a significant export product during the pandemic.
- Agricultural Exports: Vietnam supported agricultural exporters by ensuring
smooth operation of the supply chain and offering logistics solutions for
transporting rice, seafood, and coffee. The Ministry of Agriculture and Rural
Development (MARD) worked to ensure compliance with international
phytosanitary standards, facilitating agricultural exports even amid border restrictions.
3. Foreign Policy and Diplomatic Responses
● Regional Cooperation: Vietnam has played an increasingly active role in regional
diplomacy, particularly within the framework of ASEAN (Association of Southeast
Asian Nations). It has pursued peaceful resolution of disputes, particularly in the
South China Sea, while balancing relations with both China and the United States.
● Bilateral and Multilateral Agreements: In addition to trade agreements, Vietnam
has strengthened its international ties through multilateral diplomacy and participation
in global organizations such as the United Nations and World Trade Organization (WTO). II.
Business strategies in Vietnam.
Vietnam’s business strategies have evolved as the country transitions from a centrally
planned economy to a market-oriented one. Businesses in Vietnam are adopting strategies
that leverage the country’s growing economy, young labor force, integration into global
trade, and evolving consumer demands. Below are the key business strategies commonly used in Vietnam:
1. Export-Driven Strategy
● Goal: Focus on producing goods for export to international markets.
● How It's Achieved: Vietnam has embraced trade liberalization through free trade
agreements (FTAs) like the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) and EU-Vietnam Free Trade Agreement (EVFTA).
Businesses have aligned themselves to take advantage of these agreements by
focusing on export-led growth.
● Examples: Major sectors like electronics, textiles, footwear, and agriculture
(especially rice, coffee, and seafood) are export-oriented. Companies like Vinamilk
(dairy), TH True Milk (beverages), and Minh Phu Seafood Corporation have
aggressively expanded into global markets.
2. Focus on FDI (Foreign Direct Investment) Strategy
● Goal: Attract foreign investments to boost business operations and access technology.
● How It's Achieved: Vietnam has become a prime destination for foreign direct
investment, with the government offering favorable policies like tax breaks,
simplified regulations, and special economic zones (SEZs). Businesses are focusing
on forming joint ventures, strategic partnerships, and foreign investments to bring in new technology and expertise.
● Examples: The electronics sector, with companies like Samsung and Intel, has
thrived due to massive foreign investment in Vietnam. The government also promotes
FDI in high-tech sectors, renewable energy, and infrastructure development, with
large foreign firms increasingly setting up operations in the country.