Vietnam among world top 10 fastest-growing ultra high net worth countries

The global ultra wealthy population, comprising people each with a net worth above $30 million, expanded by 12.9% year-on-year in 2017 to 255,810 individuals

Vietnam has registered annual growth rate of 12.7% in its ultra-high net worth (UHNW) population since 2012, standing firmly among the world's top 10 fastest-growing UHNW countries, stated data firm Wealth-X. 

On the list, Vietnam is only behind Bangladesh and China, which posted growth rate of 17.3% and 13.4%, respectively, stated the latest report. 

According to the report, economies such as Vietnam, Bangladesh and India are expanding at a faster pace and experiencing rapid urbanization, infrastructure investment and manufacturing growth. 

Overall, the state of the world's ultra-wealthy population, or those with US$30 million or more in net worth, rose by 12.9% year-on-year in 2017 to 255,810 individuals. This was a sharp acceleration from growth of 3.5% in 2016, reflecting significantly more favorable conditions for wealth creation, despite still volatile geopolitics.

Buoyed by a synchronized upturn in the world economy, rising asset markets, and robust corporate earnings, the combined net worth of the UHNW population increased by 16.3% to US$31.5 trillion, implying healthy gains in average net wealth.

A testament to the auspicious economic climate, the ultra-wealthy population and its total net worth increased in all seven major regions, contrasting with the diverse performances seen a year earlier.

The US remained by far the dominant UHNW nation in 2017, with an increase by 8.9% of its ultra-wealthy population year-on-year to 76,000 individuals -  almost matching the combined total of the next six largest UHNW countries and equivalent to 31% of the global population, which was followed by Japan, China and Germany. 

Asia has three representatives in the top 10, including Japan, China and Hong Kong (China), which is also has the fastest growth rate. 

On average, the ultra-wealthy Asian industrialists are slightly younger than the UHNW population as a whole, as almost a quarter of the total 19,005 ultra wealthy individuals are aged below 50. 

Vietnam economic restructuring remains sluggish: CIEM

Vietnam's effort in economic restructuring leaves much to be desired in four main pillars, including reforms on state sector, public investment, credit institutions and stock market, according to the Central Institute for Economic Management (CIEM). 
 
Although Vietnam's macro-economic fundamental has been stabilized, coupled with high economic growth rate and growth quality, there remain inefficiencies in resource allocation in the economic restructuring during the 2016 - 2020 period, stated Nguyen Dinh Cung, CIEM's director, at a conference on September 5. 

More importantly, the shift of economic activities away from agriculture toward services and manufacturing, from rural to urban areas, or state sector to public sector was slower than expected, Cung said. 

Vietnam's manufacturing and processing sector has been growing strongly, however, local manufacturers only take part at the lower end of the global value chain, thus contributing modeslty to economic growth. 

Nguyen Thuy Hien, deputy director of the Ministry of Industry and Trade's Planning Department, pointed to the lack of breakthroughs in Vietnam's industrial sector. One of the major issues was the slow progress in reforming public investment as regular budget spending remains over 65% of total expenditure, nearly double ASEAN's average rate of 35%. 

Moreover, expenditure for development investment has not met up to demands. 

"Excluding revenue from land use rights, total revenue from domestic taxes and fees are at moderate level," stated Vu Sy Cuong from the Academy of Finance. 

Overall, Vietnam's state budget expenditures (as per  GDP) are much higher than those of low-income countries, according to the International Monetary Fund (IMF). 

There have not been proper measures to improve efficiencies in public investment and avoid waste, Cuong added. 

Another issue was potential risks of bad debts in the banking system, accounting for 7% of total credit by the end of 2017. As of August 28, the rate stood at 6.8% as informed by the State Bank of Vietnam (SBV). 

During the 2016 - 2020 period, Vietnam sets the average GDP growth rate of 6.5 - 6.7%, while reducing state budget deficit to below 3.5% of GDP by 2020. Additionally, public debt in the period must not exceed 65% of GDP, government debt less than 54% and foreign debt under 50%. 

Moreover, the average annual growth rate of productivity is estimated to be over 5.5%. By 2020, workforce in the agricultural sector would be reduced to below 40% of the total. 

With regard to the finance and banking sector, the bad debt ratio in credit institutions is set to remain below 3% by 2020, and market capitalization of the equity market at 70% GDP. 

The head of CIEM stressed the necessity of having more substantial changes in economic restructuring in the 2018 - 2020 period, while efforts should be made to identify new growth engines.

Cung proposed budget discipline, more efficiency government spending, and greater transparency in a bid to reduce regular spending. Meanwhile, investments in infrastructures have to focus on priority fields holding high importance to the economy. 
Additionally, modernizing the process of master planning, restructuring economic zone towards higher productivity, efficiency and quality should be priority, he continued. 

"For an additional increase by every one percentage point in GDP of Hanoi and Ho Chi Minh, the overall GDP will increase by 0.5 percentage points, as the two cities contribute 50% to Vietnam's GDP," Cung said. 

Besides, the government should be more supportive in developing the private sector and having efficient strategies in attracting foreign investment capital, according to Cung. 

Banking expert Can Van Luc cited a report of an international organization listing a number challenges to Vietnam, including bureaucracy, corruption, lack of transparency, policy inconsistency, inappropriate infrastructure and low productivity. 

Luc stated the remaining three years in the 2016 - 2020 period would be a turning point for Vietnam in transforming the economic growth model from a focus on quantity to quality. 

Meanwhile, Vietnam should apply market mechanism to all aspects of the economy, ensuring fair competition for economic participants. "Without competition there will be no development in field of science and technology," Luc stated.

Standard Chartered in July raised its growth forecasts for Vietnam to 7% this year, based on the influx of foreign direct investment.

Fighting elephants just might give the nimblest (or luckiest) ants a chance to thrive, which in this case is Vietnam, stated New York Times in a recent article. 

China and the United States, are now that country's most important trading partners. Together, the two countries gobbled up roughly 35% of Vietnam's exports last year, furthering its transformation from sleepy purveyor of rice and coffee to manufacturing hub.

When the trade war broke out, so did the ominous headlines in Vietnam. A rapid devaluation of the Chinese yuan sparked a brief run on Vietnam's currency and a drop in its stock market. Rumors spread about an influx of cheap Chinese consumer goods and the threat of American protectionism spreading in ways that would affect Vietnam's vital exports. And there was a tangible concern: Nearly US$5 billion of Vietnamese exports are part of China's value-added supply chain, meaning they may feel the impact of being exposed to punitive American tariffs.

Soon another sort of reaction began taking place. Driven by the dangers of the trade war, many foreign companies with stakes in China have started shifting production away from China to Southeast Asia. 

One sign of this development was on display in mid-July, when a group of visitors showed up on Vietnam's northern coast near Ha Long Bay. 

They represented 72 Japanese businesses, in industries ranging from textiles to electronics, and they were looking for economic refuge. "Many of these Japanese firms have been operating in China," Nguyen Duc Tiep, an official from the local-investment promotion center, told a Vietnamese magazine."

"They want to expand their investment markets out of China to shun risks caused by the nation's rising production costs and by the U.S.-China trade war, which is making it hard for Japanese firms to export their products to the U.S. from China."

The Japanese businessmen may be among the trade war's first economic victims. But the shift of manufacturing away from China is not a new phenomenon. Over the past few years, as wages in Chinese factories have risen sharply, many companies, foreign and Chinese alike, have begun moving at least some of their operations to Southeast Asia to take advantage of lower production costs. 

In Vietnam, where wages are barely a third of those in China, Adidas now makes twice as many shoes as it does in China, and Intel and Samsung Electronics have made billion-dollar investments there. The country's export-led growth depends on attracting foreign investment, and now American and Chinese policies may be hastening its arrival.

"For many companies, the trade conflict is a catalyst to explore changes they hadn't contemplated before," says Jon Cowley, a tax-and-trade partner at the law firm Baker McKenzie in Hong Kong. "For others, it's an accelerant to a process they'd already started. The trade conflict is just pushing them over the finish line."

As the battle escalates, there's a worry that Chinese companies may shift more operations southward, too, using ''tariff-jumping" tactics to get their goods to the United States. The Vietnamese, at least, are vigilant against Chinese intrusions.

It is likely that Vietnam might benefit from China's conflict with the United States, a country that, despite its own protracted war here, has become one of Vietnam's strongest partners.

Nobody can predict all of the pain and permutations of the trade war. The Vietnamese government is cautious, even projecting negligible declines in growth over the next five years. Others are far more sanguine. In July, Standard Chartered raised its growth forecasts for Vietnam to 7% this year, based on the influx of foreign direct investment.

In addition to attracting companies hedging their Chinese bets, Vietnam may also pull in American buyers eager to diversify their imports from outside China. "The consensus before was that T.P.P. would be the catalyst," says Michael Kokalari, chief economist at the Vietnam-focused asset-management firm VinaCapital. 

"But the trade war could be the thing that really opens the floodgates." In Vietnam, fighting elephants just might give the nimblest (or luckiest) ants a chance to thrive, New York Times wrote on concluding the article.

Vietnam's government bond market is considered small compared to other countries in the region, requiring solutions to expand its scale and become an efficient capital mobilization channel for the state budget. 

Under the government instruction, the MoF is tasked with restructuring public debt for the purpose of extending the maturity of outstanding government bonds and diversifying investors in the government bond market.

Recently, as government bonds were issued in the market with various maturities, investors were diversified, translating into a sharp reduction in the holding rate of commercial banks.

As of the end of July, the holding rate of commercial banks was 51.1% (a sharp decrease compared to the rate of 79.7% in 2014), equivalent to that in regional countries such as Singapore, Malaysia and was lower than that in China (68%) and Thailand (60%). 

The remaining list was held by investors such as the Vietnam Social Security, insurance companies that mainly were life insurers, the Deposit Insurance of Vietnam, foreign investors and other investors.

Additionally, the MoF has been stepping up effort in finalizing the legal framework, creating foundation for the creation and development of long-term investors and a sustainable market. The move would make the government bond market less dependent on banks.

Although the Vietnamese government bond market has sharply developed over the past time, compared to the potential of the economy and other countries in the region, the size of the local bond market is still insignificant. 

Phan Thi Thu Hien, head of the MoF's Finance-Banking Department cited the low development level of the economy as one of the main reasons, leading to low capital accumulation of economic groups. 

As of July 2018, the outstanding debt of Vietnam's bond market was 39.9% of GDP in 2017, of which the outstanding debt of the government bond market was 29.2% of GDP. At present, the size of the bond market in Malaysia is 95% of GDP (the government bond market accounts for 49.7% of GDP); that of Singapore is 81.1% of GDP (the government bond market accounts for 49.6% of GDP), that of Thailand is equivalent to 73% of GDP (the government bonds account for 53% of GDP), that of South Korea is 124.6% of GDP (the government bond market accounts for 73.6% of GDP), that of China is 68.8% of GDP (government bond market accounts for 49.8% of GDP).

Under the government's strategy for bond market development in the 2017 - 2020 period, with vision to 2030, Vietnam's government bond market is expected to become a major channel of capital mobilization for the state budget and basis for financial market development. 

Following this target, the MoF will focus on developing new products in the bond market and the operation of the derivatives stock market, stated Hien. 

Additionally, the Vietnam Social Security is requested to participate in buying and selling the government bonds in the market, aiming to attract long-term investors and develop voluntary pension funds and pension insurance products, she added.

Vietnam collected VND84 trillion (US$3.58 billion) in August for the state budget, accumulating a total of VND871.8 trillion (US$37.24 billion) in the first eight months, equivalent to 66.1% of the year's estimate and up 13.8% year-on-year, stated the Ministry of Finance.  

Of the total, collections from domestic taxes and fees in August reached VND62.5 trillion (US$2.67 billion), down VND31 trillion (US$1.32 billion) against the previous month. 

This resulted in a total of VND695.8 trillion (US$29.72 billion) in the January - August period, equivalent to 63.3% of the estimate and up 14.8% year-on-year. 

There were 44 out of 63 provinces with domestic revenue equivalent to the estimate of over 67% and 60 out of 63 provinces with higher revenue year-on-year. 

Revenue from crude oil in August stood at VND5.3 trillion (US$226.43 million), totaling VND40.9 trillion (US$1.74 billion), or 113.9% of the year's estimate and up 35.1% year-on-year, while revenue from trade jumped to VND25.8 trillion (US$1.10 billion), bringing the eight-month value to VND199.7 trillion (US$8.53 billion), or 70.6% of the estimate and up 4% year-on-year. 

Meanwhile, Vietnam's state budget expenditures in August hit VND113.8 trillion (US$4.86 billion), reaching a total of VND873.5 trillion (US$37.31 billion) in the first eight months, equivalent to 57.3% of the estimate, up 10.2% year-on-year.

This led to budget overspending of VND1.7 trillion (US$72.69 million) from the beginning of the year to the end of August, a significant improvement from a deficit of VND6 trillion (US$257.45 billion) recorded 15 days earlier. 

As of August 27, regular spending reached VND484 trillion (US$20.67 billion), equivalent to 56.12% of the estimate. Expenditure for development investment stood at VND176.83 trillion (US$7.55 billion) in eight months, equivalent to 44.24% or the target set by the National Assembly and 45.57% set by the government.

During the January - August period, the government's payables were posted at VND152.71 trillion (US$6.52 billion), of which foreign and domestic debts were VND122.8 trillion (US$5.24 billion) and VND29.91 trillion (US$1.27 billion), respectively. 

The total premiums collected by insurance companies in the first eight months of 2018 stood at VND80.83 trillion (US$3.45 billion), up 38.81% year-on-year.

In the first eight months of 2018, total assets of insurance companies operating in Vietnam were reported at VND365.52 trillion (US$15.61 billion), up 35.16% year-on-year, according to the Ministry of Finance. 

During the January - August period, insurance companies reinvested VND289 trillion (US$12.34 billion) into the economy, up 27.63% year-on-year.

The total premiums collected by insurance companies in the first eight months of 2018 stood at VND80.83 trillion (US$3.45 billion), up 38.81% year-on-year. 

In September, the MoF will continue finalizing the proposal of restructuring the securities and insurance market in the 2017 - 2020 period, while cooperating with international organizations to revise the insurance business law.

The MoF's Insurance Supervisory Authority (ISA) previously said it will step up efforts in restructuring the insurance market in the remaining months of the year towards transparency, safety and efficiency.

The ISA stated the Vietnam's insurance market maintained steady growth in the first six months of 2018. Specifically, total assets of companies in the industry stood at VND337 trillion (US$14.82 billion), up 27.33% year-on-year.

During the January - June period, a total of VND277.38 trillion (US$12.2 billion) was reinvested into the economy, up 27.47% year-on-year, while professional reserves jumped to VND218.3 trillion (US$9.6 billion), up 36.83%. 

Meanwhile, equity of insurers reached VND71.1 trillion (US$3.12 billion), up 27.87% year-on-year in the first six months. Additionally, the total premium collected by insurance companies stood at VND58.6 trillion (US$2.57 billion), up 24.35% year-on-year. Also in this period, companies paid VND16.32 trillion (US$718 million) in insurance benefits to customers, up 22.43% year-on-year. 

According to the Vietnam Insurance Association, up to 18 companies are active in Vietnam's life insurance market. Except for Bao Viet Life Insurance, which is a Vietnamese business, the remaining ones are joint ventures and wholly foreign-owned insurers, including the presence of the world's leading finance and insurance groups. 

In 2018, Vietnam's insurance market revenue is set to grow 22.38% year-on-year to reach VND129.2 trillion (US$5.68 billion). 

The market's revenue in 2017 reached VND105.6 trillion (US$4.64 billion), up 21.2% year-on-year, marking the fourth consecutive year with growth rate exceeding 20%. 

Eighty Southeast Asia startups to feature at WEF ASEAN in Hanoi

Up to 80 start-ups across Southeast Asia have been selected by a panel of judges from start-up accelerators, venture capital funds, technology experts and media leaders to will take part at the World Economic Forum on ASEAN in Hanoi on September 11-13.

The start-ups selected come from across the region and represent a wide variety of sectors, from financial services, logistics and e-commerce to agriculture, media and healthcare.

The products and services they are developing range from smart fertilizers that reduce nitrous-oxide emissions (a potent greenhouse gas) to sharia-compliant Bitcoins to new healthcare options for elderly care.

“We expect the start-ups to make an important contribution to shaping the debates at the meeting about the impact and course of new technologies and disruptive business models. We believe that they will enrich important discussions about how to upgrade innovation ecosystems and promote entrepreneurship,” said Justin Wood, head of Asia Pacific and member of the Executive Committee at the World Economic Forum.

“The start-ups will also benefit from their interactions with the other 1,000 participants at the summit, including 90 government ministers and 600 business leaders from more established companies,” Wood added.

During the meeting, the start-ups will be fully involved in the official program but will also have their own dedicated program track to discuss critical issues facing entrepreneurs, from finding finance to achieving regional scale with limited resources. 

There will also be a dedicated “hub” for the start-ups to share their stories of disruption and transformation.

Once the meeting is over, the forum hopes to establish a permanent community for the start-ups to support their growth and development.

“The theme of the meeting is ASEAN 4.0: Entrepreneurship and the Fourth Industrial Revolution, which reflects the significant transformations and disruptions that are now unfolding across Southeast Asia,” noted Wood.

“One of the important responses to the challenges raised by disruptive technologies is entrepreneurship. It is through innovation that the region will grow the companies, shape the policies and build the economic systems of the future,” he added.