Despite a decline in the mineral sector, production in Vietnam is gaining momentum, thanks to improved business sentiment in response to the government’s favourable policies.

According to the General Statistics Office (GSO), the five-month index for industrial production (IIP) grew 5.7% on-year.

“Though this rate is lower than the 7.1% rise in last year’s corresponding period, it is higher than the 5.2% climb in this year’s first four months,” GSO stated in a report on the country’s five-month socio-economic situation.

Sectors with high increases in production include metal (36.2%), fertilizer (18.5%), cloth (15.3%), paint (12.2%), and electricity (10.3%).

However, according to the Ministry of Planning and Investment’s Department for Industrial Economics, the five-month IIP could have been higher without the government’s controlled decrease in the exploitation of natural resources, especially crude oil.

In this year’s first five months, the mineral sector went down by 9.1%, leading to a 2% reduction in IIP growth. Exploitation of crude oil and natural gas decreased by 12.3%.

These reduction rates are much higher than those in last year’s corresponding period, when the mineral sector shrank by only 1.2%, resulting in a 0.2% reduction in the IIP growth, and exploitation of crude oil and natural gas decreased by 2.4% year-on-year.

State-owned PetroVietnam reported that in April 2017, its crude oil and gas output hit about 1.3 million tons, down 11% year-on-year. In this year’s first four months, the group’s total crude oil output hit about 5.25 million tons, down 12.9%, or 780,000 tons, year-on-year.

The petrol giant plans to exploit about 14.2 million tons of crude oil this year, a number far lower than last year’s 17.23 million tons. Also, PetroVietnam expects its total revenue this year to be around VND437.8 trillion (US$19.9 billion), lower than last year’s VND452.5 trillion (US$20.57 billion).

Prime Minister Nguyen Xuan Phuc last week said that the economy is gradually recovering, with enterprises becoming more optimistic about doing business in Vietnam, thanks to the government’s friendlier business policies.

“The number of newly-established enterprises is rising, and local and foreign firms are showing greater confidence while doing business in Vietnam,” he said.

According to the GSO, this year’s first five months saw about 50,540 newly-established enterprises registered at US$22 billion, up 13% in terms of quantity and 39% in terms of capital. In last year’s first five months, the number of newly-established enterprises reached 44,740 registered at US$15.9 billion.

Also in this year’s first five months, operational enterprises added US$32.3 billion to their investments. Thus the economy’s total newly-registered and newly-added capital was US$54.4 billion, higher than the US$45.7 billion in last year’s corresponding period.

“In Vietnam, private consumption is expected to grow strongly. Consumer sentiment remains buoyant, as indicated by a November 2016 survey showing that 43% of businesses expected retail sales to improve in 2017 and another 39% expected conditions to remain stable,” said Aaron Batten, country economist from the Asian Development Bank while commenting on firms’ confidence in Vietnam’s existing economic situation.

Last week, EuroCham released the results of its Business Climate Index (BCI) for 2017’s first quarter. According to the index, 67% of the respondents described their current business situation as ‘excellent’ or ‘good’.

EuroCham members that intend to maintain their investment in Vietnam represent 42% of the total answers, up 2% from the last quarter of 2016. Also, intentions to increase investments also remain substantial, with a 4% rise from last quarter in those looking to invest significantly.

VIR