báo cáo NGHIÊN cứu về tác ĐỘNG của SUY THOÁI KINH tế TOÀN cầu tới môi TRƯỜNG KINH DOANH tại VIỆT NAM e

Executive SummaryThis report aims to provide analysis on the impacts of future Global Recession forecasted to occur anytime from 2013 to 2015 on the world economy generally and Vietnam e

BÁO CÁO NGHIÊN CỨU VỀ TÁC ĐỘNG CỦA SUY THOÁI KINH TẾ TOÀN CẦU TỚI MÔI TRƯỜNG KINH DOANH TẠI VIỆT NAM RESEARCH REPORT ON IMPACT OF GLOBAL RECESSION ON VIETNAM

Executive Summary

This report aims to provide analysis on the impacts of future Global Recession forecasted to occur anytime from 2013 to 2015 on the world economy generally and Vietnam economy particularly By applying theories on International Corporate Finance to analyze data collected from various sources, the report comes to major conclusions on Global Recession’s impacts on global economic environment, Vietnamese environment, Vietnamese enterprises and investors in Vietnam Based on that, it is recommended Vietnamese enterprises to expand export market and develop local market; to re-organize labor forces and save costs; to manage State Budget using more strictly

Table of Contents

Executive Summary

Table of Contents

1 Introduction

2 Discussion and findings

3. Conclusions

4. Recommendations

5 References

1 Introduction

Since 2008, we have seen two conservative crisises, US financial crisis and EU debt crisis The two crisises did not only make negative impacts on US and EU economy but also strongly affected economies in South East Asia, devastating efforts to develop economy of countries in the region At the moment, there are several scenarios outlining for outlook of the world economy from 2013 to 2015 However, almost financial experts think that a new Global Recession will happen with more severity Hence, it can be said that the world economy is facing with the risk to suffer more difficulties and hurdles from the future Global Recession South East Asia, by that time, will be affected strongly According to forecast for worst scenario, this region will be the most affected one as highly dependent on Euro market

Vietnam will not stay out of the influence if Global Recession happens as predicted Therefore, it is needed to have a comprehensive report analyzing possible effects on Vietnam business environment Then, Vietnamese enterprises can be aware of potential financial risks and prepare for reaction

2 Discussions and findings

2.1 Effects on Vietnam business environment

 Uncertainty in financial market

Following current Eurozone debt crisis, the future Global Recession will create unpredicted fluctuation in foreign exchange rates Since Eurozone debt crisis came to serious period, EUR has devaluated versus USD and JPY, and it is forecasted that USD and JPY will continue raising up against EUR for their better safety This trend obviously makes increasing risks for export-import companies of Vietnam in borrowing, repayment and settlement in foreign currencies Foreign currencies trading

of commercial banks will also be affected

Besides foreign exchange risk, there are still other consequences of the Recession to Vietnam financial market such as high interest rate, stock market goes down and frozen real estate market,…

 Reduction in international trades

Currently, USA and EU are the biggest export markets of Vietnam Below is the export structure of Vietnam in 8M-2012

(Source: Vietnam General Statistic Office)

Thus, the future Global Recession will have serious damages for Vietnam export industry, specifically:

- Decreasing on import demands from major markets, namely USA and EU as these countries are the most affected economies by the Global Recession

- Although being impacted less, other countries also have difficulties from the recession and they finally reduce import demand as well

- Price of the main exporting products of Vietnam such as oil, rice, garment, rubber, coffee, seafood, will decrease

 Decrease in funds from overseas

Following export, the most affected area, incoming funds from overseas will stagnate Vietnam has been depending much on foreign investment fund to develop its economy, thus, the developed countries tighten investment cash flows resulting in shortage of fund for Vietnamese enterprises Furthermore, investors will tend to purchase gold, the safest assets in recession Consequently, indirect investment funds become more scarce

Other incoming foreign funds will also decrease such as overseas national foreign currency funds, income from service, tourism, currencies trading, transportation, etc

2.2 Effects on global business environment

In global view, the future Recession will lead to more consequences on a large scale The most severe ones are as below

First, the most noticeable impact is the decline in global trade Production output and purchasing power of USA and EU decrease, individual consumption as well as private investment will be reduced remarkably As a result, there will certainly be a sharp fall

in importing of materials and products from other countries

Second, weakened EUR will impact on countries depending on EU market as weakening EUR will boost exports of European countries However, this is a nightmare for Asian exporters who depend heavily on exporting to EU markets

Third, goods and raw materials prices will fall Due to high oil prices, the world demand for goods has increased dramatically in recent years However, this situation will not last long because of the U.S and China slowdown, accompanied by a drop in demand for commodities such as oil, food and minerals This will negatively impact exports and economic growth of the exporting countries in Africa, Latin America and Asia

Fourth, investors’ trust will decline and this situation has also spread to the financial markets all over the world Investors will turn accumulated assets which are safe and high conservation value such as gold

2.3 Effects on enterprises and shareholder value

If the global recession actually occurs, the value of enterprises and investors will face with risks of significant devaluation For enterprises, their value will decrease directly

by lower profitability and indirectly by inflation and high interest rates Moreover, the decline of the stock market leading to fall down of most stocks will lower value of enterprises and the shareholders

In addition, exchange rate fluctuations will make foreign investors afraid to invest in economies with weak currencies because the value of their assets will be reduced by the depreciation of the domestic currencies

2.4 Impacts of political influences on Vietnam business environment

Basically, the political situation of Vietnam is considered to be stable due to the single-party regime However, there are still downsides such as rigid management model, lack of flexibility, enabling negativities This influences considerably on the business environment, namely:

 Foreign investors are afraid of Vietnamese market due to corruption Foreign investment fund is allocated mainly for state-owned enterprises, but the effectivity of fund usage is at the lowest level compared to other economic sectors Most of state-own corporations invest in various fields instead of focusing on core business This leads to serious fund losses, especially Vinashin case

 Government’s protection policy for state-owned enterprises does not only affect the attraction of foreign investment but also decrease the confidence of private investors in the country

 Political conflict between Vietnam and China will impact businesses in Vietnam because China is one of the largest trading partner of Vietnam today

3 Conclusions

From the discussion and findings in the second part, the report comes to the following main conclusions about the impact of the future Global Recession on Vietnam and the global economy

Firstly, the global economic downturn will make global trade decline, weak EUR will change the flow of goods exported from Asian countries to Europe to the reverse direction, the prices of goods and raw materials will go down and the confidence of investors decline makes the gold become the most attractive investment options Secondly, Vietnam business environment and Vietnamese enterprises will have to suffer the impact of declining exports, tightened investment fund, reducing local consumption and narrowing down production scale

Thirdly, the most affected industries in Vietnam are crude oil, garment and textiles, rice, rubber, coffee, seafood

Finally, the risk of devaluation of assets value, together with corruption and bureaucracy, will make the domestic and foreign investors afraid of investment into the Vietnamese market

4 Recommendations

From the above conclusion, it is seen that making a reaction plan to impacts of future Global Recession is really necessary Based on the results of research and analysis, the report made the following recommendations for Vietnamese enterprises

 Expand export markets and strengthen domestic market

Increase exports to neighboring countries in Southeast Asia is a good way to reduce dependency on traditional export markets which are expected to be most severely affected by the global downturn

Besides, more focuses on developing the domestic market is also necessary

 Restructure the human resource and save costs

Restructure the human resources should be made in a positive way, such as rotation between parts, reducing work hours, alternate layouts stay Also, the companies shoud conduct staff training in order to enhance employees’ skills, thereby to improve business efficiency

 Manage state expenditure strictly

To reinforce investors’ confidence and enhance the competitiveness of Vietnam in attracting foreign investment, public expenditure management and fund utilization of state-owned enterprises should be managed more closely

5 References

http://seekingalpha.com

http://www.bbc.co.uk/

http://businessinsider.com

http://guardian.co.uk

http://vneconomy.vn/tai-chinh

Vietnam General Statistic Office