Illustrative photo (Source:Internet)
Hanoi (VNA) - Minister of Planning and Investment Nguyen Chi Dung has said the British vote to leave the European Union (EU) would not have immediate impacts on Vietnam, but long-term impacts must be taken into account.

“We have preliminarily analysed how the Brexit influences the world and Vietnam. The event is yet to have any significant impacts on Vietnam,” Minister Dung said during a dialogue on investment policies in Hanoi on June 28.

According to Dung, the UK and the EU are currently not very big partners in terms of trade and investment with Vietnam. However, the Brexit will affect currency developments in many countries, including trade partners of Vietnam, and thus affect the country in indirect ways.

Experts agreed with this point of view as they discussed the issue during an online talk held by investment forum BizLive the same day.

Nguyen Mai Phuong, a director of analysis with brokerage firm VNDirect, pointed out that Vietnam’s trade revenues with the UK accounted for 3-4 percent of Vietnam’s total foreign trade values.

The value of Vietnamese exports to the UK represented about 2.3 percent of Vietnam’s gross domestic product, according to another director of analysis, Nguyen Duc Hung Linh, from Sai Gon Securities Inc.

Here are expert answers to some major questions discussed during the online round table:

When asked how Brexit will affect Vietnam’s finance and its foreign investment influx, Vo Tri Thanh, the former deputy director of the Central Institute for Economic Management (CIEM), said Vietnam might face disadvantages in the trade balance because of possible depreciations in the currencies of a number of its trade partners.

But appreciations in some other currencies, such as the Japanese yen, would help improve the competitiveness of Vietnamese exports.

“UK direct investments in Vietnam are not too great, but capital flows pouring into Vietnam via the UK are significant. These inflows may slow in the short term due to the UK and EU’s struggling situation,” he said.

“Capital flows will also seek ‘safe havens’. If Vietnam can prove a more stable economy and a better business environment, investors may be more interested in its market. This will depend on macro-policy responses and reforms of the country,” he added.

Le Dang Doanh, the former director of CIEM, said the announcement last week that the domestic stock market lost 1.1 billion USD since the Brexit vote was quite a heavy loss.

Thanh said that because foreign investors play an important role in the local stock market, the loss is “understandable”. After “overshooting” investors’ reactions, the market is likely to reach a new balancing point that is based on global economic developments and reforms.

Regarding what Vietnamese policymakers should do, Thanh said “Macro policies must be more flexible, although it is not always easy to choose between policy flexibility and economic stability. The co-ordination of monetary and fiscal policies needs special attention, and assuring discipline in State budget operations is necessary for effective monetary policies.”

“The market is interested in the European Union – Vietnam Free Trade Agreement (EVFTA), whose progress is likely to slow,” said Can Van Luc, a member of the National Financial and Monetary Advisory Council.

The top priority of the EU and the UK now is to deal with Brexit consequences, so Vietnam will have more time for legal reviews with the EVFTA. Vietnam may also negotiate an FTA with the UK, according to Luc.

In the meantime, the banking and finance sector should intensify risk management. “The Government should establish a derivatives market and use it as a tool to manage risks,” Luc said.

Banking expert Nguyen Tri Hieu said the State Bank of Vietnam should closely observe fluctuations of the Chinese yuan for timely adjustments of the Vietnamese dong, since China is the largest import market of Vietnam.

On the future for the ASEAN Economic Community (AEC), Huynh The Du, Director of the Fulbright Economic Training Programme, said there are big gaps between Southeast Asian nations in their economic development levels. “It will take a very long time for the AEC to become lively,” he said.

Nguyen Mai, Chairman of the Vietnam Association of Foreign Invested Enterprises, reportedly told the dialogue on investment policies that members of the ASEAN community will have to work to reach a consensus on economic policies, especially those related to the law, taxes and administrative mechanism.

“This is needed for the region to avoid a ‘Brexit ASEAN,’” he said.

Nguyen Bich Lam, the head of the General Statistics Office, reportedly told a press conference on the day that it would review UK investment projects in Vietnam.

This agency would assess possible changes in investment policies when the UK exits the EU, and scrutinise taxes applied for relevant import and export goods, he said.-VNA