Vietnamese growth generates demand for Danish energy know-how
Vietnam has transitioned from being one of the least-developed nations in the world to now being among the fastest-growing economies globally. This growth entails a colossal need for energy, which Danish exporters should have an opportunity to cater for.
By: Rikke Mandrup Fogh, analyst with EKF
While the trade war between the USA and China has brought the global economy to a near-standstill, for some countries like Vietnam, that cloud has a silver lining. In the midst of a general economic slowdown, the success of Vietnam's free trade agreements and exports has made its economy one of the fastest-growing in the world.
Vietnamese economic growth has been sustained for several years now, and is forecasted to increase by a remarkable 6.7 percent in 2020. Less than two decades ago, in 1993, half the population of this country was living below the UN poverty line, but on the back of the economic boom, the poverty rate has been brought down to less than 10 percent.
This economic success was and is powered by exports, since this Southeast-Asian country has benefited from relocation of manufacturing operations from China to Vietnam.
With this advantage, Vietnam has become an attractive regional alternative to China for exports-destined production. Today, Vietnam's three main exports are mobile phones, electronics and textiles, all of which commodities were previously associated with China.
In fact, Vietnamese exports are now on such a roll that the country has been placed on the US currency manipulation watchlist, since, on the back of the trade war,
Vietnam has amassed a substantial trade surplus with the United States. In an American report, Vietnam has consequently been subjected to a full-scale investigation to determine whether the value of the Vietnamese Dong has been artificially suppressed relative to the US Dollar.
Growth comes at a cost
Vietnam's rapid growth and industrialisation are not without drawbacks. Over the last decade, energy consumption has more than tripled, and the nation's thirst for water is increasingly difficult to quench. This is because water productivity is extremely low as a result of pollution.
Another challenge is the growing population which is increasingly migrating to the cities. In 2018, the population count was 97 million, and this is predicted to reach 120 million by 2050. More people spells more pollution and waste, which require effective management in tomorrow's megacities.
The World Bank predicts that the volume of Vietnamese waste is set to double in the space of just 15 years. The problem is compounded by the huge volumes of plastic dumped in the country's rivers, and air pollution ranked as among the worst in the world.
Sustainable growth with opportunities for Danish exporters
The good news is that the Vietnamese government is well aware of the need to remedy the environmental impacts of the boom. There is now a growing interest in renewable energy, and in the Paris Agreement, the Vietnamese have committed to reducing their emissions of CO2 and greenhouse gases.
With more than 3,000 km of coastline, there are also ideal conditions for generating green energy from offshore wind, and Danish suppliers with EKF on the sideline have already supplied a number of Vietnamese wind farms. More Danish-Vietnamese energy ventures are in the pipeline, since sustained economic growth will depend on securing access to energy.
In addition to the key role of Danish exporters in Vietnam's green transition, increasingly, there are now also openings for other Danish businesses. Vietnam's 100 million – and rising – population is enjoying increasing purchasing power, with money to spend on goods such as mink pelts, medicines, machinery and fish from Denmark. Danish exports to Vietnam are currently worth around DKK 3.5 billion per annum, and this figure is likely to increase in the coming years.