Easing travel restrictions to spearhead Vietnam’s economic growth

Growing economic momentum has sustained since early 2022 and the ease of travel restriction has set the economy in motion to achieve its development objectives for the year.

Tourism recovery would be a major boost for the economy. Photo: Cong Trung

On March 15, Vietnam officially reopened its border for foreign tourists. As part of the efforts to boost tourism, many provinces/cities have put in place incentive policies for the revival of the non-smoke industry, including a greater focus on tourism infrastructure development and simplification of the visa process.

The Ministry of Health in early March proposed a new regulation that no longer requires foreigners to present Covid-19 vaccine certificate or proof of recovery from the disease upon arrival, a move if realized would be a major boost for the tourism sector.

Bui Minh Dang, deputy head of the Air Transport Division under the Civil Aviation Administration of Vietnam, said such efforts from the Government would soon make the tourism sector's revival a reality.

According to Dang, with over 20 countries and territories relaunching air connections with Vietnam, the country may welcome eight million foreigners in 2022, including six million coming for tourist purposes.

Not only the tourism sector, but the ease of travel restriction after two years fighting the Covid-19 pandemic is also set to be a welcoming sign for trade and investment activities.

“The main driving forces for growth are the industry, agriculture, and services. The recovery of the tourism would benefit hospitality services, including hotels, and restaurants,” Vice Minister of Planning and Investment Tran Quoc Phuong said.

Phuong also said the delay in public investment would soon be resolved when foreign experts can return to Vietnam.

Chairman of the European Chamber of Commerce in Vietnam (EuroCham) Alain Cany expressed his optimism that the border reopening would see the return of foreign capital inflows and contribute to Vietnam’s economic growth in years to come.

Nikkei Asia Review cited a recent study from the International Monetary Fund (IMF) that forecast Vietnam’s GDP growth may reach 6.6% this year, and considers the FDI as a key driver for Vietnam’s economic growth.

Meanwhile, General Director of CocaCola in Vietnam and Cambodia Leonardo Garcia expected the economy to recover right in the first quarter of 2022.

CocaCola is set to grasp this opportunity created by economic recovery by betting on business expansion in the country, as revealed by Leonardo.

In a similar view, US-based Wanek Furniture also plans to solidify its presence in Vietnam once the pandemic is put under control.

Vice President of Wanek Furniture in Asia Andrew Lien stressed the high confidence in Vietnam’s future and expected to pour more capital into projects in the country.

During the first two months of 2022, the industrial production index rose by 5.4% year-on-year, with manufacturing and processing as the key growth driving force.

Trade and services also posted strong performance, with exports rising by 10% during the period. In addition, the number of newly-established enterprises and those resuming operations surged by 46.2% year-on-year to 42,600.

A report from the World Bank said the country’s economy continues to be on track for recovery, while an article on the Asian Investor predicts Vietnam to “emerge strongly from the pandemic and place itself firmly on the radar of foreign investors.”

“We wouldn’t be surprised if the GDP grows by more than 7% this year with the rebound in consumption, the expectation for a full reopening of the country to foreign tourists and the recently approved stimulus aid package,” VCG Partners chief executive Jason Ng was quoted on the Asian Investor as saying.

This does not mean the road is clear for Vietnam as uncertainties and challenges remain, which range from the volatility of global prices commodities as a result of the Russia-Ukraine conflict, high inflationary pressure, and continued struggle of the business community after two years of the pandemic.

To cope with the situation, the Government has proposed a 50% cut in environmental protection tax for fuel and gas products. This, along with other policies in VAT cut and keeping the foreign exchange rate stable, shows the strong determination of the Government in keeping the macro-economic conditions firm.

Standard Chartered Bank welcomed the Government’s move to forego nearly VND30 trillion ($1.32 billion) in revenue from a cut of environmental protection tax on fuels. The UK bank said the support from the Government in combination with the upcoming VND350 trillion ($18.5 billion) economic package may kick-start the economic recovery right in the first quarter of the year.