An Overview of the

Global Financial
Crisis
Presented by Ta Quang Ngoc,
Ph.D, M.A., and B.A., in
Communications and Socio-
economic Researches
• Professor Paul Krugman, the author of New Free Trade
Theory, awarded the Nobel Economics Prize by the Royal
Swedish Academy of Sciences, said that free trade is not
always a good policy for nations.
• He sharply criticised the US economic policies under
president G.W. Bush
• In 2005, he predicted the property crisis in the US and
believed the US economic crisis could still last until 2010.
• The US and the whole world are facing the worst ever
financial crisis which can compare with the Great
Depression in 1923-1929 which former FED chairman Alan
Greenspan rated as one that could happen only once in a
century. Since its foundation as the USA, the country has
experienced many recessions with the first in 1819, then in
1832, 1857, 1883, 1893, 1907 and 1920.
• In October 1929 the Wall Street collapsed and rocketed the
US and many other countries’ economies.
• Now the world’s witnessing the worst ever economic crisis
happening in most powerful country where many economic
theories were born and many economists were awarded the Nobel
Economic Prizes.
• This forces people to reconsider basic economic theories relating
to free trade in which perhaps the most important relationship
between the self-regulating rule of the market and the regulating
role of governments. The following are two examples of market
self-regulating trends.
• When the 1929 recession occurred US Secretary of the Treasury
Andrew Mellon asked the president to let enterprises do business
at a loss and go bankrupt during the recession cycle and the
economy would become healthy.
• In the 1980s, US president Ronald Reagan and UK PM Margaret
Thatcher encouraged the free trade theory in the two powerful
economies, pursuing the policy of weak government, strong
market.’
• The IMF and WB , according to American
Economist Joseph E. Stiglitz, a 2002 Nobel
Economic Laureate, became missionaries
through them views on free market were
imposed on poor countries that needed
donor loans.
• The crisis this time originates from the
easy conditions of American banks in the
recent 10 years,
– Granting large amounts of loans to home
buyers under sub-standard contracts that
created a bubble-economy.
– When the market cooled down, millions of
borrowers were unable to make payments of
both principal and interest and banks and
investors in turn became insolvent.
• The US financial crisis takes places in a global
context was described vividly by Alvin Toffer in
his book “The Third Wave’. By placing in a
systematic relationship billions of people, the
market gives rise to a world in which no person
has the independent control of his fate, no
individual, no nation, no culture can do so.”
• The Third Wave will produce the first “trans-
market civilisation” in history.
• What is problematic is the role of the market in
our lives and the future of the civilisation itself.
So, for the first time in history, international
organisations and countries have coordinated
actions to deal with the crisis.
• The US president on Oct. 3, 08 signed the
Emergency Stabilisation Act of 2008 as a bailout
of the US economic system worth $700 billion.
• The FED on Oct. 9, 08 cut base rates by 0.5 to
1%, the lowest level in 50 years. On Oct 10,
finance ministers and central bank governors
from the group of 7 industrialised nations
proposed the five point plan for cooperation to
deal with the crisis.
• The ASEAM summit, opened in Beijing on Oct. 24,
08 with the participation of 43 countries,
discussed the crisis.
• ASEAN countries and China, Japan and Korea
(ASEAN +3) agreed to form a common foreign
exchange fund worth $80 billion to protect the
currencies of these countries.
• Finance Ministers and Central Bank governors
from the ASEAN +3 met in Manila Philippines in
Nov. 08 and a summit of these countries will be
held in Bangkok in Dec. 08 to discuss cooperation
to cope with the crisis.
• In short, 2009 will see many difficulties facing the
Vietnam’s rapid
response to the
Global Financial
Crisis
 Status of Vietnam’s
Economy
• Vietnam's economy grew by 8.5% last year, but the
target for this year and next has been scaled back to about
6.5% as the economy has been battered by a widening
trade deficit and double-digit inflation.
• According to IMF, Vietnam's economic growth will drop to
five per cent next year while the government grapples with
a large current-account deficit and weak banking and
corporate sectors.
• Vietnam has announced a stimulus plan worth more than
$1 billion to avoid recession as the global economic crisis
bites into its export-led economy
• Prime Minister Nguyen Tan Dung approved a number of
measures to boost production, investment and consumer
spending at a monthly cabinet meeting Tuesday
• Dung said the stimulus would fund public works projects,
including a large irrigation canal in the northern Red River
delta, and help finance rice storage depots for about one
million tons of grain in major farming areas.
 A package of measures applied to
combat the economic slowdown
and cushion the impact of the
global financial crisis
• Measures outlined by PM at a gov
meeting last week included:
– Revving up stagnant domestic
production and exports
– Fuelling weakening consumption power,
– Applying flexible monetary and financial
policies
– Ensuring social security,
– Care for the poor and speeding up
administrative reforms
 Overview of Vietnam’s
Economy
• Vietnam’s economy has
been bogged down in
difficulties since early this
year
• Many economic sectors are
slowing down
• Causing production
stagnancy
• Economic growth has
slowed from 8.8% last year
to 6.5% in the third quarter
of this year
• The market’s consumption
power has declined since
the start of the year.
According to Nielson Global
Online Consumer Survey, a
global ealding company,
showing that Vietnam’s
confidence declined nine
points to 97 points during
last four months.
• In 2009, the gov expects
the growth to be from 6. to
6.5%
– Due to ramping inflation
• The main causes were rigid
monetary policies and
public investment
ineffectiveness
 Actions Taken by
MoF & Central Bank
• Draw up proposals on tax cuts,
• Tax exemption
• Delay of tax levies for enterprises
• Further rate cuts and assistance
• Funds
 Focus on State-funded
Projects
• Facilitating important state-funded
projects
• Disbursement of capital from gov
bonds for medical and education
sectors and housing for the poor
• Expanding productions and export
markets of the state economic sector
– Would held stir up domestic demand
 Corporate Income tax
cut
• Bringing the corporate income tax
dwon from 18 to 25%
• Cutting corporate income tax by 30%
for small & medium sized enterprises
• Postponing the implementation of
the personal income Tax Law to July
2009
• Reducing the basic interest rate from
11 to 10%
 Future Landscape of
Vietnam’s Economy
• Officials from international agencies including the World
Bank, EuroCham, AmCham, AusCham…all agreed that
Vietnam is facing the toughest-ever challenges and
worsening business outlook.
• “Vietnam has faced the toughest-ever challenges such as
high inflation, hefty trade deficit, fluctuations in forex rates
and the slumping stock market,” Martin Rama, the World
Bank’s Country Director in Vietnam told the Vietnam
Business Forum held Dec 1 on threshold of the Consultative
Groups of Donors’ Meeting.
• Speaking about the global gloomy outlook, Thomas O’Dore,
chairman of the American Chamber of Commerce
(AmCham) said Vietnam’s economy will be facing with
similar problems as exports, which account for more than
half of its GDP value, are declining due to shrinking
purchasing power in the U.S., EU and Japan.
• The U.S. buys up to 26% of Vietnam’s exports, EU
purchased 19% and Japan imports 16%, Thomas O’Dore
said.
• Vietnam should boost productivity and cut production costs,
• Meanwhile, the Japan Bank for International Cooperation
(JBIC)’s Chief Representative Matsuda Noriyasu said that
cheap laborforce no longer is teeth of Vietnam, and
Japanese companies are concerned over underdeveloped
infrastructure networks.
• Out of surveyed 620 Japanese firms, 78% of them
complained about road systems, 60% about power supply,
and 45% about seaport situation.
• A recent survey by the Secretariat of the Vietnam Business
Forum also showed that numbers of local firms complained
about bad quality of the business climate soared to 30%, up
from 5.3% in 2007.
• Officials at the VBF proposed the government of Vietnam
further boost reforms in infrastructure developments,
intellectual property rights, courts systems, efficiency of the
public administration and high-quality human resources.
• However, Trence Francis Mahony, an official for the equity
market team said that Vietnam is better at dealing with
impacts of the global crisis than other Asian nations in
1997.
• “Vietnam has its own strengths and not much impacted
from the current crisis, and it has long-, and medium-term
outlooks, shrunk investments will be traded off,” he said.