Resilience

RANKINGS OF ALL COUNTRIES. A LOWER RANK IS BETTER. SOURCE: FM GLOBAL.

Everyone wants to be resilient. Resilience means the ability to take hits and bounce back without total catastrophe. I find that I am somewhat physically resilient, but emotionally, not so much…You can talk to my therapist more about that.

In terms of countries, it’s the ability to withstand shocks, say from higher oil prices, natural disasters, or cyber attacks. An insurance company, FM Global, ranks countries by resilience every year, compiling a score based on three areas: economic, risk quality, supply chain.

In the 2019 ranking, Vietnam was 88 out of 130 countries and territories (China and the US are broken up into territories). So not great, but not horrible. I couldn’t find the 2018 index, but in 2017, Vietnam was ranked 95.

The country scores best in terms of supply chain (47.8 out of 100), where FM Global looks at corruption, infrastructure, governance and supply chain visibility. This is also the area where Vietnam improved the most (the score was 31.4 in 2017).

Within ASEAN, Thailand improved the most since 2018, according to the company:

Rising 16 spots in the index this year is Thailand (ranked 73). Thailand, an Asian supply chain hub, showed significant improvement in supply chain visibility and corporate governance. However, Thailand remains heavily exposed to extreme weather and would see an additional rise in the index ranking by improving the quality of its natural hazard risk management.

We actually have looked at a number of the inputs already. On April 25, I looked at infrastructure using the data that goes into this index. And on February 8, I referenced the Corruption Perceptions Index, which is also an input. Basically, this is just an aggregation of a number of these rankings and scores.

Still, it gives us a helpful idea of how Vietnam is resilient relative to other countries. Norway is #1, helped by a very strong economy, basically no corruption, limited dependence on oil (which is a bit surprising to me, given Statoil), and great infrastructure. Vietnam obviously has work to do in all of those areas, but it is partially a chicken and an egg thing. So many of these metrics would improve if the country was richer, but they may not be able to get richer without improvements in these areas.

Vietnam has focused on improving infrastructure in order to boost exports, which is paying off. And corruption is under attack. However, in terms of natural disasters, Vietnam is woefully underprepared. There is a section called Natural Hazard Risk Quality, which is: ‘The quality and enforcement of a country’s building code with respect to natural hazard-resistant design (80%), combined with the level of natural hazard risk improvement achieved, given the inherent natural hazard risks in a country (20%).”

Vietnam got a ZERO on this. The UK is 91.5 and the US is 87.8. Thailand is 30.2. That is real room for improvement. That combined with low productivity (a score of 4.9 out of 100, although few countries are above 50 including the US and UK) and low urbanization rate (18.5 out of 100) hurt the ranking. Urbanization is happening in Vietnam, and so is productivity (albeit slower than people would like). But the area where the government could prepare better is to require stricter building codes in areas that are at risk of natural hazards (like floods). This is hard and expensive, but probably saves money in the long term.

I expect Vietnam will continue to move up, but it will be a fairly slow ascent, unless there are massive infrastructure investments, especially of buildings that are more resilient.