Economy of Vietnam

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Over the past 20 years, Vietnam has made the shift from a central command-based economy to one with significant market elements. Over that period, the economy has experienced rapid growth. While Vietnam is far from a rich country, high foreign investment has helped it to become richer.

1 History after 1985
2 Macro-economic trend
3 Agriculture and Industry
4 Trade and balance of payments
5 Statistics
6 See also
7 References
8 External links

[edit] History after 1985

In 1986, the Sixth Party Congress of the Communist Party of Vietnam formally abandoned Marxist economic planning and began introducing market elements as part of a broad economic reform package called "Doi Moi" ("Renovation"). In many ways, this followed the Chinese model and achieved similar results. Vietnam achieved around 8% annual GDP growth from 1990 to 1997.

Government control of the economy and a nonconvertible currency have protected Vietnam from what could have been a more severe impact resulting from the East Asian financial crisis in 1997. Nonetheless, the crisis, coupled with the loss of momentum as the first round of economic reforms ran its course, has exposed serious structural inefficiencies in Vietnam's economy. Vietnam's economic stance following the East Asian recession has been a cautious one, emphasizing macroeconomic stability rather than growth. While the country has shifted toward a more market-oriented economy, the Vietnamese government still continues to hold a tight rein over major sectors of the economy, such as the banking system, state-owned enterprises, and areas of foreign trade.

Image:Tam Coc - Ninh Binh.JPG

Rice farming in Ninh Binh Province

GDP growth fell to 6% in 1998 and 5% in 1999. Growth then rose to 6% to 7% in 2000-02 even against the background of global recession, making it the world's second-fastest growing economy. Simultaneously, investment grew threefold and domestic savings quintupled. According to the CIA World Fact Book, the unemployment rate in Vietnam is one of the lowest in the world at 2%, trailing behind only Azerbaijan, Cuba, Iceland, Andorra and Liechtenstein.

The July 13, 2000, signing of the Bilateral Trade Agreement (BTA) between the U.S. and Vietnam was a significant milestone for Vietnam's economy. The BTA provided for Normal Trade Relations (NTR) status of Vietnamese goods in the U.S. market. Access to the U.S. market will allow Vietnam to hasten its transformation into a manufacturing-based, export-oriented economy. It would also concomitantly attract foreign investment to Vietnam, not only from the U.S., but also from Europe, Asia, and other regions.

Vietnam had an average growth in GDP of 7.1% per year from 2000 to 2004. The GDP growth was 8.4% in 2005, the second largest growth in Asia, trailing only China's. Government figures of GDP growth in 2006, was 8.17%. According to Vietnam's Minister of Planning and Investment, the government targets a GDP growth of around 8.5% for 2007.

On November 7, 2006, Vietnam became WTO's 150th member, after 11 years of preparation, including 8 years of negotiation. Vietnam's access to WTO should provide an important boost to Vietnam's economy and should help to ensure the continuation of liberalizing reforms and create options for trade expansion.

However, WTO accession also brings serious challenges, requiring Vietnam's economic sectors to open the door to increased foreign competition.

[edit] Macro-economic trend

This is a chart of trend of gross domestic product of Vietnam at market prices estimated by the International Monetary Fund. Some columns have been adjusted to account for inflation.

Year	GDP per capita (PPP) constant $USD	GDP, billions of New Dong (nominal)	GDP, billions of New Dong (adj.)	Change in GDP (adjusted)	Inflation
1980	430	5.713	74,570.000	-3.5%	25.2%
1981	487	8.020	78,893.000	5.8%	69.6%
1982	548	17.348	85,323.000	8.2%	95.4%
1983	599	27.775	91,375.000	7.1%	49.5%
1984	661	49.639	99,048.000	8.4%	64.9%
1985	706	100.464	104,614.000	5.6%	91.6%
1986	731	609.708	108,126.000	3.4%	453.5%
1987	753	2,605.109	110,882.000	2.5%	360.4%
1988	803	11,152.383	116,537.000	5.1%	374.4%
1989	880	28,093.000	125,627.000	7.8%	95.8%
1990	942	41,955.000	131,968.000	5.0%	36.0%
1991	1,013	76,707.000	139,634.000	5.8%	81.8%
1992	1,107	110,532.000	151,782.000	8.7%	37.7%
1993	1,203	140,258.000	164,043.000	8.1%	8.4%
1994	1,315	178,534.000	178,534.000	8.8%	9.5%
1995	1,446	228,892.000	195,567.000	9.5%	16.9%
1996	1,585	272,036.000	213,833.000	9.3%	5.7%
1997	1,716	313,623.000	231,264.000	8.2%	3.2%
1998	1,807	361,016.000	244,596.000	5.8%	7.7%
1999	1,892	399,942.000	256,272.000	4.8%	4.2%
2000	2,037	441,646.000	273,666.000	6.8%	-1.7%
2001	2,200	481,295.000	292,535.000	6.9%	-.4%
2002	2,365	535,762.000	313,247.000	7.1%	4.0%
2003	2,553	613,442.488	336,242.808	7.3%	3.2%
2004	2,784	713,071.948	362,092.796	7.7%	7.7%
2005	3,025	806,854.877	389,243.583	7.5%	8.0%
2006	3,255	889,461.775	417,905.534	7.4%	7.0%
2007	3,503	982,013.527	448,646.166	7.4%	6.0%

[edit] Agriculture and Industry

Vietnam is now the world's largest robusta coffee, cashew nuts and pepper exporter, and the second largest rice exporter worldwide. Vietnam has the highest percent of land use for permanent crops, 6.93%, of any nation in the Greater Mekong Subregion. [1] [2]. Besides rice, key exports are coffee, tea, rubber, crude oil, pepper, garments and fishery products. However, agriculture's share of economic output has declined, falling as a share of GDP from 42% in 1989 to 26% in 1999, as production in other sectors of the economy has risen.

Paralleling its efforts to increase agricultural output, Vietnam has sought with some success to invigorate industrial production. Industry contributed 32.5% of GDP in 1999. However, most branches of heavy industry -- cement, phosphate, steel, etc. -- have stagnated or declined. Nevertheless, foreign direct investment (FDI) -- much of it gravitating to the new industrial zones in the south -- has gone some way towards transforming the industrial landscape of Vietnam.

In addition, Vietnam has achieved some success in increasing exports of some labor-intensive manufactured goods in recent years.

Mining is a key industry in Vietnam, with coal as a main export, and the chemical plants in Vietnam show promising developments.

[edit] Trade and balance of payments

Image:2004Vietnamese exports.PNG

Vietnamese exports in 2004

From the late 1970s until the 1990s, Vietnam was a member of the Comecon, and therefore heavily dependent on trade with the Soviet Union and its allies. Following the dissolution of the Comecon and the loss of its traditional trading partners, Vietnam was forced to liberalize trade, devalue its exchange rate to increase exports, and embark on a policy of regional and international economic capitalization.

Throughout the 1990s, exports expanded significantly, growing by as much as 20%-30% in some years. In 1999, exports accounted for 40% of GDP, an impressive performance in a recovering Asia. Efforts to control Vietnam's import growth have been fairly successful. In the last 4 years, import levels have remained fairly stable. For the second consecutive year, Vietnam had a balance-of-payments surplus in 1999. The country's balance-of-payments surplus has been due not only to robust trade performance but also to official development assistance and remittances from overseas Vietnamese. Vietnam's total external debt, accounting for 37.1% of GDP in 1999, is $10.6 billion.

By 2006, Vietnam had reduced the percentage of its people living in abject poverty — less than $1 a day — to 8 percent from 51 percent in 1990. The percent of the population living in abject poverty is now smaller than that of China, India, and the Philippines. Vietnam is working to promote job creation to keep up with the country's high population growth rate.

The accession to WTO, among other benefits, will allow Vietnam to take advantage of the phase out of the Agreement on Textiles and Clothing, which eliminated quotas on textiles and clothing for WTO partners on 1 January 2005.

[edit] Statistics

GDP:

Purchasing power parity: $280.2 B (2006 est.)
Real growth rate: 8.2% (2006 est.)
Per capita: purchasing power parity - $3,300 (2006 est.)
Composition by sector:
- agriculture: 20.1%
- industry: 41.8%
- services: 38.1% (2006 est.)

Population:

below national poverty line: 18.7% (2006 est.)
Household income or consumption by percentage share:
- Lowest 10%: 3.6%
- Highest 10%: 29.9% (1998)

Labour force:

44.58 million (2006 est.)
By occupation:
- Agriculture 56.8%
- Industry 37%
- Services 6.2% (July 2005)
Unemployment rate: 2% (2006 est.) (CIA fact book)

Budget:

Revenues: $8.689 billion
Expenditures: $9.718 billion, including capital expenditures of $1.8 billion (2003 est.)

Industrial production:

Products: food processing, garments, shoes, machine building, mining, cement, chemical fertilizer, glass, tires, oil, coal, steel, paper
Growth rate: 16% (2003 est.)

Electricity:

Production: 29,800 GWh (2001)
By source:
- Fossil fuel: 12.95%
- Hydro: 87.05%
- Nuclear: 0%
- Other: 0% (1998)
Consumption: 27,710 GWh (2001)
Exports: 0 kWh (2001)
Imports: 0 kWh (2001)

Agriculture:

Products: paddy rice, corn, potatoes, rubber, soybeans, coffee, tea, bananas, poultry, pigs, fish

Exports:

$19.88 billion (f.o.b., 2003 est.)
Commodities: crude oil, marine products, rice, coffee, rubber, tea, garments, shoes , pepper
Partners: Japan, Germany, Singapore, Taiwan, Hong Kong, France, South Korea, U.S., People's Republic of China

Imports:

$22.5 billion (f.o.b., 2003 est.)
Commodities: machinery and equipment, petroleum products, fertilizer, steel products, raw cotton, grain, cement, motorcycles
Partners: Singapore, South Korea, Japan, France, Hong Kong, Taiwan, Thailand, Sweden

Debt:

External: $14.69 billion (2003)

Economic aid

Recipient: $2.8 billion in credits and grants pledged by international donors for 2000 (2004)

Currency:

Inflation rate (consumer prices): 4% (1999 est.)
Exchange rates: new đong (D) per US$1 - 16,050 (December 2006), 15,788 (January 2005), 14,020 (January 2000), 13,900 (December 1998), 11,100 (December 1996), 11,193 (1995 average), 11,000 (October 1994), 10,800 (November 1993)
Fiscal year: calendar year

[edit] See also

List of economic geography topics

[edit] References

Vietnam’s Roaring Economy Is Set for World Stage, New York Times, October 25, 2006
[3]
Asia's second-fastest-growing economy takes the global stage CNN/Money - November 21, 2006

[edit] External links

Investing in Vietnam Stocks - 11/2006 Article includes global investor perspecitve on the recent state of Vietnamese stocks and companies.

Vietnam - US trade .

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