Economy of Vietnam (original) (raw)

Vietnam's communist government formally abandoned Marxist state planning and introduced free-market incentives in 1986, bringing to end the economic stagnation which marked the period after reunification from 1975 to 1985. [1]

In 1986, the Sixth Party Congress approved a broad economic reform package called "Doi Moi," or renovation that dramatically improved Vietnam's business climate. Vietnam became one of the fastest-growing economies in the world, averaging around 8% annual GDP growth from 1990 to 1997 and continuing at around 7% from 2000 to 2002, topped only by China. Vietnam's inflation rate, which stood at an annual rate of over 300% in 1987, fell below 4% in 1997. Simultaneously, investment grew three-fold and domestic savings quintupled. Agricultural production doubled, transforming Vietnam from a net food importer to the world's second-largest exporter of rice.

Foreign trade and foreign direct investment improved significantly. The shift away from a centrally planned economy to a more market-oriented economic model improved the quality of life for many Vietnamese. Per capita income, 220in1994,roseto220 in 1994, rose to 220in1994,roseto372 by 1999 with a related reduction in the share of the population living in acute poverty.

The striking economic progress that marked the 1990s slowed in the last years of the decade. Despite an impressive 23% rise in 1999's export performance to $11.5 billion, a sharp drop in new foreign investment commitments foreshadows slower economic growth than Vietnam experienced in the early 1990s. Government control of the economy and a nonconvertible currency have protected Vietnam from what could have been a more severe impact resultant from the East Asian financial crisis. 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. Substantial reforms to create a sound banking system and privatize state-owned enterprises need to be speeded up. Without these reforms, Vietnam might not cope with a rising unemployment problem. Urban unemployment has been rising steadily in recent years, and rural unemployment, estimated to be up to 35% during nonharvest periods, is already at critical levels. Layoffs in the state sector and foreign-invested enterprises combined with the lasting effects of an earlier military demobilization further exacerbate the unemployment situation.

The international community has told Vietnamese leaders that the situation calls for a bold new round of structural economic reforms. The country's leadership, however, has chosen to follow a less ambitious, slow-paced reform program. Overall systemic economic reform has been limited by both Vietnam's communist ideology and a bureaucracy which views reform as a threat to the status quo. The country's slow-paced reform has hindered Vietnam from progressing in tandem with regional competitors.

The July 13, 2000 signing of the Bilateral Trade Agreement (BTA) between the U.S. and Vietnam is a significant milestone for Vietnam's economy. Pending U.S. congressional approval, the BTA will provide 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 investor interest back to Vietnam, not only from the U.S., but also from Europe, Asia, and other regions.

GDP: purchasing power parity - $143.1 billion (1999 est.)

GDP - real growth rate: 4.8% (1999 est.)

GDP - per capita: purchasing power parity - $1,850 (1999 est.)

GDP - composition by sector:

Household income or consumption by percentage share:

Labor force: 38.2 million (1998 est.)

Labor force - by occupation: agriculture 67%, industry and services 33% (1997 est.)

Unemployment rate: 25% (1995 est.)

Budget:

Industrial production growth rate: 10.3% (1999 est.)

Electricity - production: 20.62 billion kWh (1998)

Electricity - production by source:

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: paddy rice, corn, potatoes, rubber, soybeans, coffee, tea, bananas; poultry, pigs; fish

Exports: $11.5 billion (f.o.b., 1999 est.)

Exports - commodities: crude oil, marine products, rice, coffee, rubber, tea, garments, shoes

Exports - partners: Japan, Germany, Singapore, Taiwan, Hong Kong, France, South Korea, US, China

Imports: $11.6 billion (f.o.b., 1999 est.)

Imports - commodities: machinery and equipment, petroleum products, fertilizer, steel products, raw cotton, grain, cement, motorcycles

Imports - partners: Singapore, South Korea, Japan, France, Hong Kong, Taiwan, Thailand, Sweden

Debt - external: 7.3billionWesterncountries;7.3 billion Western countries; 7.3billionWesterncountries;4.5 billion CEMA debts primarily to Russia; 9billionto9 billion to 9billionto18 billion nonconvertible debt (former CEMA, Iraq, Iran)

Economic aid - recipient: $2 billion in credits and grants pledged by international donors for 1999 and again for 2000

Currency: 1 new dong (D) = 100 xu

Exchange rates: new dong (D) per US$1 - 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