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The Council The Vietnam Economy

The Vietnam Economy

The Council

rasmus lester brian shawn darren rastusRoad mapVietnams economy:

In the Past (Before 1999)

Transition of Economic Activity

Present Economy

Current concerns

2

1954-1975

French developed the area by segments

South involved in irrigation and agriculture

North is reserved for manufacturing

Resulted in ideological differences and the civil war

Unemployment & Lack of food

History in short

1976-1986

A series of plans were created to centralizing the economy

Growth figures for industrial and agricultural sectors and national income

Plans were extremely unrealistic

Not enough resources : Technological shortfalls,too much small-scaled business

History in short

1986-1990sFree-market reforms known as i Mi (renovation)

Transition from a command economy to a Socialist-oriented market economy.

Deregulation of laws

Foreign investment grewHistory in shorti Mi1. Payment of wage and salaries on a straight cash basis 2. Pricing of inputs to state enterprises on the basis of costs 3. Permission for private employers to employ up to ten workers 4. Abolition of internal customs check points 5. A revised Foreign Investment Law 6. Virtual decollectivization of agriculture 7. Elimination of virtually all direct subsidies and price controls 8. Increased autonomy for enterprise managers 9. Devaluation of the currency (dong) to market rates 10. Elimination of the State's monopoly in foreign trade 11. Provision for foreign participation in banking 12. Reduced restrictions on private enterprise 13. Creation of export processing zones for 100% foreign-owned enterprises 14. Legislation on shareholding corporations 15. Dismantling of major elements of central planning and bureaucracy 16. A 15% reduction in the government workforce 17. A return to former owners or their heirs of businesses in the South that were nationalized in 1975.

Under i MiIndustries Sector

Private businesses and foreign investments thrived

More liberal operations

30,000 private businesses created,

Economy grew at an annual rate of more than 8%

Poverty was nearly halved.

Agricultural Sector

Scrapped agricultural collectives

Removed price controls

Enabled farmers to sell their goods in the marketplace

Rapid growth in agricultural and industrial production

Under i MiThe Past Average growth 8%

Level of exports and imports

The PastPer capita income $220 (1994)

Poverty reduction :

VietnamEast Asia and Pacific4.1%2.0%Transition of Economy activity

State Bank of Vietnam

Does this mean that Vietnam is a agriculture heavy country?Where is the country shifting its focus to?Transition of Economy activityhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHdO55H1TfiE

12

Does this mean that Vietnam is a Agriculture heavy country??

Where is Vietnam shifting its focus to?Employed population as of annual 1 July by kind of economic activity

Transition of Economy activityAgriculture and Forestry: A decrease of 13%Others: An increase of 12%

Transition of Economy activityManufacturingElectricity. gas and water supplyConstructionWholesale and retail trade; repair of motor vehicles. motor cycles and personal and household goodsHotels. restaurantTransport. storage and communicationsFinancial intermediationScientific activities and technologyReal estate. renting and business activitiesPublic administration and defence; compulsory social securityEducation and trainingHealth and social workRecreational. cultural and sporting activitiesActivities of Party and of membership organisationsCommunity. social and personal service activities and private household with employed personsThe OthersPresent Economy.GDPTotalOf whichAgriculture, forestry and fishingIndustry and constructionServiceBill. dongs1990419551625295131619019917670731058182522739719921105323751330135428841993140258418954053557828199417853448968515407802619952288926221965820100853199627203675514808761156461997313623808261005951322021998361017930731172991506451999399942101723137959160260200044164610835616222017107020014812951118581835151859222002535762123383206197206182200361344313828524212623303220047153071559922876162716992005839211175984344224319003200697426619879840469737077120071143715232586474423436706Prel. 20081477717326505587157564055GDP Growth

http://www.indexmundi.com/vietnam/gdp_real_growth_rate.htmlGDP GrowthYearGDP - real growth rateRankPercent ChangeDate of Information20036.00 %222002 est.20047.20 %2320.00 %2003 est.20057.70 %276.94 %2004 est.20068.50 %2310.39 %2005 est.20078.20 %29-3.53 %2006 est.20088.50 %283.66 %2007 est.2003-2006: Increasing at a decreasing rate, but at least still increasing2007: Drop slightly2008: Rise from 2007

As you can see, its GDP growth rate has been brisk and high, one of the highest in the region. People have even compared it to the Asian Tigers of the 1990s, and also alongside China and India.

Its entry into the WTO, has also signaled Vietnams commitment to a capitalist-based economy; thus making it more integrated into the global market and economically liberal, even though it still has communist elements in its government.21Export and Import Figures 2003

As you can see from the charts, from 2003-2007, Vietnams imports and exports have mostly been consistent. With regards to its exports, it has been exporting mostly agricultural and labour-intensive products; things like Cashew, black pepper, coffee and Textiles and garments, Electronics and PC. This is in line with its developing country status, while it was predominantly an agricultural country, its population of around 87 million people, and most of them being from the ages of 15-64 years of age makes it an attractive choice to companies around the world who need cheap labour.

Its main imports are also in line with it being a developing country- it imports mostly items that would help to boost its infrastructure, things like Machinery and spare parts, petroleum. However it still shows that agriculture is still vital to its economy through fertiliser being one of its main imports.22Export and Import Figures2005

Export and Import Figures 200523Export and Import Figures2006

Export and Import Figures 2006Export and Import Figures2007

Export and Import Figures 2007Despite the seemingly glowering praise of Vietnam as an up and rising economy, it hit a rather huge bump at 2008. In 2008, inflation sky-rocketed to around 25%, far outstripping the 8.5% GDP growth. This meant that even workers at a Nike factory who got a 10% increase in wages still would struggle to meet basic necessities. This has also resulted in strikes, something quite unusual in a communist country.

To add on to Vietnams problems as you can see from the charts that the Dong has been weakening against the USD. This has made it difficult for them to import; items like machinery and fertiliser which the country would need in order to aid in its development would be more expensive, although its exports would be cheaper to buy and might increase demand.25Currency

Monthly Average income27Prospering economy

Current ConcernsInflation

Poor Infrastructure

Power Shortage

CorruptionCurrent Concerns

30Current Concerns - InflationHigh inflation of 25%

Increased cost of production

Affects InvestorsCurrent Concerns Poor Infrastructure

Current Concerns Poor Infrastructure

World Bank agreed to loan US$190 million to Vietnam

For infrastructure development (for public and private sectors)

Current Concerns Poor Infrastructure

Current Concerns Power Shortage

In May

Vietnam faces power shortage (because of drought)

Power obtained from hydroelectric power plants.

NO WATER, NO POWER!

Current Concerns Power Shortage

In August

Electricity of Viet Nam (EVN) reports that country is facing a severe power shortage of 1,400 MW.

EVN imported approx. 2.2 billion kWh of electricity from china. (In first 7mths)

Plans to increase supply sources and retain water.Current Concerns - Corruption

Corruption Perception Index (CPI)Current Concerns - Corruption

Current Concerns - Corruption

Risks of Corruption

Sources indicates land management to be most corrupt sector in Vietnam. Policies and laws on land have many loopholes

Encourage corruption

Investors should take care during contracting proceduresRisks of corruption: Private providers should be particularly aware of continuing corruption related to public procurement and contracting procedures.

Several sources indicate that land management constitutes the most corrupt sector in Vietnam. Policies and laws on land are incoherent and have many loopholes, while supervision and enforcement of the law within land administration is fairly lax and paves the way for corruption.39

Positive Developments related to Corruption

Corruption is now a priority on the political agenda

Vietnam has abolish almost 200 unnecessary permits (for operating a business)

Companies special relationship with authorities have declined

Current Concerns - CorruptionPositive developments in relation to corruption and investment: Corruption has moved up on the political agenda in Vietnam, and the legal framework for curbing corruption is now well-developed.

Although the burden of licences and permits on private companies is still considerable, Vietnam has abolished almost 200