Vietnam - International University of Japan · 2007-07-26 · Vietnam Our quarterly Country Report on Vietnam analyses current trends. This annual Country Profile provides background

COUNTRY PROFILE

VietnamOur quarterly Country Report on Vietnam analyses currenttrends. This annual Country Profile provides backgroundpolitical and economic information.

1998-99The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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ISSN 1356-4145

Comparative economic indicators, 1997

0 100 200 300 400 500

South Korea

Taiwan

Indonesia

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Thailand

Malaysia

Singapore

Philippines

Vietnam

Gross domestic product$ bn

Sources: EIU estimates; national sources.

0 5 10 15 20 25 30 35

Singapore

Hong Kong

Taiwan

South Korea

Malaysia

Thailand

Philippines

Indonesia

Vietnam

Gross domestic product per head$ '000


-2 0 2 4 6 8 10

Vietnam

Malaysia

Singapore

Taiwan

South Korea

Hong Kong

Philippines

Indonesia

Thailand

Gross domestic product% change, year on year


0 1 2 3 4 5 6 7 8

Indonesia

Hong Kong

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Vietnam

Malaysia

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Consumer prices% change, year on year


EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998

November 9th 1998 Contents

3 Basic data

4 Political background4 Historical background6 Constitution and institutions7 Political forces

10 International relations and defence

10 The economy10 Economic structure12 Economic policy15 Economic performance16 Regional trends

17 Resources17 Population18 Education19 Health20 Natural resources and the environment

21 Economic infrastructure21 Transport and communications22 Energy provision24 Financial services26 Other services

27 Production27 Industry28 Mining and semi-processing29 Agriculture, forestry and fishing31 Construction

32 The external sector32 Merchandise trade34 Invisibles and the current account35 Capital flows and foreign debt36 Foreign reserves and the exchange rate

38 Appendices38 Sources of information40 Reference tables40 Government finances41 Money supply41 Gross domestic product41 Gross domestic product by expenditure42 Gross domestic product by sector42 Prices

1

© The Economist Intelligence Unit Limited 1998 EIU Country Profile 1998-99

42 Population43 Employed labour force43 Transport statistics44 National energy statistics44 Banking statistics44 Retail trade sector45 Tourism statistics45 Structure of gross industrial output46 Main manufactures46 Gross output of agriculture47 Food crops output47 Industrial crop production and yields48 Output and exports of main perennial industrial crops48 Animal husbandry48 Fisheries output49 Exports49 Imports50 Main trading partners50 Balance of payments, World Bank estimates51 Net official development assistance52 External debt, World Bank estimates53 Foreign direct investment commitments, 199753 Foreign reserves53 Exchange rates

2


Vietnam

Basic data

Land area 330,363 sq km

Population 64.4m (1989 census); 78.1m (1998 estimate)

Main towns Population (of province) in ’000 (1994)

Ho Chi Minh City 4,392Hanoi (capital) 2,194Haiphong 1,615

Climate Tropical monsoon; north cool and damp in winter (November-April), hot andrainy in summer; south more equable; centre most subject to typhoons. Therains are highly unpredictable

Weather in Hanoi(altitude 216 metres)

Hottest month, June, 26-33°C; coldest month, January, 13-20°C; wettestmonth, August, 343 mm average rainfall; driest month, January, 18 mm aver-age rainfall

Weather in Ho Chi MinhCity (altitude 9 metres)

Hottest month, April, 24-35°C; coldest month, January, 21-32°C; wettestmonth, September, 335 mm average rainfall; driest month, February, 3 mmaverage rainfall

Languages Vietnamese; English (increasingly favoured as a second language); some Frenchand Russian

Weights and measures Metric system. Local land measurement 1 mau=3,600 sq metres (north); 1mau=5,000 sq metres (centre)

Currency Dong. Average exchange rate in 1997: D11,745:$1; early November 1998:D13,899:$1

Time 7 hours ahead of GMT

Public holidays January 1st (New Year’s Day), February (Tet, Lunar New Year), April 7th(Emperor-Founder Hung Vuong’s Day), April 30th (Liberation of Saigon), May1st (Labour Day), September 2nd-3rd (National Day)

Vietnam: Basic data 3


Political background

Historical background

Vietnam’s identity was forged out of resistance to its giant northern neighbour,China, and the gradual expansion southwards from its original heartland inthe Red River Delta and the north-eastern coastal plain. For over 1,000 years, toAD 939, it was governed as a Chinese province. Thereafter Vietnam remainedclosely linked with China, both politically and militarily, as a tributary statethat frequently had to resist Chinese invasions. It also absorbed Chinese cul-tural influences, including the Confucian model of government. The expan-sion southwards, driven by population pressure, eventually brought Vietnaminto conflict with the Khmer empire of present-day Cambodia and Thailand.Not until the late 18th century under the Nguyen dynasty did Vietnam reachits present southern limit on the Gulf of Thailand.

The Nguyen were, however, unable to resist the growing challenge of Frenchcolonialism, which by 1885 had brought all of Vietnam under its rule, formingprotectorates in Tonkin and Annam in the north and centre and a directlyadministered colony in Cochin China in the south. The colonial regime per-mitted only limited expression to constitutionalist Vietnamese opposition andharshly suppressed more radical resistance. The imposition of the colonialadministration helped to destroy the traditional equilibrium of village life,undermined the authority of the scholar-gentry class and blocked the growthof an indigenous bourgeoisie. In these circumstances the only effective chal-lenge to French colonial rule was communist-led. A number of communistgroups were formed during the 1920s, which coalesced into the CommunistParty of Indochina, led by Ho Chi Minh, in 1930.

The rise of theCommunist Party

The second world war transformed the Communist Party’s prospects. After aperiod of cohabitation with Vichy France, the Japanese swept aside the Frenchin March 1945 and installed Emperor Bao Dai as leader of a nominally inde-pendent Vietnam. The communist united-front organisation, the Vietminh,quickly filled the vacuum left by the surrender of Japan in August 1945, and onSeptember 2nd, in Hanoi, Ho Chi Minh proclaimed the independence of theProvisional Democratic Republic of Vietnam.

The French withdraw andthe country is divided

The French refusal to give up its colony led to a protracted war, which soonbecame another engagement in the cold war. In 1954, on the eve of talks heldin Geneva under great power auspices, the Vietminh inflicted a humiliatingmilitary defeat on the French at Dien Bien Phu. The conference divided thecountry at the 17th parallel but failed to achieve agreement on a politicalsolution. Soon after the Geneva accords the US-backed Catholic northerner,Ngo Dinh Diem, took power in the south. Diem’s intransigence dampenedhopes for a peaceful reunification. In 1959 the Hanoi authorities approved amore active strategy in the south, and in the following year the National Frontfor the Liberation of South Vietnam (NLF) was formed to oppose Diem.

4 Vietnam: Historical background


The US is drawn intothe conflict

After the assassination of Diem during a military coup in November 1963 theconflict turned increasingly into an American war. By early 1968 there were500,000 US troops in Vietnam. In January 1968 the war reached a turning-point when communist forces launched the Tet offensive, which showed howfragile the hold of the south Vietnamese over territory was. In the wake of theoffensive, the US president, Lyndon Johnson, agreed to hold peace talks inParis. In January 1973 the parties finally agreed on the terms for the withdrawalof US troops.

The communists take over Two years later the north Vietnamese launched a massive offensive in thesouth in the face of which the south’s forces quickly crumpled. On April 30th1975 the communists entered Saigon and Vietnam’s 30-year war of inde-pendence was over. The victorious north rapidly undertook the formal reunifi-cation of the country and the Socialist Republic of Vietnam came intoexistence on July 2nd 1976. The bloodbath that successive US administrationshad predicted would follow the fall of the south did not materialise, but thenew authorities submitted tens of thousands of officials and soldiers of theformer south Vietnamese government to “re-education” and many urbansoutherners were sent to work in remote new economic zones, where condi-tions were often harsh.

Vietnam’s isolation bringsit into the Soviet embrace

At the same time, highly ambitious plans for the “socialist transformation” ofthe south were launched. The high hopes generated by the victory in the southwere short-lived. Instead of being accepted into the international communityand receiving aid for the reconstruction of its shattered economy, Vietnam wastreated with suspicion as a potentially disruptive force with wider hegemonicdesigns in South-east Asia. The Vietnamese invasion of Cambodia in late 1978and the toppling of the Khmer Rouge apparently confirmed these suspicions.

The invasion led to a break with China, with which relations had already beensoured by the Vietnamese authorities’ treatment of its ethnic Chinese commu-nity. The latter had borne the brunt of the government campaign against the“comprador” bourgeoisie and many Chinese had joined the exodus of “boatpeople” from the country. In early 1979 China resolved to “teach Hanoi alesson” by launching an incursion over Vietnam’s northern border. The coun-tries of the Association of South-East Asian Nations (ASEAN), together withJapan and western Europe, backed a US-led tightening of the economic em-bargo imposed on the north during the war by supporting the US’s veto ofmultilateral assistance to Vietnam. These moves forced Vietnam to rely on theSoviet Union and its Council for Mutual Economic Assistance (CMEA, thenComecon) allies for economic and military assistance, and intensified the eco-nomic crisis created by the adoption of a central planning model ill adapted tothe country’s circumstances (see The economy).

The leadership’s cohesionsurvives the post-war

challenges

The direction of economic policy and Vietnam’s foreign relations dominatedintra-party debate well into the 1980s, although, for the most part, consensuswas maintained throughout this testing period. Even the landmark Sixth PartyCongress in 1986, at which the party made its historic commitment to eco-nomic “renovation” (doi moi), did not break the cohesion of the leadership. Theeconomic reforms had by the late 1980s become part of the new consensus, but

Vietnam: Historical background 5


after communist regimes came under threat in the Soviet Union and easternEurope, there was no prospect of matching political liberalisation. Reflectingthis mix, the Politburo that emerged from the Eighth Party Congress in June1996, like its predecessor, not only contained several economic reformers butgave strong representation to the security apparatus. In so far as political reformis on the agenda, it continues to be based on the premise that the party willremain the leading political force, although in 1997 there were moves to insti-tute greater democracy “at the grass-roots level” to serve as a counterweight toincreasing corruption and bureaucracy.

Constitution and institutions

The 1992 constitution Vietnam has had four constitutions, adopted in 1946, 1959, 1980 and 1992,each regarded as appropriate to its time. The 1992 constitution was geared tothe era of renovation and the “open door”. The revolutionary rhetoric of the1980 constitution was dropped. The party was to operate within the frameworkof the law and the constitution. No longer responsible for “ensuring the build-ing of socialism”, the government was charged with specific managementfunctions under a prime minister with defined powers.

The 1992 constitution also retroactively underpinned the economic reformprogramme. A centrally run economy gave way to a “multisector economy inaccordance with the market, based on state management and socialist

Important recent events

July 1995: Diplomatic relations are normalised with the US and Vietnambecomes a member of the Association of South-East Asian Nations (ASEAN).

June 1996: Seeking a balance between economic reformers and the conservativebloc, the Eighth Party Congress expresses support for continued economic reformwhile opposing political liberalisation.

May 1997: Serious protests against local corruption rock the northern provinceof Thai Binh.

July 1997: A new 450-member National Assembly is elected.

September 1997: The National Assembly chooses Phan Van Khai as primeminister and Tran Duc Luong as president, along with a new cabinet.

December 1997: General Le Kha Phieu is chosen to be general secretary of theCommunist Party, becoming the third member of the collective leadership.

June 1998: For the first time the government and the aid donor communityhold a mid-year meeting to discuss the next phase of Vietnam’s reforms, whichthe donors regard as urgently needed to counter the effects of the regionaleconomic crisis.

6 Vietnam: Constitution and institutions


orientations”. Land would be assigned to individuals on long leases. Theautonomy of state enterprises was guaranteed. The “private capitalist eco-nomy” was given an explicit role. Foreign investors were granted ownershiprights and given guarantees against nationalisation.

The role of the NationalAssembly

The 1992 constitution also enhanced the powers of the National Assembly as“the highest organ of state power”. Elections for a new National Assembly inJuly 1997 were only slightly less tightly controlled than in the past, however.About 20% of the deputies are not party members, compared with 8% in theprevious election in 1992; three genuinely independent candidates were alsoelected. Only 117 of the 395 outgoing deputies were re-elected to the newNational Assembly, and the new members are younger and better educatedthan their predecessors.

The National Assembly, which until the late 1980s acted as little more than arubber stamp, has enhanced powers of legislation and oversight. In recent yearsit has become increasingly vocal and assertive, calling on ministers to accountfor their performance and significantly amending proposed legislation.

The judiciary is relatively weak and is not independent of the CommunistParty. There are few lawyers and trial procedures are rudimentary.

Political forces

The Communist Partyremains the dominant

force—

Vietnam continues to be organised politically along orthodox communistlines. The Communist Party of Vietnam remains the dominant political force,despite the modest downgrading of its role in the 1992 constitution (see Con-stitution and institutions). Other important forces—the government, the armyand the bureaucracy—are all subordinate to it. Government policy, forexample, is still set by the Politburo. The Politburo (which currently has 19members) is the party’s executive, elected by the 170-member Central Commit-tee at national party congresses, which, since reunification in 1976, have beenheld at more or less five-year intervals. In 1996 the party created a five-memberPolitburo Standing Committee, whose members include the three top leaders,as a way of maintaining the influence of the party over day-to-day decisions ofgovernment. The party secretariat issues directives to party members and alsoplays a strong role in directing government policy.

The entrenchment of the party in state institutions and mass organisations(such as the Confederation of Trade Unions, the Women’s Union and theYouth Union), which are grouped under the Vietnam Fatherland Front, isintended to ensure their subordination to the party line. The party’s member-ship is stagnant, at about 2.3m; it has had particular difficulty recruitingwomen and those working in the private sector. About 18,000 members weredisciplined for involvement in corruption in 1997, and the party has lost itslustre as a place of high ideals and probity.

—but there are divisions There are divisions within the party. A more conservative “party bloc” is waryof the negative effects believed to be associated with economic growth, such ascorruption and drug-trafficking. A more reformist “government bloc” argues

Vietnam: Political forces 7


for a clear separation between the government and the party and for greateremphasis on the role of the private sector. Formal factions have not emergedand both groups share a suspicion of political pluralism, along with a desire tokeep rural unrest in check.

Dissent from outside the party is becoming more important and takes severalforms. Serious unrest arose in the rural northern province of Thai Binh in May1997, spurred largely by disgust with corrupt local (and party) officials. Inresponse the party and the government have pledged to expand “grass-rootsdemocracy”, by giving elected local government councils, the people’s coun-cils, a greater role, among other measures.

Party and governmentlinks are less firm

Party and government continue to display extensive overlap. Almost all of the21 ministers in the cabinet are members of the Central Committee. About 80%of the deputies in the National Assembly are in the party. Party committeesexist at every level of the bureaucracy, and efforts are being made to establishparty cells in private enterprises (with limited success). Managers or deputymanagers often double as party secretaries in state enterprises, which helps toexplain the continued resistance to thoroughgoing reform of such enterprises.

Nonetheless, economic reform is eroding the grip of the party, albeit slowly. Ina “secret” memo written in August 1995, the then prime minister, Vo Van Kiet,argued for the party to get out of the day-to-day operation of the governmentand for an end to “business by state-sponsored civil organisations, the party orthe armed forces”. Party membership is no longer indispensable for advance-ment, partly as a result of the increasingly rapid growth of the private sectorand the much diminished role of agricultural co-operatives.

The army needs a newrationale

The People’s Army of Vietnam ranks in influence only behind the party andthe government. Its roots in society are deep. The military has confronted (andhumiliated) three of the world’s most powerful armies in the last half century(the French, the American and the Chinese).

The army was created by the party in 1944 as the Armed Propaganda Team, andarmed struggle has always been regarded as having a political dimension. Adefence white paper written in 1998 rejected the depoliticisation of the armedforces. Civilian and military leaderships overlap strongly, and many seniorofficers have moved on to top leadership positions, including the party generalsecretary (Le Kha Phieu), one-tenth of the members of the Central Committeeand one-third of the Politburo.

After Vietnam’s withdrawal from Cambodia in 1989 about 500,000 troops weredemobilised, and since then there have been sharp cuts in spending on themilitary, although it still absorbs about one-quarter of the budget. Any reduc-tion in the influence of the armed forces has been tempered by continuedsuspicion of China, specifically its claims to the Paracel and Spratly Islands inthe South China Sea (see International relations and defence), as well as by thearmed forces’ enhanced internal security role. Army businesses generate turn-over amounting to about 2% of GDP and the military is likely to resist anymoves to encourage competition against these enterprises or to privatise them.

8 Vietnam: Political forces


Other organisations The Vietnam Fatherland Front, an umbrella organisation for such groups as thetrades unions, the Women’s Union and the Youth Union, both articulatesmembers’ views and mobilises support for the party’s goals. The Front does notencompass all interests. The United Buddhist Church, which also opposed thegovernments of South Vietnam, has resisted incorporation into the officiallysanctioned Vietnam Buddhist Church, and the Vatican has urged Catholics notto join the official Committee for Solidarity of Vietnamese Catholics.

Main political figures

Le Kha Phieu: A northerner, the 65-year-oldLieutenant-General Le Kha Phieu took over as generalsecretary of the Communist Party in December 1997, whenDo Muoi retired. Previously the chief political commissar inthe armed forces, and a member of the senior command inCambodia, he was opposed for the position as generalsecretary by the economic liberalisers, who were wary of hisconservatism. As general secretary he has taken a soft line ondissent, and has allowed Phan Van Khai and the governmentto handle economic policy, including an accelerated effort atprivatising state enterprises.

Phan Van Khai: Elected prime minister in September 1997,Mr Khai was a deputy prime minister in the previous cabinetwith responsibility for economic affairs. A southerner, he wasa protégé of his predecessor, Vo Van Kiet. He rose throughthe party machine in Ho Chi Minh City before moving to theState Planning Committee in Hanoi. He has travelled widelyin the West and is regarded as a highly capable exponent ofeconomic reform.

Tran Duc Luong: An unexpected choice when he waselected president in September 1997, Mr Luong was acompromise candidate and lacks the authority of hispredecessor, Le Duc Anh. Born in the north-central provinceof Quang Ngai, President Luong trained in the Soviet Unionas a geologist, and had held the post of deputy primeminister with responsibility for industry, transport andforeign economic relations since 1987. He has travelledwidely and is often referred to as “Mr Clean”.

Nguyen Tan Dung: Elected to the position of first deputyprime minister in September 1997 at the age of 47,Mr Dung is in charge of “general economic and internalaffairs” in the cabinet. He is a former deputy minister of theinterior, and hails from Ca Mau province at the southern tipof the country. The National Assembly approved him as

acting governor of the State Bank of Vietnam in May 1998,after rejecting the government’s nomination of Cao Si Kiemseven months earlier. His early public pronouncements oneconomic matters tended to be conservative, but havebecome more pragmatic over time.

Nong Duc Manh: Chairman of the National Assembly andan ethnic Tay from the northern mountains, Mr Manh is seenas a possible future party general secretary when the nextround of changes are made four years from now. Under hischairmanship, the National Assembly has become moreinfluential.

Truong Tan Sang: The relatively youthful, 48-year-oldMr Sang was elected party secretary of Ho Chi Minh City inMay 1996 and a member of the Politburo in July 1996. Heserved as chairman of the city’s People’s Committee for threeyears, in which post he gained a reputation as an economicreformer.

Nguyen Manh Cam: Highly respected as foreign minister,Mr Cam is the second deputy prime minister. The promotionis in part a consolation prize, as he had been a leadingcandidate for the position of president, but it also recognisesthe new government’s emphasis on the foreign dimension ofeconomic policy. He is a former ambassador to the ex-SovietUnion, and as foreign minister he oversaw the normalisationof relations with the US as well as Vietnam’s entry into theAssociation of South-East Asian Nations.

Pham The Duyet: Ranked number five in the Politburo,and a member of the five-member Politburo StandingCommittee, he played a key role in helping to defuse theprotests in Thai Binh province in 1997. Has recently beenaccused of using state money for his own use. His case maytest the will of the leadership to address problems ofcorruption within their ranks.

Vietnam: Political forces 9


International relations and defence

International isolationis over

Since the final withdrawal of its troops in 1989, Vietnam has emerged from theinternational isolation that followed its invasion of Cambodia at the end of1978. Within months of the Paris agreement on Cambodia of October 1991,Vietnam established diplomatic and economic relations with most of the coun-tries of Western Europe and East Asia, including China. The country was admit-ted to ASEAN in July 1995.

The US did not lift its economic embargo until February 1994 and full diplo-matic normalisation was not achieved until June 1995. Complete trade andinvestment benefits, including access to “normal trade relations status”, arestill under negotiation and are unlikely to be granted until 1999 at the earliest.Vietnam was granted membership of the Asia-Pacific Economic Co-operation(APEC) forum in late 1997, another sign that the country has entered theinternational mainstream.

Relations with Chinafluctuate

Despite the ideological affinities between China and Vietnam, historical ani-mosities simmer close to the surface. These tensions boiled over with China’sborder incursion in 1979. China has also continued to assert its claims to theSpratly and Paracel Islands in the South China Sea, although less stridentlythan previously. A technical working group is making progress on definitivelymapping the land border between the two countries, but is making little head-way on defining boundaries in the Gulf of Tonkin. Top leaders of the twocountries have exchanged visits and in October 1997 China extended $290min project aid.

The armed forces are lessformidable than hitherto

The core of the defence forces is the 420,000-strong army, backed up by asubstantial navy (42,000) and air force (30,000), according to the InternationalInstitute of Strategic Studies. Most of the equipment dates from the 1980s andcomes from the former Soviet Union.

The economy

Economic structure

Main economic indicators, 1997

Real GDP growth (%) 8.8

Consumer price inflation (av; %) 3.1

Current-account balance ($ m) –1,682a

Population (m) 76.7

a EIU estimate.

Source: EIU.

Agriculture’s share of GDPis falling

Vietnam remains an agrarian society, with 70% of the labour force working inagriculture and forestry. However, just 26% of current-price GDP was generated

10 Vietnam: International relations and defence


in this sector in 1997, down from 41% in 1991. Despite the falling share,agricultural growth has been robust, value added rising by 4.4% annually be-tween 1993 and 1997. The most rapid growth has been in industrial crops,particularly coffee, rubber and sugarcane. The yield of rice, which accounts foralmost half of agricultural output, has doubled since 1987, enabling Vietnamto become the world’s second largest rice exporter.

Industrial growth hasbeen broadly based

Rapid industrial growth, averaging almost 14% annually between 1993 and1997, was a major contributor to the 8.9% average yearly increase in GDPduring the same period. All industrial subsectors have shared in this expansion,so changes in the structure of industry have come slowly, although since 1990growth has been particularly rapid in steel products, garments and footwear.The oil and gas industry accounted for 16% of industrial activity in 1996 (latestavailable data), up from 11% in 1993, but will grow less quickly from 1999onwards as few new fields are expected to come on stream.

The state-owned sector generates two-thirds of industrial output, a proportionthat has remained stable over the past several years. Despite its smaller contrib-ution to GDP, the non-state manufacturing sector employs four times as manyworkers as the state sector. The fastest growth is in foreign-invested industrialenterprises, whose output grew by 20% in 1997—twice as fast as state-owned orprivate industrial firms.

The services sector has expanded at about the same pace as overall GDP since1990. In recent years the fastest growing subsectors have been banking, financeand insurance (which started from a low base and in 1997 accounted for a littleover 5% of the sector’s total output).

Investment’s share of GDPhas increased

The share of investment in GDP has risen rapidly, from 11% in 1990 to 31.7%in 1997. Although the precise numbers need to be treated with caution, theydo reflect a genuine strong upward trend. The rise in investment has beenfinanced by increased government savings (6% of GDP), more foreign loans,aid and direct investment (9% of GDP) and a compression of domestic con-sumption, which has permitted domestic savings to rise to 16% of GDP. As aresult of the Asian crisis, investment inflows have fallen sharply, but the EIUstill expects the share of investment in GDP to be close to 30% in 1998. (SeeReference tables 4 and 5 for historical data on GDP by expenditure and sector.)

Comparative economic indicators, 1997

Vietnam Indonesia Philippines Thailand China India

GDP ($ bn) 24.7 228.2 83.2 153.9 902.3 378.6

GDP per head ($) 320 1,140 1,132 2,540 730 400

Consumer price inflation (%) 3.1 11.1 5.1 5.6 2.8 7.2

Current-account balance ($ bn) –1.7a –4.8 –4.3 –2.9 29.7 –6.1

Exports of goods ($ bn) 8.9 56.3 25.2 56.7 182.7 34.1

Imports of goods ($ bn) 11.2 46.2 36.3 55.1 136.4 45.1

Foreign tradeb (% of GDP) 81.4 44.9 73.9 72.6 35.4 20.9

a EIU estimate. b Merchandise exports plus imports.

Sources: National sources; EIU.

Vietnam: Economic structure 11


Economic policy

Central planning givesway to doi moi—

After reunification of the two halves of the country in 1976 the government ofthe new Socialist Republic of Vietnam moved quickly to impose on the souththe orthodox, Soviet-style, central-planning model that had been in force inthe north since 1954. The failure of this model gradually forced Vietnam’sleaders to abandon it and to edge their way towards a policy of renovation (doimoi), which was formally adopted at the Sixth Party Congress in December1986. The reform process is well under way and although it is far from com-plete, it is certainly no longer reversible.

At first reform gathered momentum only slowly and initially elements of theold system, such as the setting of physical targets, accommodating monetaryand fiscal policies and the two-price system, remained in place. The morerelaxed atmosphere, along with the removal of internal trade barriers did allowthe informal sector to blossom. But bad weather and poor management led tofamine conditions in the north in early 1988. The trade deficit continued torise and inflation averaged more than 300% for the full year.

—but real changes takeplace from 1988—

These failures stiffened the resolve to reform and a series of dramatic changeswere introduced in March 1989. Henceforth, households rather than com-munes were to form the basic economic unit in agriculture; most subsidies tostate enterprises were abolished, and they were given freedom to set prices fortheir output; the banking system was reformed and the State Bank of Vietnamestablished as a central bank to oversee the sector; the budget deficit wasbrought under control; restraints on internal and international trade werelifted; and the dong was devalued sharply, bringing it closer to its market rate.

The results of the changes were spectacular. Agricultural output rose by 7.5% in1989 and the country suddenly became the world’s third largest exporter of rice.Annual average inflation rates fell from 308% in 1988 to 35% in 1989. GDP roseby 8%, the best performance in a decade, and the boom in agriculture andservices easily offset the industrial stagnation that followed the ending of statesubsidies. The timing was fortunate, too, since the rise in revenue from oilexports almost exactly offset the decline in aid from the Eastern bloc and pro-vided an important source of budgetary revenue during the transition years.

—and a market-driveneconomy emerges

The momentum for reform continued after 1989. Foreign and joint-venturebanks were permitted from June 1991 and important gaps were filled in thelegal framework by the passage of, among others, a land law, a bankruptcy law,a labour code, a domestic investment law and a mining law and by the creationof a modern tax structure. Despite early setbacks, including the collapse ofmost of the credit co-operatives in 1990, by 1992 Vietnam had a market-drivenrather than a planned economy.

The Public InvestmentProgramme guides

current policy

The Public Investment Programme 1996-2000 (PIP), issued by the primeminister’s office in June 1996, is the most complete articulation of the govern-ment’s economic policy and goals. The PIP projected annual GDP growth of9-10%, based on growth of about 4.5% in agriculture, 14% in industry and 12%in services. The targets were essentially realised in 1996 and 1997 but are no

12 Vietnam: Economic policy


longer realistic as the regional economic crisis takes its toll on Vietnam’sgrowth prospects. Officially the government expects GDP to grow by 6% in1998—still unduly optimistic—and for growth to be only slightly lower in1999. A resumption of rapid growth depends heavily on restoring the inflow offoreign capital.

There are still someyawning gaps

The reform process is far from complete, however. Major institutional gaps stillneed to be filled. The banking system is particularly fragile, with large amountsof non-performing loans that will limit its future role. Its deposit base is small—only 21% of GDP—and it is poorly regulated. A bond market, dealing chiefly inTreasury bills, is in operation, but the launch of a stockmarket has been post-poned repeatedly since the idea was first mooted in 1991.

Although the legal groundwork on state enterprise reform has been done,implementation has been slow. About 30 small firms have been “equitised” (ieshares have been issued), and most of these have been privatised (in fact,government ownership has been reduced to below 30%). Ministries, localgovernments and company managers have resisted decrees and exhortationsby the prime minister for more rapid equitisation.

Key changes in economic policy

December 1986: At its Sixth Congress the ruling Communist Party commitsitself to economic regeneration, called doi moi (renovation).

April 1988: Decree No. 10 establishes the household, not the co-operative, asthe basic production unit in the countryside.

December 1988: The law on foreign investment is approved, paving the wayfor large inflows over the subsequent decade.

March 1989: An extensive reform package is introduced, abolishing mostsubsidies and price controls, lifting most trade restrictions and restructuring thebanking sector.

October 1990: Excise, turnover and business profits taxes are introduced,followed by a personal income tax in 1991.

June 1991: Foreign banks are permitted to open branches and joint ventures.

September 1992: A new constitution allows a “multisector economy inaccordance with the market, based on state management and socialist orientations”.

June 1996: The Public Investment Programme (PIP) reaffirms the welcome forforeign investment and envisages a larger role for private-sector financing ofinvestment, but keeps state enterprises at the core of economic development.

March 1997: A 4% dong devaluation against the dollar is the first of a series ofsmall adjustments, the latest being in August 1998.

Vietnam: Economic policy 13


Reform of the foreign-trade regime is also incomplete: the system of export andimport permits has been only partially dismantled, the number of permittedtrading companies is still highly controlled and levels of protection are high.

The state-owned sectorgrows fast and resists

privatisation

The World Bank has argued that the mobilisation of domestic resources andemployment generation both depend on the existence of a healthy privatesector. Reformist government officials seem to agree, but reality and rhetoricare far apart. State-owned enterprises have a number of advantages over privatefirms, including easier access to credit and to land-use rights, which are amongthe most valued contributions the Vietnamese partner can provide to a jointventure. State-owned firms are favoured for government contracts, and fortrade and other licences. This helps to explain why almost no managers of stateenterprises want to see their companies privatised.

Efforts at fiscal reform Under the system of central planning the prices of goods and services providedby most enterprises were set by the state in such a way as to encourage largesurpluses, which were then transferred to the government, often after a processof negotiation. As recently as 1987, 80% of government tax revenue consistedof such revenue from state enterprises.

This system became untenable when prices were liberalised, and a modern taxsystem was required. Early measures included the introduction of excise taxes,a turnover tax and a business profits tax (October 1990), a personal income tax(April 1991), a natural resources tax (March 1992) and a revised agricultural taxand a land and housing tax (1993). A value-added tax is to be introduced inJanuary 1999, along with a simplified corporate income tax. Despite thesechanges, the tax system remains complex and unduly dependent on taxes ontrade. There are ten different rates of export duty and 28 different import tariffrates, a complex system that helps explain why smuggling is so extensive.

Revenue mobilisation isweakening

Initially the system was successful at raising revenue, which amounted to 24%of GDP in 1995 and 1996. Revenue mobilisation has now dropped below 20%of GDP, as state-owned businesses have racked up large losses, eroding the taxbase. Tight, if erratic, expenditure controls have kept budget deficits low. Defi-cits are not financed by direct borrowing from the central bank but by foreignaid and (to a lesser extent) by domestic bond issues. (For historical data ongovernment finances see Reference table 1.)

Summary of government finances, 1996(% of GDP)

Revenue & grants 23.6

Total expenditure 23.8 Current expenditure (incl interest paid) 17.8 Capital expenditure 6.0Source: World Bank, Vietnam: Deepening Reform for Growth.

One-quarter of government spending is devoted to the capital budget, whichabsorbed 6% of GDP in 1996. The combination of low deficits and substantialcapital spending reflects a solid level of public saving (domestic revenue minuscurrent expenditure), which has been between 5% and 6% of GDP in recentyears. These numbers should be treated with caution: officially the government

14 Vietnam: Economic policy


budget is a state secret. Donors are putting pressure on the government torectify this lack of transparency.

Trade reform isalso needed

Although exports and imports are high relative to GDP, Vietnam’s trade regimeis inefficient in a number of ways. The average tariff on imports is high, almost20%, and provides a strong incentive for smuggling, which is extensive. Thetariff structure is designed to provide high levels of protection to some sectors,including car assembly, sugar, steel and cement. The restrictive licensing rulesfor foreign traders create a bias against private firms (which tend to be smaller).The system of export quotas for rice is clumsy, favours a small number ofstate-owned firms and effectively lowers the price received by relatively poorrice farmers. Change may be on its way, however, as Vietnam is obliged as amember of the ASEAN Free-Trade Area (AFTA) to reduce trade barriers on goodscoming from other countries the Association of South-East Asian Nations(ASEAN) by 2006.

Economic performance

Strong growth has begunto falter

Vietnam’s economic performance since 1989 is closer to that of China than tothat of the other formerly centrally planned economies. Between 1992 and1997 GDP growth did not fall below 8% per year. Vietnam appeared to be onthe trail of the Asian tigers. In 1998 economic growth has slowed sharply andit will decelerate further in 1999. The most obvious cause is the economic crisisin other countries in the region. Over the past decade these countries, notablySingapore, Japan, South Korea, Taiwan and Hong Kong, have accounted foraround 70% of the foreign investment flowing into Vietnam and 70% of thetrade turnover. When their economic growth faltered, it was inevitable thatVietnam would be hit too. The current growth slowdown also has a domesticcomponent; economic reform is incomplete, and the initial enthusiasm ofinvestors for Vietnam has dimmed, as a result of widespread corruption, perva-sive red tape and uncertainty about whether they will be permitted to repatri-ate their profits.

Inflation remains in check After experiencing hyperinflation in the mid-1980s, small budget deficits andthe avoidance of monetising them have helped to bring the consumer priceinflation rate down to below 10% since 1995. This low level of inflation will behard to maintain in the light of recent devaluations of the dong, but a returnto rapid price increases is unlikely. (Reference tables 3, 4 and 5 provide break-downs of GDP; Reference table 6 gives historical data on inflation.)

Living standards rise, asdoes inequality

The rapid increases in GDP since 1990 have raised living standards. Real house-hold income per head rose by 5% in 1995 and 4.2% in 1996. The percentage ofpeople living in poverty (as defined by the World Bank) has fallen from almost55% in 1993 to less than 30% by 1998. The poorest quintile of the populationdoes not appear to have fared so well. Between 1994 and 1996 its income perhead rose by just 0.5% annually, far less than the annual growth of 6.8%experienced by the top quintile. Concern about rising inequality has promptedthe government to pay more attention to rural development; and efforts to

Vietnam: Economic performance 15


combat poverty are now at the centre of the World Bank’s very substantialactivities in Vietnam.

Gross domestic product(% real change)

Annual average1997 1993-97

GDP 8.8 8.9 Agriculture 4.5 4.3 Industry 13.1 13.5 Services 8.3 9.4

Regional comparisonsIndonesia 8.0 7.1Philippines 5.5 4.4Thailand 6.7 6.1Sources: General Statistical Office, Statistical Yearbook; EIU.

Inflation(av; %)

Annual average1997 1993-97

Consumer prices 3.1 7.4 of which: food prices 1.6 10.5Source: General Statistical Office, Statistical Yearbook.

Regional trends

Regionalism versuscentralism

Vietnam’s peculiar geography (see Resources), and particularly the 1,600 kmdistance between the two main population centres, Hanoi and Ho Chi MinhCity, has tended to encourage regionalism. Since doi moi (renovation) began in1986, Ho Chi Minh City and the nearby provinces (especially Dong Nai) haveconsolidated their position as the country’s industrial heartland, although theHanoi-Haiphong area has grown equally quickly over the past few years.

Left behind are the high mountain areas of the north and most of the north-central coastal provinces, which have traditionally been the poorest parts ofthe country. The slow growth of the poorest areas has led to widening regionalinequality, counterbalanced to a limited extent by the equalising effect of thebudget, which raises revenue mainly in the wealthier areas but spreads theexpenditure (on schools, roads, clinics and the like) more widely. The 61 prov-inces have a significant degree of decision-making autonomy, although not intaxation or the main spending headings such as education and health. Foreigninvestors typically complain more about the difficulties they encounter withbureaucracy at the provincial, rather than the national, level.

Some smaller towns haveeconomic specialisations

Just over one-fifth of the population lives in urban areas. Only Hanoi, Ho ChiMinh City and Haiphong have populations of more than 1m. Although thesecities are also the main industrial centres, a number of smaller towns havespecialised in particular industries such as silk, porcelain or furniture. This maybe because of their proximity to the required natural resources, a result of thepolicy of dispersing industry forced on the north by the US air war, or (also in

16 Vietnam: Regional trends


the north) by long tradition. Most other small towns have grown up as market-ing and agro-processing centres.

Resources

Population

The population isconcentrated in tworice-growing deltas

In 1997 the population was officially estimated at 76.7m, 1.8% above its levelin 1996. (See Reference table 7 for population data for 1993-97; Reference table8 gives labour force data.) The population is still almost 80% rural and isconcentrated in the two main rice-growing deltas: the Red River in the northand the Mekong in the south. In the Red River Delta (excluding Hanoi) popul-ation density averages 1,170 per sq km and in Thai Binh it rises to 1,230 persq km, among the highest rural densities in the world. The Mekong Delta,which is over twice as large as the Red River Delta, has a far lower populationdensity (400 per sq km) and is the source of most of the rice surpluses thatVietnam exports.

Population by age and gender, 1992/93

Age (years) % of population Females per 100 males

0-4 12.1 98

5-9 13.1 92

10-15 12.6 101

15-20 10.8 101

20-29 16.2 110

30-39 13.5 113

40-49 7.5 120

50-59 5.9 128

60-69 5.2 115

70-79 2.6 152

80+ 0.7 200

Total 100.0 103Source: General Statistical Office, Statistical Yearbook.

Minority groups are foundin upland areas

The country’s delta populations are almost entirely ethnic Vietnamese (kinh),who made up 87% of the total population at the time of the 1989 census. Theminority groups, including Khmer, Cham, Muong and Thai peoples, whosecultures and languages are quite distinct from those of the kinh Vietnamese, arefound in the upland areas. Official efforts to move families from the denselypopulated areas to the “new economic zones” in the Central Highlands havetended to marginalise further the minority groups living there, in addition tocausing ecological stress.

The Chinese community isstill important

The once sizeable overseas Chinese community, which was largely concen-trated in the south, was depleted after many decided to leave the country, oftenas “boat people”, when the government closed down private businesses in1978. The 1989 census counted 962,000 Chinese, barely changed from the

Vietnam: Population 17


949,000 recorded in the 1979 census, yet representing almost one in everyseven urban dwellers. Much of the large inflow of remittances, estimated atabout $1bn or more annually, originates with the overseas Chinese.

Population growth isslowing

The rate of population growth has slowed from 3.1% per year in 1960-70 toaround 1.8% in 1996-97. The crude birth rate fell from 47 per 1,000 in 1960 to22 in 1997, and the crude death rate declined sharply from 21 per 1,000 in1960 to about 8 in 1997. Superimposed on these factors are the effects of warsand large-scale emigration: between 1.5m and 2m people, the majority ofwhom were men, died as a result of military action between 1960 and 1980,while perhaps 750,000 refugees left the country after the fall of Saigon andaround the time of the 1978-79 conflicts with China.

Since 1970 the total fertility rate, which measures the number of children awoman would have in her lifetime at current reproductive rates, has halvedand now stands at 2.7, a very low rate by international and historical standards.The government runs an energetic family planning programme, and its “one-or-two children” approach encourages late marriage and wide spacing of chil-dren. Use of contraceptives, mainly intra-uterine devices (IUDs), is widespreadand abortion has become common over the past decade. The fertility rate isexpected to fall to the replacement level (about 2.1) within a decade.

Between 1970 and 1994 there was a sharp fall in infant mortality from 111 per1,000 to 42 per 1,000 in the first six months of life. Life expectancy rose from43 years in 1960 to 68 by 1994.

Population indicators

Crude birth rate (per 1,000; 1992-96) 22

Crude death rate (per 1,000; 1997) 8a

Total fertility rate (1997) 2.7

Contraceptive use rateb, all methods (1997) 75

Contraceptive use rateb, modern methods (1997) 56

Abortion ratec (1992-96) 0.5

Life expectancy at birth (years; 1994) 68

Population growth rate (%; 1996/97) 1.8

a Estimate. b % of married women aged 16-45 using contraceptives. c Number of abortions permarried woman during her childbearing years (15-49).

Sources: National Committee for Population and Family Planning, Vietnam Demographic and Health Survey 1997; World Bank, World

Development Report 1996.

Education

Literacy rates areimpressively high

Although access to higher levels of education has been limited, the intro-duction of near universal primary education has produced high literacy rates.The 1989 census found that 88% of the population over 15 years old wasliterate; the rates were 84% for women and 92% for men. The rural educationsystem was nearly as well developed as the urban one, particularly in the north:87% of the rural population was literate in 1989 compared with 94% of theurban population. From about 1987 to 1991, school enrolment rates fell, par-

18 Vietnam: Education


ticularly at the secondary level. This was largely the result of the budgetarysqueeze, which reduced the wages of teachers, but was compounded by the risein alternative occupations for teachers.

Recent spending increases Education has been treated far better than health since 1992, when governmentspending began to recover strongly from the previous two years of austerity. By1996 the share of government current spending allocated to education had risento nearly 12%, from just under 5% in 1989. In the 1993/94 school year theproportion of the total population attending an educational institution wasalmost exactly the same as five years earlier, around 20%. Since then enrolmentrates have risen to record high levels, the number of secondary school studentsdoubling between 1992/93 and 1996/97. The number of college students tripledover the same period, reaching 509,000 by September 1996.

Gross enrolment rates in education(as % of relevant age group)

1991/92 1997/98a

Primary education (grades 1-5) 101 111

Lower secondary education (grades 6-9) 41 72

Upper secondary education (grades 10-12) 13 27

a Official estimates.

Sources: World Bank, Vietnam: Education Financing Sector Study; General Statistical Office, Statistical Yearbook.

Health

Healthcare provisionis under threat from

budget cuts

Vietnam has a good record in providing healthcare (as measured by suchindicators as life expectancy, infant mortality and the number of doctors perhead). After 1954 the government set up a public-health infrastructure, whichreached down to hamlet level, and the system was extended to the south afterreunification in 1976. In the late 1980s a combination of reform-linked factors,budgetary constraints, the decision to shift more responsibility for healthcarefinancing to the provinces, the reduced social role of agricultural co-operativesafter the issuing of Decree No. 10 in 1988 and the introduction of fees in March1989, began to affect the quality of healthcare. By 1996 the government wasdevoting only 1% of GDP to health spending, and 85% of all spending onhealth services came from private pockets.

Indicators of health sector quality(’000 unless otherwise indicated)

1991 1994 1997

No. of hospital beds 206 191 198

No. of physicians 26 30 33

No. of nurses 68 51 46

Government spending on health (as % of GDP) 0.8 1.3 1.0a

a 1996.

Source: General Statistical Office, Statistical Yearbook.

Vietnam: Health 19


The scarcity of funds for public investment has also degraded the water-supplyand waste-disposal systems. Their inadequacies are probably the prime cause ofthe most prevalent infectious diseases such as malaria, dengue fever, typhoidand cholera. National statistics indicate that there has been a recent fall in thenumber of certain categories of health staff, including nurses and midwives,and (until recently) in the number of hospital beds per head of population.There is particular concern that the health of people living in the poorerprovinces, where malnutrition is common and budgets low, has been declin-ing. The infant mortality rate is no longer falling, which is a clear indication oflittle improvement in the provision of primary healthcare.

Natural resources and the environment

Vietnam has a humid tropical climate heavily influenced by the monsoon. Inthe north (roughly north of the 18th parallel) there is wide variation in tem-perature between the cold, relatively dry season (November-March) and thehot, wet one. In the south the two seasons are not distinguished by markeddifferences in temperature. The north-central coastal area is susceptible to ty-phoons, which hit with particular severity in 1996 and which regularly destroyhouses, livestock and infrastructure. This frequent destruction of the capitalstock helps to explain the persistent poverty of the region. Floods frequentlyhit parts of the Mekong Delta, destroying crops but also replenishing the soil.

Cultivated area per headis low

About 36% of land area is categorised as “unused” or “barren”. Most of this island that was once forested and now lies fallow, and much of it is badlydegraded. The forests have been depleted by overexploitation, both for woodand to make room for agriculture, and 1.6% of the covered area is beingdeforested annually—a high rate by world standards. Cultivated area per headis, at 0.1 ha, one of the lowest in the world. It is government policy in bothnorth and south to increase the amount of land that is under cultivation andeffectively irrigated, and to plant trees on the areas now classified as “barren”.

Environmental threats To ease pressure on agricultural land the government has encouraged migra-tion from the overpopulated lowlands to the highlands and the settlement(“sedentarisation”) of shifting slash-and-burn cultivators in the hills andmountains. These movements have also been criticised on environmentalgrounds for causing further deforestation and soil erosion.

Rapid rural-urban migration is now putting stress on the antiquated infrastruc-ture of the cities, where increased vehicle ownership has raised the level ofnoise and pollution. Economic activity, mostly prawn cultivation, has becomea serious threat to the mangrove wetlands. Vietnam’s underpowered fishingfleet tends to operate close to the coast rather than venturing into deeper seas;the result is that the coastal waters are overfished.

A law on the protection of the environment is in place, as well as numerouslocal ordinances, but implementation is weak and the rules are sometimesconfusing. Efforts are being made to reafforest denuded hills and to protect thecharacter of the older districts of Hanoi.

20 Vietnam: Natural resources and the environment


Economic infrastructure

Transport and communications

Roads The country has a fairly dense network of roads by regional standards but theyare generally in poor condition. Half of the national roads have surfaces classi-fied as poor to very poor, while two-thirds of provincial and local roads arerated poor to very bad. Eight districts and 700-800 communes are not yetaccessible by road at all, although some of these are accessible by water. (SeeReference table 9 for data on transport.)

Recent investments have been directed towards upgrading the main roads,including large parts of the main north-south highway, the link between Hanoiand Haiphong and the roads between Ho Chi Minh City and Vung Tau. Thisdoes not deal with the problem of secondary roads, which are often impassablein the monsoon season, leaving many districts isolated for months at a time.

In 1995 there were, according to official statistics, only 39,100 lorries and25,600 passenger cars in the country. These figures probably understate thetrue number, because 27,843 cars were imported during 1990-95 and annualdemand is running at about 8,000. Motorcycles are ubiquitous and 459,000 ofthem were imported (officially) in 1995 alone. Three-quarters of the house-holds in Hanoi and Ho Chi Minh City own a motorcycle.

Railways and waterways The railway system comprises six single-track routes totalling 3,260 km. TheReunification Express takes 40 hours to travel the 1,730-km line between Hanoiand Ho Chi Minh City. The rolling-stock is in poor shape and one-quarter ofthe functioning locomotives are over 30 years old. The number of train passen-gers has been fairly stagnant, but since 1993 the volume of freight traffic hasincreased by 80% to an estimated 1.8bn tonne-km in 1997.

The tonnage of freight carried on the inland waterway systems, chiefly on theMekong River, its tributaries and canals (4,500 km) and the Red River and itstributaries (2,500 km), exceeds that transported by rail or sea, and is risingslowly. Part of the reason for the slow growth in cargo carried is that every yearonly 40% of the system’s water courses and channels are dredged, with theresult that the canals and rivers are increasingly silting up.

Ports and shipping There are seven international seaports, not counting five special ports throughwhich only oil and coal are shipped. The chief ones are Haiphong in the north,Ho Chi Minh City in the south and Danang in the centre. A significant amountof investment has gone into upgrading the ports, which permitted them tohandle 10.3m tonnes of freight in 1997, up from 4.5m tonnes in 1993. They areno longer considered to be a serious bottleneck to trade.

Only about 20% of international trade is carried on Vietnamese ships but thereare plans to expand the merchant fleet to 1m tonnes by the end of the century.In 1993 the fleet comprised 608 vessels weighing a total of 589,900 tonnes.

Vietnam: Transport and communications 21


Air transport Vietnam Airlines has modernised rapidly since the US allowed it to lease Boeingplanes in 1992. The up-to-date fleet connects Vietnam with 19 internationaldestinations and serves 15 domestic destinations, although the company hasrecently begun to prune its network in order to bring down its losses. Despiterecent fare increases, the company loses money on its domestic service, whichaccounts for 60% of its total traffic, because the fares for local customers areregulated by the government. As of late 1998 more than 15 foreign airlines hadscheduled international flights to Hanoi, Danang or Ho Chi Minh City.

Telecommunications By mid-1997 there were 1.4m installed telephone lines in Vietnam, raising thedensity of telephones to about one for every 55 people. That this is still a verylow density by international standards should not obscure the speed withwhich lines have been installed in the past few years (as recently as the end of1991 density was less than one per 500 people). The goal is to increase densityto 4-5 units per 100 people by 2000, which calls for the number of connectionsto grow by about 35% annually. Vietnam Posts and Telecommunicationssigned long-term contracts in 1997 for installing 1.3m further lines, at anestimated cost of $1.2bn.

Between 1987 and 1991 international telephone traffic increased by 1,700% to14m minutes. Incoming calls exceed outgoing, because of the high price ofcalls made from inside Vietnam. In February 1996 Vietnam opened its firstinternational fibre-optic telecommunications link.

Vietnam has suffered an ad-hoc expansion of its telecoms system and conse-quently has at least 12 different switching systems and a wide variety of equip-ment. Mobile phones are also popular, with almost 100,000 subscribers by theend of 1997. About four-fifths of all subscribers use Mobiphone, a joint venturebetween the Vietnam Post and Telecommunications company and Comvik ofSweden.

An Internet service became available in mid-1998 in both Hanoi and Ho ChiMinh City, but it is expensive, slow, difficult to get and heavily regulated (in aneffort to filter the information coming into the country). Electronic mail ismore widely available.

Energy provision

Vietnam’s energy resources include plentiful supplies of high-quality coal,massive and still largely untapped sources of hydropower and still-abundantbut diminishing supplies of fuelwood and charcoal (Reference table 10 includesnational statistics on energy production, exports and imports).

Electricity productionremains low—

Commercial energy consumption in 1996 was about 8.7m tonnes of oil equiva-lent, or 113 kg of oil equivalent per head, one of the lowest rates of energyconsumption in the world but in line with what might be expected of such apoor country. Non-commercial energy use, mainly firewood, is almost as large.

Electricity production in 1997 was 254 kwh per head, about half of the level inIndonesia and one-sixth of Thailand’s (but twice that of Bangladesh). Electricityshortages reappeared in mid-1998, prompting the prime minister publicly to

22 Vietnam: Energy provision


excoriate the state-owned power provider, Electricity of Vietnam, for poor man-agement.

The government would like capacity to grow at 14-15% per year to the end ofthe century, raising it from about 6,700 mw in late 1996 to around 9,000 mwin 2000, and increasing the amount generated from 19.1bn kwh in 1997 to26bn-29bn kwh by 2000. Most of the expanded capacity will come in the formof gas-powered plants in the south, supplemented by an increase in coal-firedproduction in the north and a modest expansion of hydroelectric power. Bythen the national grid is expected to reach all districts and four-fifths of allvillages and communes.

A number of companies are interested in building power plants on a build-operate-transfer (BOT) basis, but progress has stalled because they have beenunable to get firm guarantees from the government on the price they willreceive for electricity or to pay for inputs (gas and coal).

—and coal meetsone-quarter of primary

energy needs

Coal is the main form of commercial energy after oil, meeting about one-quarter of primary energy needs (excluding biomass). Almost all of the coalproduced is high-quality anthracite. Estimated reserves of anthracite alone areput at 3.7bn tonnes, mainly in the north-eastern province of Quang Ninh.Output was 10.6m tonnes in 1997, up from 5.9m tonnes in 1993. About one-third of the output was exported and most of the rest was used to generateelectricity. Coal dust is formed into briquettes, which are used for cooking inthe urban areas of the north of the country.

Oil and gas Since 1988 foreign oil companies have signed 29 production-sharing contractsfor offshore exploration and development.

Over three-quarters of current production comes from the Bach Ho (WhiteTiger) field, discovered by Mobil in 1975 and subsequently exploited by theVietnamese-Soviet joint venture Vietsovpetro. Output from Bach Ho was re-ported to be running at about 150,000 barrels/day (b/d) in mid-1996. Another20% of national production comes from the Dai Hung (Big Bear) field, dis-covered by Vietsovpetro in 1987 and subsequently awarded to a consortium ledby Broken Hill Proprietary (BHP) of Australia. Estimated recoverable reservesfrom Dai Hung are put at 100m barrels, downgraded from earlier estimates of800m barrels. The disappointing performance of this field led BHP to withdrawfrom the venture in 1996.

Production began in early 1997 at the small Bunga Kekwa field, where PetronasCarigali of Malaysia is expected to produce 50,000 b/d at peak output. TheRang Dong field came on stream in mid-1998.

Oil production in 1997 was 9.8m tonnes, up 11% from 1996. Although theofficial goal of producing 20m tonnes by the year 2000 is unrealistic, crude oilis a leading export, earning $1.35bn in 1996. Imports of petroleum productsamounted to $1.08bn in the same year, and within about five years Vietnam islikely to become a net importer of petroleum, especially as there has been adecline in interest in exploration and drilling since 1994.

Vietnam: Energy provision 23


The prospects for gas are more promising. Potential reserves are about 600bn cumetres, about the same as Australia’s. In April 1995 a 125-km pipeline connect-ing Bach Ho to a power plant near Vung Tau began operating, allowing 475mw of electricity-generating capacity (7% of the country’s total) to come onstream in 1996 at Ba Ria and Phu My. More ambitious plans for exploitation ofVietnam’s gas by establishing a network of pipelines and terminals have stalledbecause of differences between foreign companies and the Vietnamese statecompany, PetroVietnam, over pricing and use of the gas.

Energy balance, 1997(m tonnes oil equivalent)

Elec- Oil Gas Coal tricity Other Total

Primary supplyProduction 10.0 0.6 5.2 4.0a 7.7 27.5Imports 5.5 0.0 0.0 0.0 0.0 5.5Exports –10.0 0.0 –2.7 0.0 0.0 –12.7Total 5.5 0.6 2.5 4.0a 7.7 20.3

Net transformationb –0.2 –0.6 –0.7 –2.7 –0.1 –4.3

Final consumption 5.3 0.0 1.8 1.3c 7.6 16.0

a Expressed as input equivalents on an assumed generating efficiency of 33%. b Transformationinput and output, plus energy industry fuel and losses. c Output basis.

Source: Energy Data Associates.

Refining capacity remainssmall but more is planned

Vietnam’s refining capacity is limited to a tiny (800-b/d) facility at Cat Hai nearHo Chi Minh City. The government is committed to building a 120,000-130,000-b/d oil refinery at Dung Quat, in central Vietnam. The location, 970km north of Vung Tau (where the oil comes ashore), adds $200m to the cost,bringing the total to $1.3bn. Two private consortia considered but rejected theproject. The government is now working on the refinery with a Russian part-ner, Zarubezhneft, but the details of the financing have not yet been workedout and progress is likely to be slow. Both the World Bank and the AsianDevelopment Bank have said that Vietnam cannot afford it at present.

Financial services

The banking system hasbecome diversified

Before 1988 the banking system consisted of the State Bank of Vietnam (whichwas both the central bank and the main commercial bank), the Bank forForeign Trade (BFT) and the Construction and Investment Bank, which imple-mented the government’s capital budget. Under the reorganisation of July1988 the State Bank’s central banking functions were strengthened and itscommercial banking role was assigned to two new banks, the Vietnam Agricul-tural Bank (VAB) and the Vietnam Industrial and Commercial Bank (VICB),catering, as their names suggest, respectively to the agricultural and industrial-commercial sectors. In March 1989 the State Bank assumed the BFT’s foreign-reserve management function.

Since 1988, particularly since 1992, Vietnam has moved to a diversified systemin which state-owned, joint-stock, joint-venture and foreign banks provideservices to a broader customer base. As of December 1995, in addition to four

24 Vietnam: Financial services


state-owned commercial banks, there were 52 joint-stock banks, 23 foreignbank branches, four joint-venture banks and 62 foreign banks with repre-sentative offices, in addition to 68 credit co-operatives and about 900 people’scredit funds.

Despite these changes the banking system is in poor health. The clearest signof this is that liquid bank deposits in 1995 were just 16% of GDP, the same levelas in 1991. Public confidence in the banking system remains low. Only 4% ofall potential holders of accounts have actually opened one. The quality of loansmade by the state-owned banks is low, with an estimated 15% of all loans nowoverdue, representing 112% of the capital of the banking system. This helpsexplain the reluctance of the public to entrust more of their money to thesebanks. About one-third of all credit and half of the credit provided to stateenterprises is extended in dollars, to borrowers hoping to take advantage of thelower interest rate on dollar loans. Since there is no hedging mechanism, thishas left many borrowers highly exposed to exchange-rate changes. (Historicaldata on money supply are provided in Reference table 2, and data on bankingin Reference table 11.)

Status of loans made by the banking system(%)

1995 Jun 1997

All banksOverdue loans/bank capital 61.9 112.3Overdue loans/total loans 7.8 15.4

State-owned commercial banksOverdue loans/bank capital 7.8 15.4Overdue loans/total loans 8.9 16.4Source: World Bank, Vietnam: Deepening Reform for Growth.

Joint-stock banks tend tobe small

By July 1993 there were 31 joint-stock banks, dominated either by ethnicChinese capital or (more often) by state enterprises or agencies, and oftenexisting primarily to meet the needs of their owners. The capital of the 31joint-stock banks operating in July 1993 averaged just $9m per bank. Many ofthe joint-stock banks have very large amounts of non-performing loans, and inlate 1998 the State Bank acted to shut down or consolidate the weakest ones,establishing a fund for this purpose.

Credit co-operatives andinformal lending

The need for small lending institutions appears to be strong, but they arefragile. About 300 credit co-operatives collapsed in 1990, bankrupting some2,000 small firms. A network of credit circles (hui) collapsed in Ho Chi MinhCity in July 1993. Since the government authorised the setting up of centrallysupervised popular credit funds, almost 900 have sprung to life. Yet the WorldBank estimated that in early 1995 rural households borrowed four times asmuch informally as they did through such formal institutions.

In the light of the banking crisis in nearby countries, the State Bank hastightened reporting rules, and a new law on bank regulation came into force inOctober 1998.

Status of foreign banks Since 1988 foreign banks have been permitted to open representative officesand a decree on foreign bank branches and joint ventures was issued in June

Vietnam: Financial services 25


1991 (after the first joint-venture bank had already opened). Although therewas a total of 95 foreign representative offices, branches and joint ventures bylate 1995, their activities were initially mainly confined to trade finance. In1997 they provided almost half of new credit in the country, but they havecontinued to be restrained by rules limiting the extent to which they mayperform transactions in dong. A few foreign banks have been involved in largesyndicated loans to a select number of local companies.

The banking system isfragile

Thomson BankWatch downgraded Vietnam’s sovereign debt in 1997 from B- toC, saying that “the banking sector has long been characterised by weak manage-ment practices, a poor legal framework and alleged widespread corruption”. Thedecision was prompted by the inability or unwillingness of Vietnam’s largestbank, Vietcombank, to meet a deadline on about $40m of overdue letters ofcredit. In February 1997 the well-regarded, joint-venture VP Bank was unable tomake payments on a $2.9m letter of credit to a South Korean bank, and threemonths later the Viet Hoa Bank faced a similar problem. A serious crisis has beenavoided but the State Bank is trying to bolster its reserves and to tighten itsoversight capacities.

Other services

Tourism numbers havepeaked

An effort since 1986 to attract foreign tourists paid off initially with a bigincrease in arrivals, but in 1998 momentum was lost and the number of visitorsactually fell. Foreign visitors typically stay in Vietnam for just a few days, anddo not return. The reasons given include the high cost of travel to Vietnam, theconsiderable expense of visas and a lack of local attractions.

The total number of visitors (including holidaymakers, business people andoverseas Vietnamese visiting their families) had been growing extremely rap-idly, from 7,000 in 1986 to around 200,000 in 1990 and an estimated 1.7m in1997. The sector has become Vietnam’s fourth largest foreign-exchange earner.In 1997, 40% of the visitors were tourists, 25% were business travellers, and therest came to visit their families or for other purposes. (See Reference table 13 forfurther data on tourist arrivals and earnings.)

In 1997 an estimated 24% of visitors came from China and a further 9% fromTaiwan; 16% of all visitors were overseas Vietnamese. The flow from Francealmost halved between 1995 and 1997, reflecting the weaknesses of Vietnam asa tourist destination. Domestic tourism is increasing rapidly, as travel withinthe country becomes easier and incomes rise. However, few Vietnamese get anopportunity to travel abroad; just 18,048 did in 1997.

An expansion of facilities This expansion has been achieved by opening up the country (including easingvisa restrictions) and attracting foreign investment to develop hotels and re-sorts. By mid-October 1997, 271 foreign-invested hotel and tourism projectsworth $7.7bn had been approved. By early 1996 the country had about 55,000hotel rooms; more than half of the nearly 30,000 rooms of international stand-ard were built in 1995 and 1996. As a result of the building frenzy, occupancyrates have fallen to about 30% in mini-hotels and about 50% in internationalhotels. The boom in hotel construction is over and work has halted on at least

26 Vietnam: Other services


two partially finished hotels. Luxury hotels, which rely on business customersfor four-fifths of their traffic, have been particularly hard hit by the growingavailability of residential complexes, which have siphoned off most of theirlong-stay guests.

Production

Industry

Between 1993 and 1997 industrial-sector output grew at an annual average rateof 13.6%, well above the 8.9% average growth rate of GDP during the sameperiod. As a result, industry’s share of GDP has been increasing, and it has beenthe main driving force behind the economy’s recent rapid growth. The govern-ment’s intention is that the sector should retain this role: official plans to theyear 2000 envisage industrial growth of 14-15% per year. (See Reference tables14 and 15 for a breakdown of gross industrial output and main manufactures.)

The industrial sector, 1997

Industrial GDP (D bn) 71,718

Annual growth of industry (%) 13.4

Industrial exportsa ($ m) 4,186

Employment (’000) 3,656

a 1996.


Almost 50% of all industrial output comes from two main sectors, food andfoodstuffs (26%) and petroleum and other fuels (12%). Only electricity, chemi-cals, construction materials, machinery and garments each account for morethan 5% of total industrial output. Every industrial subsector has grown by atleast 5% annually in real terms since 1990, reflecting the broad base of indus-trial expansion. Several subsectors have expanded at more than 20% annually,notably oil and gas, steel, chemicals (including fertilisers and rubber goods),garments, footwear and printing.

Some new subsectors, such as electronics and car and motorcycle assembly,have been emerging largely as a result of foreign direct investment (FDI), butare still small. FDI has also been making a contribution to import-substitutingindustries, ranging from heavy industries, such as steel and cement, to con-sumer goods, such as beer and cigarettes. The World Bank, among others, hascriticised this as inefficient, diverting investment and other resources intoactivities that are capital-intensive and do not create much employment.

Centrally run stateenterprises

At the beginning of 1996 there were 553 centrally run, state-owned, industrialenterprises, a number that had remained fairly steady since about 150 suchenterprises were shut down or consolidated in the late 1980s. Centrally runfirms tend to be large and to be concentrated in heavy industry; in 1997 theyaccounted for 32% of all industrial output. Collectively they employed about

Vietnam: Industry 27


346,000 workers, about the same number as in 1990, an average 626 workersper firm. Despite this static level of employment, the output of these firms hasmore than doubled since 1990, rising by an average of 16% annually.

Locally managed stateenterprises

Locally run state enterprises are owned and run by the people’s committees atprovincial, city, district and ward levels. Their number continues to fall, from ahigh of 2,475 in 1987 to 1,327 in 1996, accounting for 17% of industrialoutput. They have a strong presence in chemical products and in food process-ing. After falling sharply in 1991, employment in this sector has begun to growagain, by 8.5% in 1997. Between 1990 and 1996 the output of these firms roseby slightly over 10% annually.

The fast-growing,foreign-invested sector

The fastest growing part of the industrial economy consists of foreign-investedfirms, which includes both joint ventures and 100% foreign-owned subsid-iaries. Output in this sector rose by 21% annually between 1995 and 1997,when it accounted for 29% of all industrial output. This is a high degree ofpenetration of foreign capital, which has occurred entirely since 1988. It under-scores Vietnam’s heavy reliance on a continued inflow of foreign investment inorder to sustain rapid economic growth.

The non-state sector The remaining 23% of industrial output in 1997 originated in the domestic,non-state sector, which provided jobs for 2.6m people. In 1996 the sector num-bered 623,710 entities, including 1,648 co-operatives, 4,909 private enterprisesand numerous households producing industrial goods and handicrafts. Thenon-state sector dominates the metalworking and woodworking sectors and hasa strong presence in textiles and in the rapidly growing garment and footwearsectors. (Historical data on the retail trade sector are given in Reference table 12.)

Mining and semi-processing

The resource endowmentis still not known

Vietnam is believed to have a wide array of minerals, although their preciseextent is largely undetermined. Commercially significant quantities of coal (seeEnergy), iron ore, apatite, chromite, rubies and gold are mined. Vietnam alsohas reserves of manganese and titanium ore, bauxite, tin, copper, zinc, lead,nickel, graphite and mica.

Reserves of iron ore are estimated at nearly 560m tonnes and those of apatite(a source of phosphorus used in the manufacture of fertilisers) at close to 1bntonnes. More thorough investigations have shown that the Thach Khe iron-oremine, which was once believed to contain reserves of 500m tonnes, is smallerthan expected; not only are its reserves closer to 300m tonnes, but the concen-tration of zinc in the ore is too high to be suitable for upright furnace-basedmetallurgy, so the mine is not commercially viable. The former Soviet Uniondeveloped exploitation of Vietnam’s apatite, which is now being produced at arate of around 470,000 tonnes per year.

Bauxite and copper are regarded as having great potential. Bauxite (estimatedreserves 4.2bn tonnes) is found in the northern mountains and in Lam Dongprovince in the south. Copper (estimated reserves: nearly 600,000 tonnes)mining has not been developed but could become significant.

28 Vietnam: Mining and semi-processing


Agriculture, forestry and fishing

Vietnam is still a predominantly agricultural society. Almost 80% of the popul-ation lives in rural areas, 70% of employment is in agriculture and 70% ofhouseholds cultivate at least some rice. The sector still contributes about half ofnon-oil exports, and agricultural GDP grew at a robust 4.4% annually between1993 and 1997. It accounts for 26% of current-price GDP, down from 30% in1993. (Reference table 16 includes historical data on the gross output of agricul-ture by subsector.)

Despite land scarcity thesown area has risen—

Cultivated land is scarce: only about 22% of the total land area is devoted toagriculture and the cultivated area per head is only 0.1 ha, one of the lowestrates in the world. The land that is cultivated is also unequally distributedgeographically. The country’s two rice-producing deltas, the Red River Deltaand the Mekong Delta, cover only 17% of Vietnam’s land area but contain overhalf the total cultivated land. Some 85% of cultivated area is under annualcrops, of which 65% is under rice. Upland and industrial crops cover approxi-mately 19% of cultivated area.

The scope for reclaiming land for agricultural purposes is limited, and existsmainly in the south. Estimates for the potential for expanding cultivated landvary between around 900,000 ha and 1.4m ha. However, much of this areacontains land whose soils are degraded by erosion, often associated withdeforestation or (in the deltas) by saline or acid-sulphate conditions. Mean-while about 70,000 ha per year of cultivated land are lost to agriculture owingto population pressures, soil exhaustion and urban encroachment.

Against this background, it is surprising that the area of land sown to crops hasactually increased by 3% per year since 1991. About one-third of the increaserepresents the expanded area under industrial crops such as cotton, sugar,rubber, tea and coffee; another one-third comes from additional paddy landthat has become available as a result of investments in irrigation; and most ofthe remainder is attributable to increased double- and triple-cropping.

—as have croppingintensity and yields

Two important means of increasing output are by raising cropping intensity andby boosting yields. In the early 1990s cropping intensities (sown area divided bycultivated area) were already reasonably high, at around 140% (1.8 crops peryear in the Red River Delta, 1.7 in central Vietnam and 1.3 in the south). About50% of all rice land was double-cropped but only 3% was triple-cropped.

Rice yields have doubled since the disastrous year of 1978 when they were 1.79tonnes/ha. In 1997 they were 3.9 t/ha—approaching the yields of Indonesia(4.4 t/ha in 1993), if not yet China (6 t/ha). The rise in yields has allowedVietnam to maintain its position as one of the world’s top three rice exportersfor almost a decade, and may be attributed to the thoroughgoing reforms of therural economy undertaken in 1989.

Yield growth is less hampered by shortages of fertiliser, pesticides and otherinputs than it used to be. Consumption of chemical fertiliser per cropped hareached 135 kg in 1992 (up from 40 kg in 1982), a higher rate than in Indonesiabut well below that in countries like China and the Koreas, whose

Vietnam: Agriculture, forestry and fishing 29


manpower/hectarage ratios are also comparable with Vietnam’s. (Referencetable 17 provides historical data on food crops output.)

Output of industrial cropscontinues to rise rapidly

The output of most annual industrial crops remained stagnant until about1994, when the output of sugarcane (15% annual growth during 1993-97),groundnuts and soybeans increased strongly. Output of the minor crops—jute,rush and cotton—has been more or less stagnant. (See Reference tables 18 and19 for production and yields).

The area planted with perennial industrial crops expanded rapidly during the1980s, coffee standing out as a clear success story.

Coffee: The area planted to coffee increased sixfold between 1985 and 1997,from 44,700 ha to 270,000 ha. In the same period output increased more than32 times, from 12,300 tonnes to 400,300 tonnes. Almost all of this coffee, whichis mainly of the lower-price robusta variety, is exported, bringing in about 5% ofVietnam’s total export earnings. In 1997 Vietnam became the largest coffeeexporter in the region and the fourth largest in the world. Its yields are amongthe highest anywhere, 1.5 t/ha compared with a world average of about 0.5 t/ha.Investment in the sector remains strong, both to bring more land into cultiv-ation and to improve the processing and handling of beans.

Rubber: Cultivation has benefited both from an expansion in cultivated area,from 180,000 ha in 1985 to 330,000 ha by 1997, and from the replanting ofland with new high-yielding varieties, often with Malaysian and Taiwaneseassistance. Yields have now risen remarkably, from 0.27 t/ha in 1985 to 0.55t/ha in 1997, and the quality of the rubber produced has improved. As a result,output jumped by 26.8% in 1997, compared with the year before.

The livestock sector With rising affluence and a population growing at around 1.8% per year, thedemand for meat is increasing rapidly, although consumption per head re-mains low. The number of pigs rose by 4.3% annually between 1993 and 1997and the quality of pig meat improved. Poultry output rose even more quickly,by 4.7% per year during the same period. (See Reference table 20 for data onlivestock numbers.) The cattle population has risen slowly but there has been arapid growth in the number of sheep and goats, from 372,000 in 1989 to515,000 in 1997.

Forestry Vietnam’s natural forest is officially estimated at 10m ha and a slightly largerarea is classified as deforested. Deforestation is continuing at a rate of about200,000 ha per year, enough to remove the remaining forest within 50 years.According to one set of official estimates, the country’s forest cover declinedfrom 44% of the land area in 1943 to 23% in 1984 and may now have fallenbelow 20%. The main causes of deforestation since the war have been popul-ation pressure, logging and the clearing of forests for agricultural purposes,including by “slash-and-burn” farmers. Another cause is the demand for fuel-wood, which supplies 80% of household energy needs—the equivalent of 12mtonnes of oil annually.

The government has an ambitious target of replanting 200,000 ha/year of newforest to cope with what a government report has described as “the most

30 Vietnam: Agriculture, forestry and fishing


serious challenge since reunification”. In the 1980s afforestation took place atan annual average rate of 36,000 ha, according to the World Resources Insti-tute, and the pace accelerated to 109,000 ha annually during 1990-95.

Efforts to reducedeforestation are

under way

To make wood less profitable to cut and hence to reduce deforestation, thegovernment banned the export of logs in 1992, and of all timber products in1993, although this was subsequently relaxed. The result, according to officialfigures, was that exports of wood and wood products (including furniture) fellfrom 780,000 cu metres in 1991 to 40,000 cu metres in 1994.

Forested area, 1994(’000 ha; year-end)

Natural forest 9,082

Afforested area 1,047

Deforested area 11,175

Total forest area 21,304Source: General Statistical Office, Statistical Yearbook.

Fisheries expansion A coastline of over 3,000 km and an extensive network of rivers, canals, lakesand ponds give Vietnam abundant aquatic resources. Exploitation of theseresources has expanded at a modest pace since 1990, with output of fish andshrimp increasing by 3.5% annually to reach over 1.1m tonnes by 1997. (SeeReference table 21 for historical data on fisheries output.) Fisheries exportshave increased equally rapidly, from $239m in 1990 to $651m by 1997, tobecome the country’s fourth most valuable export.

Construction

With an annual growth rate of 14.6% between 1990 and 1997, the construc-tion sector has grown even more rapidly than industry, although it is also oneof the first sectors to have been hit by the recent economic slowdown. Thesector accounted for 7% of current-price GDP in 1997, up from 4% in 1991. Theproduction of construction materials such as cement and bricks has risen evenfaster.

Large projects are fallingin importance—

Large projects were an important part of the construction sector until recently,including the Soviet-assisted Hoa Binh hydroelectric project, the north-southpower line built in 1993 and several large hotels, residential complexes andoffices. Most of these projects have now been completed and the focus is on(aid-financed) infrastructure and on the extensive development of private resi-dential housing. Little housing was built in the towns of the north in the 50years before 1990, and the average floor space per inhabitant is 3 sq metres inHanoi and 5 sq metres in Ho Chi Minh City. The government no longerprovides housing to its employees, although those who already live in state-provided accommodation are permitted to stay there. Over 95% of residentialinvestment is undertaken privately.

—as are industrial zones A popular destination for foreign investment has been industrial and exportprocessing zones. By September 1997 there were 34 such zones, with a commit-ted investment of $4.2bn (14% of all investment commitments). Despite their

Vietnam: Construction 31


popularity, less than one-fifth of the land available in the zones has beenrented out. Developers planned the zones before the regional economic crisisand presumably expected a surge in investment in factories that will make useof the zones.

The external sector

Merchandise trade

Foreign trade, 1996($ m)

Merchandise exports 7,256 of which: industrial goods, incl petroleum 4,186 agricultural goods 2,160

Merchandise imports 11,144 Fuel & raw materials 6,586 Machinery & equipment 3,075 Consumer goods 1,483

Trade balance –3,888Source: General Statistical Office, Statistical Yearbook.

Before the reforms of 1988-89 export earnings covered only 30-50% of imports.The US-led embargoes on trade and finance restricted the opportunities fortrade outside the Council for Mutual Economic Assistance (CMEA, Comecon)bloc, while stagnation in the CMEA countries limited growth in that market.

Until the reform process got under way in 1988 there was a bias against foreigntrade. Economic policy under central planning was generally inward-looking.The overvaluation of the dong, the requirements imposed by the state plan,the attractions for state enterprises of selling on the domestic open market,tight regulation of foreign exchange and the monopoly of state trading com-panies all discouraged exports.

Reforms have led to asurge in exports—

A series of adjustments to the official exchange rate brought it into line withthe free-market rate in 1989. Measures were also taken to further the decentral-isation of foreign trade, which had begun, somewhat tentatively, as early as1981. These reforms led to a surge of exports to the convertible area. In 1989they increased by 154% compared with 1988, putting the trade balance withthe convertible area into surplus. During 1991-96 the dollar value of exportsgrew at an annual average rate of 29%. The emergence of Vietnam as a majorrice and coffee exporter, rising oil exports and growing access to new marketsfor its textiles and garments, as well as for traditional commodities such asrubber, coffee and seafood, have also helped boost earnings.

—but the absoluteamounts are still small

Recorded merchandise exports now constitute about 47% of GDP, makingVietnam one of most open economies in the region. Despite this, exports perhead were worth only $97 in 1996, an indication that Vietnam is a long waybehind such countries as Thailand ($905 per head in 1996) and Indonesia

32 Vietnam: Merchandise trade


($255 per head). Exports of light manufactures were worth $28 per head in1996, reflecting the fact that commodities (oil, rice, rubber, coffee and marineproducts) are still a large component of Vietnam’s exports. (See Reference table22 for data on the main exports).

Import liberalisation After 1992, when the trade account was in near balance at a time of austerity,imports surged past exports, pushing the current-account deficit up to an un-sustainable $2.5bn in 1996 (13.5% of GDP). Since then, imports have risenmore slowly than exports, reflecting in large measure the diminished inflow offoreign investment (and the machinery that accompanies it), but also a varietyof administrative measures, including temporary import bans and restrictedaccess to foreign exchange and credit.

Smuggling remains rampant, largely because of the high and variable tax rateson imports; in 1994 the average effective import tariff on recorded imports was19%. Smuggling has increased greatly since the Cambodian and Chinese bor-ders were opened up in the late 1980s. An official estimate put the value ofsmuggled goods in the first nine months of 1995 at $1.4bn, about 17% of tradeturnover, but other figures suggest that this may understate its true extent. (SeeReference table 23 for data on the main imports).

Main trading partners During the 1990s Vietnam’s main trading partners have been fast-growingregional countries like Singapore, Hong Kong, South Korea, Taiwan and Japan.The fact that 70% of trade was with other East Asian countries in 1997 madeVietnam very vulnerable to problems in these economies. By 1998 only 50% oftrade was with these same countries, as a result of a collapse in demand, butVietnam succeeded in expanding its exports in other markets, particularlywestern Europe. (Historical statistics on direction of trade are contained inReference table 24.)

Main trading partners, 1996(% of total)

Exports to: Imports from:

East Asian NICsa 40 East Asian NICsa 60

Japan 21 EU 14

EU 16 Japan 11

China 5 China 3

a Newly industrialised countries—Singapore, Malaysia, Hong Kong, South Korea, Taiwan, Thailand,Indonesia.


Membership ofinternational economic

organisations

Vietnam’s “multidirectional” diplomacy has been explicitly based on its per-ception of growing global economic interdependence. Its integration into theregional and global economy is being formalised through membership of inter-national organisations. The most important of these is the Association ofSouth-East Asian Nations (ASEAN), which Vietnam joined in July 1995. TheAsia-Pacific Economic Co-operation (APEC) forum has agreed in principle toadmit Vietnam. Vietnam has also applied for membership of the World TradeOrganisation (WTO). Vietnam gained observer status in its predecessor, theGATT, in July 1994. Its admission to the WTO is unlikely to take place for a few

Vietnam: Merchandise trade 33


more years and will require the support of the US and the European Union,both of which are currently unimpressed by Vietnam’s credentials as a tradeliberaliser.

Within the framework of the ASEAN Free-Trade Area (AFTA) Vietnam is com-mitted to cut tariffs on imports from the other ASEAN countries. It is not,however, expected to catch up with the six countries that joined ASEAN beforeVietnam. They are committed to reducing their common external preferentialtariffs to 5% or less by 2003. Vietnam has been allowed until 2006 to come intoline with these members of the association. It hopes that of ASEAN member-ship will strengthen its already extensive trade and investment links with theindividual ASEAN countries.

Discussions are proceeding on an accord with the US that would grant “normaltrade relations status” to Vietnam, but a conclusion is some way off. Yet theeconomic consequences of full normalisation with the US are potentially enor-mous, particularly for Vietnam’s prospects as an exporter of low-cost manufac-tures such as textiles and shoes. Vietnam has rapidly developed its exports ofgarments to the EU, helped by an agreement on quota arrangements, whichwas recently renewed and expanded.

Invisibles and the current account

The current account, 1996($ m)

Current-account balance –2,482 Trade balance –3,150 Services & transfers balance 668Source: World Bank, Vietnam: Deepening Reform for Growth.

The current-accountdeficit is high

The merchandise-trade deficit has been the main reason for Vietnam’s consis-tent current-account deficits (see Reference table 25 for balance-of-paymentsdata). Vietnam’s current-account deficit was 10.7% of GDP in 1996—thanks toa surge in imports funded by aid and foreign direct investment (FDI), an in-creasingly overvalued dong and suddenly expanded access to borrowing onworld markets. Since then the deficit has narrowed, as FDI inflows have fallensharply and foreign debtors have become more wary of extending loans toVietnamese firms.

The importance of privateand official transfers

Offsetting the merchandise-trade deficit to some degree is the positive balanceon services and transfers. This includes earnings from tourism and shipping;foreign grant aid of about $576m in 1996 (about 2.5% of GDP); and remit-tances from Vietnamese working abroad and Vietnamese resident overseas(Viet Khieu, overseas Vietnamese), which were officially put at $474m in 1995and are probably twice as large in fact. On the other hand, Vietnam is a netpayer of investment income, as foreign companies repatriate profits from theirventures in the country.

34 Vietnam: Invisibles and the current account


Capital flows and foreign debt

The capital account, 1996($ m)

Capital-account balance 1,908 of which: short-term capital (net) 285 foreign direct investment (loans & equity) 1,838Source: World Bank, Vietnam: Deepening Reform for Growth.

FDI is an increasinglyimportant financing

source

The main contributions to the capital account have increasingly come from FDIand official loans, despite teething problems in the implementation of both. In1998 inflows of FDI are expected to reach $1.4bn, 40% less than in 1997, but stillthe equivalent of 5.7% of GDP. Total FDI inflows since the foreign investmentlaw was passed in 1988 come to about $10bn, or about one-third of the totalvalue of investment commitments. In terms of value of approved projects, justfive countries (Singapore, Taiwan, Hong Kong, Japan and South Korea) accountfor around 59% of the total, and the EU accounts for another 12%. The fact thatfour-fifths of foreign direct investment inflows come from other countries in theregion has made Vietnam highly vulnerable to the economic crisis in thesecountries. A timely return to rapid economic growth is contingent on a rapideconomic recovery in Asia. (Data on cumulative FDI commitments and commit-ments by country and sector in 1997 are contained in Reference table 28)

Aid commitments arerunning ahead of

disbursements

After support from former Soviet Union dried up in the late 1980s, Vietnamreceived only small amounts of foreign aid. This changed when Japan resumedlending in November 1992 and the US government dropped its objections tomultilateral lending in July 1993. Since then new aid pledges have come toover $2bn annually. Until recently, disbursement was very slow, but now thata number of large infrastructure projects are under way, the inflow has risensharply.

The great bulk of aid is in the form of loans, only some of which are on highlyfavourable terms. The largest single donor is Japan, which has promised one-third of all the aid committed to the country since 1992. (See Reference table26 for data on official development assistance in 1992-96.)

Foreign debt is still influx—

According to the IMF, at the end of 1995 Vietnam’s medium- and long-termpublic and publicly guaranteed international debt stood at $4.5bn in convert-ible currency and about $4.4bn in non-convertible currency, mainly roubles.The cost of servicing the debt is estimated by the IMF to have amounted to 7%of export earnings (the debt-service ratio) and 11% of budget receipts in 1996.These ratios are at manageable levels and are expected to remain so in thecoming years: the World Bank expects the debt-service ratio to peak at just 11%of exports in 1999. Vietnam is likely to be eligible for some further debt reduc-tion under the World Bank/IMF heavily indebted developing countries initia-tive, but this is likely to take three to four years to come to fruition.

Vietnam has followed a sequential approach to settling its debt problems. In1993 it renegotiated its debt with its bilateral and multilateral hard-currencycreditors, by a mixture of reschedulings and an estimated $3.8bn of write-offs.

Vietnam: Capital flows and foreign debt 35


Then it negotiated settlements of its rouble debts to Poland, Germany (onbehalf of the former East Germany), Hungary, the Czech Republic, Romaniaand Bulgaria. In 1996 it reached an agreement with its London Club commer-cial bank creditors, which in effect wrote off about one-half of Vietnam’s trueobligations to this group.

—particularly the roublecomponent

The remaining uncertainty is about the terms of repayment of the outstandingRb10.6bn owed to the former Soviet Union and now assumed by Russia. Usingan exchange rate of about Rb6:$1, as in the debt negotiations with othereastern European countries, would peg the debt at $1.8bn. Russia has beenseeking to have it repaid at the much higher rate of Rb0.56:$1, which wouldraise the value of the outstanding debt to an insupportable $18.9bn. (Referencetable 27 contains World Bank data on Vietnam’s external debt; the roublecomponent is converted at the Rb0.56:$1 rate, giving an unrealistically highvalue for the total debt stock.)

The resolution of the London Club debt has opened the way for Vietnam toborrow on world capital markets, although the World Bank has stronglyrecommended against this, largely because Vietnam already has access toplenty of foreign capital in the form of aid and FDI. The current turmoil inAsian markets means that such borrowing would be expensive, so it is likely tobe postponed for a year or two.

Foreign reserves and the exchange rate

The dong has beensteadily devalued—

After a number of steep devaluations in the mid- to late 1980s that brought thetwo rates more closely into line, in March 1989 the official and market ex-change rates were unified. Except for a brief time in the second half of 1991when the dong plummeted under the pressure of inflationary expectations, theState Bank of Vietnam (the central bank) was able to maintain a “managedfloat” aimed broadly at keeping the nominal dong:dollar exchange rate stable,at about D11,000:$1, a position sustained until early 1997. The State Bank set acentral, or “private”, rate for the dong, which is allowed to trade within a setband on either side of this rate. Both the central rate and the width of thetrading band are also varied from time to time (see below).

Concern over a rapidly escalating trade deficit led to a 4% devaluation of thedong relative to the dollar in March 1997, followed every six months or sosince by additional devaluations of about 5-7% each. Since mid-1997 the deval-uations have been needed to maintain the competitiveness of Vietnam’s ex-ports relative to neighbouring countries, including Indonesia and Thailand,which have undergone far larger depreciations. Despite the 25% drop in thevalue of the dong between the end of 1996 and November 1998, there is still ashortage of foreign exchange. Thus future, relatively small devaluations arelikely to be a feature of economic policy for some time to come.

—in an effort to maintainreserves

In August 1991 the State Bank established foreign-currency centres in Hanoiand Ho Chi Minh City. An interbank foreign-currency market began oper-ations in October 1994. The State Bank may intervene on any given daythrough its Foreign Currency Regulation Fund to prevent the rate from moving

36 Vietnam: Foreign reserves and the exchange rate


outside the trading band. The reserves position remains precarious. EIU esti-mates put total reserves, including gold, at $2.3bn at the end of 1997, equiva-lent to just two months of import cover. (Reference table 29 gives historicalfigures for foreign reserves.)

Exchange rate devaluations since 1997

% effective devaluation Comments

Mar 1997 4.0 Trading band widened from 1% to 5%

Oct 1997 4.8 Trading band widened from 5% to 10%

Feb 1998 5.6 Central rate reduced 5.6%

Aug 1998 7.1 Central rate reduced 10%, tradingband narrowed from 10% to 7%

Source: Press reports.

Dollars and gold are still widely used in the free market. The government’srepeated attempts to discourage their use have been ineffective. While thedong is not freely convertible, there is an active kerb market. Vietnam hadcommitted itself to convertibility on the current account to meet the condi-tions of the IMF’s Article VIII by the end of the period of the current enhancedstructural adjustment facility (ESAF) in 1998—but is unlikely to meet thirddeadline. (Exchange rates are given in Reference table 30.)

Vietnam: Foreign reserves and the exchange rate 37


Appendices

Sources of information

National statistical sources General Statistical Office, Major Social and Economic Information Obtained fromthe Large Scale Surveys in Period of 1990-96, Hanoi, 1998

General Statistical Office, Population Census 1989, Hanoi, 1991

General Statistical Office, Social Indicators in Vietnam: 1990-95, StatisticalPublishing House, Hanoi, 1997

Socialist Republic of Vietnam, Public Investment Programme 1996-2000, Hanoi,June 1996

Statistical Publishing House, The Population of Vietnam, 1992

The Statistical Yearbook (Nien Giam Thong Ke) was published in English in1990 for the first time as Statistical Data of the Socialist Republic of Vietnam,1976-89. The latest edition, from the Statistical Publishing House, is StatisticalYearbook 1997, 1998

International sources Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries (annual)

Bank for International Settlements, International Banking and Financial MarketDevelopments (quarterly)

Energy Data Associates, 1 Regent Street, London SW1Y 4NR

International Institute for Strategic Studies, Military Balance (annual)

IMF, Direction of Trade Statistics (annual)

IMF, International Financial Statistics (monthly)

OECD, External Debt Statistics (annual)

OECD, Financing and External Debt of Developing Countries (annual)

OECD, Geographical Distribution of Financial Flows to Aid Recipients (annual)

UN, World Investment Directory: Asia and the Pacific (annual)

World Bank, Global Development Finance (annual)

World Bank, Social Indicators of Development (annual)

World Bank, Trends in Developing Countries (annual)

World Bank, World Development Report (annual)

World Bank, World Tables (annual)

Select bibliography: booksand reports

Tran Thi Van Anh and Le Ngoc Hung, Women and doi moi in Vietnam, WomanPublishing House, Hanoi, 1997

The Constitutions of Vietnam, The Gioi Publishers, Hanoi, 1995

38 Vietnam: Sources of information


Nguyen Trong Dieu, Geography of Vietnam, The Gioi Publishers, Hanoi, 1995

David Dollar, Paul Glewwe and Jennie Litvack (eds), Household Welfare andVietnam’s Transition, World Bank, 1998

William J Duiker, Vietnam: Revolution in Transition (2nd edition), Westview,Boulder, 1995

Adam Fforde and Stefan de Vylder, From Plan to Market: The EconomicTransition in Vietnam, Westview, Boulder, 1996

Adam Fforde and Anthony Goldstone, Vietnam to 2005: Advancing on AllFronts, Economist Intelligence Unit, London, 1995

Dean K Forbes, Terence H Hull, David G Marr and Brian Brogan (eds), DoiMoi: Vietnam’s Renovation Policy and Performance, Canberra, 1994

Murray Hiebert, Vietnam Notebook, Review Publishing, Hong Kong, 1993

Stanley Karnow, Vietnam: A History, Penguin, New York, 1983

Benedict J Tria Kerkvliet and Doug J Porter (eds), Vietnam’s RuralTransformation, Westview/ISEAS, Boulder, 1995

Bao Ninh, The Sorrow of War, Secker and Warburg, London, 1991

Selection of Fundamental Laws and Regulations of Vietnam, Research School ofPacific studies, Auatralian National University, Hanoi, 1995

Carlyle A Thayer and David G Marr (eds), Vietnam and the Rule of Law,Canberra, Research School of Pacific studies, Auatralian National University,1993

UNDP and UNICEF, Catching Up: Capacity Development for Poverty Eliminationin Viet Nam, Hanoi, 1996

UNDP, Vietnam: Report on Poverty, Hanoi, 1995

UNICEF, Vietnam: Children and Women—A Situation Analysis, Hanoi 1994

Nguyen Khac Vien, Vietnam, A Long History, Foreign Language PublisherHouse Hanoi, 1987

World Bank, Vietnam: Deepening Reform for Growth, 1997

World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy,1995

World Bank, Vietnam: Education Financing Sector Study, 1996

World Bank, Vietnam: Energy Sector Investment and Policy Review, 1993

World Bank, Vietnam: Environmental Programme and Policy Priorities for aSocialist Economy in Transition, 1995

World Bank, Vietnam: Financial Sector Review, 1995

World Bank, Vietnam: Fiscal Decentralisation and the Delivery of Rural Services,1996

World Bank, Vietnam: Poverty Assessment and Strategy, 1995

Vietnam: Sources of information 39


Select bibliography:periodicals

Indochina Chronology (quarterly), Vietnam Centre at Texas Tech University

Vietnam Business Journal (bimonthly in English), New York

Vietnam Country Forecast (quarterly), Economist Intelligence Unit, London

Vietnam Country Report (quarterly), Economist Intelligence Unit, London

Vietnam Country Risk Service (quarterly), Economist Intelligence Unit, London

Vietnam Economic Times (weekly in Vietnamese; monthly in English), Hanoi

Vietnam Investment Review (weekly in English), Hanoi

Vietnam’s Socio-Economic Development (quarterly), Institute ofEconomics/National Centre for Social and Human Sciences, Hanoi

Vietnam Times (daily in English), Hanoi

Reference tables

Reference table 1

Government finances(D bn unless otherwise indicated)

1992 1993 1994 1995 1996

Total revenue 21,023 30,696 42,125 53,370 60,920 Domestic 20,175 29,679 40,925 51,750 59,320 Foreign grants 848 1,017 1,200 1,620 1,600

Total expenditure 22,902 36,936 43,930 54,589 61,430

Balance –1,879 –6,240 –1,805 –1,219 –510

FinancingDomestic –794 2,514 1,565 2,709 560Foreign loans 2,673 3,726 240 –1,490 –50

Memorandum items (% of GDP)Revenue & grants 19.0 22.5 24.7 23.9 23.6 of which: transfers from state enterprises 10.8 11.2 12.1 9.8 9.7Total expenditure 20.7 27.0 25.8 24.5 23.8 of which: capital expenditure 5.8 7.0 6.9 5.4 6.0Budget deficit 1.7 4.6 1.1 0.5 0.2Public savings 4.1 2.4 5.8 4.9 5.8Source: World Bank, Vietnam: Deepening Reform for Growth.

40 Vietnam: Reference tables


Reference table 2

Money supply(D bn unless otherwise indicated; end-period)

1992 1993 1994 1995 1996

Net foreign assets 10,593 6,231 6,940 10,851 14,200

Net domestic assets 16,550 26,055 36,066 41,871 50,400 of which: domestic credit 17,122 27,079 37,951 47,071 55,300

Currency outside banks 6,419 10,579 14,218 18,624 19,170

Total liquidity (M2) 27,144 32,288 43,006 52,722 64,600

Memorandum items (% of GDP)Currency in circulation 9.6 10.4 10.9 8.6 8.7M2 24.6 23.6 25.3 23.7 25.0Domestic credit 15.5 19.8 22.3 21.1 21.4Source: World Bank, Vietnam: Deepening Reform for Growth.

Reference table 3

Gross domestic product

1993 1994 1995 1996 1997

Total (D bn)At current prices 136,571 170,258 222,840 258,609 295,696At constant (1989) prices 156,431 170,258 186,499 203,919 221,872Real change (%) 8.1 8.8 9.5 9.3 8.8

Per head (D ’000)At current prices 1,924 2,348 3,013 3,432 3,855At constant (1989) prices 2,202 2,348 2,522 2,706 2,892Real change (%) 5.6 6.6 7.3 7.3 6.9Source: General Statistical Office, Statistical Yearbook.

Reference table 4

Gross domestic product by expenditure(% of total)

1993 1994 1995 1996 1997

Private consumption 76.1 68.6 66.7 70.3 n/a

Government consumption 9.8 14.7 14.3 13.7 n/a

Total investment 24.9 25.5 27.1 27.9 31.7

Exports of goods & services 32.9 34.5 35.8 42.9 46.7

Imports of goods & services –37.3 –42.9 –46.6 –56.5 –57.2

Statistical discrepancy –6.4 –0.4 2.7 1.7 0.1

GDP 100.0 100.0 100.0 100.0 100.0Sources: Central Institute for Economic Management; General Statistical Office, Statistical Yearbook.

Vietnam: Reference tables 41


Reference table 5

Gross domestic product by sector(D bn at current prices; % of total in brackets)

1993 1994 1995 1996 1997

Agriculture, forestry & fisheries 40,796 48,865 63,219 70,334 77,520(29.9) (28.7) (28.4) (27.2) (26.2)

Industry 29,371 37,535 50,912 61,419 71,718(21.5) (22.0) (22.8) (23.7) (24.3)

Construction 10,101 12,946 15,892 18,092 20,639(7.4) (7.6) (7.1) (7.0) (7.0)

Transport, postal services & telecommunications 6,036 6,924 8,747 10,634 12,779(4.4) (4.1) (3.9) (4.1) (4.3)

Trade 17,549 23,072 29,198 33,974 38,643(12.8) (13.6) (13.1) (13.1) (13.1)

Finance, banking & insurance 2,318 3,450 5,314 6,083 6,940(1.7) (2.0) (2.4) (2.4) (2.3)

State administration 14,402 18,270 22,770 27,694 30,862(10.5) (10.7) (10.2) (10.7) (10.4)

Other services 15,998 19,196 26,788 30,379 36,595(11.7) (11.3) (12.0) (11.7) (12.4)

GDP 136,571 170,258 222,840 258,609 295,696(100.0) (100.0) (100.0) (100.0) (100.0)


Reference table 6

Prices(% change; period averages)

1993 1994 1995 1996 1997

General consumer prices 5.2 14.4 12.7 4.5 3.1

Consumer goods 3.1 13.9 13.1 3.7 2.7

Food & foodstuffs 6.8 21.6 19.6 4.4 1.6

Services 17.5 12.3 9.8 8.5 8.1

Terms of trade (export prices/import prices) index 100 103 108 107 n/aSources: General Statistical Office, Statistical Yearbook; World Bank, Vietnam: Public Sector Management and Private Sector Incentives.

Reference table 7

Populationa

(’000)

1993 1994 1995 1996 1997

Males 34,671 35,386 36,092 36,773 37,736

Females 36,355 37,123 37,867 38,582 38,973

Total 71,026 72,510 73,959 75,355 76,710 of which: rural 56,318 57,326 58,342 59,079 59,939 urban 13,663 14,139 14,575 15,232 15,726

Total growth rate (%) 2.3 2.1 2.0 1.9 1.8

a Components may not sum to total because of exclusion of members of the armed forces and persons working abroad.




Reference table 8

Employed labour forcea

(’000)

1993 1994 1995 1996 1997

State sector 2,960 2,928 3,053 3,138 3,291 Government 1,256 1,232 1,206 1,308 n/a Central 260 254 264 266 n/a Local 996 978 942 1,042 n/a State enterprises 1,704 1,696 1,847 1,830 n/a Central 995 996 1,092 1,071 n/a Local 709 700 755 759 n/a

Private & co-operatives 29,764 30,736 31,537 32,654 33,703

Total 32,724 33,664 34,590 35,792 36,994 of which: industry 3,322 3,366 3,379 3,415 3,446 construction 818 960 996 975 977 agriculture 22,935 23,000 23,521 24,153 24,814 trade & supply 1,813 2,137 2,669b 3,014 3,528 education 883 947 973 994 999 health 260 271 279 293 296 finance, insurance, banking 103 122 126 125 126

a Labour force as of July 1st of each year. b Denotes break in series, so not strictly comparable toprevious year.

Source: World Bank, Vietnam: Deepening Reform for Growth.

Reference table 9

Transport statistics

1993 1994 1995 1996 1997

RoadPassengers (m) 419.2 440.6 472.2 509.4 557.2Passenger-km (m) 10,601 11,150 12,743 14,279 15,262Freight (’000 tonnes) 45,970 49,440 55,952 63,813 65,083Freight-km (m tonnes) 2,437 2,646 2,968 3,498 4,005

RailPassengers (m) 7.8 7.9 8.8 8.5 8.8Passenger-km (m) 1,921 1,796 2,133 2,261 2,320Freight (’000 tonnes) 3,187 4,000 4,515 4,042 5,100Freight-km (m tonnes) 978 1,370 1,751 1,684 1,758

Inland waterwaysPassengers (m) 86.4 104.1 109.8 117.9 129.8Passenger-km (m) 1,311 1,412 1,428 1,606 1,784Freight (’000 tonnes) 16,797 17,533 20,051 23,395 24,144Freight-km (m tonnes) 2,335 1,971 2,248 2,487 2,821

MaritimeFreight (’000 tonnes) 4,498 5,461 6,670 8,843 10,334Freight-km (m tonnes) 12,650 14,104 14,803 21,366 26,578

AirPassengers (’000) 1,100 1,776 2,435 2,754 n/aPassenger-km (m) 1,403 2,371 3,094 3,948 n/aFreight (’000 tonnes) 12 21 35 48 n/aFreight-km (’000 tonnes) 19,000 35,700 99,400 107,100 n/aSource: General Statistical Office, Statistical Yearbook.



Reference table 10

National energy statistics(m tonnes unless otherwise indicated)

1993 1994 1995 1996 1997

OutputElectricity (m kwh) 10,851 12,476 14,665 16,962 19,123Crude oil 6.3 7.1 7.6 8.8 9.8Coal 5.9 5.7 8.4 9.8 10.6

ExportsCrude oil 6.2 6.9 7.7 8.7 n/aCoal 1.4 2.0 2.8 3.6 n/a

ImportsPetroleum products 4.1 4.5 5.0 5.9 n/aSource: General Statistical Office, Statistical Yearbook.

Reference table 11

Banking statistics(D bn; end-period)

1990 1991 1992 1993 1994

Net domestic assets 9,701 13,595 16,549 26,678 31,880a

of which: State Bank of Vietnam 7,314 10,408 12,183 15,747 18,258a

commercial banks 4,815 5,409 9,158 15,645 19,373a

Liabilities 13,787 22,525 31,935 37,002 44,230 State Bank of Vietnam 6,504 8,952 15,630 19,006 23,119a

Commercial banks 7,283 13,573 16,305 17,996 21,111a

Commercial bank creditb 5,822 10,054 15,093 23,181 29,219

State banks n/a 9,503 13,789 20,988 25,684 Other banks n/a 551 1,304 2,193 3,535

Domestic currency 4,970 8,187 11,117 15,766 18,650 Foreign currency 852 1,867 3,976 7,415 10,568

State enterprises n/a 9,049 12,350 15,511 18,380 Non-state sector n/a 1,005 2,743 7,670 10,838

a End-September. b Excluding credit to the government.

Sources: World Bank: Vietnam: An Agenda for Financial Sector Development; World Bank, Vietnam: Economic Report on Industrialisation

and Industrial Policy.

Reference table 12

Retail trade sector(D bn)

1993 1994 1995 1996 1997

State 14,650 21,556 27,367 31,123 35,000

Collective 612 753 1,060 1,358 1,570

Private 52,011 69,950 90,313 108,903 119,430

Total sales 67,273 92,259 121,160 145,874 158,000

Note: Figures do not sum in source.




Reference table 13

Tourism statistics1993 1994 1995 1996 1997

Visitor arrivals (’000) 600 1,000 1,351 1,607 1,716 of which: for tourism 243 n/a 610 662 691

Tourism earnings (D bn) 3,588 4,000 5,653 5,954 5,917Domestic tourists (’000) n/a n/a n/a 2,748 2,340

Vietnamese travelling abroad (’000) 10 n/a n/a 15 18Sources: Dang Duc Dam, Vietnam’s Economy 1986-95; press reports; General Statistical Office, Statistical Yearbook.

Reference table 14

Structure of gross industrial output(% of total)

1993a 1994a 1995 1996 1997

Food products 33.5 30.5 30.0 29.7 29.5

Electricity & fuel 22.7 22.7 17.4 17.7 17.9

Textiles & garments 9.5 9.4 8.8 12.1 12.2

Building materials 7.8 8.4 8.9 8.6 8.6

Machinery 7.5 8.0 7.8 8.2 8.3

Chemicals 7.9 8.6 7.1 7.7 7.8

Metals 2.4 2.0 3.3 3.5 3.4

Forestry products 3.0 3.5 3.2 2.7 2.5

Paper & cellulose 1.8 1.9 1.9 1.9 2.0

Others 3.9 5.0 11.6 7.9 7.8

a Figures for 1993 and 1994 are not strictly comparable with those for subsequent years.




Reference table 15

Main manufactures(’000 tonnes unless otherwise indicated)

1993 1994 1995 1996 1997

Raw materials & machinerySteel 252 288 470 868 950Chromium ores 7 6 25 37 41Metal-working machine tools (units) 1,517 1,538 1,358 1,099 1,100Transformers (units) 3,756 5,881 6,186 6,910 6,450Rice mills (units) 284 2,067 2,043 2,167 2,100Chemical fertilisers 714 841 931 965 994Insecticides 14 14 16 20 20Cement 4,849 5,371 5,828 6,585 7,475Bricks (m units) 5,001 5,797 6,892 7,119 7,163

Consumer goodsGlass & glass products 51 38 77 93 93Porcelain (m units) 152 152 187 232 238Matches (m packets) 145 145 143 n/a n/aPaper 128 154 216 220 249Salt 650 481 689 709 800Fish 135 139 149 167 174Sugar 369 364 517 636 587Beer (m litres) 230 282 465 533 572Cigarettes (m packets) 1,713 1,948 2,147 2,160 2,102Tea 32 34 24 32 35Textile fibre 38 49 59 65 70Fabrics (m metres) 215 251 263 285 300Washing soap 88 97 129 167 201Radio cassettes (’000 units) 163 111 111 94 80Televisions (’000 units) 650 993 770 741 705Bicycles (’000 units) 324 286 236 56 60Bicycle tyres (’000 units) 8,479 9,446 9,703 8,656 10,213Bicycle tubes (’000 units) 10,569 10,736 11,917 12,588 13,100Electric fans (’000 units) 217 334 369 268 265

Milled rice & maize n/a n/a 15,582 16,116 16,800

Ready-made clothes (m pieces) n/a n/a 172 207 213

Cars assembled (units) n/a n/a 3,524 5,806 6,000


Sources: General Statistical Office, Statistical Data; General Statistical Office, Statistical Yearbook.

Reference table 16

Gross output of agriculture(D bn; constant 1994 prices)

1993 1994 1995 1996 1997

Crops 59,022 61,776 66,183 69,620 73,457 of which: cereals 39,059 40,183 42,110 44,654 46,953 vegetables & beans 4,360 4,529 4,984 5,088 5,246 industrial crops 9,018 10,332 12,149 12,806 13,898 fruit 5,349 5,431 5,578 5,688 5,944

Animal husbandry 12,374 13,044 13,629 14,347 15,206

Total 73,631 77,220 82,307 86,489 91,235Source: General Statistical Office, Statistical Yearbook.



Reference table 17

Food crops output(’000 tonnes)

1993 1994 1995 1996 1997

Paddy 22,837 23,528 24,964 26,397 27,646 of which: spring 9,036 10,504 10,737 12,210 13,309 autumn 5,633 5,630 6,501 6,879 6,550 winter 8,168 7,395 7,726 7,309 7,788

Other cerealsa 2,665 2,670 2,607 2,821 2,916

Total food grainsa 25,502 26,199 27,571 29,218 30,561

Other food crops Maize 882 1,144 1,177 1,537 1,641 Sweet potatoes 2,405 1,906 1,686 1,697 1,643 Cassava 2,450 2,358 2,212 2,067 1,983

a Paddy equivalent.


Reference table 18

Industrial crop production and yields

1993 1994 1995 1996 1997

JuteArea (’000 ha) 14.4 6.6 7.5 8.0 12.4Yield (tonnes/ha) 1.62 1.94 1.97 1.88 1.80Production (’000 tonnes) 23.4 12.8 14.8 15.0 22.3

RushArea (’000 ha) 9.9 10.9 10.4 9.1 7.4Yield (tonnes/ha) 6.39 6.31 7.40 6.04 7.03Production (’000 tonnes) 69.5 69.1 75.6 55.0 52.0

MulberryArea (’000 ha) 26.7 24.1 21.3 n/a n/aYield (tonnes/ha) 7.15 7.03 7.68 n/a n/aProduction (’000 tonnes) 191.3 169.3 163.6 n/a n/a

SugarcaneArea (’000 ha) 143.2 166.6 224.8 237.0 251.1Yield (tonnes/ha) 42.56 45.33 47.64 47.98 45.51Production (’000 tonnes) 6,083 7,550 10,711 11,372 11,428

GroundnutsArea (’000 ha) 217.2 248.2 259.9 262.8 251.3Yield (tonnes/ha) 1.19 1.19 1.28 1.36 1.40Production (’000 tonnes) 259.3 294.4 334.4 357.7 353.0

SoybeansArea (’000 ha) 120.1 132.0 121.1 110.4 100.1Yield (tonnes/ha) 0.87 0.94 1.03 1.03 1.02Production (’000 tonnes) 105.7 124.5 125.5 113.8 102.5

CottonArea (’000 ha) 11.5 13.2 17.5 15.0 15.2Yield (tonnes/ha) 0.44 0.66 0.73 0.74 0.93Production (’000 tonnes) 5.2 8.7 12.8 11.2 14.1Source: General Statistical Office, Statistical Yearbook.



Reference table 19

Output and exports of main perennial industrial crops(’000 tonnes)

1993 1994 1995 1996 1997aa

CoffeeOutput 136.0 180.0 218.0 320.1 400.3 Exports 122.7 176.4 248.1 283.7 n/a

RubberOutput 96.9 128.8 124.7 142.5 180.7 Exports 96.7 135.5 138.1 149.5 n/a

Cashew nutsExports 47.7 81.3 99.0 n/a n/a

TeaOutput 37.7 42.0 40.2 46.8 52.3 Exports 21.2 23.5 18.8 20.8 n/a

CoconutsOutput 1,184.0 1,078.2 1,165.3 1,317.8 n/a


Sources: General Statistical Office, Statistical Yearbook.

Reference table 20

Animal husbandry(m head unless otherwise indicated)

1993 1994 1995 1996 1997

Buffalo 3.0 3.0 3.0 3.0 2.9

Cattle 3.3 3.5 3.6 3.8 3.9

Pigs 14.9 15.6 16.3 16.9 17.6

Horses (’000 head) 132.9 131.1 126.8 126.0 119.8

Goats & sheep (’000 head) 353.0 427.9 550.5 512.8 515.0

Poultry 133.4 137.8 142.1 151.4 160.0Sources: General Statistical Office, Statistical Data; Statistical Yearbook.

Reference table 21

Fisheries output(’000 tonnes unless otherwise indicated)

1993 1994 1995 1996 1997

Sea fish 660 713 722 808 818

Aquaculture (fish) 140 178 209 256 241

Aquaculture (shrimp) 39 45 55 50 46

Sectoral GDP (D bn at constant 1994 prices) 3,743 4,676 5,204 5,439 5,384Source: General Statistical Office, Statistical Yearbook.



Reference table 22

Exports($ m; fob)

1992 1993 1994 1995 1996

Textiles & garments 221 336 550 800 1,600a

Petroleum 756 844 866 1,024 1,346

Rice 86 363 425 549 855

Marine products 302 427 551 620 651

Coffee 54 74 95 495 337

Rubber 54 74 133 181 163

Coal 47 70 71 81 115

Cashew nuts 41 44 59 130 n/a

Total incl others 2,475 2,985 4,054 5,198 7,330

a Estimate.

Sources: World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy; World Bank, Vietnam: Fiscal Decentralisation

and the Delivery of Rural Services; World Bank, Vietnam: Deepening Reform for Growth.

Reference table 23

Imports($ m; cif)

1992 1993 1994 1995 1996

Machinery & spare parts 100 922 1,815 2,761 n/a

Petroleum products 615 614 696 856 1,079

Fertilisers 320 189 247 339 628

Steel 104 233 211 n/a 529

Wheat 59 51 52 60 n/a

Cotton textiles 23 54 55 96 n/a

Monosodium glutamate 53 70 44 32 n/a

Sugar 4 14 39 61 n/a

Total incl others 2,535 3,532 5,245 7,525 10,481Sources: World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy; World Bank, Vietnam: Fiscal Decentralisation

and the Delivery of Rural Services; General Statistical Office, Statistical Yearbook.



Reference table 24

Main trading partners(%)

1994 1995 1996

Exports to:Japan 29.1 26.8 21.3Singapore 14.6 12.7 17.8South Korea 2.1 4.3 7.7Taiwan 5.4 8.1 7.4China 7.3 6.6 4.7US 2.3 3.1 2.8EU 13.9 18.0 16.2

Imports from:Singapore 19.7 17.5 18.2South Korea 12.4 15.4 16.0Japan 10.0 11.2 11.3Taiwan 6.8 11.1 11.3China 2.5 4.0 3.0US 0.8 1.6 2.2EU 17.5 13.4 14.0Source: General Statistical Office, Statistical Yearbook.

Reference table 25

Balance of payments, World Bank estimates($ m)

1992 1993 1994 1995a 1996b

Trade balance –60 –547 –1,190 –2,345 –3,150 Exports 2,475 2,985 4,054 5,198 7,330 Imports –2,535 –3,532 –5,244 –7,543 –10,481

Net services & transfers 49 –220 4 422 668 of which: non-factor services n/a 78 19 159 n/a official transfers 64 194 135 150 150

Current-account balance –10 –767 –1,192 –1,923 –2,482

Capital-account balance 656 107 1,363 1,837 1,908 Disbursements 540 12 288 652 627 Scheduled amortisations –175 –695 –679 –826 –842 Net short-term loans –41 –133 124 –225 285 Foreign direct investment 333 923 1,631 2,236 1,838

Errors & omissions –378 –397 –580 –393 286

Overall balance 268 –1,057 –409 –479 –288

FinancingChange in reserves –463 477 –292 –179 –471 Net IMF credit 0 –39 175 92 178 Debt rescheduling 0 883 0 0 0 Change in arrears 195b –266b 526 566 581

a Trade data from 1995 based on customs data, which have broader coverage. b Net arrears accumulation plus debt rescheduling.

Source: World Bank, Vietnam: Deepening Reform for Growth.



Reference table 26

Net official development assistancea

($ m)

1992 1993 1994 1995 1996

Bilateral 474.0 224.0 585.6 549.1 469.5 of which: Japan 281.2 11.5 79.5 170.2 120.9 France 19.6 31.3 179.8 94.1 67.3 Germany 27.7 28.6 52.7 120.4 52.8 Australia 8.4 19.6 33.7 39.8 47.5 Sweden 59.7 44.1 21.1 34.0 46.2 Italy 26.4 32.2 92.3 3.5 1.6

Multilateral 109.3 34.0 311.2 279.7 458.6 of which: IDA/World Bank 0 –0.6 125.2 46.5 188.0 IMF 0 –60.2 86.5 91.6 175.4 WFP 12.2 15.9 15.0 12.8 12.6 UNICEF 11.2 16.6 15.1 18.9 12.1 UNDP 19.9 19.2 15.1 10.9 11.8 UNHCR 15.0 15.4 12.1 0 0

Total 583.3 258.1 896.8 828.8 927.0 of which: grants 269.5 301.8 644.4 575.8 468.2

a Disbursements minus principal payments on earlier loans. Official development assistance isdefined as grants and loans with at least a 25% grant element, provided by OECD and OPECmember countries and multilateral agencies, and administered with the aim of promoting develop-ment and welfare in the recipient country.

Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients.



Reference table 27

External debt, World Bank estimates($ m unless otherwise indicated)

1992 1993 1994 1995 1996

Total external debt 24,533 24,458 25,115 25,813 26,764 Long-term debt 21,736 21,775 22,054 22,039 22,344 Short-term debt 2,699 2,583 2,778 3,397 3,882 of which: interest arrears on long-term debt 2,079 1,980 2,324 2,626 2,869 Use of IMF credit 98 100 282 377 539

Memorandum itemPrincipal arrears on long-term debt 5,406 5,412 7,302 9,008 10,672

Public & publicly guaranteed long-term debt 21,736 21,775 22,054 22,039 22,344 Official creditors 20,406 20,725 20,960 20,585 20,782 Multilateral 142 103 227 324 525 Bilateral 20,264 20,622 20,733 20,261 20,257 Private creditors 1,331 1,050 1,094 1,454 1,562 of which: bonds 0 0 0 0 0 banks 609 630 659 697 679

Total debt service paid 232 407 301 367 346

Principal 175 299 203 224 151

Interest 57 108 99 143 196 of which: short-term debt 19 26 32 46 86

Ratios (%)External debt/GNP 248.6 109.6 161.9 127.5 114.7Debt service paid/exports of goods & services 7.2 10.7 5.6 5.0 3.5Short-term debt/total debt 11.0 10.6 11.1 13.2 14.5Concessional long-term loans/total debt 81.3 52.5 81.1 77.8 75.5

Note. Long-term debt is defined as having an original maturity of more than one year.

Source: World Bank, Global Development Finance, 1997.



Reference table 28

Foreign direct investment commitments, 1997(% unless otherwise indicated)

Total commitments 1997 ($ m) 4,463

Total commitments 1988-97 ($ m) 31,437

By sector:Industry 36.7Construction, offices, buildings 23.6Hotels & tourism 12.3Industrial zones 11.7Transport & communications 8.9Oil & gas 5.1

By main country of origin:Singapore 15.4Taiwan 13.3Hong Kong 10.7Japan 9.7South Korea 9.4US 3.5EU 11.8Source: General Statistical Office, Statistical Yearbook.

Reference table 29

Foreign reserves($ m; year-end)

1992 1993 1994 1995 1996

Total reserves incl gold 429 363 834 1,320 1,847Sources: World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy; IMF; General Statistical Office, Statistical

Yearbook.

Reference table 30

Exchange rates(D per unit of currency; annual averages)

1993 1994 1995 1996 1997

$ 10,640 10,955 10,970 11,100 11,745

¥ 95.69 106.64 116.95 102.04 97.07

DM 6,436 6,717 7,676 7,376 6,773

Bt (Thai baht) 420.3 433.4 441.7 438.0 374.5Sources: EIU; IMF, International Financial Statistics; World Bank, Vietnam: Deepening Reform for Growth.

Editor: Anthony GoldstoneAll queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023



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Vietnam - International University of Japan · 2007-07-26 · Vietnam Our quarterly Country Report on Vietnam analyses current trends. This annual Country Profile provides background