Economy of Vietnam

This article only contains information on the economy of Vietnam after the year 1986; contributions dealing with the pre-1986 period are welcome.

History after 1985

In 1986, the Sixth Party Congress of the Communist Party of Vietnam formally abandoned Marxist economic planning and began introducing market elements as part of a broad economic reform package called "Doi Moi" ("Renovation"). In many ways, this followed the Chinese model and achieved similar results. On the one hand, Vietnam achieved around 8% annual GDP growth from 1990 to 1997 and continued at around 7% from 2000 to 2002, making it the world's second-fastest growing economy. Simultaneously, investment grew three-fold and domestic savings quintupled. On the other hand, urban unemployment has been rising steadily in recent years, and rural unemployment, estimated to be up to 35% during nonharvest periods, is already at critical levels. Layoffs in the state sector and foreign-invested enterprises combined with the lasting effects of an earlier military demobilization further exacerbate the unemployment situation.

Despite an impressive 23% rise in 1999's export performance to $11.5 billion, a sharp drop in new foreign investment commitments foreshadows slower economic growth than Vietnam experienced in the early 1990s. Government control of the economy and a nonconvertible currency have protected Vietnam from what could have been a more severe impact resulting from the East Asian financial crisis. Nonetheless, the crisis, coupled with the loss of momentum as the first round of economic reforms ran its course, has exposed serious structural inefficiencies in Vietnam's economy.

Vietnam's economic stance following the East Asian recession has been a cautious one, emphasizing macroeconomic stability rather than growth. While the country has shifted toward a more market-oriented economy, the Vietnamese government still continues to hold a tight rein over major sectors of the economy, such as the banking system, state-owned enterprises, and areas of foreign trade.

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

Agriculture and Industry

As a result of several land reform measures, Vietnam is now the second-largest rice exporter in the world. Besides rice, key exports are coffee, tea, rubber, and fisheries products.
However, agriculture's share of economic output has declined, falling as a share of GDP from 42% in 1989 to 26% in 1999, as production in other sectors of the economy has risen.

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

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

Trade and Balance of Payments

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

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

Miscellaneous

GDP:

Purchasing power parity: $203.7 billion (2003 est.)

Real growth rate: 7.2% (2003 est.)

Per capita: purchasing power parity - $2,500 (2003 est.)

Composition by sector:

*agriculture: 21.8%

*industry: 39.7%

*services: 38.5% (2003 est.)

Population:

below poverty line: 37% (1998 est.)

Household income or consumption by percentage share:

*Lowest 10%: 3.6%

*Highest 10%: 29.9% (1998)

Labour force:

45.74 million (2003 est.)

By occupation:

*Agriculture 63%

*Industry and services 37% (2000 est.)

Unemployment rate: 6.1% (2003 est.)

Budget:

Revenues: $8.689 billion

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

Industrial production:

Products: food processing, garments, shoes, machine building, mining, cement, chemical fertilizer, glass, tires, oil, coal, steel, paper

Growth rate: 16% (2003 est.)

Electricity:

Production: 29,800 GWh (2001)

By source:

*Fossil fuel: 12.95%

*Hydro: 87.05%

*Nuclear: 0%

*Other: 0% (1998)

Consumption: 27,710 GWh (2001)

Exports: 0 kWh (2001)

Imports: 0 kWh (2001)

Agriculture:

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

Exports:

$19.88 billion (f.o.b., 2003 est.)

Commodities: crude oil, marine products, rice, coffee, rubber, tea, garments, shoes

Partners: Japan, Germany, Singapore, Taiwan, Hong Kong, France, South Korea, U.S, People's Republic of China

Imports:

$22.5 billion (f.o.b., 2003 est.)

Commodities: machinery and equipment, petroleum products, fertilizer, steel products, raw cotton, grain, cement, motorcycles

Partners: Singapore, South Korea, Japan, France, Hong Kong, Taiwan, Thailand, Sweden

Debt:

External: $14.69 billion (2003)

Economic aid

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

Currency:

1 new đong (D or ₫) = 100 xu

Inflation rate (consumer prices): 4% (1999 est.)

Exchange rates: new đong (D) per US$1 - 15,788 (January 2005), 14,020 (January 2000), 13,900 (December 1998), 11,100 (December 1996), 11,193 (1995 average), 11,000 (October 1994), 10,800 (November 1993)

Fiscal year: calendar year