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Economy of Vietnam

Economy of Vietnam

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The economy of Vietnam is a developing planned
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...

-market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...

. Since the mid-1980s, through the "Đổi Mới" reform period, Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...

 has made a shift from a highly-centralized
Centralization
Centralisation, or centralization , is the process by which the activities of an organisation, particularly those regarding planning and decision-making, become concentrated within a particular location and/or group....

 planned economy to a socialist-oriented market economy
Socialist-oriented market economy
The socialist-oriented market economy is the official name given to the current economic system in the Socialist Republic of Vietnam, as a product of the Đổi mới economic reforms, which led to the displacement of the centrally-planned economy with a market socialist system based on commodity...

 which use both directive and indicative planning
Indicative planning
Indicative planning is a form of central economic planning implemented by a state in an effort to solve the problem of imperfect information in economies and thus increase economic performance...

 (see Five-Year Plans of Vietnam
Five-year plans of Vietnam
The Five-Year Plans of Vietnam are a series of economic development initiatives. The Vietnamese economy are shaped primarily by the Vietnamese Communist Party through the plenary sessions of the Central Committee and national congresses...

). Over that period, the economy has experienced rapid growth. Nowadays, Vietnam is in the period of integrating into the world's economy, as a part of globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

. Almost all Vietnamese enterprises are SMEs. Vietnam has been rising as a leading agricultural exporter and an attractive foreign investment destination in Southeast Asia
Southeast Asia
Southeast Asia, South-East Asia, South East Asia or Southeastern Asia is a subregion of Asia, consisting of the countries that are geographically south of China, east of India, west of New Guinea and north of Australia. The region lies on the intersection of geological plates, with heavy seismic...

.

In 2010, the nominal GDP reached $104.6 billion, with nominal GDP per capita of $1218.
According to a forecast in December 2005 by Goldman-Sachs, Vietnamese economy will become the 17th largest economy in the world with nominal GDP of $ 436 billion and nominal GDP per capita of 4,357 USD by 2025.
According to a forecast by the PricewaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....

 in 2008, Vietnam may be the fastest growing of emerging economies by 2025, with a potential growth rate of almost 10% per annum in real dollar terms that could push it up to around 70% of the size of the UK economy
Economy of the United Kingdom
The economy of the United Kingdom is the sixth-largest national economy in the world measured by nominal GDP and seventh-largest measured by purchasing power parity , and the third-largest in Europe measured by nominal GDP and second-largest measured by PPP...

 by 2050.

Vietnam has been listed in the Next Eleven
Next Eleven
The Next Eleven are eleven countries—Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam — identified by Goldman Sachs investment bank and Jim O'Neill as having a high potential of becoming, along with the BRICS, the world's largest...

 countries.

History



As a nation established on agricultural civilization, Vietnamese feudal dynasties always considered agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...

 as the major economic issue, their economic thought thus having affinities to physiocracy. Land ownership was regulated and there were large-scale works, for example dykes were built in the Red River Delta
Red River Delta
The Red River Delta is the flat plain formed by the Red River and its distributaries joining in the Thai Binh River in northern Vietnam. The delta measuring some 15,000 square km is well protected by a network of dikes. It is an agriculturally rich area and densely populated...

 to facilitate wet rice cultivation. In periods of peace, soldiers were sent home to do agricultural work. Furthermore, the court prohibited slaughtering water buffalo and cattle and held many agricultural ceremonies. Handicrafts and art were significant, but commerce was deprecated and businessmen were called by the derogatory term con buôn. The national economy was self-sufficient.

From the 16th century, Confucianism
Confucianism
Confucianism is a Chinese ethical and philosophical system developed from the teachings of the Chinese philosopher Confucius . Confucianism originated as an "ethical-sociopolitical teaching" during the Spring and Autumn Period, but later developed metaphysical and cosmological elements in the Han...

 was losing its influence on Vietnamese society. A money economy began to develop, but unfortunately, in negative ways. Early commercial ports such as Hội An
Hoi An
Hội An , or rarely Faifo, is a city of Vietnam, on the coast of the South China Sea in the South Central Coast of Vietnam. It is located in Quang Nam province and is home to approximately 120,000 inhabitants...

 were constrained and foreign countries with their different cultures and their invasion ambitions were seen as a threat. This policy of closure led to a degree of stagnation in the Vietnamese economy, and contributed to Vietnam becoming a French colony.

Until French colonization
French Indochina
French Indochina was part of the French colonial empire in southeast Asia. A federation of the three Vietnamese regions, Tonkin , Annam , and Cochinchina , as well as Cambodia, was formed in 1887....

 in the mid-19th century, Vietnam's economy had been uniformly agrarian, subsistence, and village-oriented. French colonizers, however, deliberately developed the region differently, designating the South
South Vietnam
South Vietnam was a state which governed southern Vietnam until 1975. It received international recognition in 1950 as the "State of Vietnam" and later as the "Republic of Vietnam" . Its capital was Saigon...

 for agricultural production and the North
North Vietnam
The Democratic Republic of Vietnam , was a communist state that ruled the northern half of Vietnam from 1954 until 1976 following the Geneva Conference and laid claim to all of Vietnam from 1945 to 1954 during the First Indochina War, during which they controlled pockets of territory throughout...

 for manufacturing. Though the plan exaggerated regional divisions, the development of exports — coal from the North, rice from the South — and the importation of French manufactured goods stimulated internal commerce.

When the North and South were divided politically
Geneva Conference (1954)
The Geneva Conference was a conference which took place in Geneva, Switzerland, whose purpose was to attempt to find a way to unify Korea and discuss the possibility of restoring peace in Indochina...

 in 1954, they also adopted different economic ideologies: communist in the North and capitalist in the South. Destruction caused by the 1954-75 Second Indochina War seriously strained Vietnam's economy. Across Vietnam, the situation was worsened by the country's 1.5 million military and civilian deaths and its later exodus of 1 million refugees, including tens of thousands of professionals, intellectuals, technicians, and skilled workers.

Though the government's Second Five-Year Plan (1976–1981) set extraordinarily high goals for annual growth rates for industry, agriculture, and national income and aimed to integrate the North and the South, the Plan's aims were not achieved: the economy remained dominated by small-scale production, low labor productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

, unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...

, material and technological shortfalls, and insufficient food and consumer goods. The more modest goals of the Third Five-Year Plan (1981–85) were a compromise between ideological and pragmatic factions; they emphasized the development of agriculture and industry. Efforts were also made to decentralize planning and improve the managerial skills of government officials.

From the late 1970s until the 1990s, Vietnam was a member of the Comecon
Comecon
The Council for Mutual Economic Assistance , 1949–1991, was an economic organisation under hegemony of Soviet Union comprising the countries of the Eastern Bloc along with a number of communist states elsewhere in the world...

, and therefore heavily dependent on trade with the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....

 and its allies. Following the dissolution of the Comecon and the loss of its traditional trading partners, Vietnam was forced to liberalize trade, devalue its exchange rate to increase exports, and embark on a policy of regional and international economic capitalization.

Throughout the 1990s, exports expanded significantly, growing by as much as 20%-30% in some years. In 1999, exports accounted for 40% of GDP, an impressive performance in a recovering Asia. Vietnam became a member of the World Trade Organization (WTO) in 2006, which freed Vietnam from textile quotas enacted worldwide as part of the Multi Fibre Arrangement
Multi Fibre Arrangement
The Multi Fibre Arrangement governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the amount developing countries could export to developed countries. It expired on 1 January 2005....

 (MFA) of 1974. The MFA placed restrictions on the import by industrialized countries of textiles from developing countries. For China and other WTO members, however, textile quotas under the MFA expired at the end of 2004, as agreed in the Uruguay Round
Uruguay Round
The Uruguay Round was the 8th round of Multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade , spanning from 1986-1994 and embracing 123 countries as “contracting parties”. The Round transformed the GATT into the World Trade Organization...

 of trade negotiations in 1994.

In 1986 Vietnam launched a political and economic renewal campaign (Đổi Mới) that introduced reforms intended to facilitate the transition from a centralized economy to a "socialist-oriented market economy." Đổi Mới combined government planning with free-market incentives and encouraged the establishment of private businesses and foreign investment, including foreign-owned enterprises
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...

. By the late 1990s, the success of the business and agricultural reforms ushered in under Đổi Mới was evident. More than 30,000 private businesses had been created, and the economy was growing at an annual rate of more than 7 percent, and poverty was nearly halved.

Developments since 1997


Vietnam's economic stance following the 1997 Asian Financial Crisis, East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...

n 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 state sectors
Public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...

 of the economy, such as the bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

ing system, state-owned enterprises, and areas of foreign trade. GDP growth fell to 6% in 1998 and 5% in 1999.

The July 13, 2000, signing of the Bilateral Trade Agreement (BTA) between the USA and Vietnam was a significant milestone for Vietnam's economy. The BTA provided for Normal Trade Relations (NTR) status of Vietnamese goods in the U.S. market. Access to the U.S. market is expected to allow Vietnam to hasten its transformation into a manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

-based, export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...

-oriented economy. It would also concomitantly attract foreign investment to Vietnam, not only from the U.S., but also from Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

, Asia, and other regions.

In 2001 the ruling Communist Party of Vietnam
Communist Party of Vietnam
The Communist Party of Vietnam , formally established in 1930, is the governing party of the nation of Vietnam. It is today the only legal political party in that country. Describing itself as Marxist-Leninist, the CPV is the directing component of a broader group of organizations known as the...

 approved a 10-year economic plan that enhanced the role of the private sector while reaffirming the primacy of the state. Growth then rose to 6% to 7% in 2000-02 even against the background of global recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...

, making it the world's second-fastest growing economy. Simultaneously, investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

 grew threefold and domestic savings quintupled.

In 2003 the private sector accounted for more than one-quarter of all industrial output. However, between 2003 and 2005 Vietnam fell dramatically in the World Economic Forum
World Economic Forum
The World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....

's Global Competitiveness Report rankings, largely due to negative perceptions of the effectiveness of government institutions. Official corruption
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...

 is endemic, and Vietnam lags in property rights, the efficient regulation of markets, and labor and financial market reforms.

Vietnam had an average growth in GDP of 7.1% per year from 2000 to 2004. The GDP growth was 8.4% in 2005, the second largest growth in Asia, trailing only China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

's. Government figures of GDP growth in 2006, was 8.17%. According to Vietnam's Minister of Planning and Investment, the government targets a GDP growth of around 8.5% for 2007.

On November 7, 2006, Vietnam became the World Trade Organization (WTO)'s 150th member, after 11 years of preparation, including 8 years of negotiation. Vietnam's access to WTO was intended to provide an important boost to Vietnam's economy, to ensure the continuation of liberalizing reforms and create options for trade expansion. However, WTO accession also brings serious challenges, requiring Vietnam's economic sectors to open the door to increased foreign competition.

Although Vietnam’s economy, which continues to expand at an annual rate in excess of 7 percent, is one of the fastest growing in the world, the economy is growing from an extremely low base, reflecting the crippling effect of the Vietnam War
Vietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...

 (1954–75) and austerity measures introduced in its aftermath.

Agriculture, fishing and forestry


In 2003 Vietnam produced an estimated 30.7 million cubic meters of wood. Production of sawn wood was a more modest 2,950 cubic meters. In 1992, in response to dwindling forests
Deforestation in Vietnam
According to a 2005 report conducted by the Food and Agriculture Organization of the United Nations , Vietnam has the second highest rate of deforestation of primary forests in the world, second only to Nigeria....

, Vietnam imposed a ban on the export of logs and raw timber. In 1997 the ban was extended to all timber products except wooden artifacts. During the 1990s, Vietnam began to reclaim land for forests with a tree-planting program.

Vietnam’s fishing
Fishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....

 industry, which has abundant resources given the country’s long coastline and extensive network of rivers and lakes, has experienced moderate growth overall. In 2003 the total catch was about 2.6 million tons. However, seafood exports expanded fourfold from 1990 to 2002 to more than US $2 billion, driven in part by shrimp
Shrimp
Shrimp are swimming, decapod crustaceans classified in the infraorder Caridea, found widely around the world in both fresh and salt water. Adult shrimp are filter feeding benthic animals living close to the bottom. They can live in schools and can swim rapidly backwards. Shrimp are an important...

 farms in the South and "catfish", which are a different species from their American counterpart but are marketed in the United States under the same name. By concentrating on the U.S. market for the sale of vast quantities of shrimp and catfish, Vietnam triggered antidumping complaints by the United States, which imposed tariffs in the case of catfish and is considering doing the same for shrimp. In 2005 the seafood industry began to focus on domestic demand to compensate for declining exports.

Mining and minerals


In 2003 mining and quarrying accounted for a 9.4% share of GDP; the sector employed 0.7 percent of the workforce. Petroleum and coal are the main mineral exports. Also mined are antimony
Antimony
Antimony is a toxic chemical element with the symbol Sb and an atomic number of 51. A lustrous grey metalloid, it is found in nature mainly as the sulfide mineral stibnite...

, bauxite
Bauxite
Bauxite is an aluminium ore and is the main source of aluminium. This form of rock consists mostly of the minerals gibbsite Al3, boehmite γ-AlO, and diaspore α-AlO, in a mixture with the two iron oxides goethite and hematite, the clay mineral kaolinite, and small amounts of anatase TiO2...

, chromium
Chromium
Chromium is a chemical element which has the symbol Cr and atomic number 24. It is the first element in Group 6. It is a steely-gray, lustrous, hard metal that takes a high polish and has a high melting point. It is also odorless, tasteless, and malleable...

, gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...

, iron
Iron
Iron is a chemical element with the symbol Fe and atomic number 26. It is a metal in the first transition series. It is the most common element forming the planet Earth as a whole, forming much of Earth's outer and inner core. It is the fourth most common element in the Earth's crust...

, natural phosphates, tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...

, and zinc
Zinc
Zinc , or spelter , is a metallic chemical element; it has the symbol Zn and atomic number 30. It is the first element in group 12 of the periodic table. Zinc is, in some respects, chemically similar to magnesium, because its ion is of similar size and its only common oxidation state is +2...

.

Industry and manufacturing




Although industry contributed 40.1 percent of GDP in 2004, it employed only 12.9% of the workforce. In 2000, 22.4% of industrial production was attributable to non-state activities. During 1994–2004, industrial GDP grew at an average annual rate of 10.3 percent. Manufacturing contributed 20.3 percent of GDP in 2004, while employing 10.2 percent of the workforce. During 1994–2004, manufacturing GDP grew at an average annual rate of 11.2 percent. The top manufacturing sectors — food processing
Food processing
Food processing is the set of methods and techniques used to transform raw ingredients into food or to transform food into other forms for consumption by humans or animals either in the home or by the food processing industry...

, cigarettes and tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...

, textiles, chemicals, and electrical goods — experienced rapid growth. Almost a third of manufacturing and retail activity is concentrated in Ho Chi Minh City
Ho Chi Minh City
Ho Chi Minh City , formerly named Saigon is the largest city in Vietnam...

.

Energy



Petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

 is the main source of commercial energy, followed by coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...

, which contributes about 25% of the country’s energy (excluding biomass
Biomass
Biomass, as a renewable energy source, is biological material from living, or recently living organisms. As an energy source, biomass can either be used directly, or converted into other energy products such as biofuel....

). Vietnam’s oil reserves are in the range of 270–500 million tons. Oil production rose rapidly to 403300 oilbbl/d in 2004, but output is believed to have peaked and is expected to decline gradually.

Crude oil is Vietnam’s leading export, totaling 17 million tons in 2002; in 2004 crude oil represented 22 percent of all export earnings. Petroleum exports are in the form of crude petroleum because Vietnam has a very limited refining capacity. Vietnam’s only operational refinery, a facility at Cat Hai near Ho Chi Minh City, has a capacity of only 800 oilbbl/d. Refined petroleum accounted for 10.2 percent of total imports in 2002.

Vietnam’s anthracite coal reserves are estimated at 3.7 billion tons. Coal production was almost 19 million tons in 2003, compared with 9.6 million tons in 1999. Vietnam’s potential natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

 reserves are 1.3 trillion cubic meters. In 2002 Vietnam brought ashore 2.26 billion cubic meters of natural gas. Hydroelectric power is another source of energy. In 2004 Vietnam began to build a nuclear power
Nuclear power
Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...

 plant with Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

n assistance.

Services and tourism




In 2004 services accounted for 38.2 percent of gross domestic product (GDP). During 1994–2004, GDP attributable to the services sector grew at an average annual rate of 6.0 percent.

In 2004 Vietnam received 2.9 million international arrivals, up from 2.4 million the previous year. The annual increase represented a strong rebound from a slight decline in 2003 attributable to the severe acute respiratory syndrome
Severe acute respiratory syndrome
Severe Acute Respiratory Syndrome is a respiratory disease in humans which is caused by the SARS coronavirus . Between November 2002 and July 2003 an outbreak of SARS in Hong Kong nearly became a pandemic, with 8,422 cases and 916 deaths worldwide according to the WHO...

 (SARS) epidemic in Asia. From 1999 to 2004, tourism rose by 63 percent. Most of the visitors in 2004—27 percent—came from China, with 8–9 percent each coming from the United States, Japan, and South Korea. The Vietnam National Administration of Tourism
Vietnam National Administration of Tourism
The Vietnam National Administration of Tourism is the government agency of Vietnam which manages tourist operations and activities throughout the country. It has full control in terms of business development, planning, public relations, personnel training, conducting research, and instructing and...

 is following a long-term plan to diversify the tourism industry, which brings needed foreign exchange into the country.

Currency, exchange rate, and inflation


As of April 2008, one U.S. dollar was equivalent to about 20,850 Vietnamese dong
Dong
Dong may refer to:Asian languages* Vietnamese đồng , the currency unit of Vietnam* Dong people , an ethnic minority group in China* Dong language* Dong Lake, a lake in the Hunan Province of China* Dong quai, a medicinal herb...

. The relationship between the U.S. dollar and Vietnamese dong is important because the dong, although not freely convertible, is loosely pegged to the dollar through an arrangement known as a "crawling peg
Crawling peg
Crawling peg is an exchange rate regime usually seen as a part of fixed exchange rate regimes which allows depreciation or appreciation in an exchange rate gradually...

". This mechanism allows the dollar-dong exchange rate to adjust gradually to changing market conditions. Vietnam's economy experienced a hyperinflation
Hyperinflation
In economics, hyperinflation is inflation that is very high or out of control. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases...

 period in its early years of the extensive reform program, especially from 1989-1992. Gold still maintains its position as a physical currency to a certain extent, although seeing its economic role declining in recent years.

In 2008 inflation was tracking at 20.3% for the first half of the year, higher than the 3.4 percent rate measured in 2000 but down significantly from 160 percent in 1988. The sudden onset of inflation in 2008 is due to rising worldwide commodity and food prices.

Mergers & Acquisitions


From 1999 to 2010, Vietnamese companies have been involved as either an acquiror or acquired company in 1'320 mergers and acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...

 with a total know value of 7.7 bil. USD. The number and value of deals hit a new record in 2010. The number of deals that happened in 2010 has been 417 which is an increase of 27% compared to 2009. The value of deals in 2010 was 2.1 bil. USD which is an increase of 64% compared to the year before. The Mergers & Acquisitions in Vietnam faced many obstacles, lowering the rate of success of the transaction. Common obstacles come from culture, transparency and legal aspects.

Foreign economic relations


Economic relations with the United States are improving but are not without challenges. Although the United States and Vietnam reached a landmark bilateral agreement in December 2001 that boosted Vietnam’s exports to the United States, disagreements over textile and catfish exports are hindering full implementation of the agreement. Further disrupting U.S.-Vietnamese economic relations are efforts in Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 to link non-humanitarian aid to Vietnam's human rights
Human rights
Human rights are "commonly understood as inalienable fundamental rights to which a person is inherently entitled simply because she or he is a human being." Human rights are thus conceived as universal and egalitarian . These rights may exist as natural rights or as legal rights, in both national...

 record. Barriers to trade and intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...

 are also within the purview of bilateral discussions.

Given neighboring China's rapid economic ascendancy, Vietnam treats its economic relationship with China as being of the utmost importance. Following the resolution of most territorial disputes, trade with China is growing rapidly, and in 2004 Vietnam imported more products from China than from any other nation. In November 2004, the Association of Southeast Asian Nations
Association of Southeast Asian Nations
The Association of Southeast Asian Nations, commonly abbreviated ASEAN rarely ), is a geo-political and economic organization of ten countries located in Southeast Asia, which was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Since then, membership has...

 (ASEAN), of which Vietnam is a member, and China announced plans to establish the world’s largest free-trade area by 2010.

Vietnam became a member of the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

 (WTO) on January 11, 2007.

Foreign trade



In 2004 Vietnam’s merchandise import
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...

s were valued at US$31.5 billion, and growing rapidly. Vietnam’s principal imports were machinery (17.5%), refined petroleum (11.5%), steel (8.3%), material for the textile industry (7.2%), and cloth (6.0%). The main origins of Vietnam’s imports were China (13.9%), Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...

 (11.6%), Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...

 (11.3%), Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

 (11.1%), South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...

 (10.4%), Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...

 (5.8%), and Malaysia (3.8%).


In 2004 Vietnam’s merchandise exports were valued at US$26.5 billion, and, much like imports, were growing rapidly. Vietnam’s principal exports were crude oil (22.1%), textiles and garments (17.1%), footwear (10.5%), fisheries products (9.4%), and electronics
Electronics
Electronics is the branch of science, engineering and technology that deals with electrical circuits involving active electrical components such as vacuum tubes, transistors, diodes and integrated circuits, and associated passive interconnection technologies...

 (4.1%). The main destinations of Vietnam's exports were the United States (18.8%), Japan (13.2%), China (10.3%), Australia (6.9%), Singapore (5.2%), Germany (4.0%), and the United Kingdom (3.8%).

In 2007 Vietnam ran a trade deficit of US$14.1 billion, but the trade deficit for the first half of 2008 alone was measured at US$14.8 billion.

External debt, foreign aid, and foreign investment



In 2004 external debt amounted to US$16.6 billion, or 37 percent of gross domestic product (GDP).

From 1988 to December 2004, cumulative foreign direct investment (FDI) commitments totaled US$46 billion. By December 2004, about 58% had been dispersed. About half of FDI has been directed at the two major cities (and environs) of Ho Chi Minh City and Hanoi
Hanoi
Hanoi , is the capital of Vietnam and the country's second largest city. Its population in 2009 was estimated at 2.6 million for urban districts, 6.5 million for the metropolitan jurisdiction. From 1010 until 1802, it was the most important political centre of Vietnam...

. In 2003 new foreign direct investment commitments were US$1.5 billion. The largest sector by far for licensed FDI is industry and construction
Construction
In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking...

. Other sectors attracting FDI are oil and gas, fisheries, construction, agriculture and forestry, transportation and communications, and hotels and tourism. During the period 2006-2010, Vietnam hoped to receive US$18 billion of FDI to support a targeted growth rate in excess of 7%. Despite rising investments, foreign investors still regard Vietnam as a risky destination, as confirmed by recent survey by the Japan External Trade Organization of Japanese companies operating in Vietnam. Many of these companies complained about high costs for utilities, office rentals, and skilled labor. Official corruption and bureaucracy, the lack of transparent regulations, and the failure to enforce investor rights are additional issues impairing investment, according to the U.S. State Department. Vietnam tied with several nations for 102nd place in Transparencies International's 2004 Corruption Perceptions Index.

The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

's assistance program for Vietnam has three objectives: to support Vietnam’s transition to a market economy, to enhance equitable and sustainable development, and to promote good governance. From 1993 through 2004, Vietnam received pledges of US$29 billion of official development assistance
Official development assistance
Official development assistance is a term compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development to measure aid. The DAC first compiled the term in 1969. It is widely used by academics and journalists as a convenient indicator of...

 (ODA), of which about US$14 billion, or 49 percent, actually has been disbursed. In 2004 international donors pledged ODA of US$2.25 billion, of which US$1.65 billion actually was disbursed. Three donors accounted for 80 percent of disbursements in 2004: Japan, the World Bank, and the Asian Development Bank. During the period 2006–10, Vietnam hopes to receive US$14 billion–US$15 billion of ODA.

Pledged foreign direct investment US$21.3 billion for 2007 and a record US$31.6 billion for the first half of 2008. Mergers and acquisitions have gradually become an important channel of investments in the economy, especially after 2005.

Economic indicators and international rankings

Organization Title Ranking
Economist Intelligence Unit
Economist Intelligence Unit
The Economist Intelligence Unit is part of the Economist Group.It is a research and advisory company providing country, industry and management analysis worldwide and incorporates the former Business International Corporation, a U.S. company acquired by the parent organization in 1986...

Resilience amid turmoil Bechmarking IT industry competitiveness 2009 56 out of 66
International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

Gross Domestic Product (PPP) 40 out of 182
World Economic Forum
World Economic Forum
The World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....

Global Competitiveness 59 out of 133
World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

Ease of Doing Business 78 out of 177
Heritage Foundation
Heritage Foundation
The Heritage Foundation is a conservative American think tank based in Washington, D.C. Heritage's stated mission is to "formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong...

/The Wall Street Journal
The Wall Street Journal
The Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....

Index of Economic Freedom 139 out of 179
Transparency International
Transparency International
Transparency International is a non-governmental organization that monitors and publicizes corporate and political corruption in international development. It publishes an annual Corruption Perceptions Index, a comparative listing of corruption worldwide...

Corruption Perceptions Index
Corruption Perceptions Index
Since 1995, Transparency International publishes the Corruption Perceptions Index annually ranking countries "by their perceived levels of corruption, as determined by expert assessments and opinion surveys." The CPI generally defines corruption as "the misuse of public power for private...

116 out of 180

External links