Economy of Vietnam

The socialist-oriented market economy of the Socialist Republic of Vietnam is the 47th-largest economy in the world measured by nominal gross domestic product (GDP) and 35th-largest in the world measured by purchasing power parity (PPP). The country is a member of Asia-Pacific Economic Cooperation, Association of Southeast Asian Nations and the World Trade Organization.

Since the mid-1980s, through the Doi Moi reform period Vietnam has made a shift from a highly centralized command economy to a mixed economy that uses both directive and indicative planning through five-year plans. Over that period, the economy has experienced rapid growth. In the 21st century, Vietnam is in a period of being integrated into the global economy. Almost all Vietnamese enterprises are small and medium enterprises (SMEs). Vietnam has become a leading agricultural exporter and served as an attractive destination for foreign investment in Southeast Asia. In a similar fashion to other Communist countries after the end of the Cold War, the planned economy of Vietnam lost the momentum for productivity and sustainable growth. In the current period, Vietnam's economy relies largely on foreign direct investment to attract the capital from overseas to support its continual economic rigor.[10] Foreign investment on the luxury hotel and sector and resorts will rise to support high-end tourist industry.[11]

According to a forecast by PricewaterhouseCoopers in February 2017, Vietnam may be the fastest-growing of the world's economies, with a potential annual GDP growth rate of about 5.1%, which would make its economy the 20th-largest in the world by 2050.[12] Vietnam has also been named among the Next Eleven and CIVETS countries. Despite economic achievement following Doi Moi, there exist issues that cause many analysts and researchers to remain worried about the economic slowdown in the country in recent years.[13][14]

Economy of Vietnam
Quan 1
Ho Chi Minh City is the financial center of Vietnam
CurrencyVietnamese đồng
Calendar year
Trade organisations
AFTA, WTO, APEC, ASEAN, FAO
Statistics
GDP
  • Increase $241.272 billion (nominal, 2018)[1]
  • Increase $710.307 billion (PPP, 2018)[1]
GDP rank
GDP growth
6.2% (2016) 6.8% (2017)
7.1% (2018e) 6.6% (2019f)[2]
GDP per capita
  • Increase $2,551 (nominal, 2018 est.)[1]
  • Increase $7,510 (PPP, 2018 est.)[1]
GDP per capita rank
GDP by sector
  • 3.091% (2019f est.)[1]
  • 3.540% (2018)[1]
  • 3.521% (2017)[1]
Population below poverty line
  • 7% (2018 est.)[4]
  • 8% (2017 est.)[5]
Negative increase 35.3 medium (2016, World Bank)[6]
Increase 0.694 medium (2017) (116th)
Labour force
55.4 million (as of 2018)[4]
Labour force by occupation
Unemployment2.17% (Q1/2019)[4]
Main industries
Mobile phone, electronics, machinery, steel, food processing, wood industry, textile, footwear, vehicle, rice, coffee, cashews, seafood, vegetable and tourism
Decrease 69th (2019)[7]
External
ExportsIncrease $214.1 billion (2017 est.)[5]
Main export partners
ImportsIncrease $202.6 billion (2017 est.)[5]
Import goods
Machinery and equipment, mobile phone, petroleum products, raw materials for the clothing and shoe industries, electronics, plastics, automobiles, metal, and chemical products
Main import partners
FDI stock
Decrease $129.5 billion (31 December 2017 est.)[5]
Increase Abroad: $19.75 billion (31 December 2015 est.)[5]
Decrease $5.401 billion (2017 est.)[5]
Negative increase $96.58 billion (31 December 2017 est.)[5]
Public finances
Positive decrease 58.5% of GDP (2017 est.)[5][note 1]
−6.7% (of GDP) (2017 est.)[5]
Revenues54.59 billion (2017 est.)[5]
Expenses69.37 billion (2017 est.)[5]
Economic aid$2.174 billion (2016)
Standard & Poor's:[8]
BB- (domestic)
BB- (foreign)
BB- (T&C assessment)
Outlook: stable[9]
Moody's:[9]
Ba3
Outlook: Positive
Fitch:[9]
BB
Outlook: stable
Foreign reserves
Increase $49.5 billion (31 December 2017 est.)[5]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

History

Until 1858

Civilization in Vietnam had been built on agriculture. The feudal dynasties always considered agriculture as the main economic base, and their economic thoughts have been predicated on physiocracy. Land ownership was regulated, and such large-scale works as dykes were constructed in the Red River Delta to facilitate wet rice cultivation. In peaceful times, soldiers were sent home to do farm work. Furthermore, the court prohibited slaughtering water buffalo and cattle and held many agriculture-related ceremonies. Handicrafts and art were valued, 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 was losing its influence on Vietnamese society and a monetary economy began to develop. Early commercial ports, such as Hội An, 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.

1858–1975

Until the French colonization in the mid-19th century, Vietnam's economy had been mostly agrarian, subsistence-based and village-oriented. French colonizers, however, deliberately developed the regions differently as the French needed raw materials and a market for French manufactured goods, designating the South for agricultural production as it was better suited for agriculture, and the North for manufacturing as it was naturally wealthy in mineral resources. 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 domestic commerce.[15]

The separation distorted the basic Vietnamese economy by overly stressing regional economic differences. In the South, while irrigated rice remained the principal subsistence crop, the French introduced plantation agriculture with products such as tea, cotton, and tobacco. The colonial government also developed some extractive industries, such as the mining of coal, iron, and nonferrous metals. A shipbuilding industry was begun in Hanoi; railroads, roads, power stations, and hydraulics works were constructed. In the South, agricultural development concentrated on rice cultivation, and, nationally, rice and rubber were the main items of export. Domestic and foreign trade were centered around the Saigon-Cholon area. Industry in the South consisted mostly of food-processing plants and factories producing consumer goods.[16]

When the North and South were divided politically in 1954, they also adopted different economic ideologies: communism in the North and capitalism in the South. Destruction caused by the Second Indochina War from 1954 to 1975 seriously strained the economy. The situation was worsened by the country's 1.5 million military and civilian deaths, and the subsequent exodus of 1 million refugees, including tens of thousands of professionals, intellectuals, technicians and skilled workers.[15]

GDP per capita in Vietnam, 1956–1974 (in US$/year)
Year 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974
Republic of Vietnam 62 88 105 100 118 100 85 81 90 65
Democratic Republic of Vietnam 40 50 51 68 59 60 55 60 60 65

1976–1997

The government's Second Five-Year Plan (1976–1981) aimed for extraordinarily high annual growth rates in industrial and agricultural sectors and national income and sought to integrate the North and the South, but the goals were not attained. The economy remained dominated by small-scale production, low labor productivity, unemployment, material and technological shortfalls, and insufficient food and consumer goods.[15] 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.[15]

After reunification in 1975, the economy of Vietnam was plagued by enormous difficulties in production, imbalances in supply and demand, inefficiencies in distribution and circulation, soaring inflation rates, and rising debt problems. Vietnam is one of the few countries in modern history to experience a sharp economic deterioration in a postwar reconstruction period. Its peacetime economy was one of the poorest in the world and had shown a negative to very slow growth in total national output as well as in agricultural and industrial production. Vietnam's gross domestic product ( GDP) in 1984 was valued at US$18.1 billion with a per capita income estimated to be between US$200 and US$300 per year. Reasons for this mediocre economic performance have included severe climatic conditions that afflicted agricultural crops, bureaucratic mismanagement, elimination of private ownership, extinction of entrepreneurial classes in the South, and military occupation of Cambodia (which resulted in a cutoff of much-needed international aid for reconstruction).[17]

From the late 1970s until the early 1990s, Vietnam was a member of the Comecon, and therefore was 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 embark on a policy of economic development.[18]

In 1986, Vietnam launched a political and economic renewal campaign (Đổi Mới) that introduced reforms 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. Furthermore, the Vietnam government stressed the necessity to lower birth rates when developing the economic and social rights of the population by implementing a policy that restricted the number of children per household to two, called the two-child policy.[19] 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, the economy was growing at an annual rate of more than 7%, and poverty was nearly halved.[18]

Throughout the 1990s, exports increased by as much as 20% to 30% in some years. In 1999, exports accounted for 40% of GDP, an impressive performance in the midst of the economic crisis that hit other countries in Asia. Vietnam became a member of the World Trade Organization (WTO) in 2007, which freed Vietnam from textile quotas enacted worldwide as part of the Multi Fibre Arrangement (MFA) in 1974.[20] 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 of trade negotiations in 1994.[18] A 2019 study found that Vietnam's WTO entry led to substantial gains in productivity for private firms, but had no impact on state-owned enterprises. In the absence of state-owned enterprises, "the overall productivity gains would have been about 40% larger in a counterfactual Vietnamese economy."[21]

Development since 1997

LANDMARK72 night
Keangnam Hanoi Landmark Tower is the second tallest building in Vietnam.

Vietnam's economic policy following the 1997 Asian Financial Crisis has been a cautious one, emphasizing macroeconomic stability rather than growth. While the country shifted toward a more market-oriented economy, the Vietnamese government still continues to hold a tight reign over major state sectors, such as the banking system, state-owned enterprises and foreign trade.[22] GDP growth fell to 6% in 1998 and 5% in 1999.

The signing of the Bilateral Trade Agreement (BTA) between the United States and Vietnam on July 13, 2000, was a significant milestone. The BTA provided for "normal trade relations" (NTR) status of Vietnamese goods in the U.S. market. It was expected that access to the U.S. market would allow Vietnam to hasten its transformation into a manufacturing-based, export-oriented economy. Furthermore, it would attract foreign investment, not only from the U.S., but also from Europe, Asia and other regions.

In 2001, the ruling Communist Party of Vietnam approved a 10-year economic plan that enhanced the role of the private sector, while reaffirming the primacy of the state.[18] Growth then rose to 6% to 7% between 2000 and 2002 even in the midst of the global recession, making it the world's second fastest-growing economy. At the same time, investment grew threefold and domestic savings quintupled.

In 2003, the private sector accounted for more than one-quarter of all industrial output.[18] However, between 2003 and 2005, Vietnam fell dramatically in the World Economic Forum's global competitiveness report rankings, largely due to negative perceptions of the effectiveness of government institutions.[18] Official corruption is endemic, and Vietnam lags in property rights, efficient regulation of markets, and labor and financial market reforms.[18]

Vietnam had an average GDP growth of 7.1% a year from 2000 to 2004. The GDP growth was 8.4% in 2005, the second-largest in Asia, trailing only China's. The government estimated that GDP grew in 2006 by 8.17%. According to the Minister of Planning and Investment, the government targeted a GDP growth of around 8.5% in 2007.[23]

On November 7, 2006, the General Council at the World Trade Organization (WTO) approved Vietnam's accession package. On January 11, 2007, Vietnam officially became the WTO's 149th member, after 11 years of preparation, including eight years of negotiation.[20] The country's access to the WTO was intended to provide an important boost to the economy, as it ensured that the liberalizing reforms continue and created options for trade expansion. However, the WTO accession also brought serious challenges, requiring the economy to open up to increasing foreign competition.

Vietnam's economy continues to expand at an annual rate in excess of 7%, one of the fastest-growing in the world, but it grew from an extremely low base, as it suffered the crippling effect of the Vietnam War from the 1950s to the 1970s, as well as the austerity measures introduced in its aftermath.[18] In 2012, the communist party was forced to apologise about the mismanagement of the economy after large numbers of SOEs went bankrupt and inflation rose. The main danger has been over the bad debt in the banks totalling to 15% and forecast growth is 5.2% for 2012 but this is also due to the global economic crisis.[24] The government has launched schemes to reform the economy, however, such as lifting foreign ownership cap from 49% and partially privatizing the country's state-owned companies that have been responsible for the recent economic downturn. By the end of 2013, the government is expected to privatize 25–50% of SOEs, only maintaining control on public services and military. The recent reforms have created a major boom in the Vietnamese stock market as confidence in the Vietnamese economy is returning.

Over the last 2 decades, Vietnam has experienced a rapid construction booming that contributed to economic growth but also caused "bubble" to the economy. Skyscrapers ballooned in big cities. According to Skyscrapercity, in 2013, the top three tallest buildings in Vietnam were the Hanoi Landmark 72 (336m), the Hanoi Lotte Center (267m), and the Saigon Bitexco Financial Tower (263m).

Vietnam's current economic turmoil has given rise to question of a new period of changing political economy, however.[25] Poverty remains to be the main concern on the national performance index as of 2018. The Provincial Governance and Public Administration Performance Index (PAPI) found that 28% of survey respondents cited poverty as their main problem.[26] Most respondents agreed with the statement that "[P]overty reduction is imperative to ensuring that Vietnam becomes an advanced, developed country. The percentage of the poorest Vietnamese respondents who believed that their economic situation would worsen increased from 13% in 2016 to 26% in 2017.[27] The percentage of respondents with health insurance increased from 74% in 2016 to 81% in 2017, with strongest gains in the rural population groups.[27]

In 2017, Transparency International, a non-profit that tracks graft ranked Vietnam as 113th worst out of 176 countries and regions for perceptions of corruption.[26] Several graft cases found in 2016 and 2017 led to the corruption crackdown which prosecuted many bankers, businesspeople, and government officials under charges of corruption. PAPI found that bribery at public district hospital services decreased from 17% in 2016 to 9% in 2017.[27] Reports of land seizures went down from an average of about 9% before 2013, to less than 7% in 2017. The number of respondents who believed that their land was sold at a fair market value decreased from 26% in 2014 to 21% in 2017.[27] Land-use graft and petty graft, such as police officers accepting bribes, are common. Vietnam has been privatizing many of its state-owned operations to reduce corruption and increase efficiency.[28]

As March, 2018 Vietnam's economy continued to grow, achieving the best annual growth rate in over a decade; which has led media outlets to speculate if in the near future it could be one of the asian tigers.[29][30]

According to DBS Bank, Vietnam’s economy has the potential to grow at a pace of about 6%-6.5% by 2029. Vietnam can overpower Singapore’s economy by the next decade because of its strong foreign investment inflow and productivity growth.[31]

Data

The following table shows the main economic indicators in 1980–2017. Inflation below 5 % is in green.[32]

Year GDP
(in Bil. US$ PPP)
GDP per capita
(in US$ PPP)
GDP growth
(real)
Inflation rate
(in Percent)
Unemployment
(in Percent)
Government debt
(in % of GDP)
1980 23.6 435 Decrease−3.5 % Negative increase25.2 % n/a n/a
1981 Increase27.3 Increase493 Increase5.8 % Negative increase69.6 % n/a n/a
1982 Increase31.4 Increase555 Increase8.2 % Negative increase95.4 % n/a n/a
1983 Increase34.9 Increase607 Increase7.1 % Negative increase49.5 % n/a n/a
1984 Increase39.2 Increase669 Increase8.4 % Negative increase64.9 % n/a n/a
1985 Increase42.7 Increase715 Increase5.6 % Negative increase91.6 % n/a n/a
1986 Increase45.0 Increase739 Increase3.4 % Negative increase453.5 % n/a n/a
1987 Increase47.3 Increase760 Increase2.5 % Negative increase360.4 % n/a n/a
1988 Increase51.5 Increase811 Increase5.1 % Negative increase374.4 % n/a n/a
1989 Increase57.7 Increase890 Increase7.8 % Negative increase95.8 % n/a n/a
1990 Increase62.8 Increase952 Increase5.0 % Negative increase36.9 % 12.3 % n/a
1991 Increase68.7 Increase1,022 Increase5.8 % Negative increase81.8 % Positive decrease10.4 % n/a
1992 Increase76.4 Increase1,116 Increase8.7 % Negative increase37.7 % Negative increase11.0 % n/a
1993 Increase84.5 Increase1,213 Increase8.1 % Negative increase8.4 % Positive decrease10.6 % n/a
1994 Increase93.9 Increase1,326 Increase8.8 % Negative increase9.5 % Positive decrease10.3 % n/a
1995 Increase105.0 Increase1,459 Increase9.5 % Negative increase16.9 % Positive decrease5.8 % n/a
1996 Increase116.9 Increase1,598 Increase9.3 % Negative increase5.6 % Negative increase5.9 % n/a
1997 Increase128.6 Increase1,731 Increase8.2 % Increase3.1 % Negative increase6.0 % n/a
1998 Increase137.5 Increase1,823 Increase5.8 % Negative increase8.1 % Negative increase6.9 % n/a
1999 Increase146.3 Increase1,910 Increase4.8 % Increase4.1 % Positive decrease6.7 % n/a
2000 Increase159.8 Increase2,058 Increase6.8 % Positive decrease−1.7 % Positive decrease6.4 % 31.4 %
2001 Increase174.7 Increase2,220 Increase6.9 % Positive decrease−0.3 % Positive decrease6.3 % Positive decrease32.3 %
2002 Increase189.9 Increase2,382 Increase7.1 % Increase4.0 % Positive decrease6.0 % Negative increase35.2 %
2003 Increase207.9 Increase2,570 Increase7.3 % Increase3.3 % Positive decrease5.8 % Negative increase38.8 %
2004 Increase230.3 Increase2,808 Increase7.8 % Negative increase7.9 % Positive decrease5.6 % Positive decrease37.4 %
2005 Increase255.7 Increase3,103 Increase7.5 % Negative increase8.4 % Positive decrease5.3 % Positive decrease36.5 %
2006 Increase281.9 Increase3,384 Increase7.0 % Negative increase7.5 % Positive decrease4.8 % Negative increase38.4 %
2007 Increase310.0 Increase3,681 Increase7.1 % Negative increase8.4 % Positive decrease4.6 % Negative increase40.9 %
2008 Increase334.0 Increase3,924 Increase5.7 % Negative increase23.1 % Negative increase4.7 % Positive decrease39.4 %
2009 Increase354.7 Increase4,123 Increase5.4 % Negative increase6.7 % Positive decrease4.6 % Negative increase45.2 %
2010 Increase382.1 Increase4,395 Increase6.4 % Negative increase9.2 % Positive decrease4.3 % Negative increase48.1 %
2011 Increase414.3 Increase4,717 Increase6.2 % Negative increase18.7 % Negative increase4.5 % Positive decrease44.6 %
2012 Increase444.1 Increase5,001 Increase5.2 % Negative increase9.1 % Positive decrease2.7 % Negative increase48.4 %
2013 Increase475.8 Increase5,300 Increase5.4 % Negative increase6.6 % Negative increase2.8 % Negative increase51.8 %
2014 Increase513.3 Increase5,657 Increase6.0 % Negative increase6.6 % Positive decrease2.1 % Negative increase55.0 %
2015 Increase553.5 Increase6,035 Increase6.7 % Increase0.6 % Negative increase2.3 % Negative increase57.0 %
2016 Increase595.4 Increase6,423 Increase6.2 % Increase2.7 % Steady2.3 % Negative increase59.8 %
2017 Increase647.4 Increase6,913 Increase6.8 % Increase3.5 % Positive decrease2.2 % Positive decrease58.2 %

Economic sectors

Banco Nacional de Vietnam, Ciudad Ho Chi Minh, Vietnam, 2013-08-14, DD 01
National Bank of Vietnam, Ho Chi Minh City

Agriculture, fishery 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, 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.[18]

Vietnam's fishing industry, which has abundant resources given the country's long coastline and extensive network of rivers and lakes, has generally experienced moderate growth. In 2003, the total catch was about 2.6 million tons. However, seafood exports increased fourfold between 1990 and 2002 to more than US$2 billion, driven in part by shrimp farms in the South and "catfish", which are a different species from their American counterparts, but are marketed in the United States under the same name. By selling vast quantities of shrimp and catfish to the U.S., Vietnam triggered antidumping complaints by the U.S., which imposed tariffs in the case of catfish and was considering doing the same for shrimp. In 2005, the seafood industry began to focus on domestic demand to compensate for declining exports.[18]

Vietnam is one of the top rice exporting countries in the world, but the limited sophistication of small-scale Vietnamese farmers causes quality to suffer.[33] Vietnam is also the world's second largest exporter of coffee, trailing behind Brazil.[34]

Energy, mining and minerals

Petroleum is the main source of energy, followed by coal, which contributes about 25% of the country's energy (excluding biomass). Vietnam's oil reserves are in the range of 270–500 million tons. Oil production rose rapidly to 403,300 barrels per day (64,120 m3/d) in 2004, but output is believed to have peaked and is expected to decline gradually.

In 2003, mining and quarrying accounted for 9.4% of GDP, and the sector employed 0.7% of the workforce. Petroleum and coal are the main mineral exports. Also mined are antimony, bauxite, chromium, gold, iron, natural phosphates, tin, and zinc.[18]

Crude oil was Vietnam's leading export until the late 2000s, when high-tech electrical manufactures emerged to become the biggest export market (by 2014, crude oil comprised only 5% of Vietnamese exports, compared to 20% of all exports in 1996). This is in part because Vietnam crude oil peaked in 2004, when crude oil represented 22% of all export earnings.[35] 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 barrels per day (130 m3/d). Refined petroleum accounted for 10.2% of total imports in 2002. As of 2012, Vietnam had only one refinery, the Dung Quat refinery, but a second one, the Nghi Son Refinery was planned and was scheduled for construction in May 2013.[18][36]

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 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 confirmed plans to build a nuclear power plant with Russian assistance,[18] and a second by a Japanese group.

Industry and manufacturing

Although the industrial sector contributed 40.1% 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. From 1994 to 2004, the industrial sector grew at an average annual rate of 10.3%. Manufacturing contributed 20.3% of GDP in 2004, while employing 10.2% of the workforce. From 1994 to 2004, manufacturing GDP grew at an average annual rate of 11.2%. The top manufacturing sectors — electronics, food processing, cigarettes and tobacco, textiles, chemicals, and footwear goods — experienced rapid growth. Benefits from its proximity to China with lower labor cost, Vietnam is becoming a new manufacturing hub in Asia, especially for Korean and Japanese firms. For instance, Samsung produces about 40% of its phones in Vietnam.[37]

Services and tourism

In 2004, services accounted for 38.2% of gross domestic product (GDP). From 1994 to 2004, GDP attributable to the service sector grew at an average annual rate of 6.0%.[18]

In 2012, Vietnam welcomed 6.8 million international visitors and the number is expected to reach over 7 million in 2013. Vietnam keeps emerging as an attractive destination. In Tripadvisor's list of top 25 destinations Asia 2013 by travellers' choice, there are four cities of Vietnam, namely Hanoi, Ho Chi Minh City, Hoi An and Ha Long.

2016 was the first year ever which Vietnam welcomed over 10 million international visitors.[38]

Banking and finance

Banking

Vietinbank Da Lat
VietinBank – Vietnam's largest listed bank

Most efficient and reliable banks are the largest (also state-owned) ones: VietinBank, BIDV, and Vietcombank. The banking sector is dominated by the three institutions. There is also a trend of foreign investment into profitable banks. For example, VietinBank is currently owned by Bank of Tokyo Mitsubishi UFJ (20%) and International Finance Corporation (10%) while Vietcombank is owned by Mizuho (15%).

Vietnam's top five banks by authorised capital
Rank Bank Date of update Authorised capital
In VND, billions In US dollars, billions
1 VietinBank June 8, 2015 37,234 1.63
2 BIDV June 30, 2015 34,187 1.50
3 Agribank June 30, 2015 29,605 1.30
4 Vietcombank June 30, 2015 26,650 1.17
5 Sacombank June 9, 2015 18,853 0.82

(NOTE: Exchange rates as of 30 December 2016. Source: tradingeconomics.com. 1 USD = 22,769 VND)

Finance

Vietnam has two stock trading centers, the Ho Chi Minh City Securities Trading Center and the Hanoi Securities Trading Center, which run the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX), respectively.

Currency, exchange rate and inflation

Currency

Vietnam's currency is the Vietnamese đồng.

Exchange rate

The exchange rate between the U.S. dollar and the Vietnamese đồng is important because the dong, although not freely convertible, is loosely pegged to the dollar through an arrangement known as a "crawling peg". This mechanism allows the dollar–dong exchange rate to adjust gradually to changing market conditions.[18] As of December 5, 2018, a US dollar is worth 23,256 Vietnamese đồng.

Gold still maintains its position as a physical currency to a certain extent, although it has seen its economic role declining in recent years.[39]

Inflation

Vietnam's economy experienced a hyperinflation period in its early years of the extensive reform program, especially from 1987 to 1992.[40]

In 2008, inflation was tracking at 20.3% for the first half of the year,[41] higher than the 3.4% in 2000, but down significantly from 160% in 1988.[18]

In 2010, inflation stood at 11.5%, and 18.58% in 2011.[42]

At the end of 2012, inflation stood at 7.5%, a substantial decrease from 2011.[43]

In 2013, inflation stood at 6%,[44] and 4.09% in 2014.[45] In 2016, it was only 2%

Mergers and acquisitions

With 1,120 inbound deals with a cumulated value of almost 15 bil. USD, there is a tremendous interest by foreign companies to get access to the Vietnamese market or continue the expansion using mergers and acquisitions. From 1991 to February 2018, Vietnamese companies were involved as either an acquiror or an acquired company in 4,000 mergers and acquisitions with a total value of 40.6 bil. USD. The mergers and acquisitions activities faced many obstacles, lowering the rate of success of the transaction. Common obstacles come from culture, transparency and legal aspects.[46] The Institute for Mergers, Acquisitions and Alliances that has been active in Vietnam since 2006 and its M&A expert Christopher Kummer think that after the peak in 2016 and 2017 the trend will decrease in 2018.[47][48][49] Among the largest and most prominent transactions since 2000 are:

Date Announced Acquiror Name Acquiror Nation Target Name Target Nation Value of Transaction ($mil)
12/19/2017 Vietnam Beverage Co Ltd Vietnam Sabeco Vietnam 4,838.49
02/16/2012 Perenco SA France ConocoPhilips Co-Oil&Gas Asset Vietnam 1,290.00
04/29/2016 Central Group of Cos Thailand Casino Guichard-Perrachon-BigC Vietnam 1,135.33
12/25/2015 Singha Asia Holding Pte Ltd Singapore Masan Consumer Corp Vietnam 1,100.00
02/13/2015 China Steel Asia Pac Hldg Pte Singapore Formosa Ha Tinh (Cayman) Ltd Vietnam 939.00
08/07/2014 Berli Jucker PCL Thailand Metro Cash & Carry Vietnam Co Vietnam 875.20
12/27/2012 Bk of Tokyo-Mitsubishi UFJ Ltd Japan VietinBank Vietnam 742.34
04/17/2015 TCC Land International Pte Ltd Singapore Metro Cash & Carry Vietnam Co Vietnam 705.14
10/05/2011 Vincom JSC Vietnam Vinpearl JSC Vietnam 649.39
01/28/2016 Masan Grp Corp Vietnam Masan Consumer Corp Vietnam 600.00

All of the top 10 deals are inbound into Vietnam and none outbound.[50]

Trade

Viet Nam Export Treemap
A proportional representation of Vietnamese exports

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, which helped increase Vietnam's exports to the United States, disagreements over textile and catfish exports are hindering full implementation of the agreement. Further disrupting the economic relations between the two countries were efforts in Congress to link non-humanitarian aid to Vietnam's human rights record. Barriers to trade and intellectual property are also within the purview of bilateral discussions.[18]

Given neighboring China's rapid economic ascendancy, Vietnam highly values its economic relationship with China. 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 country. In November 2004, the Association of Southeast Asian Nations (ASEAN), of which Vietnam is a member, and China announced plans to establish the world's largest free-trade area by 2010.[18]

Vietnam became a member of the World Trade Organization (WTO) on January 11, 2007.[18]

In December 2015, Vietnam joined the ASEAN Economic Community along with the 9 other ASEAN members. The community's goal is to integrate the 10 members of ASEAN and bring a freer flow of labor, investment and trade to the region.[51]

Foreign trade

Trades and balance of trade

Since Đổi Mới in 1986, Vietnam has increased trading, growing both exports and imports in double digits ever since. More recently, alarms on trade account deficits have been raised domestically, especially after joining the WTO in 2007. Throughout the next five years after 2007, Vietnam ran a trade deficit with the rest of the world in the tens of billions of dollars, with the record trade deficit in 2008 of US$18 billion.[41]

The account deficit has since decreased. In 2012, Vietnam recorded a trade surplus of US$780 million, the first trade surplus since 1993. Total trade reached US$228.13 billion, an increase of 12.1% from 2011.[52] In 2013, Vietnam recorded the second year of trade surplus of US$863 million. In 2014, Vietnam recorded the third year of trade surplus of US$2.14 billion, the largest trade surplus ever in history.[53] Three years later, in 2017, it surpassed itself with a record of $2.92 billion.

Year Total trade (US$ billions) Export (US$ billions) Export change (%) Import (US$ billions) Import change (%) Account balance (US$ billions)
2001 31.20 15.00 16.20 -1.2
2002 36.40 16.70 11.3 19.70 21.6 -3.0
2003 45.20 20.2 21.0 25.2 27.9 -5.1
2004 58.50 26.5 31.2 32.0 27.0 -5.4
2005 69.40 32.4 22.3 37.0 5.7 -4.5
2006 84.70 39.8 22.8 44.9 21.4 -5.1
2007 111.30 48.6 22.1 62.7 39.6 -14.1
2008 143.40 62.7 29.0 80.7 28.7 -18.0
2009 127.00 57.1 -8.9 69.9 -13.4 -12.9
2010 157.00 72.2 26.4 84.8 21.3 -12.6
2011 203.41 96.91 34.2 106.75 25.8 -9.84[54]
2012 228.57 114.57 18.2 113.79 6.6 0.780[55]
2013 263.47 132.17 15.4 131.30 15.4 0.863
2014 298.23 150.19 13.7 148.04 12.1 2.14
2015 327.76 162.11 7.9 165.65 12 -3.54[56]
2016 349.20 175.94 8.6 173.26 4.6 2.68
2017 425.12 214.01 21.2 211.1 20.8 2.92[57]
2018 480.17 243.48 13.2 236.69 11.1 6.8[58]

Exports

Vietnamese-Exports-2004
A map of Vietnamese export destinations, 2004

In 2004, Vietnam's exports of merchandise were valued at US$26.5 billion, and, were growing rapidly along with imports. Vietnam's principal exports were crude oil (22.1%), textiles and garments (17.1%), footwear (10.5%), fisheries products (9.4%) and electronics (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%).[18]

In 2012, export rose 18.2%, valued at US$114.57 billion.[52] Vietnam's main export market included the EU with US$20 billion, United States with US$19 billion, ASEAN with $US 17.8 billion, Japan with US$13.9 billion, China with US$14.2 billion, and South Korea with US$7 billion.[59]

In 2013, exports rose 15.4%, valued at US$132.17 billion, of which export of electronics now comprised 24.5% of total export, compared with a 4.4% in 2008. Textiles and garments are still an important part in Vietnam's export, valued about US$17.9 billion in 2013.

In 2014, exports rose 13.6%, reaching US$150.1 billion. Electronics and electronics parts, textiles and garments, computers and computer parts are the three main export groups of Vietnam. The United States continued to be Vietnam's largest export market, with US$28.5 billion. The EU is second with US$27.9 billion, ASEAN is third, China is fourth and Japan is the fifth largest export market of Vietnam.

Imports

In 2004 Vietnam's merchandise imports 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 (11.6%), Singapore (11.3%), Japan (11.1%), South Korea (10.4%), Thailand (5.8%), and Malaysia (3.8%).[18]

Vietnam import rose 6.6% in 2012, valued at US$113.79 billion.[52] Major import countries were China US$29.2 billion, ASEAN with US$22.3 billion, South Korea with US$16.2 billion, Japan with US$13.7 billion, EU with US$10 billion, and United States with US$6.3 billion.[59]

In 2014, imports rose 12.1%, reaching US$148 billion, most of which are materials and machinery needed for export. China continued to be Vietnam's largest import partner, with US$43.7 billion. The ASEAN is second with US$23.1 billion, South Korea is third, Japan is fourth and the EU is the fifth largest import partner of Vietnam.

External debt, foreign aid and foreign investment

In 2004, external debt amounted to US$16.6 billion, or 37% of GDP.[60][18]

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. In 2003 new foreign direct investment commitments were US$1.5 billion. The largest sector by far for licensed FDI is industry and construction. Other sectors attracting FDI are oil and gas, fisheries, construction, agriculture and forestry, transportation and communications, and hotels and tourism. From 2006 to 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 the respondents complained about high costs of utilities, office rentals and skilled labor. Corruption, bureaucracy, lack of transparent regulations and the failure to enforce investor rights are additional obstacles to investment, according to the U.S. State Department. Vietnam tied with several nations for the 102nd place in Transparencies International's Corruption Perceptions Index in 2004.[18]

The World Bank'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 (ODA), of which about US$14 billion, or 49%, 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% of disbursements in 2004: Japan, the World Bank, and the Asian Development Bank. From 2006 to 2010, Vietnam hopes to receive US$14 billion to US$15 billion of ODA.[18]

Pledged foreign direct investment US$21.3 billion for 2007 and a record US$31.6 billion for the first half of 2008.[41] Mergers and acquisitions have gradually become an important channel of investments in the economy, especially after 2005.

Free trade agreements

Economic indicators and international rankings

Organization Title Year Ranking
BSA (The Software Alliance) The IT Industry Competitiveness Index 2011 53 out of 66[70]
International Monetary Fund Gross Domestic Product (PPP) 2017 34 out of 190
World Economic Forum Global Competitiveness 2017 55 out of 137[71]
World Bank Ease of Doing Business 2018 68 out of 190
The Heritage Foundation/The Wall Street Journal Index of Economic Freedom 2018 141 out of 180 – mostly unfree (2013)[72]
Transparency International Corruption Perceptions Index 2016 113 out of 177

Literature

  • Jandl, Thomas (2013). Vietnam in the Global Economy. Lexington Books.

Notes

  1. ^ official data; data cover general government debt and include debt instruments issued (or owned) by government entities other than the treasury; the data include treasury debt held by foreign entities; the data include debt issued by subnational entities, as well as intragovernmental debt; intragovernmental debt consists of treasury borrowings from surpluses in the social funds, such as for retirement, medical care, and unemployment; debt instruments for the social funds are not sold at public auctions

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External links

APEC Vietnam 2017

APEC Vietnam 2017 (Vietnamese: APEC Việt Nam 2017) was the year-long hosting of Asia-Pacific Economic Cooperation (APEC) meetings in Vietnam, which culminated with the APEC Economic Leaders' Meeting in Đà Nẵng, hosted at InterContinental Danang Sun Peninsula Resort. It marked the second time Vietnam played host to the APEC, having hosted the event previously in 2006.

ASEAN–China Free Trade Area

The ASEAN–China Free Trade Area (ACFTA), also known as China–ASEAN Free Trade Area is a free trade area among the ten member states of the Association of Southeast Asian Nations (ASEAN) and the People's Republic of China.

Agriculture in Vietnam

In 2004, agriculture and forestry accounted for 21.8 percent of Vietnam's gross domestic product (GDP), and between 1994 and 2004, the sector grew at an annual rate of 4.1 percent. Agriculture's share of economic output has declined in recent years, falling as a share of GDP from 42% in 1989 to 26% in 1999, as production in other sectors of the economy has risen. However, agricultural employment was much higher than agriculture’s share of GDP; in 2005, approximately 60 percent of the employed labor force was engaged in agriculture, forestry, and fishing. Agricultural products accounted for 30 percent of exports in 2005. The relaxation of the state monopoly on rice exports transformed the country into the world’s second or third largest rice exporter. Other cash crops are coffee, cotton, peanuts, rubber, sugarcane, and tea.

Beer in Vietnam

Lagers are the most popular type of beer in Vietnam.

Beibu Gulf Economic Rim

The Beibu Gulf Economic Rim or Beibu Economic Belt (simplified Chinese: 环北部湾经济圈; traditional Chinese: 環北部灣經濟圈; pinyin: Huán Běi bù wān jīng jì quān) also known as Gulf of Tonkin Economic Belt in (Vietnamese: Vành đai kinh tế vịnh Bắc Bộ) defines the economic region or rim surrounding around China's southwestern coastal region and cities around the Gulf of Tonkin. The region is part of Chinese government's "Go West" strategy, to boost its less developed western regions. The implementation of the campaign, has resulted in many construction projects in cities on the Beibu Gulf Rim, especially in Guangxi. The Beibu Gulf economic rim has emerged as a new highlight of China-ASEAN cooperation, especially between Vietnam, who is also cooperating in this economic zone. It covers Guangdong, Hainan and Guangxi, and northern and central Vietnam.

Coconut production in Vietnam

Coconut production contributes to the national economy of Vietnam. According to figures published in December 2009 by the Food and Agriculture Organization of the United Nations, the country is the world's eighth largest producer of coconuts, producing 1,246,400 tonnes in 2009.

Equitisation

Equitisation (Vietnamese: Cổ phần hóa) is a Vietnamese English term that denotes the conversion of a state-owned enterprise in Vietnam into a public (joint stock) company or a corporation. It is the same as privatization.

Foreign aid to Vietnam

The World Bank’s assistance program of foreign aid to 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 (ODA), of which about US$14 billion, or 49 percent, has been disbursed. In 2004 international donors pledged ODA of US$2.25 billion, of which US$1.65 billion 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.

Hanoi Stock Exchange

Hanoi Stock Exchange (HNX), formerly the Hanoi Securities Trading Center (Hanoi STC) located in Hanoi, Vietnam, was launched in March 2005 and handles auctions and trading of stocks and bonds. The Hanoi STC was renamed in 2009 to the Hanoi Stock Exchange. It was the second securities trading center to open in Vietnam after to Ho Chi Minh City Securities Trading Center.

At the end of 2006, combined market capitalization of both Ho Chi Minh City Securities Trading Center and Hanoi Securities Trading Center is 14 billion USD, or 22.7% the GDP of Vietnam.

Foreign investors are also permitted to invest up to a limit of 49% ownership of companies except 30% in banks.

On 18 May 2015, the HNX joined the United Nations Sustainable Stock Exchanges (SSE) initiative as part the SSE's regional dialogue in Bangkok hosted by the Stock Exchange of Thailand.

|-

From 2020, HNX will serve as Vietnam’s bonds exchange while all stock tradings will be transferred to HOSE.

Ho Chi Minh City Stock Exchange

Ho Chi Minh City Stock Exchange or Ho Chi Minh Stock Exchange (HOSE or HSX), located in Ho Chi Minh City, is the largest stock exchange in Vietnam. Established in 2000 as the Ho Chi Minh City Securities Trading Center (HoSTC), it is an administrative agency of the State Securities Commission, along with the Hanoi Securities Trading Center. The stock exchange is located at 45-47 Ben Chuong Duong, District 1, Ho Chi Minh City, Vietnam. The current top executive of HSX, with the title of Deputy Chairman, is Mr. Tran Dac Sinh.On 18 May 2015, the HoSE joined the United Nations Sustainable Stock Exchanges (SSE) initiative as part the SSE's regional dialogue in Bangkok hosted by the Stock Exchange of Thailand.

List of Vietnamese billionaires by net worth

This is a list of Vietnamese billionaires based on an annual assessment of wealth and assets compiled and published by Forbes magazine in 2018.

List of Vietnamese regions by Human Development Index

This is a list of the Regions of Vietnam by Human Development Index as of 2018 with data for the year 2017.

Ministry of Planning and Investment (Vietnam)

The Ministry of Planning and Investment (MPI, Vietnamese: Bộ Kế hoạch và Đầu tư), formerly the State Planning Commission, is a governmental ministry charged with the role of state management over planning and investment. The ministry's headquarters is located in Hanoi.The agency provides, among others, strategic advice for country-level socio-economic development. It also programs and plans economic management mechanisms and policies for the national economy, for specific sectors as well as for domestic and foreign investments.

Foreign investment in Vietnam is governed under the Law on Foreign Investment and its related regulations, decrees and circulars. The four main types of foreign investments in Vietnam are:

Joint Ventures

Business Cooperation (Contracts)

100-Percent Foreign-Owned Enterprises

Build-Operate-Transfer enterprises

Science and technology in Vietnam

Science and technology in Vietnam represents the wide scientific and technological advances Vietnam has made and has been developing. The main managing agency responsible for science and technology (S&T) in Vietnam is the Ministry of Science and Technology (MOST). MOST's responsibilities include scientific research, technology development and innovation activities; development of science and technology potentials; intellectual property; standards, metrology and quality control; atomic energy, radiation and nuclear safety; and state management on public services in fields under the Ministry’s management as stipulated by law.

This article describes trends and developments in science and technology in Vietnam since 2008, in particular.

Socialist-oriented market economy

The socialist-oriented market economy (Vietnamese: Kinh tế thị trường theo định hướng xã hội chủ nghĩa) is the official title given to the current economic system in the Socialist Republic of Vietnam. It is described as a multi-sectoral market economy where the state sector plays the decisive role in directing economic development, with the eventual long-term goal of developing socialism.The socialist-oriented market economy is a product of the Đổi Mới economic reforms which led to the replacement of the centrally planned economy with a market-based mixed economy based on the predominance of state-owned industry. These reforms were undertaken to allow Vietnam to integrate with the global market economy. The term "socialist-oriented" is used to highlight the fact that Vietnam has not yet achieved socialism and is in the process of building the basis for a future socialist system. The economic model is similar to the socialist market economy employed in the People's Republic of China.

Vietnam Chamber of Commerce and Industry

Vietnam Chamber of Commerce and Industry (VCCI) is a national organization which assembles and represents business community, employers and business associations of all economic sectors in Vietnam. To promote trade and business relations with enterprises abroad is one of its main functions. VCCI is an independent, non-governmental, non-profit organization having the status of a legal entity and operating with financial autonomy.

Vietnam Consumer Confidence Index

Vietnam Consumer Confidence Index (Vietnam CCI) is an indicator designed to measure consumer confidence of Vietnam, which is defined as the degree of optimism on their activities of savings and spending.

Vietnam Investor Confidence Index

The Vietnam Investor Confidence Index measures the attitude of both Vietnamese local and foreign investors (investing into Vietnam stock market) to risk.

Vietnam and the International Monetary Fund

Vietnam joined the International Monetary Fund (IMF) on September 21, 1956, under the policy of Article VIII. Their quota contributes an estimated SDR of 1,153 millions and voting power of 0.24%. As of August 2016, the current IMF Resident Representative to Vietnam is Jonathan Dunn.Following the events of the Vietnam War, most trade and financial relations between Vietnam and foreign entities was severely restricted. The Soviet Union remained one of the few nations with continued contact with the financial institutions in Vietnam. After the Vietnamese withdrawal from Cambodia in 1989, Japan was among the first to express a desire to resume financial aid relations with Vietnam. Japan and France endeavored to reestablish Vietnam's involvement in the IMF but were met with resistance from the United States who were seeking to use the restrictions to the pressure the nation to cooperate in establishing the whereabouts of missing US military service members.Informal contact between the IMF and Vietnam was reestablished in the later part of the 1980s. The US voted down most efforts to establish continued relations and financial assistance from the IMF to Vietnam until the early 1990s. A preliminary formal agreement for financial support was not reached until October 1993 and codified in a full agreement a year after that.So far they have taken about two ECF type loans, one on April 13, 2001, which estimated 290 SDR million, and the other on November 11, 1994, which had reached about 145 SDR million.In 1998, Vietnam was in slow recovery of its economy after the Southeast Asia Economic Crisis. As a member of ASEAN, their best solution was to heavily rely on loans from the IMF. In 1999, IMF warned that the federal direct investment into Vietnam was too concentrated in the "import substituting and non-tradable" sectors like construction and telecommunication as opposed to investment in exportable goods and services.In 2001, Vietnam sent a letter of intent to the IMF to receive a loan to fund the Poverty Reductions and Growth Funds arrangement. In order to create a greater macroeconomic stability for Vietnam they would rely on the monetary policy while under shock scenarios as it has proven to lift off interest rates. According to IMF records, Vietnam is still paying that loan and continues their membership with the IMF.Since 2012, the Vietnamese dong closely tied to the U.S. dollar. Every year or two Vietnam undergoes a cycle staff report based off Article IV Consultation and hold discussions of their economic developments. As of July 2016, Vietnam has found some promising progress as they have decreased their poverty rate by one percent and managed to lower their inflation. Their main source of exports are crude oil, electronics, coffee, rice, and rubber, while their key export buyers are the US, Japan, and the developing members of ASEAN.As of July 2017, IMF credits Vietnam's economy with "growth momentum [that] remains robust underpinned by strong manufacturing activity and foreign direct investment." In an earlier April 2017 report, the IMF had warned that countries with significant amount of exports to the US have seen "relatively weak" share prices.

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