Course contents (Asia)
- About Vietnam
- Vietnam's Economy
- Strategies for Specific Industry Development
- Invest in Vietnam. Foreign Direct Investment
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Learning Unit Summary
Vietnam is a country with rich natural resources and a well educated
(literacy rate is over 90%), diligent population of 80.4 million. Since 1986
the ruling Communist Party of Vietnam has committed itself to economic
reform, or "Doi Moi" (New Changes) a move from a centrally planned economy
to a multi- sectorial one based on open market principles, and thus opened
the door to foreign investment.
Real GDP growth will remain strong in 2008-09, although there will be a
slight deceleration from the estimated high of 8.5% recorded in 2007.
Consumer price inflation is estimated to have averaged 8.3% in 2007, driven
up mainly by rising food prices. Inflation will remain high in 2008-09,
averaging around 8% owing to a mix of both supply- and demand-side
pressures.
Based on balance-of-payment data, in 2006 exports reached an
estimated US$40bn, up by 23% year on year, while the import bill increased
by around 21% to an estimated US$40.3bn. As a result, the merchandise trade
deficit eased to an estimated US$379m in 2006, from US$839m in 2005.
Vietnam's economy is 49.8 percent free, according to our 2008 assessment,
which makes it the world's 135th freest economy (Heritage). Its overall
score is 0.4 percentage point better than last year, mainly reflecting an
improvement in trade freedom. Vietnam is ranked 25th out of 30 countries in
the Asia–Pacific region, and its overall score is lower than the regional
average.
Vietnam's score on government size is above the world average. Total
government expenditures equal about a fourth of GDP, which is relatively low
compared to other countries. Yet weakness in all other areas suggests that
this is not because of bureaucratic efficiency. The government imposes high
personal tax rates, but overall tax revenue is not so large.
Vietnam has weak investment freedom, financial freedom, property rights,
and freedom from corruption. Although it is undergoing reform, the financial
sector is neither well regulated nor independent of the government. Despite
some progress made, foreign investment is subject to an array of opaque
regulations and cannot be guaranteed legally. The judiciary is subject to
political influence, and commercial cases often take years to reach
resolution. Corruption is a serious problem in the legal system, as well as
for the civil service as a whole.
Vietnam's membership of the World Trade Organisation (WTO) will help to
improve the business operating environment. The government will also push
ahead with its plans to reform state-owned enterprises, and there will be
progress in leveling the playing field for private enterprises
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