Vietnam - Overview
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Vietnamese growth is sustained by international trade and foreign investments, with exports ensuring more than two-thirds of the GDP in 2013. The impact of the financial crisis on Vietnam was limited with a GDP growth of 6.2% in 2011, 5.2% in 2012 and 5% in 2013. Certain sectors, e.g. industrial production, textile, shoe, electronics and seafood production have been growing rapidly. The 2014 growth outlook remains one of the best in Asia (5.5%).
The government launched reforms for all the key sectors of the economy and anticipates partial privatization of public companies; however, their implementation remains gradual. A tax reform has also been undertaken in order to compensate for the fall in customs revenues, as a consequence of its entry into the WTO and to make the country more attractive to investors. In order to deal with the global financial crisis, the government has established several recovery plans aimed at improving the business climate and therefore promoting production and exports, stimulating consumption and investments, increasing social security and reducing poverty, introducing monetary policies and effective taxation. 2013 has been another year of good economic results, even if the economy is relatively slowing down.
Domestic consumption remained very strong in 2013. Inflation remains high but on the decrease (18.7% in 2011, 12.6% in 2012 and 8.8% in 2013) and recent reforms have allowed to improve the standard of living of the inhabitants. The percentage of the population living on less than a dollar per day has declined in a significant way and it is now lower than China, India or the Philippines: the poverty rate went from 58% to 14% in the past 15 years. However, the urban unemployment rate has risen in recent years. The national unemployment rate was 2.1% in 2013 (after 4.5% in 2012), but under-employment, estimated at 30%, remains constant.
To ensure sustained growth in a period of high international uncertainty, at the end of 2011 the government launched what it calls "the three structural mid-term and long-term projects": developing infrastructure, training the young and modernizing the institutions. To reach these objectives, still in the agenda in 2014, the country will have to reform public companies, develop the private sector and modernize the banking system.
Industry, which represents over 38.5% of the GDP, is the main driver of growth in the Vietnamese economy. The sector is still dominated by large public groups. The country's main industries are textile, food industry, furniture industry, plastics and paper industries. The energy sector is in full-growth since several years ago (coal, hydrocarbons, electricity, cement, steel and naval industry). Even though it is the "new comer" in the oil industry, today Vietnam is the third biggest Southeast Asian producer. The country has also invested into high value-added industries such as cars, electronic and computer technologies (software).
The services sector is sustained by tourism and telecommunications. These profitable sectors should strongly contribute to the economic health of the country in the next following years. In 2013, the tertiary sector represented over 42,2% of the GDP.
Foreign trade overview
Vietnamese trade is characterized by a strong geographic inequality, the country shows a trade surplus with western countries and a growing deficit with its Asian neighbors. This trend was again verified in 2013. Vietnam is currently classified as the second largest rice exporter in the world, behind India but, since 2012, ahead of Thailand. The other exports mainly constitute textiles, clothing and footwear products and crude oil, whereas imports are mainly made up of tool machinery, refined oil and steel. Since 2011, the government is implementing measures to reduce the trade deficit which is responsible for the deficit of the balance of payment.
The main export customers of Vietnam are the USA (18% of exports in 2013), Japan, China and South Korea. For imports, the country's main partners remained, in 2013, China (27% of all imports), South Korea, Japan and Taiwan.
The Vietnamese economic model remains heavily dependent on foreign investment and exports, namely to the United States and Europe. Since 2003, these have been growing on average by 25% annually.
FDI inflow has increased considerably since the country authorized foreign investments back in 1988, and it has reached record levels in 2010 and 2011. The social-political stability of the country is one of its main assets. Although FDI was affected by the global economic crisis, showing a drop in 2009, the policy of economic openness has since 2010 resulted in growing investor attraction: the FDI flows increased to $11 billion in 2011 (they were less than $2 billion at the beginning of the 2000s).
In 2013 FDI reached 8.2 billion USD.
Traditionally, Vietnam was directed towards light industry, but FDI is now rapidly growing in heavy industry, real estate and tourism.
Investment planners in Vietnam estimate a significant growth in the FDI capital, confirming the country's third position amongst Asian nations, in terms of investment attractiveness just behind China and India. Some measures remain to be taken for the improvement of Vietnam's competitiveness in order to attract more FDI, namely the improvement of its legal procedures, the acceleration of the process of setting the legislation for investments and companies, the intensification of the decentralization process, the creation of an incentive policy for the development of supporting industries and the simplification of economic partnerships. For more information, you can consult The Investment and Trade Promotion Center of Ho Chi Minh City (ITPC).
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).