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VIETNAM


  
   

 

Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 35,110 32,700 31,200 56
         
GNI per capita
 US $ 430 410 390 167
Ranking is given out of 208 nations - (data from the World Bank)

Books on Vietnam

REPUBLICAN REFERENCE

Area (sq.km)
329,560

Population
79,939,000

Capital
Hanoi

Currency
dong

President
Tran Duc Luong

 

 

Update No: 034 - (12/10/04)

International relations
Vietnam will continue to deepen its relations with fellow members of the Association of South East Asian Nations (ASEAN) and its regional prominence will increase in October 2004 when it hosts the Asia-Europe Meeting (ASEM, an informal forum for dialogue between the EU member states and a number of Asian countries). 
Relations with some countries in the region, most notably China, will continue to be tested by disputes over the sovereignty of the Spratly islands in the South China Sea. The governments controversial decision recently to commence tours to the Spratly islands and renovate an airport there is worrisome as it has angered other nations that claim sovereignty over the islands. In addition to China, the other nations with a sovereignty claim are Brunei, Malaysia, the Philippines and Taiwan. Vietnam reasserted its claim to sovereignty when criticising the decision by China and the Philippines in September 2004 to cooperate in a three-year project to gather data on petroleum resources around the islands. 

Economic policy outlook
According to official statistics, the government recorded a much smaller deficit in the first half of 2004 than planned in its budget. Although revenue collection remains on target to meet the full year budget, expenditure has been slow, with only 44 per cent of the annual budget spent in the first half. However, the rate of spending normally picks up in the second half of the year. The disbursement of development funds has been particularly slow so far this year, government ministries and agencies will come under increasing pressure to meet development expenditure targets. Salaries for state workers were also set to be raised in October. The full year deficit is therefore likely much closer to the governments target of 5 per cent of GDP. In 2004-2005, tax revenue growth will face some constraints owing to cuts in import tariffs and amendments to the personal income tax regime. 
The State Bank of Vietnam (SBV) has finally moved to tighten monetary policy in an effort to curb domestic credit growth and ease inflationary pressures. In late June, the SBV raised the compulsory reserve requirement for both dong and US dollars deposits. However, the SBV has decided against raising interest rates. In September, it left its annual lending rate unchanged at 7.5 per cent. The SBV governor, Le Duc Thuy, has been intent on avoiding any upward movement in interest rates in order to avoid jeopardizing the governments success in achieving its economic expansion targets. However, this focus on loose monetary policy and economic growth has raised some concerns and heightened the risk of overheating, at end-2003 outstanding domestic credit had risen by 32 per cent year-on-year, although the pace of annual credit growth slowed to around 26 per cent in the first quarter of 2004. The SBV will probably be compelled to tighten monetary policy further in 2005, probably by raising interest rates, if there are insufficient signs of slowing demand for credit.
The economy is set to continue to perform well in 2004-2005, with real GDP expanding by an annual rate of nearly 7 per cent. However, the rapid pace of growth in domestic credit over the past year or so raises questions about quality and sustainability of this impressive economic expansion. Much of this credit is currently channelled to state owned enterprises (SOEs), some of which have yet to embark on a much-needed restructuring programme. However, if the government makes greater efforts to improve the efficiency with which the resources are allocated (by reforming inefficient SOEs and permitting the burgeoning private sector greater access to capital and land), the risk of the economy overheating and suffering a severe slowdown will be greatly reduced. Domestic business sentiment and foreign investor confidence have proved resilient, and this is unlikely to change over the nest year or so. As a result, fixed investment growth will remain robust. However, some upward pressure on interest rates will temper consumer spending in 2005. Exporters will benefit from a pick up of the economies of Vietnams main trading partners, the US and Japan and will continue to record strong growth. However, rapid growth in imports of mainly capital goods, will offset the impact of expanding exports on overall GDP data. 
In terms of sectoral trends, the governments efforts to promote agricultural and fisheries products will help to boost the domestic agriculture in the next few years, and there is little risk to continued industrial growth of around 10 per cent annually in 2004-2005. 
Consumer price inflation has accelerated markedly, reaching 9.9 per cent year-on-year in September. The main factor driving up consumer prices has been a surge in prices for food, which accounts for one-half of the basket of goods in the consumer price index. The rice price is forecasted to record an annual rise of 20 per cent averagely for all types of rice this year. Recent increases of retail petroleum prices have also pushed up total prices. Higher wage payments to government workers, buoyant consumer demand financed mainly by rampant credit growth, and the rising level of general economic activity will contribute to annual average inflation of 8 per cent this year. In response to an expected tightening of monetary policy in addition to slower food price rises, inflation should ease in 2005, dipping below 7 per cent. 
Export revenue rose in the first seven months of 2004, expanding by around 22 per cent year-on-year, but revenue growth will slow over the remaining months of 2004 and in the whole of 2005, owing to factors inhibiting growth in the leading two exports, crude oil and textiles and garments. Crude oil prices are forecasted to contract by 12 per cent year-on-year next year and garment and textile export growth will be limited by insufficient quotas this year and greater competitive pressure next year. Offsetting some of these concerns is the bright outlook for revenue from seafood (despite the US imposing anti-dumping tariffs on Vietnams shrimps) and agricultural commodities exports, in addition to impressive growth in some emerging exports, including wood products, and electronic products and computers.

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FOREIGN ECONOMIC COOPERATION

Vietnam-China trade set to reach US$5bn 

Given the current rate of two-way trade between China and Vietnam, economic officials say the two nations may reach US$5 billion in trade turnover this year, a target initially set for 2005, Vietnam News Agency reported. 
Vietnam's Deputy Prime Minister, Vu Khoan, announced the news at a September 23 workshop in Hanoi on the economic relationship between Vietnam and China. 
Deputy Prime Minister, Khoan, also said he expects Vietnam and China to reach $10 billion in bilateral trade turnover by 2010. 
Khoan said leaders from both nations have conducted regular meetings to develop comprehensive economic ties. The upcoming visit by Chinese Prime Minister, Wen Jiabao, to Vietnam will mark a new milestone between the two countries' relationship. 
Besides trade cooperation, China has helped Vietnam to recover, expand and upgrade a series of metallurgy plants and chemical manufacturing factories. Chinese businesses are helping to develop several infrastructure and electricity projects as well as investing in nearly 300 projects throughout Vietnam. 
Chinese ambassador to Vietnam, Qi Jianguo, said trade turnover this year to date between the two countries stands at $3.7 billion. The ambassador noted that the statistic is a firm foundation for reaching the targeted $10 billion two-way trade turnover by 2010. 
In addition, Chinese direct investment to Vietnam, including from Hong Kong, reached $4 billion, with 600 registered projects by July.
Jianguo stressed that since the China-ASEAN (Association of Southeast Asian Nations) Early Harvest Program, China's imports from Vietnam have increased rapidly. 
The trade turnover between the two countries has progressed rapidly in recent years, increasing from $32 million in 1991 to $2.4 billion in 2000. 
Last year, trade turnover posted $4.6 billion when China became Vietnam's third-largest trade partner and its largest importer. Meanwhile, Vietnam is China's 27th largest business partner, the ambassador said. 
The seminar was co-hosted by the Vietnam Chamber of Commerce and Industry (VCCI) and the Chinese Embassy in Vietnam with more than 400 participants from the embassy and relevant government agencies. 
The workshop provided comprehensive information about the Vietnamese-Chinese trade dynamic, and created opportunities for businesses on both sides to exchange experiences. 
At the workshop, VCCI also launched a commerce website for Vietnam and China in Vietnamese, Chinese and English. 
The web page will provide up-to-date information on the two nations' laws, policies, markets and prices. 

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TOURISM

Vietnam, Turkey sign trade, tourism agreements

Vietnam and Turkey have signed agreements on tourism co-operation, developing small- and medium-sized enterprises (SMEs) and trade promotion during a recent visit to Turkey by Trade Minister, Truong Dinh Tuyen. 
During the visit, Minister Tuyen and Turkish Minister of the Interior, Abdulkadir Aksu, co-chaired a session of the Vietnam-Turkey Committee for Economic Co-operation. They said they were pleased at the development of bilateral economic co-operation, with two-way trade values increasing from US$47m in 2001 to nearly US$70m in 2002, US$80m in 2003 and more than US$43m in the first half of this year.
Discussions focused on how to promote economic, trade and investment relations as well as co-operation in science, agriculture, transport, the textile industry and tourism. The ministers also agreed to give top priority to promoting co-operation in construction, developing SMEs, shipbuilding, irrigation development, telecommunication, farm produce, food processing and energy.
Minister Tuyen attended a Vietnam-Turkey business forum in Istanbul and visited an international trade fair in Izmir.

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