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Key Economic Data 
  2002 2001 2000 Ranking(2002)
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)

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Area (




Tran Duc Luong



Update No: 033 - (26/08/04)

Political outlook 
The domestic political scene remains broadly stable, with the leadership of the Communist Party and the government not expected to change in 2004-2005. The Party continues to show its determination to deal with any wrongdoer. The prime minister, Phan Van Khai recently established an inter-ministerial group to probe allegations of corruption in the state communications provider, Vietnam Post and Telecommunication Corporation. The tenure of the post and telecommunications minister, Do Trung Ta, therefore may also come to a premature end. 
In May, the government announced that 43 former and current high-placed executives at the state-owned oil and gas corporation, PetroVietnam, would be disciplined for "administrative and economic wrongdoing", a euphemism for corruption. In June, the deputy general director Nguyen Quang Thuong was arrested on corruption charges related to falsifying purchase contracts. A year ago the company's general director, Nguyen Xuan Nham, was fired for alleged corruption. 
Nguyen Thai Nguyen, who was deputy head of the Government Office was a close aide to Mr. Khai, recently received another prison sentence for corruption. 
Despite these shows of progress in terms of demonstrating the leadership's eagerness to crack down on corrupt officials, greater effort needs to be made to increase the pace of bureaucratic and institutional reform in order to tackle corruption, a problem that remains endemic. There has been some progress in the state's administrative reform programme. Most notably, the one-stop shop" mechanism, which aims to create single agencies to deal with applications of a range of activities requiring official approval, is being expanded and will be in place at the provincial and district levels in all 64 cities and provinces by the end of 2004. This should help to limit opportunities for graft. 
Authorities will continue to seek to maintain political stability by suppressing anti-government forces that are perceived to be a threat to "national unity". The government recently called on ministries and agencies to step up efforts to prevent the spread of "poisonous information." Security in Central Highland region remains unstable despites the government's efforts to improve the welfare of ethnic minorities. This is partly because of the long-held distrust between the ethnic minority groups, mostly Christians, and the majority ethnic Vietnamese (Kinh) people. 

International relations 
The government's controversial decision recently to commence tours to and to renovate an airport on the disputed Spratly islands is worrisome as it has angered other nations that claim sovereignty over the islands, including China, the Philippines and Taiwan. 
Relations with the US will be subjected to both positive and negative developments in 2004-2005. Bilateral ties have been boosted by shows of military cooperation, but ideological differences and the likelihood of disputes over Vietnam's human rights records will ensure that diplomatic relations remain prickly. 

Policy Trends 
Being a developing nation, Vietnam has been on the right track to focus on boosting growth and reducing poverty. These policies have earned the praise of foreign donors and investors. However, the government's effort to push forward with economic reform pledges has been less impressive and there is little prospect of a marked improvement in 2004-2005.
The process of privatising state-owned enterprises (SOEs) has been hampered by recalcitrant managers and vested interests. The lure of public ownership and control remains strongly illustrated by the government's strategy to develop a local automotive industry through state owned firms. However, the government is promising to equitise one of the large state-owned commercial banks, Vietcombank. If successful, this will pave a way for privatising some of the larger SOEs. 
The government remains determined to implement trade-related reforms in order to join the World Trade Organisation (WTO), but it is now likely to miss its ambitious target of becoming a member in 2005. 

Monetary policy 
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. The SBV governor, Le Duc Thuy, has been intent on avoiding any upward movement in interest rates in order to avoid jeopardising the government's success in achieving its economic expansion targets. However, this focus on loose monetary policy and economic growth has raised some concerns, outstanding domestic credit had grown by 32 percent year on year by end 2003. In late June, with inflation surging to more than 8 percent year on year, the SBV hiked compulsory reserve requirements for both dong and US dollars deposits. With banks therefore required to set aside more funds in non-interest bearing accounts with the SBV, interest rates will begin to shift upwards as commercial banks compete for deposits to meet demand for loanable funds. The SBV will probably be compelled to tighten monetary policy further in 2005 if there are insufficient signs of slowing demand for credit in the second half of 2004. 

External sector
Vietnam's exporters continue to record strong revenue growth, although in 2004-2005 year on year expansion (on a customs basis) will slip from the impressive pace of 22 percent recorded in 2003. 
Global crude oil prices are forecast to remain firm this year, thereby supporting overall export growth. The constraints on textile export growth, resulting from a textile quota agreement with the US, are also starting to bite. Offsetting some of this weakness is the bright outlook for seafood and agricultural commodities exports. 
Trade deficit remains wide. Import demand is largely driven by greater demand for capital equipment and imported inputs used in the manufacture of goods for export, consequently, in 2004-2005 steady import growth will continue. The merchandise trade account will remain in deficit, thereby contributing to an overall current-account deficit of more than 5 percent of GDP in 2004-2005. The growth in the combined deficit of the services and income accounts, which will rise to about USD2.3 billion, will be more than offset by expanding remittances from overseas Vietnamese nationals. 

Economic growth 
The economy is expected to continue to perform well in 2004 and 2005 with real GDP expanding by an annual rate of around 7 percent. In line with buoyant consumer confidence, private sector consumption will remain strong, although some upward on interest rates in the second half of 2004 will harm consumer spending. Domestic business sentiment and foreign investor confidence are also proving to be resilient and will contribute to robust growth in fixed investment. Vietnamese exporters will benefit from a pick-up activity in the economies of its main trading partners, the US and Japan and will continue to record strong growth. However, rapid growth in imports, mainly of capital goods, will offset the impact of expanding exports on overall GDP data. In terms of sectoral trends, there is little risk to continued industrial growth of around 10 percent annually in 2004-2005. The government's efforts to promote agricultural and fisheries products will help to boost the domestic agricultural sector in the next few years, and ongoing growth in demand for financial and telecoms services, together with a rebound in tourism, suggest that services as a whole will continue to record annual growth of around 6 percent. 

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