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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 39,157 35,110 32,700 57
GNI per capita
 US $ 480 430 410 164
Ranking is given out of 208 nations - (data from the World Bank)

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Tran Duc Luong



Update No: 039 - (03/03/05)

Identifying the problems
The Communist Party will remain the dominant political force in 2005-2006, but its long-term hold on power will be under threat if it fails to tackle the endemic corruption within its ranks. In an effort to shore up public confidence, the party chief, Nong Duc Manh, has championed a tough anti-corruption stance over the past few years. He has been closely supported by the Prime Minister, Phan Van Khai, who has been displaying greater mettle in dealing with corrupted officials. Khai recently announced plan to establish an anti-corruption agency. Although this development is welcome, there remains some scepticism over whether its investigations will be extensive and fully impartial. The National Assembly (the legislature) is also becoming more assertive, ensuring that government ministers will be increasingly held to account for their performances. 
The leadership is also concerned about long-term threats to national unity as outbreaks of unrest among ethnic minority groups in the Central Highlands appear likely to continue. The government has made some effort to boost the quality of life of these groups. 

Bird Flu
In terms of more immediate concerns, another serious outbreak of bird flu has revealed the apparent ineffectiveness of the government's efforts to contain the spread of the virus. Since late December a further 12 people have died after contracting the virus, raising the number of human fatalities to more than 30 over the past year. In mid-January, the deputy minister, Nguyen Tan Dung called for the application of strong measures throughout the country to prevent the further spread of the virus to humans. Although containing the virus remains an immediate task for the authorities, the government is not expected to suffer any major public backlash if it continues to fail to do so. The main regional focus is on the potential for the virus to mutate into a form capable of human-to-human transmission. In Vietnam all the human victims of bird flu had had direct or indirect contact with infected poultry, and no evidence of human-to-human transmission has been found. However, in Thailand a probable case of human-to-human transmission has been claimed. 

International relations 
In 2005-2006, the government will continue its efforts to deepen its relations with fellow members of the Association of South East Asia Nations (ASEAN) in addition to other countries in the region, particularly China. Although trade and investment ties with China will strengthen, bilateral relations will continue to be tested on occasion by disputes over the sovereignty of the Spratly Islands. Similarly, although trade and investment relations with the US will strengthen, differences over human rights issues ensure that there will be occasional diplomatic disputes between the two governments. The Vietnamese government has lodged an official protest against the US administration's decision to list Vietnam as a "Country of particular concern".

Policy trends 
Vietnam's foreign donors continue to praise the government for its efforts in reducing poverty and boosting growth, and have offered generous pledges of assistance.
In December 2004, donors pledged a record of USD3.4 billion in ODA for 2005. Although this figure is much higher than the USD2.8 billion promised for 2004, almost half of the increase is attribute to exchange-rate changes (accounting for about USD170 million) and the inclusion of international non-governmental organisations in the total (around USD100 million). The EU committed a total of USD960 million, followed by Japan (USD902 million), the World Bank (USD750 million) and the Asian Development Bank (USD374 million). 
There are, however, still a number of policy issues on which the government scores poorly. The International Monetary Fund (IMF) commended the government for its prudent macroeconomic management, but raised concerns over the slow pace of economic reform, particularly in the area of reforming state-owned enterprises and commercial banks. The National Assembly has passed a competition law, which will strengthen regulations covering business competition when it comes into effect in July 2005. The government is also determined to implement trade-related reforms in order to join the World Trade Organisation (WTO). Vietnam's chances of joining the WTO by late 2005 have improved following the recent conclusion of the ninth round of multilateral negotiations, as well as bilateral agreements with the EU and Singapore. 

Fiscal policy 
In 2005-2006, tax revenue growth is expected to face some constraints, primarily owing to cuts in import tariffs, but the buoyant economy and more efficient tax collection will ensure that revenue remains fairly robust. The budget deficit is expected to rise, however, in line with a forecast expansion in expenditure to finance reforms and development programmes. There is also a risk that the continued failure to push ahead with restructuring inefficient state-owned enterprises and commercial banks will push up the government's off-budget liabilities. 
GDP growth rate of 2004 was reported at 7.7 percent, the fastest pace of growth since 1997. In 2005-2006, the pace of economic growth is expected to slow slightly but it will remain impressive, at around 7 percent per year. Private consumption growth will remain high, in line with strong consumer confidence and firming commodity prices, particularly for rice, which will boost rural incomes. Fixed investment growth will also be strong. Domestic business sentiment and foreign investor confidence have proved resilient and this is unlikely to change over the next year or so. Despite the slowdown in the economies of some of Vietnam's main trading partners, exports will be fairly buoyant. Continued growth in imports, mainly of capital and intermediate goods, will offset the impact of export growth on overall GDP data, but such imports are an indication of the expanding industrial sector. 

Debt outlook 
The expansion in Vietnam's external debt stock, which is forecast to reach USD20 billion by 2006, up from USD13.3 billion in 2003, is driven largely by the expected continued inflow of official financing at concessional rates of interest. Therefore, there is little concerns that Vietnam will face difficulties in servicing its debt - the debt-service ratio will be 3-3.5 percent in 2005-2006, with official financing at concessional rates of interest accounting for around 80 percent of the total debt stock.  

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