| VIETNAM AND ITS ECONOMY Overview Vietnam has a population of over 83 million and a land area of 325,360 square kilometers bordered by Cambodia, Laos and China. The population is young, with over 70% under 35 years of age and with a high literacy rate of 94%. Average wages are low and currently about half the level of those in China. Vietnam is one of the fastest growing economies in Asia. Since Vietnam introduced major economic reforms, or Doi Moi, in 1986, it has enjoyed sustained economic growth with GDP increasing by an average of 6% per annum until 1990. For most of the 1990s, growth averaged 8.9% per year until the onset of the Asian financial crisis in 1998. Still, Vietnam recovered fairly quickly and real GDP growth has steadily improved from less than 5% in 1999 to 8.4% in 2005, the highest economic growth rate in the past seven years since 1996 when the country scored growth of 9.3%. Manufacturing is the country’s main growth engine. The largest industries include food and foodstuffs, mining and chemicals, and textiles and garments. The agricultural sector is also a major contributor to the economy. Vietnam’s main agricultural products include rice, coffee, tea, pepper and sugar cane. Vietnam is the second biggest exporter of rice and the largest producer of robusta coffee beans in the world. The country is still in the process of economic reform and opening up, with taxation, trade regulations and foreign investment policies undergoing further fine-tuning. ECONOMIC ENVIRONMENT In 2005 GDP surged 8.4%, the strongest result in a decade. The economy overcame floods, bird flu and rising commodity prices to record growth in all sectors. Industrial production and retail and services made the largest contribution to growth with agriculture and construction somewhat subdued. Retail and services accounted for 58.6% of GDP, the highest proportion in recent years, heralding the arrival of a consumer economy with major implications for the economy going forward. Total foreign direct investment (“FDI”) attracted reached $5.8 billion in 2005, jumping by 38.1% yearon-year. This performance was characterized by a sharp increase in FDI projects from Taiwan, Singapore and Japan. The trend was marked by both new projects and increased investment into existing projects such as Canon, Honda and Toto. 120 new FDI projects began operating in 2005 and the sector now employs 870,000 workers and in 2005 exported $10.3 billion worth of goods, up 26% year-on-year In 2005, Vietnam received around 3.34 million foreign tourists and 15 million domestic tourists, up 18.4% and 7.6% year-on-year respectively. Tourism earned the country revenues of VND30 trillion ($1.91 billion), up 14% year-on-year. Employment in the sector is approximately 235,000 people, with hotels employing about 115,000. This is expected to rise to about 340,000 in 2010 with hotels alone employing about 186,000. In 2005, export growth rose 21.1% year-on-year to $31.5 billion as shipments picked up in the second quarter after a slow start earlier this year. Oil exports drove this growth, followed by farm products, textiles, footwear and seafood. However, Vietnam’s two major export segments, textile and footwear, have continued to struggle in the face of stiff competition from China and a dumping suit in the EU. The United States remains Vietnam’s key export market followed by ASEAN, EU, Japan and then China. |
