Vietnam is a country whose economy is evolving. Its rapidly changing economy is facing significant alterations in the process of transition. Vietnam is moving away from its current economy, which is a non-market socialist one, towards a market economy with a socialist orientation. Vietnam is one of the poorest countries in the world with a Gross Domestic Product of only $300. High levels of population along with the proper training will allow Vietnam to effectively use its number one resource, people. Australia plays a key role in assisting Vietnam’s economic growth and development through their aid programs.
Economic reforms are changing Vietnam from an agricultural rich economy to a service industry one. Throughout the years, agriculture, as a percent of Gross national product, has decreased from year to year, while service and industrial are increasing. This steady decline is because of the changing situation with its economy. With this decrease, migration to cities and towns is usually normal, but not in this case, as Vietnam has stayed primarily rural. The main agricultural cash crops in Vietnam are rice, coffee, cashews, corn potatoes rubber, soybean and tea. Clothing, computers and electronics are a growing part of the economy as well. Tourism is the largest industry in the service sector.
In Vietnam land sales are not permitted. This is because of the communist rule, and the ownership of all land by the state. During the current economic reform to a market system of economy, household farms have replace the once popular collective farms. Land rights are guaranteed to the families for twenty years on farmland and fifty years for forestland. Though the farmers can still not own land they do have the right to use it, rent it, inherit it, and well as claim it as collateral.
The changing economy has caused the industrial and service sectors to steadily expand. With this increase, many are being dominated by state owned industries.
Along with the escalating change towards a market economy, competition within the private sector has also risen due to the fact that state owned enterprises are increasing as well. If these state owned enterprises were private then economic efficiency would be increased as well. This in turn would benefit the Vietnam economy and people. The government has instated rules so this can happen. They have also forced the state owned enterprises to be self- sufficient. They are now highly self-sufficient. They are self-run, determine what their production inputs and outputs are, and are responsible for the financing and accounting of their firm. Though they seem to be individual entities, the government still has a strong hold on them because the governments has complete ownership of the firm, even though there are shareholders.
With the institution of Doi Moi the economy of Vietnam has experienced a very strong growth. The past decade the Gross Domestic Product averaged 7.5%. Throughout the most recent years the growth has not been as severe but still positive. It was gaining strength as 2000 began but has been slowing down. There is still a positive growth but not as significant as in the mid 90s. See following chart for the Real GDP Growth in %.
Towards the end of the 90s many factors accounted for this slow down. Economics reforms were slowing as well. State owned enterprises and banks were becoming inefficient as well. This, along with a decrease in demand and consumption, a decrease in foreign and local investing, as well as a decrease in outputs all contributed to the slow down in economic growth. So, as this slow down became evident, changes needed were made in order to increase the GDP. In the year 2000, certain things happened which did in fact raise the growth in real GDP. The world economy was growing and manufacturing and commodity prices were improving as well. Along with a rapid growth in the industrial sector as well as the non-state sector Vietnam was able to recover from a slowing GDP growth quickly.
In order to accelerate the economic growth more and reduce the poverty, which seems to be plaguing the country, the Vietnam Government installed Doi Moi reforms. This process was accelerated by the collapse of the Soviet Union, formerly Vietnam’s chief political and financial supporter. A major element of the reform programme has been the encouragement of foreign investment in Vietnam. A Program of Action was added as, an amendment, to the Doi Moi reforms. These measures were made to: Improve the competitiveness and efficiency of the economy, reform the state enterprise sector and develop the private sector, strengthen the financial sector, develop the rural sector and reduce poverty, invest in human resources and protect the environment, improve public administration, transparency, and participation, raise productivity through infrastructure investment. These amendments were implemented in order to improve the effectiveness and success of the Doi Moi reforms.
Most communist or non-market socialist economy countries have low levels of incomes and poor standards of living. This is true with Vietnam, but with the transition to a market economy, more irregular levels of income were created and higher levels of poverty were as well, Not everyone had the same opportunities. There was an enormous gap and obvious separation in between the rich and poor, and rural and urban areas. Economic growth is the key to the narrowing of the income gap and alleviation of poverty.
Economic growth is viewed as one way of helping alleviate poverty. Problems such as isolation, natural devastation, lack of resources and participation, and sustainability all can be helped by economic growth. Natural disasters are common in Vietnam. Floods, typhoons, pests, and illness all have plagued this third world country at one time or another. Growth in the economy would allow for more investment in this country so such troubling things can be prevented or dealt with more efficiently. With the lack of resources) A growth in the Vietnam economy would allow for more efficient allocation for resources and access to outside areas which would be able to give or trade needed resources. The lack of sustainability in financial and environmental areas would benefit by allowing the government to focus on sustainable activities rather then let the people worry about basic problems. Increased education and higher investments in the government would boost the participation in the planning of government programs. Economic growth could help the problem of isolation by allowing people to receive a better education. An education can help the Vietnamese communicate with others from all over the world and also gain an understanding of the world economy. This would open the doors of Vietnam to the outside world, for trade and education.
Vietnam was a non-market socialist economy and its major trading partners were East European members of COMECON (Councils for Mutual Economic Aid.) The Soviet Union was one of the most important partners too. In the early nineties, with the fall of the Soviet Union and the Soviet Trade Bloc, Vietnam was in need of new trading partners, since they heavily relied on the USSR. The more modern, open trade policy in which Vietnam had to adopt is a result of the extensive trade reforms, which were needed in order for the Vietnam economy to grow. Since the middle 1980s, increases in external trade volumes and the attraction of external resources have helped and allowed Vietnam to become a partner in the global economy. Being part of the open global economy, Vietnam had to lower its tariffs, have a flexible exchange rate regime, decrease its quantity restrictions, and decrease it export controls. The result was a rapid growth in its export sector as well as an increase in foreign investments. Vietnam relies heavily on foreign aid and these investments. Much of the foreign investment goes to joint ventures usually with state owned enterprises. Textile industries as well as hotel services receive much of the foreign investment, because of bureaucratic decisions.
The government has not stepped in to increase its export industry but relies heavily on its agricultural exports. The main imports of Vietnam are machinery and equipment, steel, bikes, fertilizer, and automobiles. While the main exports are rice, coffee, cashews, corn potatoes rubber, soybean and tea. Importing and exporting so heavily, has allowed Vietnam to be part of trade organizations. They are a member of the Association of South East Asian Nations (ASEAN) and Asia Pacific Economic Cooperation (APEC). Its also considering joining the infamous World Trade Organization (WTO). The recent trade agreement between Vietnam and the United States of America is seen to be the initial step in gaining membership to the WTO. Vietnams membership would increase their economic growth, expand its agricultural processing and manufacturing sectors, and increase it income earning opportunities, food output, and food security. The membership to the WTO, as well as other trade organizations help Vietnam advance it economy by allowing it access to more resources and support. Australia became one of these supportive countries.
Australia is a wealthy country with very modern technology and has an interest in the stability and development of Vietnam and its region. Australia is one of Vietnams largest financial supporters. In the year 2000 2001 it allocated $73.2 million in aid to Vietnam. Stipulations were given to Vietnam in order to receive this financial aid. The Vietnamese government was to improve the livelihood of the poor through support for better rural services, including health and infrastructure. In May of 2000, the My Thuan Bridge opened. It was a joint investment and effort between the Vietnam Government as well as the Australian Government. This was one of Vietnams highest priorities concerning national infrastructure. The My Thuan Bridge opens transportation to the Mekong Delta, which is a major rice growing area, as well as links in to Ho Chi Minh City. The Australian support for health and health services has helped the Vietnamese immensely. The health care in Vietnam is one priority area of many. Malaria and dengue fever are high priority health projects as well as health care for women and children.
Another area of Australian investment was to improve the capacity for mid to long-term development through human resource development. Having a population of approximately 80 million people in a country, which is only 331,688 square kilometers, people are a huge resource and commodity. Investment in people is critical for economic growth in Vietnam. Education is an important part of this. So much of the Aid Australia gives Vietnam is directed in the way of education and children, for they are the future. Australia gave Vietnam about 500 scholarships for students to study abroad in Australia. They also offered Vietnam English-speaking classes for their government officials, as well.
The third area of Australian investment was that which supported the Vietnam Governments reform program. It is doing this by increasing the effectiveness and accountability of government, including capacity building, systems development and policy advice. To achieve a market oriented economy Vietnam must first work on the effectiveness, organization and decision making of its government. They must assist in banking and legal areas, throughout the country in order to achieve a more balanced market that meets international standards. Australia is funneling money into such areas but has also instituted programs in order to help Vietnam be more self-sufficient. They are training people in international law and human rights, as well as funding for research in the area of public and international policy. Along with the teaching and funding Australia is also monitoring the programs to make sure they are effective and being used to there full potential.
Vietnam is a country whose economy is going through changes and with the support of such countries such as Australia, Vietnams goal to move from its current economy, which is a non-market socialist one, towards a market economy with a socialist orientation is become closer to attain. The change of the economy and stable growth will help Vietnam raise it quality of living as well as open up doors to the country and its people.
The United Stated Library of Congress
Gardener, L.C. et al. (1997) Vietnam: The Early Decisions. Austin: university of Texan Press.
Karnow, Stanley (1983). Vietnam A History. New York: Penguin Books.
Long, Robert Emmet (1986). Vietnam: The Early Decisions. New York: Wilson.