Vietnam economy

From the International Herald Tribune/AP, 26 March 2008:

Within Asia, Vietnam’s growth has been second only to China in the past few years, with economic liberalization drawing a flood of foreign investment.

But rising inflation, which reached 16.4 percent in the first quarter, has threatened to undermine the economic success story …

Standard Chartered forecasts Vietnam’s GDP to expand about 7.5 percent this year.

From The Economist, 31 Jan 2008:

Economist chart 2008 Worries about the soaring cost of living are being felt across Asia, but in few places is there more concern than in Vietnam, where the government this week said the annual inflation rate had hit 14.1%, its highest since 1995. On January 30th the central bank raised its various official interest rates by up to 1.5 percentage points to try to prevent an inflationary spiral.

The country is suffering from the worldwide surge in the cost of fuels and foodstuffs — food prices are up by a whopping 22% year-on-year. But the inflationary spike is also partly the consequence of a prolonged boom: Vietnam’s economy grew by around 8.5% last year, one of Asia’s most impressive rates, having grown by an average of 7.5% annually in the previous decade …

Some of the things Vietnam wants and needs to do to make the economy more competitive in the long term are pushing up prices in the short term. This is true, for instance, of a big infrastructure drive to build roads, power stations and so on. The IMF, worried that public spending is intensifying inflationary pressures, is urging the government to save any windfall from its recent tax reforms, rather than use it to boost spending on infrastructure even more. The World Bank, by contrast, is urging it to spend even more on such projects, worried that the country’s continued growth will otherwise be at risk. The state electricity firm has been giving warnings of blackouts as it struggles to meet big increases in demand. …

The country earns a lot from exports, especially of farm produce. But much of its growth is driven by domestic demand. So a modest weakening in external demand might be just enough to stop the economy overheating and curb inflation …

More from The Economist (24 April 2008):

From (no date):

Vietnam’s greatest economic resource is its literate and energetic population. Its long coastline provides excellent harbors, access to marine resources, and many attractive beaches and areas of scenic beauty that are well suited to the development of tourism; a lack of infrastructure, however, has inhibited full utilization of these assets. The actual potential for economic growth based on Vietnam’s wealth of natural resources, however, is being rendered increasingly problematic by population growth, environmental degradation, and rising domestic demand, and the country remains one of the poorest in the world.

Rural Development and Economy

Accelerating Rural Development in Vietnam (PDF, 1.1 MB): World Bank document prepared at the end of fiscal year 2005; data refer to the status of the World Bank portfolio on 30 June 2005.

A large number of new companies and family businesses were formed after the country’s Enterprise Law went into effect in 2000. About three-quarters of the workforce in Vietnam lives in rural areas (2003, Rural Poverty Portal). As mechanization reduces the number of agricultural jobs, it’s important that displaced workers not relocate to the cities, as that would create a whole new set of poverty problems.

But Viet Nam, with a population of 80 million, needs to create more than one million jobs a year for new jobseekers. Much of Viet Nam’s population still lives in rural areas, where unemployment and under-employment rates run as high as 30 percent. At the same time, job growth in the dominant state-owned enterprises is sluggish, while those enterprises continue to drain vast amounts of resources, including land and credit, without offering strong prospects for significant employment generation. The state-owned companies employ only about five percent of the workforce. (United Nations Development Programme, 2003)

This is the same challenge the United States faced in the 1920s and 1930s — how do you keep people “down on the farm” so as not to increase urban poverty?


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