Vietnam's Economy in Transition

Vietnam’s Economy in Transition

Background

Vietnam is known as the Socialist Republic of Vietnam. Vietnam is a country located in southeastern Asia that is still in transition in gaining economic growth from the Communist takeover in 1954 under the ruling of Ho Chi Minh. France conquered Vietnam and made it become part of the French Indochina in 1887. Although Vietnam declared independence after World War II, France continued to rule until the Communist forced power over them. Vietnam was divided into North and South. The North consisted of the Communist while the South consisted of the anti-Communist under the Geneva Accords of 1954. In order to bolster the government, the United States gave military and economic aid to South Vietnam to fight off the Communist North but had to withdraw in a cease-fire agreement in 1973. Consequently, the Communist North forced coerced the Anti-Communist South to reunite the country under the conservative leadership policies which limited economic gain providing little peace (“Vietnam” p.1). In an effort to increase liberalization Vietnamese authorities needed to modernize the economy by enacted structural reforms to create more competitive export driven industries in 1986. This was motivated by Vietnam’s “doi moi” policy which mean refers to a free-market where buyers and sellers determine prices as oppose to government regulations (Wikipedia.com p.11). In addition, the Protestant Montagnard population consisting of ethnic minority of the Central Highlands is unhappy with the loss of land to Vietnamese settlers. Hao Hao Buddhists are still protesting against religious persecution. (“Vietnam” p.2).

Geography and Climate

Vietnam has to initiate a lot of effort into restoring its own natural resources that were destroyed through the harsh environment of war. The country is left with the devastating impact of deteriorating land. The South’s climate is tropical as oppose to the North where it is monsoonal during the month of May through September. Currently, agricultural practices of slash-and-burn and logging are contributing to soil degradation and deforestation. Marine life population is threatened due to over fishing and water pollution.

Economy

Vietnam exports rice, coffee, tea, rubber, and fishery products. Approximately 65% of the workforce is involved in agriculture, fisheries and forestry. Vietnam has one-third global share in production of cashew nuts. Also, Vietnam is the second largest rice exporter in the world. Vietnam has 6.93% of land use for permanent crops having the highest percentage of any nation in the Greater Mekong Sub region. However, agriculture's share of economic output has declined falling as a share of GDP from 42% in 1989 to 20% in 2006. The GDP per capita income of 6.9% in 2006 increased to 7.0% in 2008. The unemployment rate (“Vietnam” p.5). The rampant population of 85,262,356 people has increased urban industrialization and migration in Ho Chi Minh City and Hanoi. (“Vietnam” p.4). The population increase is positive for the long term future of Vietnam. The Vietnamese labor force in mid-1985 was estimated at 31.2 million, having increased at the rate of 3.5 to 4 percent annually between 1981 and mid-1985. A 1987 Vietnamese estimate put unemployment at more than 20 percent. More than half of the work force was committed to agriculture.

Provided below are the recent unemployment rates from 2003-2007:

YEAR UNEMPL. RATES % CHANGE

2003 25%

2004 16.1% -75.60%

2005 1.9% -68.65%

2006 2.4% 26.32%

2007 2.0% -16.67

The natural resources are vital increasing productivity and to the well being of the people as well as the country. In addition, the GDP growth was 8.17% in 2006 which is the fastest growing rate in Southeast Asia. The GDP growth was estimated to hit a ten-year high record at 8.44% in 2007. Furthermore, foreign investment has increased dramatically and exhibits many opportunities of advancement in Vietnam (wikipedia.com p.3 ).

Doi Moi Reforms

Farmers were no longer required to sell to government. Land was leased to farmers and transferable. Secondly, private commerce was allowed. The state still controlled the industry. State monopoly of foreign trade eliminated. Therefore led to joint ventures with Vietnamese and foreigners own wholly. Also, there were no import quotas. Laws encouraged foreign investment. There were guarantees against expropriation and full