Vietnam Economics and Business

Business

After the end of the Vietnam War and the reunification of North Vietnam and South Vietnam, the country was extremely poor with ruined industries and transport routes and, in addition, severely damaged agricultural areas and forests. Business was also socialized in the south, but private small industries still lived there. In 1986, reformists took over political power. “The renovation policy ” Môi M車imeant a gradual transition from centrally planned economy to market economy. The country was opened to foreign investors and the inflow of capital increased sharply, especially during the 1990s and mainly from wealthier countries in the region such as Taiwan, South Korea and Japan. Industry was the engine of the economy and strong exports have driven the expansion. Vietnam has become increasingly integrated into the global business community and is now highly dependent on foreign trade.

Vietnam GDP (Nominal, $USD) 2003-2017

Since the beginning of the 1990s, the pace of economic growth has been one of the highest in the world. In the mid-00s, it was close to 8 percent per year. This has significantly contributed to a rapid reduction in poverty and a growing middle class and thus a growing domestic market. Vietnam is 2010 in the transition to being a middle-income country. A small proportion of illiterates and a sharp decline in child mortality in recent years have also improved the country’s ranking on the welfare list HDI (Human Development Index), where Vietnam 2017 ranked 116th among 189 countries.

Since the 1980s, the structure of business has changed. A majority of Vietnamese still live in rural areas, and agriculture, forestry and fishing together account for more than half of their employment. However, in 2017 these industries accounted for only 15 percent of GDP, while the industry (including construction and mineral extraction) reached up to 39 percent after very strong growth during the 1990s. Almost half of industrial production comes from wholly or partly foreign-owned companies. Foreign investors and multinational companies have often seen Vietnam as an alternative to China, with good work ethic, economic and political stability, competitive labor costs and favorable tax rates. But problems also appear in the form of a lack of sufficiently educated labor, weak and inefficient links in transport systems and other infrastructure as well as a bureaucratic organization. The fastest growth has been around Hô Chi Minh City in the south and around Hanoi far up in the north, Vietnam’s two most important areas by far. There are also the country’s two stock exchanges.

Since 2007, Vietnam has been a member of the World Trade Organization (WTO). As a result, foreign trade has been further liberalized as trade quotas and subsidies are lifted. However, there are still many restrictions in the banking and finance sector and also retail and other domestic services. In 2008, rapidly rising inflation, an increased trade deficit, a growing crisis for the banks and worries in the labor market came to reduce economic growth. But despite the global economic crisis, Vietnam’s growth in 2009 was just over 5 percent. However, inflation rose to reach 10 percent in 2010, which worsened the conditions for low-income and unemployed people.

Vietnam has for many decades received a great deal of development assistance, including from Sweden. When the country is now in transition to become a middle-income country, Swedish aid will be phased out. The commitment in Vietnam focuses on collaboration to achieve improved governance, reduced corruption, increased respect for human rights and environmentally sustainable development.

Agriculture

Around the middle of the 1950s, agriculture was collectivized in North Vietnam, and after 1975 the corresponding transformation began in southern Vietnam. However, the collective could not achieve the necessary increase in production, and as early as 1979 part of the work on the collective was outsourced. Reforms around 1990 meant that farmers could lease farmland and sell their products on the market themselves. The lease contracts can now be inherited, and it is also possible to sell land. Price control and delivery control have been removed. All these changes have led to a significant increase in production.

Despite periodic adverse weather conditions and outbreaks of livestock diseases, agricultural production increased annually by 4 percent during the period 1995-2008. In 2008, agriculture accounted for 52 percent of employment and in 2017 accounted for 15 percent of GDP.

Rice is basic food and is grown on most of the field. It has been exported for decades, and Vietnam was the world’s second largest rise exporter in the early 1990s. As artificial irrigation increases, high-yielding varieties and new plant species are increasingly cultivated, and it is now very common to take two crops a year, in the south where the supply of water is extra good, even three crops are taken.

As a result of urban growth on the fertile plains, agricultural land disappears. In the very densely populated lowlands, the land is over-utilized and the nutrient content decreases. At the same time, more of the highlands have been cultivated by migrants. From there, a large part of the exports of coffee, rubber and tea now come. Other sales products are sugar cane, peanuts, cashew nuts, tobacco and cotton. Total agricultural exports doubled during the 1990s. Chickens and ducks are by far the most common domestic animals, and their numbers increased sharply during the 1990s. The number of pigs and cattle has also increased. Water buffaloes are used as draft animals.

Forestry

During the Vietnam War, large forest areas were destroyed by chemical weapons and fires. Extensive new crops and increased sweat farming on the slopes then reduced the forest area even more. However, during the 1990s, the state, with the support of the FAO, has conducted large reforestation projects to increase forest land and create productive forestry. In the mid-00s, almost 40 percent of the country’s area was officially wooded and thereafter the forest area has increased further. However, the proportion of productive forest land is considerably smaller.

The state sees forest as an important natural resource and strives for increased export of forest products. To promote the growth of a domestic forest industry, exports of unprocessed timber and sawn timber were prohibited during part of the 1990s. The ban was lifted after a few years, and in 2007, timber and timber products, including furniture, accounted for 5.3 percent of export earnings. Wood is also the most important source of energy for rural households. Reproduction projects are also being run along the coast, but mangrove forests are disappearing at a rapid rate, mainly as a result of extensive cultivation of giant shrimp for export.

Fishing

Fish has since played an important role in the Vietnamese diet and is a major part of the protein intake. Until the 1980s, coastal fishing was still considered, due to a lack of larger boats and fuel. Furthermore, low retail prices meant that the fishermen could not afford to invest in better tools. Since the 1990s, foreign investment and cooperation with Thai companies have enabled the potential of the fishery to be exploited. With better equipment, more and more of the fishing has been able to be directed to deep-sea areas.

In 2007, the total catch was 4.3 million tonnes, half of which came from fish and seafood farms. Seafood, fish and fish products accounted for about 8.5 percent of export earnings. The cultivation of seafood, especially of giant prawns for export, had then increased very sharply in a few years. It had dramatically reduced the mangrove forests along the coast, as they were largely cleared to open for cultivation ponds. Fishing continued to increase in 2009, while shellfish farming declined.

Energy and minerals

Wood, grain waste and energy from small hydroelectric power stations have traditionally covered most of the country’s energy needs. Vietnam still has low percapita consumption of fossil fuels commercially internationally. However, during the 00s, the need for energy for industries and households and for transport increased annually by about 15 percent.

The conditions for energy production differ greatly between northern and southern Vietnam, and the energy requirements are largely covered in various ways in the north and south. Oil deposits now play an important role in Vietnam’s economy. Extraction to a significant extent only started in the 1990s, and it increased annually until 2004. Oil was extracted in nine fields, all offshore off the mouth of the Mekong in the south, and half of it came from the Bach Ho oil and natural gas field. Crude oil then accounted for just over 20 percent of the country’s export income.

After 2004, assets fell in several oil fields and production in 2008 amounted to only 75 percent of 2004’s volume. Extensive exploration has shown that oil is also found off other sections of the Vietnam coast and even further out at sea. New fields have been opened and in 2009 oil production again increased. But the recovery takes place together with foreign companies and the global economic crisis in the late 00s halted investment. Until 2009, most of the crude oil was mainly exported to Japan and Australia. At the same time, Vietnam imported increasingly refined oil and other oil products. The country’s first oil refinery did not start until 2009 and two more are being built.

Extraction of natural gas increased sharply during the 1990s. It takes place partly in the oil fields and partly in two specific natural gas fields, including those in the South China Sea. In pipelines, the natural gas is transferred to power plants at Hô Chi Minh City. All natural gas is used in the country and 85 percent of it is used to produce electricity, mainly for the industry in southern Vietnam. Additional natural gas pools have been found further out at sea, including near the controversial Spratly Islands. High-grade coal is mined in northeastern Vietnam. Half of it is used in the country, while half is exported, mainly to China. The extraction of coal also increased sharply during the 1990s, and a new mine was opened in the Red River delta. Coal is mainly used to produce electricity in northern Vietnam.

The water energy potential is great in northern Vietnam and in the past more than half of the electricity came from small and medium-sized hydropower plants. But production is dependent on a certain amount of rainfall, and interruptions in electricity supply occur. More and more electricity now comes from other sources of power; more than 1/3 from natural gas and 1/6 from coal (2007). However, both small and larger hydropower plants are still being built.

In northern Vietnam, several minerals are extracted to a fairly small extent, such as chromium, tin, bauxite, phosphate and gold, and iron ore.

Industry

Since ancient times, there has been heavy industry in northern Vietnam, focused on using the region’s mineral and energy resources. In the south, there were food and textile industries that processed the raw materials from the agricultural area around the lower Mekong.

The national plans after the reunification in 1975 emphasized a commitment to heavy industry, but gradually the state investment came to increasingly go to manufacturing consumer goods in light industry. The “renovation policy ” Đ車i M車i, which began in the latter part of the 1980s, meant, among other things, increased opportunities for private enterprise and trade. Foreign investment has increasingly come to Vietnam and has resulted in very strong industrial growth, mainly in the production of export goods such as textile and clothing products. During the latter part of the 1990s, foreign-owned electronics industries also became more common.

In the years 2000-08, industrial production increased by close to 12 percent per year, among the highest growth rates in the world. This was mainly a result of further liberalization of the Vietnamese economy, competitive advantages over the industry in many other developing countries and thus increased exports and continued large inflow of foreign capital as well as a growing domestic market. In 2017, industry accounted for 33 percent of GDP and just over 14 percent of employment. State-owned companies remain mainly in the heavy industry, which has its center in the Hanoi region in the north. Subsidies to state-owned enterprises have gradually decreased and many of them have not been able to withstand the new competition but have been closed down or privatized. There are still inefficient and corrosive state corporations, and the state sector continues to shrink. In the south, with its center in the Hô Chi Minh region, small and medium-sized, privately owned businesses dominate. During the 00s, they showed the fastest growth and accounted for an ever larger share of exports. They are also of great importance for employment, both in cities and in rural areas, as they are usually focused on labor-intensive production, especially in the textile and electronics industries. Food, tobacco and plastic products are also manufactured for the domestic market. Out in the villages, it is the small businesses that provide jobs for those who are no longer needed in the increasingly modernized agriculture. Production in companies that are wholly or partly foreign-owned also increases rapidly. In 2007, 44 percent of industrial production and 57 percent of exports came from such companies. as they are usually focused on labor-intensive production, especially in the textile and electronics industries. Food, tobacco and plastic products are also manufactured for the domestic market. Out in the villages, it is the small businesses that provide jobs for those who are no longer needed in the increasingly modernized agriculture. Production in companies that are wholly or partly foreign-owned also increases rapidly. In 2007, 44 percent of industrial production and 57 percent of exports came from such companies.

Foreign trade

In the 1980s, the eastern states dominated Vietnam’s foreign trade; The Soviet Union accounted for 50-65 percent. During the latter part of the 1980s, the country’s economic policy was liberalized. Foreign trade became increasingly important and a global pattern of trade emerged. By the end of the 1990s, Vietnam had become one of the world’s most trade-dependent countries. The total value of imports and exports in 2008 was more than 137 percent of GDP. At that time, more than 90 percent of foreign trade was conducted with the countries around the Pacific (ASEAN) and the EU.

  • COUNTRYAAH: Find major trading partners of Vietnam, including major exports and major imports with latest trade value and market share as well as growth rate.

In 2017, 20 percent of exports went to the United States, 14 percent to China and 8 percent to Japan. The textile and clothing exports and electronic product crude oil were about the same size groups of exports. Other important export goods were crude oil, seafood, simpler machines and means of transport, forest products, coffee, rice and rubber.

The main importing countries in 2017 were China (26 percent of the import value), South Korea (20 percent) and Japan (8 percent). Imports from China had almost quadrupled since 2003. Only a few percent of imports came from the United States. Machinery and transport equipment, fuel and semi-finished products for the manufacturing industry constituted the largest import goods.

Tourism and gastronomy

Tourism is a fast growing industry in Vietnam, abbreviated as VNM by abbreviationfinder.org. In 2016, the country had 10 million visitors, most of whom came from China, South Korea, the United States and Japan.

Vietnam’s landscape is stately with dense rice fields and often dramatic rock and rock formations. The most popular tourist attractions are Hanoi, Hô Chi Minh City and Huễ.

Hanoi is a traditional administrative city with environments from different eras. The city center has old-world charm. The city also houses a number of beautiful temples. Museums of Vietnam’s archeology, arts and crafts can be found in both Hanoi and Hô Chi Minh City. In addition, these cities have both stately monumental architecture (town halls, theaters, courthouses) and ordinary urban buildings from the French era. Huễ is the city of culture, characterized by the heyday of the united Vietnam in the early and mid-19th century; Huễ was the emperor’s residence until 1955. The imperial city, the “Forbidden City,” which was largely destroyed during the Vietnam War, is gradually restored and is now included on UNESCO’s World Heritage list. Also interesting are the Nguyễn dynasty tombs outside the city.Hô Chi Minh City is a commercial city with hectic business and entertainment life. High office buildings are rapidly transforming the city center; the cosmopolitan character is emphasized by the Chinese districts (Cholon).

Note: the capital city of Vietnam is Hanoi with a population of 4,500,000 (UN estimate 2019). Other major cities include Ho Chi Minh City (formerly Saigon) with a population of 8,400,000, Can Tho with a population of 1,500,000, Haiphong with a population of 1,300,000, Da Nang with a population of 1,100,000 (UN estimate 2019).

The conditions for bathing tourism are limited. From Hô Chi Minh City, however, you can get to the French colonial era Cap Saint-Jacques, now Vung Tau, with baths in the South China Sea. Near the Hô Chi Minh city is also the French mountain town of Da Lat, where the government used to move during the hottest months. In the mountainous regions in the west and northwest there are minority people with strange costume and housing conditions.

Anyone who wants to find traces of the Vietnam War and the political independence struggle can visit the remains of Diễn-Biễn-phu, see the guerrillas of underground tunnels and the prisons where American prisoners of war or Vietnamese freedom fighters were “interrogated” or visit museums about the revolution and the armed struggle and Hô Chi Minh City).

Despite the influence of Chinese, Thai and French cuisine, Vietnamese cuisine has managed to retain its originality. Three regional kitchens are usually distinguished: in the north, the wok and the fast-frozen food are more common than in the rest of the country, and the spice is often less strong. The central parts of the country are characterized by chili-packed dishes, while the southern parts have a greater variety of vegetables and fruits, flavors with coconut milk and often exhibit curry dishes that gossip about influences from India. Everyday food is noodles (pho), which can be eaten for breakfast, lunch or dinner, in soups with seafood (eg shrimp, hu tieu), with chicken (pho ga) or shredded beef. Also cha gio or bi cuon(spring rolls) are very common, stuffed with pork, shrimp, crab, mushrooms or vegetables. Often the fish sauce is also nuoc mam. One feature of Vietnamese cuisine is that fresh vegetables are always served to the food, which also always includes a large bowl of rice (com). Dishes with pork are common, nem nuong is grilled, marinated meat with shallots and garlic, gio lua pork mince in banana leaves. For vegetarians, com chay, fried vegetables are recommended.

Vietnam Economics and Business

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