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Rising inflation

High inflation is the major internal obstacle that constrains economic growth of Vietnam. Inflation should be kept in check and the budget deficit must be reduced to an acceptable level. Furthermore, in the future years, it will be needed to closely follow changes in production and prices in order not to over-stimulate the economy by means of an easing of financial policies, which might stimulate inflation. 3. Human resource policy With purpose to encourage foreign direct investment in the long run, the Vietnamese government must develop and implement a well planned human resource program.

Professional workers not only use capital in a more effective manner, but also attract more capital inflows from foreign countries. Such human resource policy needs more resources to be given to the education sector. This may decrease the growth rate of real GDP in the short term, but will bring good results in the long term. 4. Weak financial regulation In the wave of globalization Vietnam seems to have entered a period of high economic growth. But state financial regulation still needs to be rationalized.

Rural access to credit still needs to be unblocked in the future. Further progress in establishing a financial system that supports the free market structure and stimulates both domestic and foreign investors is still needed. 5. Rich and poor gap The rural-urban income inequality that is also called as the rich-poor gap should be taken into the consideration by the government. The income gap between the rich and the poor is increasing in size. It results in the appearance of class discriminations, materialism, graft, corruption, and many crimes.

This also may bring political instability and disturbance of public order in the near future. As indicated earlier, the regional income inequality together with the urbanization that happened over the last two decades have considerably contributed to create serious problems in Vietnam that should be resolved. The urban-rural gap in per capita income is constantly made wider. This, in turn, enhances the movement of the Vietnamese toward urban regions. The rich-poor gap between the urban and rural region is evident.

This, therefore, calls for a careful policy re-examination with respect to several issues. First, the most momentous concern is the country security issue. The poorest Vietnamese region is located right at the border with China. This region is the homeland of many ethnic minorities all inhabiting rural regions. These people are the poorest in the income scale of Vietnam. They do not always recognize themselves as Vietnamese (Benhabib and Rustichini 46).

Second, the problem of social disturbance may gain an explosive size as indicated in Kolko (1997). When the income gap comes to a certain critical level, economic controversies and social quarrels (that can occur between farmers themselves and between rural and urban residents) could become unavoidable. Finally, rural residents can go from their region to urban areas. This would create new urban problems in regard of housing, unemployment and all kinds of poverty-related problems such as crimes, prostitution, falsity, and continuing similarly.

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