Each country has policies and regulations that ensure that the country is able to sustain its needs. An example of such country is Vietnam. The aim of the paper is to objectively and subjectively explore the economy of Vietnam. The paper discusses the main imports and exports, money system, manufacturing and industries, foreign trade, relation with other partners. This will bring the view of the economic status of the economy. Brief Description of Vietnam Vietnam is a country that is located in the Indochina Peninsula that is in the Southeast Asia.
Laos borders it in the northwest, China in the north, South China Sea to the east and Cambodia to the southwest. The country has a population of 86 million people and was under Chinese control in the ancient times. French colonized the country and many wars and ideological differences as resulted the economy shifting each time (Tran-Nam & Pham 2003, pp. 34). History of Vietnamese Economy Vietnam was a member of Comecon in the period late 1970s to 1990s. This means that the company dependent on the trade with Soviet Union with its allies.
When the Comecon was dissolved, Vietnam resulted in loosing traditional trading partners, the country liberalize the trade, regional capitalization and devalued exchange rate. In the 1990s, exports grew to more than 20% in some years. In 1999, exports were 40% of the GDP and became a member of WTO in 2006. This lead to removal of textile quotas. Brief Description of Vietnam Economy The economy of Vietnam is an economy that is developing. The economy of Vietnam moved around agriculture, which resulted in development of certain commercial port such as the Hoi An and the Pho Hien.
However, the economy has changed from the central command planning to the socialist economy which is commonly termed has a mixed market economy. Thus, the shifting resulted in the rapid growth of the economy and resulted it her economy integrating with the rest of the world towards globalization. Most of the Vietnamese enterprises are SMEs with a raising exportation on agricultural products that has attracted foreign investment. The managerial capabilities of Vietnam is developing at a greater speed with the potential young workforce has projected that the country will have developed by 2020.
Vietnamese Policies, Government and Trade Partners Before the colonization by French, the economy was subsistence, agrarian and village oriented. When French took over the country, they developed the country differently assigning the North to manufacturing and the South for agricultural. This resulted to regional divisions, nevertheless, at this time, the exports were coal from the North and South exported rice, which stimulated internal commerce. Moreover, 1954 saw the South and North split politically resulting in different ideologies.
The South adopted capitalist economy while the North adopted communist economy. The Second Indochina War affected the economy because of the many deaths and the exodus of many intellectuals, skilled workers, professionals and technicians. The government developed various policies and timescale of improving the economy. Five-year economy plans were employed and in 1986, the government introduced reforms that changed the economy to socialist oriented from centralized economy. The government encouraged free-market incentives, foreign investment and private businesses.
It resulted in the economy growing by 7% in the 1990s and poverty was reduced by half. The 1997 Asian Financial Crisis East Asia resulted in the government shunning growth and emphasized on macroeconomic stability. At the same time, the government was controlling state-owned enterprises, banking system and foreign trade, which resulted the economy growing at a rate of 5% in 1999. In 2000, Vietnam and United States government signed a Bilateral Trade Agreement (BTA), which improved the economy. One of the agreements in the BAT was the provision for Normal Trade Relations (NTR) to Vietnamese goods.
This results the country to change into manufacturing and export oriented economy. Moreover, the agreement could allow foreign investment attraction from Asia, Europe and other countries. In 2001, the government approved a ten-year economic plan that developed the private sector. It resulted in the economy growing by 7% and at time, there was global recession. This resulted the country being the second fastest growing economy. Moreover, domestic savings quintupled and the investment grew threefold. In 2003, a quarter of the industrial output was from the private sector.
In the World Economic Forum’s Global rankings (2003-2005), the country performed poorly because of the effectiveness of the government institutions and endemic corruption. Moreover, there are shortcomings from the property rights, labor and financial market and the efficient regulation. The GDP of Vietnam has continuing be improving. The GDP growth in 2000 to 2004 was 7. 1%, 2005 was 8. 4%, which is the second largest in Asia and in 2006 it was 8. 17%. In 2006, Vietnam joined the WTO becoming the 150th member. It took the government 11 tears for preparation and 8 years of negations.
Her entrance to the WTO is a boost to the economy of Vietnam because it ensures the continuation of liberalization and sponsors the expansion of trade. The regulations of WTO will increase competition in the country because the country is required to open her doors. Main Imports and Exports The foreign trade for Vietnam is growing at a faster rate since the relaxation of certain policies in 1990s. The main imports for the country include refined petroleum, machinery and steel. The main exports are crude oil, garments and textiles and footwear. Most of the balance of trade has been positive but in 2004, the balance of trade was negative.
The merchandise trade deficit was US$5 billion while the balance of trade was a negative of US$1. 4 billion. By 2004, the imports were valued at US$31. 5 billion but continue growing rapidly. The following tables shows the important and exportation of Vietnamese government with partners (Tran-Nam & Pham 2003, pp. 45). Vietnam has diverse mineral deposits and mainly in the north. There are deposits of phosphates, anthracite coal, gold, antimony, bauxite, iron ore, tungsten, lime, chromite and zinc. Additionally, there are deposits of oil reserves at the southern coast.
Agriculture is the backbone of the economy of Vietnam because a high number of populations earn income through farming. Agriculture doubles up has a raw material source for the processing industries and a contributor to exportation. Cultivation is common in the lowlands and some portions of the highlands. The common location where agriculture is practiced is Mekong River Delta, southern terrace region and Red River Delta. Rice is grown in the Mekong and Red River deltas, which contribute to four-fifths of the cultivated land. Other agricultural products are corn, cassava, groundnuts, soybeans and sweet potatoes.
Water buffalo is used for plowing since the agriculture is labor intensive. Additionally, there are plantations of fruit trees, banana, sugar cane and coconut that are grown in the southern terrace regions and Mekong River delta. In the central highlands, tea and coffee is grown. Production of rubber and Kapok trees are found in many parts and cultivate betel peppers and areca palms for feeding silkworms. Additionally, there is the exportation of seafood such as crab, shrimp, lobster and squid. These seafood forms a basis of foreign exchange that has resulted in an increase of commercial shrimp farms.
Freshwater fisheries are in the plains of Bassac Rivers and Mekong region. Forestry is also a major economic industry. There is a wide spread of charcoal production and there are factories that produce pulp, furniture and paper. By products of timber e. g. limber, rattan and plywood contributes to the Vietnamese economy. However, this industry is faced by soil degradation and deforestation that threatens its viability. Government and Economy The country was established based on agricultural civilization, which resulted to many Vietnamese dynasties considered agriculture as a major economic issue that moved around physiocracy.
The regulation of land ownership was systematic and a dyke was constructed over the Red River Delta. There were also policies that encouraged the soldiers to be given time to go home and cultivate. There were many agricultural ceremonies and exhibitions in which cattle and water buffalo were not slaughtered. Additionally, art trade and handicraft were important industries in the country. In the 16th century, Vietnamese society began to loose Confucianism. This period saw the introduction of money; however, it spread in negative ways.
In ports such as the Hoi An, the people saw that foreign partners were a threat because of the different cultural lifestyle. This philosophy resulted to the economy stagnating resulting the country being a French colony. Manufacturing in Vietnam In the 1970s, Vietnamese manufacturing was influenced a lot by wars. After reunification, there was evident industrial growth but stopped because of war threats from China and the war 9in Cambodia. Thus, the Vietnamese government redirected the finance, food and other resources to the military, which caused shortages in other sectors.
Moreover, the attack by Chinese in 1979 caused a lot of industrial damage in the North closing mostly industrial facilities including apatite mine and a steel plant. After the war, the national leadership consolidated workshops and factories that were hidden and scattered in the North. In the South, major industries and banks were nationalized to increase the chances of its survival and at the same time be under state control. War time planning mechanism were used to ensure that more outputs are produced and little consideration on long term costs which later decreased the profits and increased financial burdens to the government.
In 1977, the management style changed and reforms were instituted, the reforms formulated production plans, arranged production resources and contained production expenses. Additional reforms were adopted in incentive-structured wages and the streamlining of prices that reflected the costs were put into consideration. Handicrafts and light industries were not able to solve problems that were associated to agriculture as a source of raw material. It resulted in many food-product, grain and consumer goods enterprises ceased or reduced production in 1980.
This resulted in food shortages especially fish and grain, which resulted in the decrease of consumer goods and resulted in lessening workers’ incentives. The industrial sector in 1985 accounted 32% of the national income, which approximated 20% in 1980. The period of 1981-1985, industrial success was unevenly distributed and in most cases, the production levels were those of 1976. The manufacture of paper products and food processing were the highest production sectors. For example, the production sugar increased from 271,000 (1981) tons to 434,000 (1985).
Additionally, the fishing industry improved dramatically within the same period (Smith 2008, pp. 125). By 1985, brick production reached 3. 7 billion bricks, which was a change of regular decline. Glass production reached 41,000 tons exceeding previous records. In early 1981, paper production was 42,000 tons, which increased to 75,000 tons in 1985. The textile industry grew by 8% by 1985 (Alpert 2005, pp. 56). By 2004, industry contributed to 40. 1% to GDP and employed 12. 9% of the workforce. Non-state activities contributed 22. 4% of the industrial production.
In the period of 1994-2004, the GDP of industrial production increased at an annual average of 10. 3%. The same period saw manufacturing GDP increase at an annual average of 11. 2% resulting in employment 10. 2% of the work force. Therefore, the manufacturing industries are cigarettes and tobacco, food processing, chemicals, textiles, and electrical goods. All this manufacturing and industries are located in Ho Chi Minh City. Energy in Vietnam In the early 1980s and late 1970s, the production of fuel increased by 10%. The coal output was 5. 3 million tons in 1980 a drop from 1978 6 million tons.
In 1985, the coal that was produced was 6 million tons. Thus, coal was the main energy that was used in 1980s and accounted to two-thirds of energy. However, some issues that affected coal sector including management in mining sites, shortages of materials and equipments and inadequate consumer and food for the miners (Smith 2008, pp. 127) . The electric power sector had some problems that constituted uncompleted projects and lack of spare parts and oil. Nevertheless, the electric power sector by 8% in 1978-1980. Electricity that was produced increase by 60% in the period of 1976 to 1978 by 3.
8 billion kilowatt hours. In 1985, the electricity production increased to 5. 4 billion Kwhs. The sector developed at a lower speed causing power shortages that made many industries and manufacturing plants to operate 45 to 50% of their capability. Currently, the petroleum was the main source, followed by 25% of coal and biomass. The oil reserve in Vietnam is in the range of 270-500 million tons. In 2004, the production of oil rose to 403,300,000 barrels per day. Anthracite coal in Vietnam is approximated 3. 7 billion tons. In 2003, the coal that was produced was 19 million tons, which is an increase from the 1999, 9.
6 million tons. The potential reserve of natural gas is 1. 3 trillion cubic meters. 2. 26 billion cubic meters of gas were brought in 2002. By 2004, Vietnam government with the collaboration of Russia constructed a nuclear power plant. Crude oil is the leading export for Vietnam totaling 17 million tons by 2002 and in 2004; it accounted to 22% of all export earnings. Most of the exported oil is crude because the government has limited refining capacity. The operational refinery has a capacity of 800,000 barrels per day. The refined petroleum accounted 10. 2% of the total imports in the year 2002.