Vietnam is a country in transition, steadily dismantling
a monolithic centralised ‘command’ economy entirely made
up of state monopolies protected by subsidies and tariff
industries have already been exposed to the chill wind of
competition. For example, Vinacoal, the state company exploiting
the country’s vast coal reserves, now competes successfully
in the open market following the removal of subsidies. After
a painful period of restructuring, involving a massive ‘shake-out’
of labour, exports are now buoyant.
The government has implemented a programme of ‘equitisation’,
a form of privatisation akin to a management ‘buy-out’, and
is encouraging other state companies to seek foreign investment
small stock market has been established in Ho Chi Minh City
trading shares within a limited band of price variation.
in breaking up the state monopolies is slow for a number of
reasons, notably the reluctance of managers to lose the security
of state control, the massive investment needed to enable
aging industries to compete and an understandable government
reluctance to exacerbate an already high rate of unemployment.
Growth has been high and reasonably steady over the last decade,
and inflation has been brought under control. The Vietnamese
Dong is a closed currency, pegged to the US dollar. The government
has strongly resisted calls to float the Dong, but the State
Bank is slowly implementing measures to free up the banking
system in preparation for monetary reform.
Accurate economic date is hard to obtain. The official figure
of income per head, currently estimated at around $300 US,
is almost certainly understated due to the extensive ‘moonlighting’,
and a thriving black economy. Smuggling on a massive scale,
mostly between Vietnam and China, distorts import and export
figures. Informed guesswork suggests that between a quarter
and a third of Vietnamese ‘imports’ may be entering the country
illegally across its long, porous border with its mighty neighbour.
The border police are working hard, and have had some notable
successes, but the length and terrain of the border makes
effective control very difficult.
Vietnam continues to rely heavily upon agriculture. Most farming
is at subsistence level and labour intensive – although 70%
of the population still works in agriculture, the sector contributed
only 25% of GDP in 1999, down from 40% in 1991. Industrial
growth has averaged 13% over the same period.
GDP overall is rising rapidly, from $23bn US in 1999 to $32bn
US in 2001, and during the same period GDP per capita rose
from $300 US to $403 US, a 34% increase. At the same time,
inflation dropped from 4.3% to 2.4%.
However, although rapid growth is undeniably raising standards
of living at all levels, there is mounting concern about wealth
distribution. The income of the wealthiest sector of the population
is now eight times greater than that of the poorest, and the
gap is widening. Furthermore, the speed of development is
outpacing regulatory measures and procedures, opening the
way for widespread corruption and fraud.
These two issues are probably the greatest challenge to the
continuing success of ‘doi moi’. The government is well aware
of the scale of the problem, and is working hard to overhaul
the personal and corporate tax structure and make revenue
collection more efficient.
complexity of the procedures has made large-scale VAT fraud
difficult to detect – they are being simplified. Each individual
civil servant, local authority official, manager of a state
company and Party member is now obliged to make an annual
declaration of his or her income and assets.
to the future
Vietnam is fully committed to ‘doi moi’ and the development
of a socialist system. We have recently become members of
the Asian free trade group, and are applying for to join the
WTO. We recognise that our transition will not be easy: tariff
barriers begin to drop in 2004, and some of our less efficient
industries will suffer badly. Nevertheless, we are confident
that we can overcome the challenges that face us now and in
the next few years.