Main Industry SectorsEconomic OverviewForeign Direct Investment [FDI]FDI Government MeasuresCountry Strong PointsCountry Weak PointsForeign Trade Overview
The declining agricultural sector is dominated by cultivation and plantations (rice, coffee,cashew nuts, corn, pepper, sweet potatoes, peanuts, cotton, rubber and tea), and aquaculture. Vietnam is the sector that employs the biggest part of the population. Industry is the main driver of growth in the Vietnamese economy. The sector is still dominated by large public groups. Vietnams main industries are textile, food industry, furniture industry, plastics and paperindustries. The energy sector is in full-growth since several years ago (coal, hydrocarbons, electricity,cement, steel and naval industry). Vietnam is the "new comer" in the oil industry, today Vietnam is the third biggest SoutheastAsian producer. Vietna,m has also invested into high value-added industries such as cars, electronic andcomputer technologies (software). The services sector is sustained by tourism and telecommunications. These profitable sectors should strongly contribute to the economic health of the country inthe next following years.
After adopting a major reform plan (Doi Moi) in 1986, Vietnam experienced a periodof strong growth.From 2004 to 2007, the annual GDP growth surpassed 8%, then, it slowed down to 3.5%in 2008.Vietnamese growth is sustained by international trade and foreign investments, withexports ensuring more than two-thirds of the GDP.Due to the international economic crisis, the country entered into recession in 2009 andits growth was almost zero in 2010.The government launched reforms for all the key sectors of the economy and anticipatespartial privatization of public companies; however, their implementation remainsgradual. A tax reform has also been undertaken in order to compensate for the fall incustoms revenues, as a consequence of its entry into the WTO and to make the countrymore attractive to investors.
In order to deal with the global financial crisis, the government has established severalrecovery plans aimed at improving the business climate and therefore promotingproduction and exports, stimulating consumption and investments, increasing socialsecurity and reducing poverty, introducing monetary policies and effective taxation.The reforms have succeeded in the improvement of the standard of living of theinhabitants.The GDP per capita went from USD 220 in 1994 to more than USD 1,000 today.The percentage of the population living on less than a dollar per day has declined in asignificant way and it is now lower than China, India or the Philippines.The urban unemployment rate has risen in recent years and under-employment,estimated at 30% remains constant.
FDI inflow has increased considerably since the country authorized foreign investments in 1988, and ithas reached record levels in 2008 with USD 1.9 billion. The social-political stability of the country is one of its main assets. FDI was strongly affected by the global economic crisis, showing a drop of more than 80% in 2009. Vietnam was directed towards light industry, but FDI is now rapidly growing in heavy industry, realestate and tourism. Despite the crisis, investment planners in Vietnam estimate a significant growth in the FDI capital. According to a survey carried out by the Asian Business Council, Vietnam ranks in third position amongstAsian nations, in terms of investment attractiveness for the 2009-2010 period, just behind China and India. Some measures remain to be taken for the improvement of Vietnams competitiveness in order to attractmore FDI, namely the improvement of its legal procedures, the acceleration of the process of settingthe legislation for investments and companies, the intensification of the decentralization process,the creation of an incentive policy for the development of supporting industries and thesimplification of economic partnerships.
The promotion of foreign investments is part of the countrys development strategy. Vietnam government has never stopped perfecting its judicial system, creating more incentivesand taxation policies for foreign investors and trying to respect its commitments with regard tothe international community. "Business forums" are frequently organized between theVietnamese government and the private sector, these being opportunities for foreign investors toestablish fruitful dialogue and to assert their interests. Vietnamese efforts to maintain socio-political stability and set up and professionalizeinvestment promotion activities also play a crucial role in increasing the FDI flow.
Vietnam,s strong points are: Positive economic prospects in terms of growth, despite the global crisis; A young, cheap, rapidly growing and more and more technologically qualified manpower; A certain social-political stability; A government committed to liberalizing the economy and to introducing reforms based on the free market
The countrys weak points are: Weak investment and financial freedom; The lack of guarantees for property rights; A high level of corruption (in the legal system, as well as for civil service).
Vietnam is one of the Asian economies most open to international trade, which represents morethan 100% of the GDP, more than twice the Chinese rate and more than 4 times the Indian rate. Vietnam has demonstrated its strong commitment to trade liberalization in these recent years. Vietnam has joined the WTO and signed Free Trade Agreements (FTAs) with ASEAN countries andthe USA. Vietnam also has a cooperation agreement with the EU. Vietnamese trade is characterized by a strong geographic inequality, the country shows a tradesurplus with western countries and a growing deficit with its Asian neighbors. Vietnam is currently classified as the third largest rice exporter in the world. The other exports mainly constitute textiles, clothing and footwear products and crude oil, whereasimports are mainly made up of tool machinery, refined oil and steel. The main export customers of Vietnam are the USA, Japan, the EU, Australia and China. For imports, the countrys main partners are China, Singapore, Japan, South Korea and Thailand. The global economic crisis affected Vietnams foreign trade. Exports dropped by 14% in relation to2009, and imports by 28%, the trade deficit rose to USD 500 million.
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