Vietnam - International University of Japan · Vietnam Basic data Land area 330,363 sq km Population 64.4 million (1989 census); 76.7 million (1997 estimate) Main towns Population

COUNTRY PROFILE

VietnamOur quarterly Country Report on Vietnam analyses currenttrends. This annual Country Profile provides backgroundpolitical and economic information.

1997-98The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK

ISSN 1356-4145

December 15th 1997 Contents

2 Basic data

3 Political background3 Historical background5 Constitution and institutions6 Political forces9 International relations and defence

10 The economy10 Economic structure12 Economic policy17 Economic performance18 Regional trends

19 Resources19 Population21 Education22 Health23 Natural resources and the environment

24 Economic infrastructure24 Transport and communications27 Energy provision33 Financial services35 Other services

36 Production36 Industry38 Mining and semi-processing39 Agriculture, forestry and fishing44 Construction

45 The external sector45 Merchandise trade47 Invisibles and the current account48 Capital flows and foreign debt49 Foreign reserves and the exchange rate

51 Appendices51 Sources of information53 Reference tables

1

EIU Country Profile 1997-98 © The Economist Intelligence Unit Limited 1997

Vietnam

Basic data

Land area 330,363 sq km

Population 64.4 million (1989 census); 76.7 million (1997 estimate)

Main towns Population of province in ’000 (1994)

Ho Chi Minh City 4,392Hanoi 2,194Haiphong 1,615

Climate Tropical monsoon; north cool and damp in winter (November-April), hot andrainy in summer; south more equable; centre most subject to typhoons. Therains are highly unpredictable

Weather in Hanoi(altitude 216 metres)

Hottest month, June, 26-33°C; coldest month, January, 13-20°C; wettestmonth, August, 343 mm average rainfall; driest month, January, 18 mm aver-age rainfall

Weather in Ho Chi MinhCity (altitude 9 metres)

Hottest month, April, 24-35°C; coldest month, January, 21-32°C; wettestmonth, September, 335 mm average rainfall; driest month, February, 3 mmaverage rainfall

Languages Vietnamese; English (increasingly favoured as a second language); some Frenchand Russian

Weights and measures Metric system. Local land measurement 1 mau=3,600 sq metres (north);5,000 sq metres (centre)

Currency Dong. Average exchange rate in 1996: D11,050:$1; mid-December 1997:D12,293:$1

Time 7 hours ahead of GMT

Public holidays January 1st (New Year’s Day), February (Tet, Lunar New Year), April 7th(Emperor-Founder Hung Vuong’s Day), April 30th (Liberation of Saigon), May1st (Labour Day), September 2nd-3rd (National Day)

2 Vietnam: Basic data


Political background

Historical background

Vietnam’s identity was forged out of resistance to its giant northern neighbour,China, and the gradual expansion southwards from its original heartland inthe Red River Delta and the north-eastern coastal plain. For over 1,000 years, toAD 939, it was governed as a Chinese province. Thereafter Vietnam remainedclosely linked with China, both politically and militarily, as a tributary statewhich frequently had to resist Chinese invasions. It also absorbed Chinesecultural influences, including the Confucian model of government. The expan-sion southwards, driven by population pressure, eventually brought Vietnaminto conflict with the Khmer empire of present-day Cambodia and withThailand. Not until the late 18th century under the Nguyen dynasty did Viet-nam reach its present-day southern limit on the Gulf of Thailand.

The Nguyen were, however, unable to resist the growing challenge of Frenchcolonialism, which by 1885 had brought all of Vietnam under its rule, formingprotectorates in Tonkin and Annam in the north and centre and a directlyadministered colony in Cochin China in the south. The colonial regime per-mitted only limited expression to constitutionalist Vietnamese opposition andharshly suppressed more radical resistance. The imposition of the colonialadministration helped to destroy the traditional equilibrium of village life,undermined the authority of the scholar-gentry class and blocked the growthof an indigenous bourgeoisie. In these circumstances the only effective chal-lenge to French colonial rule was communist-led.

The second world war transformed the Communist Party’s prospects. After aperiod of cohabitation with Vichy France, the Japanese swept aside the Frenchin March 1945 and installed Emperor Bao Dai as leader of a nominally inde-pendent Vietnam. The communist united front organisation, the Vietminh,quickly filled the vacuum left by the surrender of Japan in August 1945, and onSeptember 2nd, in Hanoi, Ho Chi Minh proclaimed the independence of theProvisional Democratic Republic of Vietnam.

French withdrawal andthe division of the country

The French refusal to give up its colony led to a protracted war, which soonbecame another engagement in the cold war. In 1954, despite the Vietminh’shumiliating military defeat of the French at Dien Bien Phu on the eve of theconference, talks held in Geneva under great power auspices divided thecountry at the 17th parallel but failed to achieve agreement on a politicalsolution. Soon after the Geneva accords the US-backed Catholic northerner,Ngo Dinh Diem, took power in the south. Diem’s intransigence dampenedhopes for a peaceful reunification. In 1959 Hanoi approved a more activestrategy in the south, and in the following year the National Front for theLiberation of South Vietnam (NLF) was formed to oppose Diem.

The US is drawn intothe conflict

After the assassination of Diem in November 1963 the conflict turned increas-ingly into an American war. By early 1968 there were 500,000 US troops inVietnam. In January 1968 the war reached a turning point when communist

Vietnam: Historical background 3


forces launched the Tet offensive. In the wake of the offensive, the US president,Lyndon Johnson, agreed to hold peace talks in Paris. In January 1973 the partiesfinally agreed on the terms for the withdrawal of US troops. Two years later theNorth Vietnamese launched a massive offensive in the south in the face ofwhich the Republic of Vietnam’s forces quickly crumpled. On April 30th 1975the communists entered Saigon and Vietnam’s 30-year war of independence wasover. The victorious north rapidly undertook the formal reunification of thecountry. The bloodbath that successive US administrations had predicted wouldfollow the fall of the south did not materialise, but the new authorities submit-ted tens of thousands of officials and soldiers of the former South Vietnamesegovernment to “re-education” and many urban southerners were sent to workin remote New Economic Zones where conditions were often harsh.

Vietnam’s isolation bringsit into the Soviet embrace

At the same time, highly ambitious plans for the “socialist transformation” ofthe south were launched. The high hopes generated by the victory in the southwere short-lived. Instead of being accepted into the international communityand receiving aid for the reconstruction of its shattered economy, Vietnamfound itself treated with suspicion as a potentially disruptive force with widerhegemonic designs in South-east Asia. These suspicions were apparently con-firmed by the Vietnamese invasion of Cambodia in late 1978 and the topplingof the Khmer Rouge.

The invasion led to a break with China, with which relations had already beensoured by Hanoi’s treatment of its ethnic Chinese community. The latter hadborne the brunt of the government campaign against the comprador bourgeoisieand many Chinese had joined the exodus of “boat people” from the country.In early 1979 Beijing resolved to “teach Hanoi a lesson” by launching anincursion over Vietnam’s northern border. The countries of the Association ofSouth-East Asian Nations (ASEAN), Japan and western Europe backed a US-ledtightening of the economic embargo imposed on the north during the war bysupporting Washington’s veto of multilateral assistance to Vietnam. Thesemoves forced Vietnam to rely on the Soviet Union and its Council for MutualEconomic Assistance (CMEA) allies for economic and military assistance, andintensified the economic crisis created by the adoption of a central planningmodel ill-adapted to the country’s circumstances (see The economy).

The leadership’s cohesionsurvives the post-war

challenges

The direction of economic policy and Vietnam’s foreign relations dominatedintra-party debate well into the 1980s. Occasionally disputes in these areas ledto the ousting of prominent figures from the Politburo. But, for the most part,consensus was maintained throughout this testing period. Even the landmarksixth party congress in 1986, at which the party made its historic commitmentto economic “renovation” (doi moi), did not break the cohesion of the leader-ship. The economic reforms had by the late 1980s become part of the newconsensus, but even after communist regimes came under threat in the SovietUnion and eastern Europe, there was no prospect of matching political liberal-isation. Reflecting this mix, the Politburo that emerged from the eighth partycongress in June 1996, like its predecessor, contained not only several eco-nomic reformers but gave strong representation to the security apparatus. In sofar as political reform is on the agenda, it continues to be based on the premisethat the party will remain the leading political force, although in 1997 there

4 Vietnam: Historical background


were calls from two former leaders for more “democracy at the grass-rootslevel” to serve as a counterweight to increasing corruption and bureaucracy.

Important recent events

July 1995: Diplomatic relations are normalised with the US, and Vietnam becomes amember of the Association of South-East Asian Nations (ASEAN).June 1996: Seeking a balance between economic reformers and the conservativebloc, the eighth party congress expresses support for continued economic reformwhile opposing political liberalisation.January 1997: The number of provinces is increased from 53 to 61, more nearlyapproximating the pre-independence arrangement. Six businessmen are sentencesto death for corruption.May 1997: Serious protests against local corruption rock the northern province ofThai Binh.July 1997: A new 450-member National Assembly is elected.September 1997: The National Assembly chooses Phan Van Khai as prime ministerand Tran Duc Luong as president, elects five deputy prime ministers to the newcabinet, and dismisses the governor of the State Bank of Vietnam, the central bank.

Constitution and institutions

The 1992 constitution Vietnam has had four constitutions, adopted in 1946, 1959, 1980 and 1992,each regarded as appropriate to its time. The 1992 constitution is geared to theera of renovation and the “open door”. The revolutionary rhetoric of the 1980constitution was dropped. The party is to operate within the framework of thelaw and the constitution. No longer responsible for “ensuring the building ofsocialism”, the government is charged with specific management functionsunder a prime minister with defined powers. The National Assembly, whichuntil the late 1980s acted as little more than a rubber stamp, has enhancedpowers of legislation and oversight. Breaking with the collective presidency ofthe 1980 constitution, the state presidency is once again vested in an individ-ual, as in the constitutions of 1946 and 1959.

The 1992 constitution also gave retroactive underpinning to the economicreform programme. A centrally run economy gave way to a “multisector eco-nomy in accordance with the market, based on state management and socialistorientations”. Land would be assigned to individuals on long leases. Theautonomy of state enterprises was guaranteed. The “private capitalist eco-nomy” was given an explicit role. Foreign investors were granted ownershiprights and given guarantees against nationalisation.

The role of the NationalAssembly

The constitution enhanced the powers of the National Assembly as “the high-est organ of state power”. Elections for a new National Assembly in July 1997were only slightly less tightly controlled than in the past, however. About 20%of the deputies are not party members, up from 8% in the previous election in1992; three genuinely independent candidates were also elected. Only 117 ofthe 395 outgoing deputies were elected to the new National Assembly, and thenew members are younger and better educated than their predecessors.

Vietnam: Constitution and institutions 5


The National Assembly devoted its September session to changes in the leader-ship. Two former deputy prime ministers, Tran Duc Luong and the economicreformer Phan Van Khai, were elected to become the country’s president andprime minister respectively. Along with the Communist Party general-secretary, Do Muoi, these men make up the country’s leadership troika.

In addition to approving a new cabinet, with five deputy prime ministers, theNational Assembly voted out the governor of the central bank, the State Bankof Vietnam. In recent years the National Assembly has become increasinglyvocal and assertive, calling on ministers to account for their performance, andsignificantly amending proposed legislation.

Political forces

The Communist Partyremains the dominant

force

Vietnam continues to be organised politically along orthodox communistlines. The Communist Party of Vietnam remains the dominant political forcein the country despite the modest downgrading of its role in the 1992 constit-ution. Other important forces—the government, the army and the bureauc-racy—are all subordinate to it. Government policy, for example, is still set bythe Politburo. The Politburo (which currently has 18 members) is the party’sexecutive, elected by the (currently 170-member) Central Committee at nat-ional party congresses which, since reunification in 1976, have been held moreor less at five-year intervals. In 1996 the party created a five-member PolitburoStanding Committee, whose members include the three top leaders, as a way ofmaintaining the influence of the party over day-to-day decisions of govern-ment. The party secretariat issues directives to party members and also plays astrong role in directing government policy.

The entrenchment of the party in state institutions and mass organisations(such as the Confederation of Trade Unions, the Women’s Union and theYouth Union), which are grouped under the umbrella of the Vietnam Father-land Front, is intended to ensure their subordination to the party line. Theparty’s membership is thought to be around 2.4m, and may be declining as aproportion of the population as the party faces increasing difficulty in recruit-ing new members. The party has had problems recruiting women (29% of newrecruits) and members from the private sector; in some provinces the localparty does not allow members to own or manage private enterprises.

Historically the Communist Party has been notable for its cohesion and thecontinuity of its leadership. According to one calculation, no more than 30people served on the Politburo between the party’s first congress in 1935 andthe seventh in 1991. Only rarely has the party been affected by internal fac-tionalism and has, except for a short period during the late 1950s, avoided theexcesses commonly committed by communist parties in power.

Over the past few years the consensus within the party has begun to erode. Aconservative “party bloc” is wary of the negative effects of economic growth,including so-called “social evils” such as corruption, drug-trafficking and prosti-tution, and takes a hard line on security issues. The more reformist “governmentbloc” argues for a clear separation between the government and the party, andfor greater emphasis on the role of the private sector. In the run-up to the eighth

6 Vietnam: Political forces


party congress in 1996 a Politburo member, Nguyen Ha Phan, who was also thehead of the Central Committee’s Economic Commission, was expelled appar-ently for trying to stack the selection of delegates to the congress in favour ofconservative candidates. The two groups have not evolved into formal factions,and they have much common ground such as a shared suspicion of politicalpluralism, but the differences are becoming increasingly wide and clear.

Although until his death in 1969 Ho Chi Minh was the pre-eminent figure inthe party, his style was to shun the personality cult and to foster collectiveleadership. Until the 1980s a core group, most of whom had been associates ofHo Chi Minh since the 1920s, occupied key posts in the party or government.The sixth party congress in December 1986 all but completed the protractedprocess of handing over power from that generation to the next. At both theseventh party congress in 1991 and the eighth in 1996, half of the memberselected to the Politburo were newcomers. The Central Committee that emergedfrom the eighth party congress is larger, younger and better-educated than itspredecessors, and is believed to be firmly behind continued economic reform.

Party and governmentlinks are eroding

There remains extensive overlap between party and government. Almost all ofthe 21 ministers are members of the Central Committee. About 80% of thedeputies in the National Assembly are in the party. Party committees exist atevery level of the bureaucracy, and efforts are being made to establish partycells in private enterprises. Managers or deputy managers often double as partysecretaries in state enterprises, which helps to explain the continued resistanceto thoroughgoing reform of state enterprises.

Nonetheless economic reform is eroding the grip of the party, albeit slowly. Ina “secret” memo written in August 1995, the then prime minister, Vo Van Kiet,argued for the party to get out of the day-to-day operation of the governmentand for an end to “business by state-sponsored civil organisations, the party orthe armed forces". Party membership is no longer indispensable for advance-ment, partly as a result of the increasingly rapid growth of the private sectorand the much- diminished role of agricultural co-operatives.

Finding a new rationalefor the army

The People’s Army of Vietnam ranks in influence only behind the party andthe government. Its roots in society are deep. The military has confronted (andhumiliated) three of the world’s most powerful armies in the last four decades(the French, the American and the Chinese). To fight these wars required thebroad mobilisation of society. Aside from the armed forces proper, whosestrength was put at 492,000 in mid-1997 by the International Institute forStrategic Studies, there is a reserve of between 3m and 4m and local paramili-tary forces numbering 4m-5m.

The army was created by the party in 1944 as an Armed Propaganda Team, andarmed struggle has always been regarded as having a political dimension. More-over there has been an overlap between the civilian and military leaderships.A number of the top civilian leaders played important roles in strategic planningduring the wars against the French and the Americans. Military men have heldhigh party and government posts. Around one-tenth of the members of theCentral Committee come from the military, and one-third of the 18 members of

Vietnam: Political forces 7


the Politburo are drawn from the upper ranks of the military or internal securityforces, although none of the leadership troika is a military man.

After Vietnam’s withdrawal from Cambodia in 1989 about 500,000 troops weredemobilised and since then there have been sharp cuts in the military budget.Any reduction in the influence of the armed forces has been tempered by

Main political figures

Do Muoi (80): Born in Haiphong and active in the party for60 years, he was put in charge of “socialist transformation”in the north in the 1950s and in the south after liberation in1975. Regarded as the conservatives’ choice when he waselected prime minister in 1988, he presided over the firstflowering of the private sector under communist rule. Sincebecoming party general secretary in 1991, he has come tobe seen as a “Confucian referee” reconciling different partyfactions. He has travelled widely in Asia, has a high publicprofile and is considered incorruptible. He did not stand forre-election to the National Assembly in 1997, and isexpected to retire in 1998.

Phan Van Khai (63): A southerner and protégé of theoutgoing prime minister, Vo Van Kiet, Mr Khai was a deputyprime minister in the previous cabinet with responsibility foreconomic affairs. Earlier he had taken over the Ho Chi MinhCity party machine from Mr Kiet, and had entered centralgovernment through the State Planning Committee. He hastravelled widely in the West and is regarded as a highlycapable exponent of economic reform.

Tran Duc Luong (60): An unexpected choice as president,Mr Luong takes over from Le Duc Anh, who had suffered astroke in 1996 and whose continued poor health limited hisability to continue to play an active leadership role. PresidentLuong was born in the north-central province of QuangNgai, trained in the Soviet Union as a geologist, and hadheld the post of deputy prime minister with responsibility forindustry, transport and foreign economic relations since1987. He has travelled widely and is often referred to as “Mr.Clean”. As a compromise candidate lacking a strongmandate, he may be unable to exert the same authority asMr Anh, who had transformed the previously ceremonialpresidency into a post carrying real power.

Le Kha Phieu (65): The fifth-ranking member of thePolitburo, the northerner, Lieutenant-General Le Kha Phieu,is one of the leading candidates to take over as generalsecretary of the Communist Party when Do Muoi retires. Heis effectively chief political commissar in the armed forces.However his conservatism and abrasive style have created abacklash and may have spoiled his chances of furtherpromotion.

Nguyen Van An (58): A member of the Politburo, Mr Anheads the influential Organisation Department of the partyCentral Committee. He is considered by some as the leadingcandidate to replace Do Muoi as general secretary of the party.

Nong Duc Manh (56): Speaker of the National Assemblyand an ethnic Tay from the northern mountains, Mr Manh isseen as a possible future party general secretary when thenext round of changes are made five years from now.

Truong Tan Sang (48): Elected party secretary of Ho ChiMinh City in May 1996 and a member of the Politburo inJuly 1996, after serving as chairman of the city’s People’sCommittee for three years in which post he gained areputation as an economic reformer.

Nguyen Tan Dung (48): With his election in September1997 as first deputy prime minister, Mr Dung continued hisrapid rise up the party and government hierarchies. He is incharge of “general economic and internal affairs” in the newcabinet. A Politburo member, he is also a member of thefive-person Politburo Standing Committee. From Ca Mauprovince at the southern tip of Vietnam, he has served asdeputy minister of the interior and he heads the party’sEconomic Department. His public pronouncements oneconomic matters tend to be conservative, and he may havebeen promoted to act as a counterweight to the reformistprime minister, Phan Van Khai.

Nguyen Manh Cam: Highly respected as foreign minister,Mr Cam is the second deputy prime minister. The promotionis in part a consolation prize, as he had been a leadingcandidate for the position of president, but it also recognisesthe new government’s emphasis on the foreign dimension ofeconomic policy. He is a former ambassador to the SovietUnion, and as foreign minister he oversaw the normalisationof relations with the US as well as Vietnam’s entry into theAssociation of South-East Asian Nations (ASEAN).

Nguyen Cong Tan (62): A former minister of agriculture,he was elevated to the position of third deputy primeminister in September 1997. His promotion suggests thatthe new government will put more emphasis on ruraldevelopment.

8 Vietnam: Political forces


continued suspicion of China, and specifically its claims to the Paracel andSpratly islands in the South China Sea (see International relations and de-fence), as well as by the armed forces’ enhanced internal security role. Thecurrent military leadership is a conservative force in party debates, cautioningabout the potentially harmful consequences of economic reform, resisting at-tempts to “depoliticise” the army under the guise of professionalisation, andwarning of “hostile forces” whose aim is to overthrow socialism through“peaceful evolution". These warnings refer mainly to the United States. Mean-while, army businesses generate turnover amounting to about 2% of GDP, andthe military is likely to resist any moves that would encourage competitionagainst these enterprises, or privatise them.

The various mass organisations grouped under the Vietnam Fatherland Frontare intended to articulate their members’ views (as well as mobilise support forthe party’s goals). They have not always succeeded in encompassing all inter-ests. The United Buddhist Church, which also opposed the governments ofSouth Vietnam, has resisted incorporation into the officially sanctioned Viet-nam Buddhist Church, and the Vatican has urged Catholics not to join theCommittee for Solidarity of Vietnamese Catholics.

Since 1989 both farmers and students have protested their specific grievances.Most seriously, there was a spate of protests in northern Thai Binh province in1997, where corrupt and incompetent local officials had borrowed money fromthe public to upgrade infrastructure and then found themselves unable toservice the loans. Protests over inadequate compensation for land expropiatedby the state broke out near Hanoi in late 1996 and near Ho Chi Minh City inlate 1997.

International relations and defence

International isolationis over

Since late 1991 Vietnam has moved out of the international isolation thatfollowed its invasion of Cambodia at the end of 1978. The tilt towards theSoviet Union that had so worried Beijing turned to utter dependence, markedby Hanoi’s signature of a Treaty of Friendship and Co-operation with Moscowand its joining CMEA (Comecon). As the economic reform programme gotunder way and socialism began to fall apart in eastern Europe, Vietnam beganto seek to open its doors to the outside world.

With the final withdrawal of Vietnamese troops from Cambodia in September1989, the process of normalising economic ties with the ASEAN group and thecountries of western Europe, North-east Asia (Taiwan, Hong Kong and SouthKorea) and Australia and New Zealand began to gather pace. But it was notuntil the Paris agreement on Cambodia of October 1991 that the log-jam trulybroke. Within months, diplomatic and economic relations with most of thesecountries, as well as with China, were fully normalised. In deference to Wash-ington, Japan continued to keep a low investment and aid profile.

The United States did not lift its economic embargo until February 1994 andfull diplomatic normalisation was not achieved until June 1995; ambassadorswere exchanged in April 1997. Full trade and investment benefits, includingaccess to most favoured nation (MFN) status, are still under negotiation and are

Vietnam: International relations and defence 9


unlikely to be granted until 1998 at the earliest. Vietnam’s application formembership of the Asia-Pacific Economic Co-operation (APEC) forum was oneof only two accepted (in principle) at the APEC summit in November 1996, andis another sign that the country has entered the international main stream.

Relations with China Despite the ideological affinities between Beijing and Hanoi, historical ani-mosities simmer close to the surface, boiling over with China’s border incur-sion in 1979. In the wake of Vietnam’s climb-down on Cambodia, China beganto assert its claims to the Spratly and Paracel islands in the South China Sea.There were also reports of tension along the northern land border.

Since 1995 relations between the two countries have improved greatly if un-evenly. Vietnam’s position was strengthened by its admission to ASEAN in July1995, a development that would have been unthinkable four years earlier.ASEAN membership was useful in March 1997 when a Chinese oil rig waspulled into disputed water off the coast of central Vietnam. Vietnam protestedloudly and in April the rig was withdrawn.

A technical working group meets regularly to tackle the problem of definingboundaries along the northern border and in the Gulf of Tonkin, and China hastoned down the stridency of its claims to the South China Sea. The two rail linksbetween the countries have been reopened and are carrying increasing amountsof freight traffic. The party general secretary, Do Muoi, visited Beijing in Novem-ber 1995 and again in July 1997. The Chinese prime minister, Li Peng, headedthe Chinese delegation to the eighth party congress in June 1996, the highest-ranking Chinese leader to visit Vietnam in a generation. In October 1997 Chinaextended $290m in project aid, more than half of it on concessional terms.

The economy

Economic structure

Main economic indicators, 1996

Real GDP growth (%) 9.3

Consumer price inflation (%) 5.6

Current-account balance ($ m) –2,482

Population (m) 75.4Source: EIU.

Agriculture’s share of GDPis falling

Vietnam remains an agrarian society, with 70% of the labour force working inagriculture and forestry. Although the sector grew at a robust annual averagerate of 5.2% between 1991 and 1996, its expansion has been slower than thatof industry and services. Thus in current-price terms the share of agriculture inGDP fell, from 41% in 1991 to 27% by 1996, making its share smaller thanthose of industry and construction (31%) and services (42%). Within agricul-ture there has been rapid growth in industrial crops, which accounted for 20%of crop output in 1996. Among crops whose growth has been especially notice-able in this subsector have been coffee, rubber and sugar-cane.

10 Vietnam: Economic structure


Industry’s structure hasyet to be radically

transformed

Fast industrial growth, averaging almost 14% annually between 1991 and1996, was a major contributor to the 8.9% average yearly increase in GDPduring the same period. All industrial subsectors have shared in this expansion,so changes in the structure of industry have come slowly. The production ofsteel products, garments, footwear and the printing sector have grown partic-ularly rapidly, by 29% annually between 1990 and 1995, although togetherthese items still account for just 7% of industrial output. The oil and gasindustry accounted for 16% of industrial activity in 1996, up from 11% in1993, but future growth is expected to be relatively slow.

Until 1993 the state-owned sector was the fastest-growing part of industry, thenaccounting for 72% of industrial output. Within the state-owned sector there arewide disparities, with dynamic joint-venture firms existing alongside decayingenterprises. Despite its smaller contribution to GDP the non-state manufac-turing sector employs four times as many workers as the state sector. The fastestgrowth is in foreign-invested industrial enterprises, whose output grew by20.1% year on year during the first ten months of 1997, compared with 10.6%for state-owned industrial firms and 10.1% for the private industrial sector.

Services growth After outstripping the other two sectors in the late 1980s, mainly because of thederegulation of domestic and foreign trade, the services sector has been ex-panding at about the same pace as overall GDP since 1990. In recent years thefastest-growing subsectors have been banking, finance and insurance (whichstarted from a low base and in 1996 accounted for a little over 5% of the sector’stotal output), and housing. The hotel and tourism sector expanded rapidlyuntil 1996, but is now growing slowly as a result of the stagnation in thenumber of tourists visiting Vietnam.

Investment’s share of GDPhas increased

Investment’s share of GDP has risen rapidly, from 11% in 1990 to 28% in 1996.Although the precise numbers need to be treated with caution, they do reflecta real trend. The rise in investment has been financed by increased governmentsavings (6% of GDP), more foreign loans, aid and direct investment (9% ofGDP), and a compression of domestic consumption which has permitted dom-estic savings to rise to 16% of GDP. There is some evidence that the domesticsavings rate has reached a plateau (See Reference table 4), although it is high fora country as poor as Vietnam. The robust investment rate augurs well forcontinued economic growth in the range of 8-10% annually.

It is remarkable that even during the most difficult years of economic trans-ition, 1990-92, as aid from the Eastern bloc all but dried up while that from thehard-currency area was only just beginning to flow, investment was growingstrongly. During that period the falling-off of foreign savings was more thanoffset by increased domestic savings stimulated by the higher GDP growthrates, more stable prices and positive real interest rates. It is remarkable thatVietnam has one of the most open economies in the region, as reflected in thehigh ratio of trade to GDP. This is partly the result of very rapid increases inboth exports and imports since 1989.

Vietnam: Economic structure 11


Comparative economic indicators, 1996

Vietnam Indonesia Philippines Thailand China Japan

GDP ($ bn) 23.4 225.8 74.1 185.0 838.8 4,598

GDP per head ($) 311 1,149 1,088 3,079 690 36,536

Consumer price inflation (%) 5.6 6.6 8.1 5.9 8.3 0.1

Current-account balance ($ bn) –2.5 –7.7 –1.9 –14.7 7.2 65.9

Exports of goods ($ bn) 7.3 50.2 13.5 54.4 151.1 400.3

Imports of goods ($ bn) 10.5 44.2 21.3 70.9 131.5 316.7

Foreign tradea (% of GDP) 76.1 51.0 47.0 68.0 33.7 15.7

a Merchandise exports plus imports. Trade figures do not include smuggled goods.

Sources: National sources; EIU.

Economic policy

After reunification of the two halves of the country in 1976 the government ofthe new Socialist Republic of Vietnam moved quickly to impose on the souththe orthodox Soviet-style central planning model that had been in force in thenorth since 1954. The evident failure of this model, which is nowadays offi-cially described as “the bureaucratic centralised state subsidy system”, gradu-ally forced Vietnam’s leaders to abandon it and to edge their way towards apolicy of renovation (doi moi), which was formally adopted at the sixth partycongress in 1986. The reform process is still under way, but is now far beyondthe point of being reversible.

Pragmatic centralplanning

The Vietnamese economy had deviated from the pure central planning modelin several respects, partly because it was essentially a backward, agriculturaleconomy. Although nominally priority was to be given to industry, with heavyindustry receiving the lion’s share of investment funds, investment was spreadthinly, output per head of most industrial items was low compared with that inother developing countries in the region, and manufacturing output and em-ployment remained overwhelmingly concentrated in light rather than heavyindustry.

Recognising these factors, government policy had regularly sought to take amore balanced approach in setting priorities. As early as 1960 the strategy forthe first five-year plan was defined as giving “reasonable priority to heavyindustry and to the development of agriculture and light industry at the sametime”. Similar formulations guided the second (1976-80) and third (1981-85)five-year plans.

Parallel with the planned economy ran a second, market economy with its ownprice structure and its own informal credit system. Despite the steps taken toincorporate it into the central planning system, much of the south’s economyremained obstinately outside the control of the state, and the collectivisationof agriculture did not progress very far. Moreover, in what amounted to thefirst promptings for reform, enterprises were constantly striving to “breakfences”—that is, to extend activities conducted outside the plan.

12 Vietnam: Economic policy


Crisis in the late 1970sleads to a first wave

of reform—

A multifaceted economic crisis in the late 1970s accelerated this process ofspontaneous reform. The withdrawal of aid in the wake of the invasion ofCambodia, the silent resistance of farmers in the south to collectivisation andpoor weather intensified the production crisis that was occurring more or lesssimultaneously. Output per head fell by 2% per year between 1976 and 1980.As early as 1979 the Central Committee recognised that economic realities hadbeen ignored in the attempt to transform the economy.

But reformed policies were not introduced until nearly two years later. The keyprovisions, both announced in January 1981, were Directive No 100 of theCentral Committee secretariat, instituting the output contract system in agri-culture, and Decree No 25-CP, establishing a “three-plan system” in industry.The output contract system allowed collectives to parcel out land to farminghouseholds which contracted to deliver a fixed amount of output. Output inexcess of the targeted amount could be disposed of on the free market, gener-ally at much higher prices. Decree No 25-CP gave formal recognition to thenon-plan activities of state enterprises. These reforms were an ambiguous re-sponse to the spread of non-plan activities in both sectors: while they acknow-ledged that free-market activity was expanding, they were also intended to setclear limits to its scope.

—which fails to solvethe problem—

The first wave of reform created a conservative backlash, and at the fifth partycongress in 1982 there were calls to speed up agricultural collectivisation in thesouth. Farmers were increasingly squeezed by having to make higher manda-tory deliveries of grain, and inflation rose rapidly as the government printedmoney to pay its bills. In June 1985 the eighth plenum of the Central Commit-tee passed a resolution calling for prices to be set on the basis of costs andprofits, rationing to be ended and wages to be adjusted accordingly. In Septem-ber the dong was redenominated, but this essentially cosmetic manoeuvrefailed, and inflation in 1986 rose to 487%.

This decisive failure of partial reform gave the initiative to advocates of morecomprehensive reform. The sixth party congress, held in December 1986,seemed to confirm the victory of the reformists, and voted for a policy of doimoi (renovation). The congress identified three central factors as the source ofthe economy’s problems: discrimination against “the non-socialist compo-nents” (the collective and private sectors); inefficient central allocation to thestate sector; and sectoral imbalances arising from the favoured role assigned toheavy industry.

Reform gathered momentum only slowly, and initially elements of the oldsystem, such as the setting of physical targets, accommodating monetary andfiscal policies and the two-price system, remained in place, although the morerelaxed atmosphere, along with the removal of internal trade barriers, led to ablossoming of the informal sector. Bad weather contributed to a poor harvestin late 1987, when grain output fell by 3.5%, and famine conditions appearedin the north in early 1988. The trade deficit continued to rise, and the traderatio (the ratio of exports to imports) fell below 35% in 1987. The budget deficitcontinued to fuel inflation, which fell, but only to about 300% per year.

Vietnam: Economic policy 13


—but real changes takeplace from 1988

From early 1988 the party and the government began to introduce a number ofmeasures aimed at stimulating production and controlling inflation, culminat-ing in a series of dramatic changes in March 1989. The key components of thereform package were:

• the reorganisation of agriculture on the basis of the household rather thanthe collective;

• granting state enterprises greater autonomy in decision-making, includingthe right to contract for their inputs and output;

• the abolition of almost all subsidies and price controls;

• tax and expenditure reforms to reduce the budget deficit;

• increases in interest rates to positive real levels and restraints on the expan-sion of credit;

• lifting restrictions on both internal and international trade, and the deval-uation of the dong to bring the official rate into line with the market rate;

• restructuring the banking system to create a two-tier system consisting ofthe State Bank of Vietnam (the central bank) and state-run specialised commer-cial banks;

• measures to encourage the development of the private sector; and

• a new, and more liberal, foreign investment law.

Later in 1989 Vietnam withdrew fully from Cambodia and demobilised about500,000 troops. The results of the changes were spectacular. Agricultural out-put rose by 7.5% in 1989 and the country suddenly became the world’s thirdlargest exporter of rice. Inflation rates fell from 308% in 1988 to 35% in 1989.GDP rose by 8%, the best performance in a decade, with the boom in agricul-ture and services easily offsetting the industrial stagnation which followed theending of state subsidies. The timing was fortunate too, since the rise in reve-nue from oil exports almost exactly offset the decline in aid from the Easternbloc countries, and provided an important source of budgetary revenue duringthe transition years.

The momentum for reform continued after 1989. Foreign and joint-venturebanks were permitted from June 1991 and important gaps were filled in thelegal framework through the passage of, among others, a land law, a bank-ruptcy law, a labour code, a domestic investment law and a mining law, andthe creation of a modern tax structure. Despite early setbacks, including thecollapse of most of the credit co-operatives in 1990, by 1992 Vietnam had amarket-driven rather than a planned economy.

New targets are adoptedin 1991 and 1996

The seventh party congress of June 1991 adopted an economic programmecalled “Socio-Economic Stabilisation and Development Strategy to the Year2000". It projected that GDP would grow at 8% annually between 1992 and theend of the century, based on assumptions that the investment ratio woulddouble, that the incremental capital-output ratio (ICOR) would be between 2and 3, and that half of the necessary $40bn of capital would come from abroad.These targets were raised in 1994, and the revisions confirmed in the Public



Investment Programme 1996-2000 (PIP), issued by the prime minister’s officein June 1996.

The PIP projected annual GDP growth of 9-10%, based on growth of about4.5% in agriculture, 14% in industry and 12% in services. These targets are inline with current growth rates, but will require the investment rate to rise from28% of GDP (in 1996) to 34% by the year 2000. This calls for $41bn of invest-ment over the five-year period, or twice as much as during the previous fiveyears. Of this total 40% is projected to be financed from overseas, mainly in theform of foreign direct investment (FDI).

Because continued growth depends heavily on maintaining the inflow of for-eign capital, the PIP states: “FDI is welcome ... the government will continue toenhance the investment environment, especially improving the legal frame-work and streamlining procedures to approve investment projects".

There are still someyawning gaps

The reform process is far from complete, however. Major institutional gaps stillneed to be filled. The banking system has been expanding rapidly, and hasincreased lending to the non-state sector much faster than lending to stateenterprises. But its deposit base is small—only 21% of GDP—and it is poorlyregulated. Medium- and long-term lending, although rising rapidly, is stillmodest. A bond market, dealing chiefly in Treasury bills, is in operation, butthe long-envisaged stockmarket is unlikely to be functioning before the end ofthe century.

Although the legal groundwork on state enterprise reform has been done,implementation has been slow. Only 13 small firms have been “equitised” (theVietnamese form of privatisation), despite frequently reiterated plans to equi-tise hundreds more.

Reform of the foreign trade regime is also incomplete: the system of export andimport permits has been only partially dismantled, the number of permittedtrading companies is still tightly controlled and levels of protection are high.

The state-owned sectorgrows fast and resists

privatisation—

The World Bank has argued that the mobilisation of domestic resources andemployment generation both depend on the existence of a healthy privatesector. Reformist government officials seem to agree. Of the $25bn that is to bemobilised domestically between now and 2000, two-thirds are expected tocome from non-budget sources, mainly from the private sector.

Reality and rhetoric differ here, however. Until recently the output of the state-owned sector was growing at about the same rate as the private sector, if joint-venture companies are included, although this expansion is occurring withoutcreating many jobs. State-owned enterprises have a number of advantages overprivate firms. Most have easier access to credit, often without collateral. Manycan easily obtain land-use rights, which are among the most valued contrib-utions the Vietnamese partner can provide to a joint venture. State-owned firmsare favoured for government contracts, and for trade and other licences.

This helps explain why almost no managers of state enterprises want to seetheir companies privatised. The draft political report submitted to the eighthparty congress in June 1996 set a target whereby 60% of GDP would come from

Vietnam: Economic policy 15


the state-owned and co-operative sector by the year 2020, up from about 40%currently. This particular clause was omitted from the final report issued by thecongress, but it reflects how widespread is the belief in basing economic growthon the state-owned sector.

Despite the advantages enjoyed by state enterprises, the situation is becomingeasier for private businesses. The creation of joint-stock banks, the 1992 con-stitution and the promulgation of the companies laws gave a new impetus tothe private sector. The large number of new jobs created by the private sectorand the rapid increase in credit granted to it tends to confirm the view that theexpansion of the private sector has been under-recorded by measuring its out-put alone.

—slowing the process oftransition

Until the reforms of the late 1980s the fiscal and banking systems were gearedto the needs of central planning, and thus their role was the passive one offacilitating the achievement of physical plan targets. Since 1988, with the shiftaway from a system which allocates resources under the state plan and theassociated “subsidy-based mechanism”, the government has introduced a se-ries of reforms for reducing central control and increase enterprise and house-hold autonomy. Fiscal, monetary and banking policy has therefore becomedirected more towards macroeconomic adjustment than physical allocation. Inall these spheres, however, the transition is not complete. (Reference table 2provides historical money supply data.)

Efforts at fiscal reform Under the system of central planning the prices of goods and services providedby most enterprises were set by the state in such a way as to encourage largesurpluses which were then transferred to the government, often after a processof negotiation. As recently as 1987 80% of government tax revenue derivedfrom taxes on state enterprises.

Once prices were liberalised, especially after 1989, this system could not beused, and so new sources of revenue were required. Early measures included theintroduction of excise taxes, a turnover tax and a business profits tax (October1990), a personal income tax (April 1991), a natural resources tax (March1992), a revised agricultural tax and a land and housing tax (1993). A value-added tax is to be introduced in January 1999, along with a simplified corpor-ate income tax; the enabling legislation was passed in 1997. Despite thesechanges, the tax system remains complex and unduly dependent on taxes ontrade. There are ten different rates of export duty and 28 different import tariffrates, a complex system which helps explains why smuggling is so extensive.

The system has been quite successful at raising revenue, which has stabilised ataround 24% of GDP, one of the highest levels in the region, after falling below14% of GDP in 1991, during the most difficult part of the transition from aplanned to a market economy. Except in 1993 (when it rose to 4.6% of GDP)the budget deficit has been kept very small, falling below 1% of GDP for eachof the past two years. The government has made a point of not borrowing fromthe central bank in its determination to keep inflation rates low. (For historicaldata on government finances see Reference table 1.)



One-quarter of government spending is devoted to the capital budget, whichabsorbed 6% of GDP in 1996. Almost one third of government capital spendinggoes into transport and communications, and another sixth into irrigation andother agricultural activities. Government current spending takes up 18% ofGDP, with relatively small shares of this total devoted to education (2.1% ofGDP) and health (1% of GDP).

The combination of low deficits and substantial capital spending reflects asolid level of public saving, which has been between 5% and 6% of GDP inrecent years. The system of budgeting is still imperfect, and there has been atendency to make overoptimistic projections of revenue, only to find that amid-year correction to expenditure is needed in order to keep the deficit downto a manageable level.

Summary of government finances, 1996(% of GDP)

Revenue & grants 23.6

Total expenditure 23.8 Current expenditure (including interest paid) 17.8 Capital expenditure 6.0Source: World Bank, Vietnam: Deepening Reform for Growth.

Trade reform is alsoneeded

Although exports and imports are high relative to GDP, Vietnam’s trade regimeis inefficient in a number of ways. The average tariff on imports is high, atalmost 20%, and provides a strong incentive for smuggling, which is extensive.The tariff structure is designed to put moderate tariffs on raw materials andhigh tariffs on finished consumer goods; the result is very high rates of effectiveprotection, which in turn provides a strong incentive for investors to jump thetariffs walls and set up potentially very inefficient import-substituting prod-uction. This has happened in a number of areas, including car assembly, sugar,steel and cement. The restrictive licensing rules for foreign traders create a biasagainst private firms (which tend to be smaller). The system of export quotasfor rice is clumsy, favours a small number of state-owned firms, and has theeffect of lowering the price received by (relatively poor) rice farmers. Changemay be on its way, however, as Vietnam meets its obligations as a member ofthe ASEAN Free Trade Area (AFTA) to reduce trade barriers on goods comingfrom other ASEAN countries.

Economic performance

Strong growth issustained through the

reform period

Vietnam’s economic performance since 1989 is without parallel among theso-called transitional economies (those formerly centrally-planned economiesthat have undertaken a reform programme aimed at introducing market mecha-nisms) with the exception of China. Even in the years of austerity (1989-90) theeconomy did not go into the type of free fall experienced in the Soviet Unionand eastern Europe. During the period of the 1991-95 five-year plan GDPgrowth averaged 8.2% per year; economic growth has not fallen below 8% since1992. This is a clear improvement over the average annual growth rate achievedduring the 1986-90 plan, which was 3.9%. (Reference tables 3, 4 and 5 providebreakdowns of GDP; Reference table 6 gives historical data on inflation.)

Vietnam: Economic performance 17


Isolation may havehastened the reform

process

In the early years of reform, rapid economic growth, a low rate of inflation andan impressive expansion and diversification of trade were all achieved at a timewhen the US embargo prevented the resumption of Western multilateral andbilateral assistance on any scale and when the collapse of socialism in easternEurope and the Soviet Union removed the prop of Council for MutualEconomic Assistance (CMEA, Comecon) aid, investment and trade. It may beargued that these crises forced Vietnam to develop and think through its ownreforms, rather than follow reforms imposed by outside funding agencies. Thesolutions adopted during these years were institutional and managerial ones,not relying on further injections of public investment: by the final year of thefourth plan (1986-90) public investment was 21% lower than in 1985, the lastyear of the third plan period, and did not surpass its 1985 level until 1993.

Gross domestic product(% real change)

Annual average1996 1991-96

GDP 9.3 8.9 Agriculture 4.7 5.1 Industry 14.5 13.6 Services 10.0 9.4

Regional comparisonsIndonesia 8.0 7.3Philippines 5.5 2.2Thailand 6.7 8.4Sources: General Statistical Office, Statistical Yearbook; EIU.

Inflation, 1996a

(% change)

Annual average1996 1992-96

Consumer prices 5.6 11.0

a A more detailed breakdown for 1992-96 is given in Reference table 6.

Source: General Statistical Office, Statistical Yearbook.

Regional trends

Regionalism versuscentralism

Vietnam’s peculiar geography (see Resources) has tended to encourage region-alism. This tendency has been reinforced by history, in particular by the grad-ual southward migration that unfolded over several centuries, by the differentpatterns of administration and economic development promoted by theFrench in the three zones into which it divided the country, and by the divi-sion of the country into north and south for over 20 years from 1954.

Economic growth was initially most rapid in and around Ho Chi Minh City butmore recently the fastest growth has been in Hanoi. Over the past two or threeyears growth has spilled out from Ho Chi Minh City itself into the nearbyprovinces, where land is cheaper and more easily available and where theauthorities are often more receptive to foreign investment.

18 Vietnam: Regional trends


Left behind are the high mountain areas of the north and most of the north-central coastal provinces, which have traditionally been the poorest parts ofthe country. The slow growth of the poorest areas has led to widening regionalinequality: where rural GDP per head was 25% of urban GDP per head in 1990,by 1994 the figure had fallen to 18%. On the other hand the poorer areas arehelped by the equalising effect of the budget, which raises revenue mainly inthe wealthier areas but spreads the expenditure (on schools, roads, clinics andthe like) more widely. The government has also tried to steer projects towardsneglected areas, as evidenced by its insistence that the country’s first large oilrefinery should be located in Dung Quat, about 970 km north of Vung Tau (thenearest source of landed crude oil), in the poor central province of Quang Ngai.

In a compromise between wanting to foster rapid growth while spreading thebenefits, the government has adopted a growth strategy based on three core“growth triangles”. These are Hanoi-Haiphong-Quang Ninh in the north,Ho Chi Minh City-Bien Hoa-Vung Tau in the south, and Quang Nam-Danang-Quang Ngai-Hue in the centre. As of September 1997 over 80% of all licensedforeign investment was destined for the two big triangles, with a further 4% forthe Danang triangle. This distribution seemed to owe more to the naturalattractions of these regions than to any active policy of promoting them. In itsoriginal form, as set out at the seventh party congress in 1991, this regionalinvestment strategy was designed to have a more direct impact on the outlyingregions. Investment resources were to be devoted to developing food prod-uction in the deltas, the forests and the agricultural and mineral resources ofthe uplands, to fisheries, to tourism and oil in the coastal areas, and to smalland medium-sized urban centres everywhere.

Some smaller towns haveeconomic specialisations

Just one-fifth of the population lives in urban areas. Only three cities, Hanoi,Ho Chi Minh City and Haiphong, have populations of more than 1m. Al-though these cities are also the main industrial centres, a number of smallertowns have specialised in particular industries, either because of their proxim-ity to the natural resources on which those industries are based or as a result ofthe policy of dispersing industry forced on the north by the US air war. Othersmall towns, such as Thanh Hoa in the north of the central region, Buon MeThuot and Dalat in the Central Highlands, and Can Tho in the Mekong Delta,have grown up as marketing and agro-processing centres. A longer traditionexplains the specialisation of villages, again chiefly in the north, in light indus-trial activities such as silk, porcelain and furniture.

Resources

Population

Population isconcentrated in tworice-growing deltas

The total population of Vietnam was put at 64.4 million in the last officialcensus in April 1989, but was probably higher because of under-recording aspeople attempted to avoid registration for the military draft and evade officialcontrol of economic activities. In 1996 the population was officially estimated

Vietnam: Population 19


at 75.4 million, 1.9% above its level in 1995. (See Reference table 7 for popul-ation data for 1992-96; Reference table 8 gives labour force data.)

The population is still basically rural (80% in 1996 compared with 85% in1960) and is concentrated in the two main rice-growing deltas: in the north,the Red River, and, in the south, the Mekong. In the Red River Delta (excludingHanoi) population density averages 1,170 per sq km and in Thai Binh 1,230 persq km; this is among the highest in the world for a rural area. The MekongDelta, which is over twice as large as the Red River Delta, has a far lowerpopulation density (400 per sq km) and is the source of most of the ricesurpluses which Vietnam exports.

Minority groups are foundin upland areas

The country’s delta populations are almost entirely ethnic Vietnamese (kinh),who made up 87% of the total in 1989. The minority groups, including Khmer,Cham, Muong and Thai peoples, whose cultures and languages are quite dis-tinct from those of the kinh Vietnamese, are found in the upland areas. Thesegroups often have links with others belonging to the same ethnic groups acrossthe border in Yunnan and Guangxi in China, and in Laos and Cambodia.There is a distinct ethnic boundary in north-central Vietnam, north of whichare to be found Thai and Sinic minorities (Thai, Tay, Muong, Nung, Dao etc)who are not found in significant numbers to the south.

The mountain people of the Central Highlands, the scene of fighting duringthe late 1960s and early 1970s, continued to provide the basis for the continu-ing guerrilla activities of the Front Unifié pour la Libération des RacesOpprimées (FULRO) against the Hanoi government for many years after thewar had ended. Official policy is to resettle the upland groups into permanentvillages and to end their “slash-and-burn” method of agriculture. The rate offorest destruction has led to ominous talk of an ecological catastrophe (seeAgriculture, forestry and fishing), fuelled in part by rapid migration into thelightly settled Central Highlands by loggers, and by farmers hoping to establishthemselves by cultivating commercial crops such as coffee.

The overseas Chinesecommunity

The once sizeable overseas Chinese community, which was largely concen-trated in the south, was depleted after many decided to leave the country, oftenas “boat people”, when the government closed down private businesses in1978. According to the census, it numbered 962,000 in 1989, barely changedfrom the 949,000 recorded in the 1979 census, yet representing almost one inevery seven urban dwellers. Much of the large inflow of remittances, estimatedat about $500m or more annually, originates with the overseas Chinese. Thecommunity has partly recouped its position in the economy since the late1980s, largely on the strength of its links with Hong Kong and Taiwan. Asignificant amount of unregistered (“ghost”) investment has also been under-taken by the Chinese community.

Population growth is 1.9%per year and falling

The rate of population growth has slowed from 3.1% per year in 1960-70 to1.9% in 1995-96. Superimposed on the fall in the crude birth rate from 47 per1,000 in 1960 to 31 per 1,000 in 1989 and the sharp decline in the crude deathrate from 21 per 1,000 in 1960 to 8 per 1,000 in 1989 are the effects of the warsand large-scale emigration: between 1.5m and 2m died as a result of military

20 Vietnam: Population


action between 1960 and 1980, while perhaps 750,000 refugees left the countryafter the fall of Saigon and around the time of the 1978-79 conflicts with China.

Since 1970 the total fertility rate, which measures the number of children awoman would have in her lifetime at current reproductive rates, has halved andnow stands at under 3. By international and historical standards this is a veryrapid drop, and indicates that families are opting for fewer children, presumablyin the hope of providing each child with a better education. The governmentruns an energetic family planning programme, and its “one-or-two children”approach emphasises late marriage and wide spacing of children. Contraceptiveuse is widespread, mainly IUDs, and abortion has become common over thepast decade. The fertility rate is expected to fall to the replacement level (about2.1) within a decade, mirroring the fall in China. Although the population willcontinue to grow for a generation or more thereafter, as the cohort born duringthe “baby boom” reaches child-bearing age, the growth will be at a slower paceand the population will stabilise by the middle of the next century.

Between 1970 and 1994 there was a sharp fall in infant mortality from 111 per1,000 to 42 per 1,000 in the first six months of life. Life expectancy has risenfrom 43 years in 1960 to 68 by 1994.

Population indicators

Crude birth rate (per ’000; 1993) 30

Crude death rate (per ’000; 1993) 8

Total fertility rate (1994) 3.1

Contraceptive use ratea (1989-95) 49

Life expectancy at birth (years; 1994) 68

Population growth rate (%; 1994-95) 2.0

a % of married women aged 16-45 using contraceptives.

Source: World Bank, World Development Report 1996.

Changing attitudes tosocial services

For such a poor country, Vietnam’s social indicators in such areas as educationand health are impressive. The change in the development model adopted bythe country has been reflected in attitudes to payment for social services.During the 1980s these were meant to be free but in practice the populationhad to make contributions to support teachers’ and doctors’ wages as well as tosuch projects as the construction of schools. These changes were institutional-ised in 1989 when official charges for social services were introduced. There isprovision for subsidising poorer families and areas.

Education

Impressively high literacyrates

Although access to higher levels of education has been limited, the intro-duction of near universal primary education has produced high literacy rates.The 1989 census found that 88% of the population over 15 years old wasliterate; the rates were 84% for women and 92% for men. The rural educationsystem was nearly as well-developed as the urban one, particularly in thenorth: 87% of the rural population was literate in 1989 compared with 94% ofthe urban population. During the transition period, from about 1987 to 1991,

Vietnam: Education 21


school enrolment rates fell, particularly at the secondary level. This was largelythe result of the budgetary squeeze, which reduced the wages of teachers,coupled with the rise in alternative occupations for teachers.

Recent spending increases Education has been treated far better than health since 1992, when govern-ment spending began to recover strongly from the previous two years of auster-ity. By 1996 the share of government current spending allocated to educationhad risen to nearly 12% from just under 5% in 1989. As a result, by the 1993/94school year the proportion of the total population attending an educationalinstitution was almost exactly the same as five years earlier, at around 20%.Since then enrolment rates have risen to record high levels, with the numberof secondary school students rising by 112% between 1991/92 and 1996/97and a near tripling in the number of college students over the same period.

Gross enrolment rates in education(as % of relevant age group)

1991/92 1996/97

Primary education 101.4 111.4

Lower secondary education 40.5 68.5

Upper secondary education 12.6 23.5Source: World Bank, Vietnam: Education Financing Sector Study.

Health

Healthcare provisionis under threat from

budget cuts

Vietnam has a good record in providing healthcare (as measured by suchindicators as life expectancy, infant mortality and the number of doctors perhead). After 1954 the government set up a public health infrastructure whichreached down to hamlet level and the system was extended to the south afterreunification in 1976. In the late 1980s a combination of reform-linked factors,budgetary constraints, the decision to shift more responsibility for healthcarefinancing to the provinces, the reduced social role of the agricultural co-operatives after the issuing of Decree No. 10 in 1988 and the introduction offees in March 1989, began to affect the quality of healthcare. By 1996 thegovernment was devoting only 1% of GDP to health spending, and 85% of allspending on health services came from private pockets.

The scarcity of funds for public investment has also degraded the water-supplyand waste-disposal systems. Their inadequacies are probably the prime cause ofthe most prevalent infectious diseases such as malaria, dengue fever, typhoidand cholera. National statistics indicate that there has been a recent fall in thenumber of certain categories of health staff, including nurses and midwives,and (until recently) in the number of hospital beds per head of population.There is particular concern that the health of people living in the poorerprovinces, where malnutrition is common and budgets low, has been declin-ing. The infant mortality rate is no longer falling, which is a clear indication oflittle improvement in the provision of primary healthcare.

22 Vietnam: Health


Indicators of health sector quality(’000 unless otherwise indicated)

1991 1994 1996

No. of hospital beds 206 191 197

No. of physicians 26 30 32

No. of nurses 68 51 46

Government spending on health (as % of GDP) 0.8 1.3 1.0Source: General Statistical Office, Statistical Yearbook.

Natural resources and the environment

Vietnam’s geography is unusual. The country consists of a thin coastal striplinking the two fertile deltas of the Mekong and the Red River, bordered in thenorth and west by uplands and mountains. Although the two main conurba-tions of Hanoi/Haiphong and Ho Chi Minh City and the two deltas are thecountry’s economic powerhouses, about 50% of the population lives outsidethese areas in the mountains of the north and the Central Highlands and in thecentral coastal regions. Settlement in these areas has been officially encouragedsince the mid-1950s.

Vietnam has a humid tropical climate heavily influenced by the monsoon. Inthe northern part of the country (roughly north of the 18th parallel) there iswide variation in temperature between the cold, relatively dry season (Novem-ber-March) and the hot, wet one. In the south the two seasons are not distin-guished by marked differences in temperature. The north central coastal area issusceptible to typhoons, which hit with particular severity in 1996 and regu-larly destroy houses, livestock and infrastructure. This frequent destruction ofthe capital stock help to explain the persistent poverty of the region. Parts ofthe Mekong delta are frequently hit by floods, which destroys crops but alsoreplenishes the soil.

Cultivated area per headis low

About 36% of land area is categorised as “unused” or “barren”. Most of this island that was once forested and now lies fallow, and much of it is badlydegraded. The forests have been depleted by overexploitation, both for woodand to make room for agriculture, and 1.6% of the covered area is beingdeforested annually—a high rate by world standards. Cultivated area per headis, at 0.1 ha, one of the lowest in the world. It is government policy in bothnorth and south to increase the amount of land that is under cultivation andeffectively irrigated, and to afforest the areas now classified as “barren”.

The country’s water resources are fairly evenly distributed, allowing the devel-opment of irrigation, aquaculture, water-borne transportation and hydro-electric generation throughout much of the country. The remaining 14% ofland consists of urban areas, unused areas not included in the “barren” cate-gory (such as non-irrigated water surfaces) and land containing mineral andenergy resources. Although by world standards not a major producer of anyminerals, Vietnam has substantial high-quality reserves of several, includingoil and natural gas, coal, apatite (an input for phosphatic fertiliser), iron ore

Vietnam: Natural resources and the environment 23


and bauxite; however, when calculated on a per head basis, Vietnam is not richin minerals or other natural resources.

Environmental threats To ease pressure on agricultural land the government has encouraged migra-tion from the overpopulated lowlands to the highlands and the settlement(“sedentarisation”) of shifting slash-and-burn cultivators in the hills andmountains. Both have been politically controversial in so far as they have inthe past involved forced relocation. These movements have also been criticisedon environmental grounds for causing further deforestation and soil erosion.At the same time, urban population growth has outstripped that of rural mi-grant destinations such as the Central Highlands, placing enormous stress onthe antiquated urban infrastructure.

Economic activity, mostly prawn cultivation, has become a serious threat tothe mangrove wetlands, mainly in the far south, just as they were recoveringfrom the massive damage they suffered during the US war. Along the country’sextensive coastline the weather, particularly in the typhoon-prone centre, hasbeen the most persistent threat to the environment. Vietnam’s underpoweredfishing fleet tends to operate close to the coast rather than venturing intodeeper seas; the result is that the coasts are overfished.

Industrial pollution, until recently mainly confined to the heavy industrialareas of the north, is becoming more of a nationwide problem as the economyundergoes rapid industrialisation, and the mushrooming of motorised traffichas created serious urban pollution and congestion in the major cities. A num-ber of laws and regulations contain provisions for protecting the environment,ranging from local ordinances to the sectorally specific land and oil and gaslaws to the omnibus Law on the Protection of the Environment. One result ofthis motley body of law is a great deal of confusion.

Economic infrastructure

Transport and communications

Vietnam’s transport system has been degraded by years of war and lack ofinvestment. The sector is of considerable importance because of the peculiargeography of the country, with the two major cities of Hanoi and Ho Chi MinhCity 1,600 km apart. Rapid growth is putting considerable strain on the exist-ing transport infrastructure. The already limited capacity of the country’s sea-ports has been further constrained by neglect, which has led to serious siltationproblems.

Roads The country has a fairly dense network of roads by regional standards, butthese are generally in poor condition. Half of the national roads have surfacesclassified as poor to very poor, while two-thirds of provincial and local roadsare rated poor to very bad. Although about 40% of freight traffic goes by road,journeys tend to be short. Because the country is criss-crossed by more than2,000 rivers and other water courses, its roads are served by tens of thousands

24 Vietnam: Transport and communications


of bridges (the 10,800 km of national roads alone have 2,550 bridges), many ofwhich also require rebuilding. Eight districts and 700-800 communes are notyet accessible by road at all. (See Reference table 9 for data on transport.)

Recent investments have been targeted at upgrading the main roads, includinglarge parts of the main north-south highway, the link between Hanoi andHaiphong, and the roads between Ho Chi Minh City and Vung Tau. This doesnot address the problem of secondary roads, which are often impassable in themonsoon season, leaving many districts isolated for months at a time. Australiahas confirmed that it will pay for two-thirds of the proposed $66m bridgeacross the main effluence of the Mekong at My Thuan.

In 1995 there were, according to official statistics, just 39,100 lorries and25,600 passenger cars in the country. These are probably low figures, because27,843 cars were imported during 1990-95, and annual demand is running atabout 8,000. Motorcycles are ubiquitous, and 459,000 of them were imported(officially) in 1995 alone. Two-thirds of the households in Hanoi and Ho ChiMinh City own a motorcycle.

Railways The railway system comprises six single-track routes totalling 3,260 km. Themain rail links are Hanoi-Ho Chi Minh City (1,730 km), Hanoi-Haiphong(102 km), Hanoi-Muc Quan (176 km), Hanoi-Thanh Hoa (160 km), Hanoi-LaoCai (295 km) and Dong Anh-Thai Nguyen, which are all operational, if slow.The number of train passengers has been stagnant, although they are typicallytravelling further than before. Since 1993 the volume of freight traffic hasincreased by over 80% to an estimated 1.8bn tonne-km in 1996.

The railways were in a poor state at the end of the war, and additional damagewas inflicted by the Chinese invasion in early 1979. Rehabilitation continuesbut much remains to be done. The journey time on the Reunification Expressalong the 1,730-km line linking Hanoi and Ho Chi Minh City has been reducedfrom 72 hours to 40. In 1996 the lines into China were reopened, near LangSon and between Lao Cai and Pho Lu. A Japanese-aided study of the rail systemhas put investment requirements at $862m. Priorities have been identified asupgrading the Hanoi-Ho Chi Minh City and Hanoi-Lao Cai lines and purchas-ing new diesel locomotives and other rolling stock. The present stock of416 locomotives is a varied assortment from a dozen different countries, ofwhich only 348 are considered operational; around 27 are functioning steamlocomotives, and about 90 are over 30 years old.

Inland waterways The tonnage of freight carried on the inland waterway systems, chiefly of theRed River and its tributaries (2,500 km) and of the Mekong River, its tributariesand canals (4,500 km), exceeds that transported by rail or sea. However, goodscarried by this means fell from 16.4m tonnes in 1986 to 13.2m tonnes in 1989,before recovering to the 1986 level in 1991 and climbing to an estimated 22mtonnes in 1996. Part of the reason for the slow growth in cargo carried is thatevery year only 40% of the system’s water courses and channels are dredged,with the result that the canals and rivers are increasingly silting up. Use of theinland waterways is also hampered by the ageing fleet and fluctuating waterlevels between the dry and rainy seasons.

Vietnam: Transport and communications 25


Ports and shipping There are seven international seaports, not counting five special ports throughwhich only oil and coal are shipped. The chief ones are Haiphong in the north,Ho Chi Minh City in the south and Danang in the centre. These ports constit-ute further major bottlenecks in the supply and trading systems: while foreigntrade turnover has been increasing at over 25% per year during the 1990s, theexpansion of the ports has tended to lag behind.

Antiquated equipment, limited storage space and serious siltation have limitedthe ports’ throughput. Nonetheless, throughput in Saigon Port in Ho Chi MinhCity rose from 1.9m tonnes in 1984 to 3.1m tonnes in 1988, 5m tonnes in 1992and 6.4m tonnes in 1994, well above its design capacity of around 5m tonnes.The Asian Development Bank (ADB) is to provide $30m towards a $40m pro-ject to upgrade Saigon Port by increasing its loading capacity fourfold, install-ing new cargo-handling equipment and computerising its operations.

Despite its problems Haiphong’s throughput has been running well above itsannual capacity of 3.2m tonnes. In the first ten months of 1995 alone it handled3.85m tonnes of cargo. Japanese aid has been earmarked for substantially up-grading the port. Plans for upgrading the ports with private-sector participationhave had limited success. One of the few projects to get under way is a port atPhu My near Vung Tau, which has backing from the World Bank’s InternationalFinance Corporation (IFC). The Maritime Department has announced plans forlarge port complexes in Quang Ninh (based on Haiphong), the area from DaNang to Quang Ngai in the centre, Ho Chi Minh City, Vung Tau and theMekong Delta, to be completed by 2000. Recent dredging at the mouth of theMekong has opened up the port of Can Tho to ships of up to 10,000 tonnes.Only about 20% of international trade is carried on Vietnamese ships but thereare plans to expand the merchant fleet to 1m tonnes by the end of the century.In 1993 the fleet comprised 608 vessels weighing a total of 589,900 tonnes.

Air transport Over the past five years there has been considerable development in bothdomestic and international air routes. The national airline, Vietnam Airlines,was long denied access to state-of-the-art Western-built aircraft because of theUS embargo, and had to rely on a fleet of Russian aircraft, most of them TU-134s. During 1992 Washington eased its strict interpretation of the rules onleasing, allowing Vietnam Airlines to lease A310s and Boeing 737s, 747s and767s. By 1996 the airline described its core fleet as consisting of six Boeing767s, one A320 Airbus and four ATR 72s, which handled over 90% of itsvolume. In fact it has continued to use the older Russian planes on someroutes; one of them crashed near Phnom Penh in late 1997, killing almost allof the passengers aboard.

There are 24 civil airfields but Vietnam Airlines’ domestic services linked only 11of them as of early 1996. Since the beginning of 1995 the airline has had regularflights on 46 routes, covering 19 international and 15 domestic destinations.The company loses money on its domestic service, which accounts for 60% ofits total traffic, because the fares for local customers are regulated by the govern-ment. Pacific Airlines, which was set up in September 1992 by Vietnam Airlinesand a number of local state companies and private investors, has six flights perweek to Taipei from Ho Chi Minh City and Hanoi. In late 1996, 20 foreignairlines had scheduled international flights to Hanoi or Ho Chi Minh City.

26 Vietnam: Transport and communications


Telecommunications By mid 1997 there were 1.4m installed telephone lines in Vietnam, raising thedensity of telephones to about one for every 53 people. That this is still a verylow density by international standards should not obscure the speed withwhich lines have been installed in the past few years (as recently as the end of1991 density was less than one per 500 people). The goal is to increase densityto 4-5 units per 100 people by 2000, which calls for the number of connectionsto grow by about 35% annually. Vietnam Posts and Telecommunicationssigned long-term contracts in 1997 for installing 1.3m further lines, at anestimated cost of $1.16bn.

This expansion is all the more remarkable in that it has been achieved throughad hoc financing methods involving a plethora of foreign suppliers. In 1987Overseas Telecommunications International (OTCI) of Australia (now Telstra)installed a Vista dish in Ho Chi Minh City, creating a new link to the outsideworld through the Intelsat system. Previously international callers had had torely on the Intersputnik system routed through eastern Europe. The success ofits first project persuaded OTCI to set up two larger satellite stations in Hanoiand Ho Chi Minh City in a joint venture with Vietnam Telecom International,Vietnam Post and Telecommunications’ international calls affiliate. Between1987 and 1991 international telephone traffic increased by 1,700% to 14 mil-lion minutes.

The revenue generated from this service has been an important source offinancing for other telecoms projects. Lines of credit arranged by Japanese,German and South Korean suppliers and concessional lending by the Italianand French governments have been among the other sources drawn on to fundthe installation of digital exchanges, fibre-optic links and a domestic equip-ment manufacturing capacity. In February 1996 Vietnam opened its first inter-national fibre-optic telecoms link. The downside of this improvised expansionis that Vietnam has at least 12 different switching systems and a wide variety ofequipment. Mobile phones are also popular, with almost 100,000 subscribersby the end of 1997. About four-fifths of all subscribers use Mobiphone, whichis a joint venture between the Vietnam Post and Telecommunications com-pany and Comvik of Sweden.

Energy provision

Vietnam has considerable energy potential but little of it has so far been ex-ploited. Both consumption and production per head are low, although con-sumption is growing rapidly, by over 8% annually. Vietnam’s energy resourcesinclude plentiful supplies of high-quality coal, massive and still largely un-tapped sources of hydropower, and still abundant but diminishing supplies offuelwood and charcoal (Reference table 10 includes national statistics on en-ergy production, exports and imports).

Electricity productionremains low—

Commercial energy consumption in 1995 was about 8.7m tonnes of oil equiva-lent or 115 kg of oil equivalent per head, one of the lowest rates of energyconsumption in the world but in line with what might be expected of such apoor country.

Vietnam: Energy provision 27


The power sector received a large slice of public investment funds in the 1980s,much of it in the form of Soviet aid, and output increased at an annual averagerate of 10.5% between 1985 and 1992. Major projects that have come onstream since the start of the 1980s have included the Pha Lai thermal plant(440 mw) and all eight units of the Hoa Binh hydroelectric project (1,920 mw)in the north, and all four units of the Tri An hydroelectric project (400 mw) inthe south. The Hoa Binh plant is the fifth largest hydroelectric power station inthe world.

Nonetheless, production of electricity remains low: in 1994 output was 226 kwhper head, about half of the level in Indonesia and one-sixth of Thailand’s (buttwice Bangladesh’s output per head). The government would like capacity togrow at 14-15% per year to the end of the century, raising capacity from about6,700 mw in late 1996 to around 9,000 mw in 2000, and increasing the amountgenerated from 16.4bn kwh in 1996 to 26bn-29bn kwh by 2000. Most of theexpanded capacity will come in the form of gas-powered plants in the south,supplemented by a solid increase in coal-fired production in the north and amodest expansion of hydroelectric power. By then the national grid is expectedto reach all districts and four-fifths of all villages and communes.

The shift to coal- and gas-fired plants is expected to reduce the share of outputgenerated from hydro-sources from 71% in 1995 to about 50% by 2000. Thegovernment hopes that half of this new capacity will be developed on a build-operate-transfer (BOT) basis. In mid-1996 the government signed the first BOTcontract with Oxbow International Power of the US, for a $300m 300-mwcoal-fired power station in Quang Ninh province in the north; final agree-ments have not yet been reached on the price that Oxbow will receive forelectricity, and how much it will have to pay for coal. The price of electricity isto be raised gradually from the current 5 cents per kwh to about 7 cents, tocover the full cost of incremental supplies of electricity. In September 1997Wartsila of Finland signed an agreement to build a 120-mw gas turbine electricpower station in Ba Ria-Vung Tau on a BOT basis, for a total cost of $110m;construction has already begun.

—and regionaldistribution is uneven

To correct the imbalance in supplies between the north and the rest of thecountry the government decided in February 1992 to launch a 500-kv, 1,500-km power line linking the Hoa Binh hydroelectric power station and otherplants in the north to the deficit regions to the south. The $600m scheme,described as the country’s most ambitious infrastructure project since thebuilding of the Ho Chi Minh trail, was completed more or less on target bymid-1994, after consuming the equivalent of the government’s entire capitalbudget for a year. It created new problems, however, in particular by overload-ing Ho Chi Minh City’s antiquated distribution system. Planners also hope toreduce the enormous transmission and distribution losses, which currentlyabsorb slightly over 20% of all electricity generated. In 1995 the ADB grantedloans for the rehabilitation of the systems in the north and centre. Reversingthe usual direction of flow, the north-south power line was used to bringelectricity from the south to the north in mid-1997, because dry conditions inthe north forced a reduction in output from the giant Hoa Binh scheme.

28 Vietnam: Energy provision


Coal meets one-quarter ofprimary energy needs—

Coal is the main form of commercial energy after oil, meeting about one-quarter of primary energy needs (excluding biomass). Almost all of the coalproduced is high-quality anthracite. Estimated reserves of anthracite alone areput at 3.7bn tonnes, of which 3.6bn are located in the north-eastern provinceof Quang Ninh and the rest in the Thai Nguyen Basin in the nearby provinceof Bac Thai. Proven reserves of anthracite have been established at 1.5bn ton-nes. There are large undeveloped deposits of lignite in the Red River Delta.Possible reserves of all types of coal (anthracite, bituminous coal, lignite andpeat) are sometimes given as 20bn-30bn tonnes.

—but large amounts ofinvestment are needed

Annual output of coal peaked at 6.9m tonnes in 1988, but fell off in thefollowing four years to around 4.5m tonnes, reportedly because of difficultiesassociated with the introduction of the market mechanism. Since then prod-uction has risen sharply, reaching an estimated 9.3m tonnes in 1997, of which3.8m tonnes will be exported, putting the government target of raising outputto 10m tonnes by 2000 in sight.

Oil and gas The waters offshore of Vietnam have been regarded as having oil potential fortwo decades, but after several years of intensive exploration since the late 1980sin the three offshore basins, the Mekong and Con Son basins in the south andthe Tonkin Gulf basin in the north, regarded as promising, the high hopes heldby many oil companies have still to be borne out. Since 1988 Western andother foreign oil companies have signed 29 production-sharing contracts foroffshore exploration and development.

Over three-quarters of current production comes from the Bach Ho (WhiteTiger) field, discovered by Mobil in 1975 and subsequently exploited by theVietnamese-Soviet joint venture Vietsovpetro. Output from Bach Ho was re-ported to be running at about 150,000 barrels/day (b/d) in mid-1996, up fromthe average production level of 140,000 b/d in 1995. Another 20% of nationalproduction comes from the Dai Hung (Big Bear) field, discovered by Viet-sovpetro in 1987 and subsequently awarded to a consortium led by Broken HillProprietary (BHP) of Australia. Estimated recoverable reserves from Dai Hungare put at 100m barrels, downgraded from the estimate of 800m barrels whichwas current as recently as 1992. The disappointing performance of this field ledBHP to withdraw from the venture in 1996.

Production began in early 1997 at the small Bunga Kekwa field, where PetronasCarigali of Malaysia is expected to produce 50,000 b/d at peak output. Prod-uction from the field is now running at about 16,000 b/d, a little over 10% oftotal oil production.

Oil production in 1996 was 8.8m tonnes, up 16% from 1995. It is clear that theofficial goal of producing 20m tonnes by the year 2000 is unrealistic, despitethe output which is expected to come on stream in the near future from Rubyand Rang Dong. Crude oil is the country’s leading export, earning $1.35bn in1995, but imports of petroleum products amounted to $1.08bn in the sameyear. By the end of the century Vietnam is likely to become a net importer ofpetroleum, especially as there has been a decline in interest in exploration anddrilling since the peak level of drilling was reached in 1994.

Vietnam: Energy provision 29


Comparative economic indicators, 1996

0 100 200 300

South Korea

Taiwan

Indonesia

Thailand

Hong Kong

Singapore

Malaysia

Philippines

Vietnam

Brunei (a)

Gross domestic product$ bn

(a) Not available.Sources: EIU estimates; national sources.

490.1490.1490.1490.1490.1490.1490.1490.1490.1490.1490.1490.1

0 5,000 10,000 15,000 20,000

Singapore

Hong Kong

Taiwan

South Korea

Malaysia

Thailand

Philippines

Indonesia

Vietnam

Brunei (a)

Gross domestic product per head$

(a) Not available.Sources: EIU estimates; national sources.

30,85730,85730,85730,85730,85730,85730,85730,85730,85730,85730,85730,857

0 2 4 6 8 10

Philippines

Indonesia

Vietnam

Hong Kong

Thailand

South Korea

Malaysia

Taiwan

Brunei

Singapore

Consumer prices% change, year on year

Sources: EIU estimates; national sources.

0 2 4 6 8 10

Vietnam

Malaysia

Indonesia

Singapore

South Korea

Thailand

Taiwan

Philippines

Hong Kong

Brunei (a)

Gross domestic product% change, year on year

(a) Official estimate, 1995.Sources: EIU estimates; national sources.

30


The prospects for gas are more promising. Potential reserves are about 600bn cumetres, about the same as Australia’s. Until recently all the associated gas pro-duced from Vietnam’s oilfields was flared. In April 1995 a 125-km pipelineconnecting Bach Ho to a power plant near Vung Tau began operating. By theend of year the field was producing around 900,000 cu metres/day of gas. In1996 475 mw of electric-generating capacity (7% of the country’s total) came onstream at Ba Ria and Phu My, fed by this gas. More ambitious plans for exploit-ation of Vietnam’s gas through a network of pipelines and terminals have stalledbecause of differences between the foreign companies and the Vietnamese statecompany, PetroVietnam, over pricing and how the gas was to be used.

Energy balance, 1996(m tonnes oil equivalent)

Elec- Oil Gas Coal tricity Other Total

Primary supplyProduction 8.8 0.6 3.9 2.9a 7.6 23.8Imports 5.5 0.0 0.0 0.0 0.0 5.5Exports 8.8 0.0 1.5 0.0 0.0 10.3Total 5.5 0.6 2.4 2.9a 7.6 19.0

Net transformationb 0.8 0.6 0.6 1.7 0.1 3.8

Final consumption 4.7 0.0 1.8 1.2c 7.5 15.2

a Expressed as input equivalents on an assumed generating efficiency of 33%. b Transformationinput and output, plus energy industry fuel and losses. c Output basis.

Source: Energy Data Associates.

Refining capacity remainssmall but more is planned

Vietnam’s refining capacity is limited to a tiny (800 barrels/day) facility at CatHai near Ho Chi Minh City. As a result Vietnam has to import almost all of the5m-6m tonnes/year (t/y) of petroleum products that it consumes. Until 1990 itbought most of these imports at low prices from the Soviet Union. Soviet reluc-tance to subsidise the export of its products to Vietnam, combined with supplydifficulties in the former Soviet Union, forced Vietnam to look elsewhere.

More thought consequently went into expanding domestic refining capacity. Inearly 1994 France’s Total and two Taiwanese companies signed an agreement withPetroVietnam to conduct a feasibility study for a 120,000-130,000 b/d, $1.3bn oilrefinery, to be constructed in Dung Quat in central Vietnam. In September 1995Total announced that it was withdrawing from the project on the grounds that itslocation made it unfeasible, adding at least $200m to the total cost. The site is 970km north of Vung Tau, the nearest source of landed crude oil.

The government has said that it will build the refinery itself, but the financingdetails are somewhat sketchy. Both the World Bank and the ADB have said thatVietnam cannot afford it at present.

Nonetheless, the project now appears to be back on track, with an unusualseven-firm partnership comprising PetroVietnam, Conoco Asia and Stone andWebster (both of the US), the LG Group of South Korea, Petronas of Malaysia,and the Chinese Petroleum Corporation and the China Investment andDevelopment Company of Taiwan. Even if the consortium goes ahead with therefinery, it will not come into operation before 2000, and only if incentives areavailable that would make the otherwise uneconomic location viable.

32 Vietnam: Energy provision


Financial services

The banking system isnow diversified

Before 1988 the banking system consisted of the State Bank of Vietnam (whichwas both the central bank and the main commercial bank), the Bank forForeign Trade (BFT) and the Construction and Investment Bank, which imple-mented the government’s capital budget. Under the reorganisation of July1988 the State Bank’s central banking functions were strengthened and itscommercial banking role was assigned to two newly created banks, the Viet-nam Agricultural Bank (VAB) and the Vietnam Industrial and CommercialBank (VICB), catering, as their names suggest, respectively to the agriculturaland industrial-commercial sectors. In March 1989 the State Bank assumed theBFT’s foreign reserve management function.

Since 1988, but particularly since 1992, Vietnam has moved to a diversifiedsystem in which state-owned, joint-stock, joint-venture and foreign banks pro-vide services to a broader customer base. As of December 1995, in addition tofour state-owned commercial banks, there were 52 joint-stock banks, 23 foreignbank branches, four joint-venture banks and 62 foreign banks with repre-sentative offices, in addition to 68 credit co-operatives and about 900 people’scredit funds.

Despite these changes the banking system is in poor health. The clearest signof this is that liquid bank deposits in 1995 were just 16% of GDP, the same levelas in 1991. Public confidence in the banking system remains low. Only 4% ofall potential holders of accounts have actually opened one. The quality of loansmade by the state-owned banks is low, with an estimated 15% of all loans nowoverdue, representing 112% of the capital of the banking system. This helpsexplain the reluctance of the public to entrust more of their money to thesebanks. (Historical data on money supply are provided in Reference table 2.)About one-third of all credit, and half of the credit provided to state enter-prises, is extended in dollars, to borrowers hoping to take advantage of thelower interest rate on dollar loans. Since there is no hedging mechanism, thishas left many borrowers highly exposed to exchange-rate changes.

Status of loans made by the banking system(%)

1995 Jun 1997

All banksOverdue loans/bank capital 61.9 112.3Overdue loans/total loans 7.8 15.4

State-owned commercial banksOverdue loans/bank capital 7.8 15.4Overdue loans/total loans 8.9 16.4Source: World Bank, Vietnam: Deepening Reform for Growth.

The State Bank set a maximum lending rate for short-term loans of 2.1% permonth in late 1993 (an annualised rate of 28.3%), and perversely limited therate on long-term loans to 1.7% per month. These rates remained in place untillate 1995, when they began to fall sharply, partly in response to the continuedfall in inflation, but also because borrowers were turning to other and cheapersources of finance such as export credits, and leaving the banking system withexcess reserves. By the end of 1996 the short-term lending rate had fallen to

Vietnam: Financial services 33


1.25% per month (an annualised rate of 16.1%), while medium- and long-termrates had dropped to 1.35% (17.5%) and 1.55% (20.3%) respectively. Interestrates on one-year Treasury bills fell even further in 1997, to as low as 9% byOctober, as cautious banks reined in their (already modest) lending and parkedtheir funds in government securities.

The state banks still dominate the system but are losing ground fast to theforeign banks. State enterprises are still the main borrowers (holding 53% ofnon-government credit at the end of 1995 against 90% at the end of 1991) andtheir lending is still predominantly short-term because of the skewed interestrate structure (Reference table 11 includes data on bank assets, liabilities andcommercial bank credit).

Joint-stock banks tend tobe small-scale

Two decisions taken in 1995 were expected to increase the relative weight ofjoint-stock banks. One allowed foreign participation in joint-stock banks. Theother abolished the turnover tax on interest spreads, which hurt joint-stockbanks particularly hard because of their reliance on equity rather than bor-rowed funds to finance their lending. Neither seems to have had much impacton the size of these banks, most of which remain small.

The minimum capital for a rural joint-stock bank without branches was D1bn(less than $90,000) in December 1994; at the other extreme, a joint-stock bankin Ho Chi Minh City had to meet a minimum capital requirement of D70bn.The capital of the 31 joint-stock banks operating in July 1993 averaged $9m perbank. Joint-stock banks appear to be dominated either by ethnic Chinese capi-tal or (more often) by state enterprises or agencies. Many exist primarily tomeet the needs of their owners. The decision of the armed forces to set up theirown joint-stock bank, the Military Joint-Stock Bank for Commerce, in 1994was publicly explained by the need to fund the military’s growing number ofbusinesses.

Credit co-operatives andinformal lending

After 1988 there was also a mushrooming of credit co-operatives. They owedtheir growth to the failure of the state-run commercial banks to provide fundsto the burgeoning non-state sector and to the generous deposit rates they wereprepared to offer. In March 1990 it became clear that at least some of theestimated 300 co-operatives were able to offer these rates only because theywere in effect operating pyramid schemes. A general run on the credit co-opera-tives ensued, as a result of which some 2,000 small firms were reported to havegone bankrupt. The collapse of a network of credit circles (hui) in Ho Chi MinhCity in July 1993 was a more recent reminder that informal financial institu-tions were still both attractive and poorly regulated. In 1994 the governmentauthorised the setting up of centrally-supervised popular credit funds intendedto supplant sources of informal credit (there are now about 900 in existence).The World Bank estimated that in early 1995 rural households borrowed fourtimes as much informally as they did through formal institutions.

Two banking decrees, issued in October 1990 and governing both commercialbanks, credit co-operatives and other financial institutions, and the State Bank,aimed to regulate the financial system more strictly. Credit co-operatives hadto be licensed by the State Bank rather than by local People’s Committees. Thefirst decree also gave the state commercial banks greater autonomy and permit-

34 Vietnam: Financial services


ted them to compete with each other and to seek capital from sources otherthan the state. The second decree introduced new instruments through whichthe State Bank could control the banking sector, including open-market oper-ations and varying reserve requirements and discount rates. Reporting ruleswere tightened in early 1997, and a draft law is circulating which wouldstrengthen the prudential rules governing banking.

Status of foreign banks Since 1988 foreign banks have been permitted to open representative offices,and a decree on foreign bank branches and joint ventures was issued in June1991 (after the first joint-venture bank had already opened). Although therewas a total of 95 foreign representative offices, branches and joint ventures bylate 1995, their activities were initially mainly confined to trade finance, al-though recently they have provided almost half of the incremental credit inthe country. A few foreign banks have been involved in large-scale syndicatedloans to a select number of local companies.

A fragile system Thomson BankWatch downgraded Vietnam’s sovereign debt in 1997 from B-to C, saying that “the banking sector has long been characterised by weakmanagement practices, a poor legal framework and alleged widespread corrup-tion”. The move was prompted by the inability or unwillingness of Vietcom-bank, the country’s largest, to meet a deadline on about $40m of overdueletters of credit. In February 1997 the well-regarded joint-venture VP Bank wasunable to make payments on a $2.9m letter of credit to a South Korean bank,and three months later the Viet Hoa Bank faced a similar problem. A seriouscrisis has been avoided, but the State Bank is trying to bolster its reserves and totighten its oversight capacities.

Other services

Tourism numbers havepeaked

An effort since 1986 to attract foreign tourists paid off initially with a bigincrease in arrivals, but in 1997 momentum was lost and the number of visitorsactually fell slightly. Foreign visitors typically stay in Vietnam for just a fewdays, and do not return. The reasons given include the high cost of travel toVietnam, the considerable expense of visas and a lack of local attractions.

The number of visitors (a category which includes holidaymakers, businesspeople and overseas Vietnamese visiting their families) had been growing ex-tremely rapidly, from 7,000 in 1986 to around 200,000 in 1990 and an esti-mated 1.6m in 1996. The sector has become Vietnam’s fourth largestforeign-exchange earner. According to a survey undertaken in 1993, 40% of thevisitors were tourists, 25% were business travellers, and the rest came to visittheir families or for other purposes. (See Reference table 13 for further data ontourist arrivals and earnings.)

This expansion has been achieved by opening up the country (including easingvisa restrictions) and attracting foreign investment to develop hotels and re-sorts. By mid-October 1997, 271 foreign-invested hotel and tourism projectsworth $7.7bn had been approved. By early 1996 the country had about 55,000hotel rooms; more than half of the nearly 30,000 rooms of international stand-ard were built in 1995 and 1996. As a result of the building frenzy, occupancy

Vietnam: Other services 35


rates by late 1997 had fallen to about 30% in mini-hotels and 55% in inter-national hotels, and the boom in hotel construction was tapering off. Luxuryhotels, which rely on business customers for four-fifths of their traffic, havebeen particularly hard-hit by the growing availability of residential complexeswhich have siphoned off most of their long-stay guests.

The government’s target is for arrivals to rise to between 3.5 million and 3.8million by 2000, but it is now clear that this is unrealistic. The longer-termprospects are brighter, as a stronger tourist infrastructure develops and visitorsare drawn to the ten areas earmarked for tourism development (Hanoi, QuangNinh, Thua Thien-Hue, Quang Nam-Danang, Khanh Hoa, Lam Dong, Ba Ria-Vung Tau, Ho Chi Minh City and Can Tho).

In 1993 just over 30% of all international tourists came from Taiwan, 15% fromFrance and about 10% each from the United States and Japan. Domestic tour-ism is increasing by as much as 50% annually, as travel within the countrybecomes easier and incomes rise. However, few Vietnamese get an opportunityto travel abroad; just 9,545 did in 1993.

The sector’s development has been criticised (by the UN Development Pro-gramme, UNDP, among others) as unco-ordinated. In some tourist areas, suchas Do Song beach near Haiphong and Ha Long Bay in Quang Ninh province,unregulated expansion of hotel building reportedly led to serious overcapacityand environmental degradation. The destruction of the pine forests around DaLat has reportedly raised the temperature in the area, threatening to reduce itsattraction as a hill station. Partly in response to this phenomenon, in 1992control of tourism was taken out of the hands of the Ministry of Commerceand Tourism and transferred to the General Department of Vietnamese Tour-ism, which is directly accountable to the prime minister. For data on Vietnam’sfast-growing retail sector, see Reference table 12.

Production

Industry

Between 1991 and 1996 the industrial sector grew at an annual average rate of13.9%, well above the 8.9% average growth rate of GDP during the sameperiod. As a result, industry’s share of GDP has been increasing, and it has beenthe main driving force behind the economy’s recent rapid growth. The govern-ment’s intention is that the sector should retain this role: official plans to theyear 2000 envisage industrial growth of 14-15% per year. (See Reference tables14 and 15 for a breakdown of gross industrial output and main manufactures.)

36 Vietnam: Industry


The industrial sector, 1996

Industrial GDP (D bn) 61,419

Exportsa ($ m) 2,928

Employmenta (’000) 3,497

Real output growth (%) 14.4

a 1995.


Almost 50% of all industrial output comes from two main sectors, food andfoodstuffs (30%) and the production of petroleum and other fuels (16%). Onlyelectricity, chemicals, construction materials, machinery and textiles/garmentseach account for more than 5% of total industrial output. Every industrialsubsector has grown by at least 5% annually since 1990, reflecting the broadbase of industrial expansion. Several subsectors have expanded at more than20% annually, notably oil and gas, steel, chemical products (including fertiliserand rubber goods), garments, footwear and printing. The rapid growth of con-sumer goods industries, such as garments and footwear, represents a rebound,after the setback they suffered following the collapse of the Eastern bloc, asthey have found new markets in western Europe and elsewhere. An indicationof this is that light industrial goods made up 26% of exports in 1990, fell to14% in 1991 and then bounced back to 28% by 1995.

Some new subsectors, such as electronics and car and motorcycle assembly,have been emerging largely as a result of foreign direct investment (FDI), butare still small. FDI has also been making a contribution to import-substitutingindustries, ranging from heavy industries, such as steel and cement, to con-sumer goods, such as beer and cigarettes. The World Bank, among others, hascriticised this as inefficient, diverting investment and other resources intoactivities which are capital-intensive and do not create much employment.

Unlike under central planning, state investment in recent years has concen-trated more on infrastructure and less on industry. Nonetheless, until recentlythe state sector, which includes joint ventures between state-owned and foreigncompanies, grew faster than the non-state sector. This is partly attributable tothe creation of a legal framework which grants state enterprises greater auton-omy while removing the subsidies on which many of them relied for survival.However, the rapid growth of the state industrial sector has also been the resultof earlier heavy investment in such areas as oil and power generation, as well asnew (and often quite small) investments in heavy industries, such as steel andcement. These sectors are not expected to grow as rapidly over the next fewyears: during the first ten months of 1997 the output of foreign-invested indus-trial enterprises rose by 20.1% year on year, compared with 10.6% for state-owned industrial enterprises and 10.1% for private industrial concerns.

Centrally run stateenterprises

At the beginning of 1995 there were 549 centrally run state-owned industrialenterprises, a number which had remained fairly steady since about 150 suchenterprises were shut down or consolidated in the late 1980s. Centrally-runfirms tend to be large and to be concentrated in heavy industry; in 1996 theyaccounted for 45% of all industrial output, including almost all production of

Vietnam: Industry 37


oil and gas, electricity and steel. Collectively they employed about 359,000workers, about the same number as in 1990, an average 650 workers per firm.Despite this static level of employment, the output of these firms has morethan doubled since 1990, rising by an average of 16% annually.

Locally managed stateenterprises

Locally run state enterprises are owned and run by the People’s Committees atprovincial, city, district and ward levels. Their number continues to fall, from ahigh of 2,475 in 1987 to 1,409 in 1995, accounting for 23% of industrialoutput. They have a strong presence in chemical products and in food process-ing. After falling sharply in 1991, employment in this sector has begun to growagain, by about 4% per year. Between 1990 and 1996 the output of these firmsrose by slightly over 10% annually.

The non-state sector The remaining 32% of industrial output (in 1996) originated in the non-statesector where 1,648 co-operatives, 4,909 private enterprises and 493,046 house-holds produced industrial goods and handicrafts, and provided jobs for 2.86mpeople in 1995, up from 2.58m in 1990. While the number of co-operatives hasshrunk rapidly, from over 30,000 in 1988, the number of private industrialenterprises has grown very fast, from a mere 770 in 1990. These private enter-prises include sole proprietorships and limited liability or shareholding com-panies set up under the Law on Private Enterprises and the Law on Companiesof December 1990. In 1993 they accounted for just 4% of industrial output, butoutput has been rising exceptionally rapidly, in some years by more than 50%.The non-state sector dominates the metalworking and woodworking sectorsand has a strong presence in textiles and in the rapidly growing garment andfootwear sectors.

Mining and semi-processing

The resource endowmentis still not known

Vietnam is believed to have a wide array of minerals, although their preciseextent is largely undetermined. In so far as the country’s minerals have beendeveloped, mining has been concentrated in the north. Mining is poorly regu-lated, particularly in the gem-, gold- and coal-producing areas of the north.Commercially significant quantities of coal (see Energy), iron ore, apatite, chro-mite, rubies and gold are mined there. Vietnam also has reserves of manganeseand titanium ore, bauxite, tin, copper, zinc, lead, nickel, graphite and mica.

Reserves of iron ore are estimated at nearly 560m tonnes and those ofapatite (a source of phosphorus used in the manufacture of fertilisers) are putat close to 1bn tonnes. More thorough investigations have shown that theThach Khe iron ore mine, which was once believed to contain reserves of 500mtonnes, is smaller than expected; not only are its reserves closer to 300mtonnes, but the concentration of zinc in the ore is too high to be suitable forupright furnace-based metallurgy, so the mine is not commercially viable. TheSoviet Union developed Vietnam’s apatite, which is now being produced at arate of around 470,000 tonnes per year.

Bauxite and copper are regarded as having great potential. Bauxite (esti-mated reserves 4.2bn tonnes) is located in the northern mountains and in Lam

38 Vietnam: Mining and semi-processing


Dong province in the south. Copper (estimated reserves: nearly 600,000 ton-nes) has not been developed but could be produced on a significant scale.

Agriculture, forestry and fishing

Vietnam has traditionally been an agricultural economy in which rice-growinghas been the dominant form of cultivation. The sector still accounts for around70% of employment and almost one-third of exports (close to half, if forestryand aquatic products are included), although its share of GDP (at currentprices) fell below 30% in 1993 and will continue to decline as industrialisationproceeds. During the years of central planning it suffered from collectivisationand was starved of investment in favour of industry. Under this system foodwas procured at low prices from the countryside so that the industrial work-force and the bureaucracy could be fed cheaply. In 1993 agriculture’s share ofstate investment was just 18%.

Reforms have yieldedresults

Offsetting the low level of investment have been a number of reforms, amongthem Decree No 10 of April 1988, effectively dismantling the agricultural collec-tives, providing credit to the newly emerged household farm sector and openingup the marketing system. By encouraging both greater output of traditionalproducts and diversification into new ones, the reforms underpinned histori-cally high average sectoral growth rates of 4.9% in 1991-96 The reforms’ mosttrumpeted success has been the transformation of Vietnam from a net importerof rice in 1988 to the world’s third largest exporter in 1989 and second largestexporter in 1996.

Future agricultural growth will have to come from the intensification of ricecultivation, the expansion of the area under industrial crops such as tea, rub-ber, sugar and coffee, and a change in the structure of output towards high-value products such as fruit, livestock, aquatic products, vegetables and flowers.These changes are already occurring, and the area planted with industrial crops(including fruit) rose from 16.2% of the total in 1992 to 19.4% by 1995.(Reference table 16 includes historical data on the gross output of agricultureby subsector.)

Running down theco-operatives

Under Decree No. 10 the household rather than the co-operative was con-firmed as the basic unit of production. The co-operative ceased to be themonopoly supplier of all the main inputs and services provided to householdsin exchange for compulsory deliveries. Land tenure was guaranteed for a periodtypically of around 15 years. Very soon after the decree went into effect it wasreported that about half of co-operative cadres, about 200,000, had lost theirjobs, and in the south 70-80% of co-operatives had effectively ceased to func-tion. At the same time the new rules on land tenure gave rise to a rash ofdisputes throughout the country.

Government influencedeclines

The government retains some influence over prices by selling inputs for ricethrough the co-operatives at a fixed barter rate. However, since Decree No 10farmers have been free to decide which inputs and services they purchase fromthe co-operatives, limiting this form of leverage. This appears to be especially

Vietnam: Agriculture, forestry and fishing 39


true in the south, where farmers have increasingly turned to the free market forinputs and have used the surpluses they have begun to generate to buildirrigation works, buy machinery and livestock, and gain access to new tech-nology and plant varieties on their own account. The government retains thepower to intervene directly in the market through buffer-stock operations.

Agriculture’s terms oftrade improve and then

worsen

There is some evidence that, with the shift to a free market in agriculturalproduce, the terms of trade initially shifted in favour of the sector. Certainlywith the co-operatives no longer in a position to extract rents from theirmembers, incomes rose, a finding confirmed by the 1993 Living StandardsMeasurement Survey.

These gains appear to have since been eroded—for three reasons. First, theexchange rate has stabilised in nominal terms and appreciated in real terms(until very recently), and although a given dollar price of rice exports still givesthe same number of dong, the purchasing power of these dong has fallen as aresult of domestic inflation. Second, the government has reduced the numberof firms, all state-owned, that have the right to export rice. In some areas theremaining firms have monopoly power, and have pushed down the pricereceived by farmers. In 1997 the government did permit a private growers’consortium to export rice, suggesting that the system may be becoming moreflexible. Third, the government has promoted the consolidation of the rubberand coffee industries, which has also given greater monopoly power to buyers,at the expense of producers.

Despite land scarcity sownarea has risen—

Cultivated land is scarce: only about 22% of the total land area is devoted toagriculture, and there is only 0.1 ha of land for each person, one of the lowestrates in the world. The land that is cultivated is also unequally distributedgeographically. The country’s two rice-producing deltas, the Red River Deltaand the Mekong Delta, cover only 17% of Vietnam’s land area but contain overhalf the total cultivated land. Some 85% of cultivated area is under annualcrops, 65% under rice. Upland and industrial crops cover approximately 19%of cultivated area.

The scope for reclaiming land for agricultural purposes is limited, and existsmainly in the south. Estimates of the potential for expanding cultivated landvary between around 900,000 ha and 1.4m ha. However, much of this areacontains land whose soils are degraded by erosion, often associated with defor-estation or (in the deltas) by saline or acid-sulphate conditions. Meanwhileabout 70,000 ha per year of cultivated land are lost to agriculture owing topopulation pressures, soil exhaustion and urban encroachment.

Against this background it is surprising that the area of land sown to crops hasactually increased by 3% per year since 1991. About one-third of the increaserepresents the expanded area under industrial crops such as cotton, sugar,rubber, tea and coffee; another third comes from additional paddy land whichhas become available as a result of investments in irrigation; and most of theremainder is attributable to increased double- and triple-cropping.

—as have yields Two important means of increasing output are by raising cropping intensityand by boosting yields. In the early 1990s cropping intensities (sown area

40 Vietnam: Agriculture, forestry and fishing


divided by cultivated area) were already reasonably high, at around 140%(1.8 crops per year in the Red River Delta, 1.7 in central Vietnam and 1.3 in thesouth). About 50% of all paddy was double-cropped but only 3% was triple-cropped. A target was set of raising cropping intensities in the south to1.4 crops per year by 1995 and to 1.6 by 2000.

Rice yields have just about doubled since the disastrous year of 1978 when theywere 1.79 tonnes/ha. In 1996 they were 3.76 tonnes/ha. They remain low byregional standards: in 1993 Indonesia’s yields were 4.4 tonnes/ha and China’s6 tonnes/ha.

Yield growth is less hampered by shortages of fertiliser, pesticides and otherinputs than it used to be. Consumption of chemical fertiliser per croppedhectare rose from under 40 kg in 1982 to 135 kg in 1992, a higher rate than inIndonesia but well below that in countries like China and the Koreas whosemanpower/hectarage ratios are comparable with Vietnam’s. Less tractable is thethreat of natural disasters, in particular typhoons and storms (to which the northand centre are regularly subjected) and floods (which tend to affect the MekongDelta). (Reference table 17 provides historical data on food crops output.)

Only recently has outputof annual industrial crops

begun to soar

The output of most industrial crops remained stagnant until about 1994, whendramatic increases were seen in the output of sugar-cane, groundnuts andsoybeans. Output of the minor crops—jute, rush, and cotton—has been moreor less stagnant (see Reference tables 18 and 19 for production and yields).Production of sugar-cane rose by 23% annually between 1993 and 1996.

Perennial industrial crops The area planted with perennial industrial crops expanded rapidly during the1980s. Assistance from the Council for Mutual Economic Assistance (CMEA,Comecon) countries, increasingly attractive prices for cultivators, as well as thegovernment’s policy of promoting tree crop production in the highlands toease the resettlement in these areas of people from the lowlands, helped tostimulate this expansion. The crops showing most increase have been coffeeand rubber.

Coffee: The area planted to coffee increased more than fivefold between 1985and 1996, from 44,700 ha to 254,000 ha. In the same period output increasedmore than 20 times, from 12,300 tonnes to 253,000 tonnes. Almost all thiscoffee is exported, bringing in about 5% of Vietnam’s total export earnings. In1997 Vietnam became the largest coffee exporter in the region and the fourthlargest in the world. Its yields are among the highest anywhere, at 1 tonne/hacompared with a world average of about 0.5 tonnes/ha. Investment in thesector remains strong, both to bring more land into cultivation and to improvethe processing and handling of beans.

Rubber cultivation has benefited both from an expansion in cultivated area,from 180,000 ha in 1985 to 303,000 ha by 1996, and from the replanting ofland with new high-yielding varieties, often with Malaysian and Taiwaneseassistance. Much of the existing rubber land was originally planted duringFrench colonial times and yields were very low. Yields have now risen remark-ably, from 0.27 tonnes/ha in 1985 to 0.48 tonnes/ha in 1995. The quality of



processing, particularly of latex, has improved and has helped Vietnam expandits export markets for rubber.

The livestock sector The livestock sector was neglected until recently. The share of state investmentin livestock breeding has been low. Animal husbandry has tended to be asideline activity carried out by farming families and the methods of productionare traditional. Moreover, there have been shortages of high-quality animalfeed, and breeders have depended on broken rice, rice straw and the top stemsof sugar cane to feed their livestock.

There has been some movement towards modernising methods since 1989. Inthat year the Animal Breeding and Food Production Company was set up. Itruns five animal food-processing factories, three cattle breeding farms andseveral artificial insemination centres, and a number of joint ventures for theproduction of animal feed and meat processing have been approved. Maize andsweet potato production is being developed partly to increase supplies of feed.

Between 1991 and 1995 the number of pigs rose by 6.3% annually, and thequality of pig meat improved. Poultry output also rose rapidly, by 6.8% peryear during the same period. These increases are in large measure in responseto increased demand for meat from a population which is growing (by about2% per year) and becoming more affluent. Consumption of meat per head ofpopulation remains low, however. (See Reference table 20 for data on livestocknumbers.) While the number of horses has fallen, and buffalo and cattle pop-ulations have risen slowly, there has been a rapid growth in the number ofsheep and goats, from 372,000 in 1989 to 513,000 in 1995, with most of theexpansion over the past two or three years.

Forestry Vietnam’s forested area is officially estimated at 10m ha, and a slightly largerarea is deforested. Deforestation is continuing at a rate of about 200,000 ha peryear. According to one set of official estimates, the country’s forest cover de-clined from 44% of the land area in 1943 to 29% in 1979 and 23% in 1984 andmay now have fallen below 20%. During the war with the United States anestimated 5% of Vietnam’s forests was completely destroyed and 50% wasseriously damaged (a defoliant, Agent Orange, was sprayed over an estimated1.7m ha, much of which was forested).

The main causes of deforestation since the war have been population pressure,logging and the clearing of forests for agricultural purposes, including theirburning by “slash-and-burn” farmers. Annual timber production was estimatedat 2.8m cu metres in 1995 and 1996, of which almost 75% came from private-sector firms and households. Broken down by value, about two-fifths of thewood extracted was for firewood, one-third consisted of logs and the remainderwas bamboo and rattan.

The government has an ambitious target of replanting 200,000 ha/year of newforest to cope with what a government report has described as “the mostserious challenge since reunification”. In the 1980s afforestation took place atan annual average rate of 36,000 ha, according to the World ResourcesInstitute. Official government statistics indicate that 165,000 ha were subject

42 Vietnam: Agriculture, forestry and fishing


to “concentrated afforestation” in 1995, and that on average 109,000 ha wereafforested during 1990-95.

A drive to slowdeforestation is under way

Measures have been taken to slow the process of deforestation. Forest protec-tion legislation was passed in 1992, including a ban on the export of logs andlow-value-added timber products and the designation of some forested areas asprotected national parks. In 1993, faced with evidence that these regulationswere being flouted, the prime minister issued a blanket ban on the export of alltimber products as a temporary measure while the forestry ministry drew up anew list of products and types of wood that could be exported. However, facingmounting opposition in the National Assembly and from important vestedinterests such as the military, which is heavily involved in the timber trade, theprime minister later relaxed the ban. According to official figures, exports ofwood and wood products (including furniture) fell from 780,000 cu metres in1991 to 40,000 cu metres in 1994.

At current rates of deforestation Vietnam will be without forests in less than 50years’ time. Further significant deforestation will have serious repercussions foragriculture generally, particularly in the deltas, which depend on the forests forflood control and for soil and water management.

It will also remove a major source of fuel, foreign exchange and such key itemsas building materials. About 90% of household energy use relies on vegetablesources, of which about 80% is fuelwood. According to World Bank estimates,consumption of energy from vegetable sources amounted to 32m tonnes ofwood equivalent (12m tonnes of oil equivalent). The sustainable annual yieldof biomass is estimated to be much higher, at 80m tonnes of wood equivalent.

Forested area, 1994(’000 ha; year-end)

Natural forest 9,082

Afforested area 1,047

Deforested area 11,175

Total forest area 21,304Source: General Statistical Office, Statistical Yearbook.

Fisheries expansion A coastline of over 3,000 km and an extensive network of rivers, canals, lakesand ponds give Vietnam abundant aquaculture resources. Exploitation of theseresources has expanded at a modest pace since 1990, with output of fish andshrimp increasing by 3.5% annually, to reach close to 1m tonnes by 1995. (SeeReference table 21 for historical data on fisheries output.) Output of shrimpand farm-raised fish has grown more quickly than this, and has helped fuel arapid increase in fishery exports, which rose in value from $239m in 1990 to$651m by 1996, making them the country’s fourth most valuable export. Thetarget is to raise export earnings to $1bn by 2000.

This expansion has placed stress on both off- and onshore waters. The mangroveswamps of the far south, where much of the country’s prawns are bred, are indanger (see Natural resources and the environment). The limited range ofVietnam’s fishing fleet means that it tends to operate in fishing grounds close tothe shore. To increase the share of fish that are caught in deep-sea waters thegovernment is offering credits to local fishermen and trying to attract more



foreign investment in the sector. As of late 1996 there were 40 foreign-investedfisheries projects valued at $129m, including processing plants; although stillmodest, these numbers represent a doubling over the previous year.

Construction

With an annual growth rate of 15.3% between 1990 and 1995, the construc-tion sector has grown even more rapidly than industry. The sector accountedfor 7% of GDP in 1995, up from 4% in 1991. The production of constructionmaterials such as cement and bricks has risen even faster.

Large-scale projects arestill important—

The pattern of Soviet assistance stressed a small number of large-scale projects,such as the Bim Son cement works and the gigantic Hoa Binh hydroelectricproject. Such projects still absorb a large proportion of the small state capitalbudget. Thus, in 1993 the north-south powerline absorbed as much as two-thirds of the $800m capital budget. In recent years these large-scale projectshave been supplemented by a wave of hotel, residential and office construc-tion, often foreign-financed and built.

Local construction activities are well-developed and there has been a great dealof housebuilding in rural areas over the past few years. Such ventures arealmost entirely locally financed and organised, often relying on pilfering fromthe state for such inputs as coal for brick kilns. In urban areas the substantialhousing stock left from the French and US periods is badly overcrowded anddecayed, and the mass housing projects based on East European designs sur-rounding such cities as Hanoi are of poor quality. War destruction, rapid ur-banisation and low investment have reduced the average floor space perinhabitant in Hanoi to around 3 sq metres. In Ho Chi Minh City the situationis only slightly better, at 5 sq metres per inhabitant.

—as are industrial zones A popular destination for foreign investment has been industrial and exportprocessing zones. By September 1997 there were 34 such zones, with a commit-ted investment of $4.2bn (14% of all investment commitments). Despite theirpopularity, only 11% of the land available in the zones had been rented out bymid-1997, so developers are presumably anticipating a surge in investment infactories which will make use of the zones.

The state’s role inresidential housing has

declined

The state’s role in providing residential housing has been declining: in 1986-90it built around 173,000 sq metres per year of such housing; in 1991-93 thefigure halved, to about 86,500 sq metres. There has been a correspondingincrease in the amount of private capital invested in housing, which by 1992,according to incomplete official data, had increased to nearly 22 times theamount invested in housing through the state budget.

44 Vietnam: Construction


The external sector

Merchandise trade

Foreign trade, 1996($ m)

Merchandise exports 7,330

Merchandise imports –10,481

Trade balance –3,150Source: IMF.

Until the reforms of 1988-89 exports covered only 30-50% of imports. TheUS-led embargoes on trade and finance restricted the opportunities for tradeoutside the Council for Mutual Economic Assistance (CMEA, Comecon) bloc,while stagnation in the CMEA countries limited growth in that market.

Until the reform process got under way in 1988 there was a bias against foreigntrade. The general orientation of economic policy under central planning wasinward-looking. The overvaluation of the dong, the requirements imposed bythe state plan, the attractions for state enterprises of selling on the domesticopen market, tight regulation of foreign exchange and the monopoly of statetrading companies all discouraged exports.

Reforms have led to asurge in exports—

A series of adjustments to the official exchange rate brought it into line withthe free-market rate in 1989. This ended the need for the quantitative controlson imports and the export subsidies that the overvalued dong had demanded.Measures were also taken to further the decentralisation of foreign trade whichhad begun, somewhat tentatively, as early as 1981. The rules on the retentionof foreign exchange were relaxed. These reforms led to a surge of exports to theconvertible area. In 1989 they increased by 154% compared with 1988, puttingthe trade balance with the convertible area into surplus. During 1991-1996 thedollar value of exports grew at an annual average rate of 29%. In addition to theeffect of the foreign trade reforms the emergence of Vietnam as a major rice andcoffee exporter, rising oil exports and growing access to new markets for itstextiles and garments, as well as for traditional commodities such as rubber,coffee and seafood, have helped boost earnings. Vietnam now supplies 10% ofthe footwear imported into the EU.

—but the absoluteamounts are still small

Recorded merchandise exports now represent about 30% of GDP, but in 1996exports per head were worth only $99, one measure of how far Vietnam isbehind such countries as Thailand ($905 per head in 1996) and Indonesia($255 per head). Exports of light manufactures were worth $28 per head in1996, reflecting the fact that commodities (oil, rice, rubber, coffee, and marineproducts) still dominate Vietnam’s exports (see Reference table 22 for data onmain exports).

Import liberalisation Since 1992, when the trade account was in near-balance at a time of austerity,a pattern has emerged in which strong export growth is outpaced by an evenstronger, largely investment-related import surge. Since the economy is grow-

Vietnam: Merchandise trade 45


ing fast and a somewhat more liberal import regime is in place, a pattern oflarge current-account deficits is to be expected, but the large $3.2bn tradedeficit of 1996 (13.5% of GDP) came as a surprise to many. The governmentreacted by restricting trade financing, temporarily banning a range of importsand raising tariff rates, in order to reduce the deficit quickly to a more manage-able level. It has succeeded in this, but at the cost of injecting more uncertaintyinto the trade regime.

Smuggling remains rampant, partly because of a system of import licensingwhich favours state-owned companies and helps restrain imports, and partlybecause of the high and variable tax rates on imports. In 1994 tax collections atthe border represented an estimated 19% of the value of recorded imports.Smuggling has increased greatly since the Cambodian and Chinese borderswere opened up in the late 1980s. An official estimate put the value of smug-gled goods in the first nine months of 1995 at $1.4bn, about 17% of tradeturnover, but other figures suggest that this may understate its true extent (seeReference table 23 for data on main imports).

Main trading partners Vietnam’s main trading partners are Japan, Singapore, Hong Kong, SouthKorea, Taiwan, and China. Exports to Japan, with which Vietnam enjoys asurplus, have been growing rapidly mainly owing to rising sales of crude oil.Singapore, which is Vietnam’s largest source of imports (although many ofthem are transshipped), overtook Japan as Vietnam’s leading trading partner in1991, and the two countries have been vying for the top position ever since.

Main trading partners, 1995(% of total)

Exports to: Imports from:

East Asian NICsa 35 Japan 11

Japan 27 East Asian NICsa 57

Western Europe 13 Western Europe 11

China 7 China 4

a Newly industrialised countries—Singapore, Malaysia, Hong Kong, South Korea, Taiwan, Thailand,Indonesia.

Source: General Statistical Office, Statistical Yearbook 1995.

Membership ofinternational economic

organisations

Vietnam’s “multidirectional” diplomacy has been quite explicitly based on itsperception of growing global economic interdependence. Its integration intothe regional and global economy is being formalised through membership ofinternational economic organisations. The most important of these is theAssociation of South-East Asian Nations (ASEAN), which Vietnam joined inJuly 1995. The Asia-Pacific Economic Co-operation (APEC) forum has agreed inprinciple to admit Vietnam. Vietnam has applied for membership of the WorldTrade Organisation (WTO), in whose precursor, the GATT, Vietnam gainedobserver status in July 1994. Its admission is unlikely to take place for a fewmore years.

Within the framework of the ASEAN Free Trade Area (AFTA) Vietnam is com-mitted to cut tariffs on imports from the other ASEAN countries. It is not,however, expected to catch up with the six countries, which joined ASEANbefore Vietnam and which are committed to reducing their common external

46 Vietnam: Merchandise trade


preferential tariffs to 5% or less by 2003. Instead it has been allowed until 2006to come into line with these members of the association. It hopes that member-ship of ASEAN will strengthen its already extensive trade and investment linkswith the individual ASEAN countries.

Despite normalisation of diplomatic relations with the United States in July1995, economic normalisation, involving such benefits as Most FavouredNation (MFN) status, US Exim Bank concessional credits and Overseas PrivateInvestment Corporation (OPIC) guarantees, is some way off. The economicconsequences of full normalisation with the US are potentially enormous, par-ticularly for Vietnam’s prospects as a low-cost manufacturer of such items astextiles and shoes. In July 1996 Vietnam reached an agreement with the EU onquota arrangements, which allowed its exports to the EU to rise to $420m in1996. A new agreement, covering the period 1998-2002 was agreed to in late1997, and will open up Vietnam’s market to EU goods; in return Vietnam will beallowed to increase its exports of textiles and garments to the EU by about 30%.

Invisibles and the current account

Current account, 1996($ m)

Current-account balance –2,482 Trade balance –3,150 Services & transfers balance 668

Capital-account balance 1,908 of which: short-term capital (net) 285 foreign direct investment (loans and equity) 1,838Source: World Bank, Vietnam: Deepening Reform for Growth.

The current-accountdeficit is high

The merchandise trade deficit has been the main reason for Vietnam’s consis-tent current-account deficits (see Reference table 24 for balance-of-paymentsdata). Vietnam’s current-account deficit was a high 10.7% of GDP in 1996—thanks to a surge in aid flows and foreign direct investment (FDI), an increas-ingly overvalued dong, and suddenly expanded access to borrowing on worldmarkets. The deficit is expected to remain over 5%, even assuming that GDPgrows at the rates projected by the government. The government takes solacefrom the fact that the deficit is a healthy sign of a booming economy and quiteappropriate at Vietnam’s stage of development, as those willing to finance itimplicitly acknowledge. However there is growing concern that the current-account deficits actually being recorded are not sustainable.

The importance of privateand official transfers

Offsetting the trade deficit to some degree is the positive balance on servicesand transfers. This includes the substantial earnings from tourism, from ship-ping and by Vietnamese workers abroad; foreign grant aid of about $576m in1996 (about 2.5% of GDP); and remittances from overseas Vietnamese, whichwere officially put at $474m in 1995 and are probably twice as much in fact. Onthe other hand, Vietnam is a net payer of investment income, as foreigncompanies repatriate profits from their ventures in the country.

Vietnam: Invisibles and the current account 47


Capital flows and foreign debt

FDI is an increasinglyimportant financing

source

Although Vietnam has consistently run current-account deficits, its method offinancing them has changed since the collapse of the Eastern bloc forced it toopen up its economy to the wider world. Until 1989 Vietnam’s chroniccurrent-account deficits with the non-convertible area were balanced by anequivalent surplus on the capital account derived from inflows of Eastern blocaid. Overall balance-of-payments deficits with the convertible area were fi-nanced chiefly by the accumulation of arrears. Since then, although arrearscontinued to mount until recently, the main contributions to the capital acc-ount have increasingly come from FDI and overseas development assistance(ODA), despite teething problems in the implementation of both.

In 1996 inflows of FDI are estimated to have reached $1.84bn; somewhatsurprisingly the World Bank claims that this level is lower than the figure($2.2bn) for 1995. Total FDI inflows since the foreign investment law waspassed in 1988 come to about $7bn, or almost 30% of the total value ofinvestment commitments. In terms of both value and number of approvedprojects, just five countries (Singapore, Taiwan, Hong Kong, Japan and SouthKorea) account for around 66% of the total, and the EU accounts for another10%. Singapore heads the list in terms of cumulative value. Since 28% of theFDI commitments come from other ASEAN countries, Vietnam is likely to feelthe effect of the financial and currency crises afflicting the region, as FDIinflows from this source slow down over the next year or two.

Aid commitments arerunning ahead of

disbursements

With the drying up of Eastern bloc aid and the slow resumption of Western aidin deference to the United States, Vietnam has for most of the 1990s been ableto dispose of only small amounts of foreign aid. Two events, the resumption ofJapanese lending in November 1992 and the US government’s decision to dropits objections to multilateral lending in July 1993, have changed the atmos-phere without so far opening the aid floodgates. The problem is largely on theVietnamese side, with its lack of domestic counterpart finance and unfamiliar-ity with project procedures, and commitments are now running well ahead ofdisbursements. The donors have been generous in their pledges of aid, offering$2.4bn at their annual meeting in December 1996. The World Bank argues thata similar level of aid commitments is called for again in 1997, in order tomaintain the flow of aid disbursements over the years to come. The great bulkof aid is in the form of loans, only some of which are on highly favourableterms. The largest single donor is Japan, which has promised one-third of allthe aid committed to the country since 1992. (See Reference table 25 for dataon official development assistance in 1992-96.)

Foreign debt is still in flux According to the IMF, at the end of 1995 Vietnam’s medium- and long-termpublic and publicly guaranteed international debt stood at $4.5bn in convert-ible currency and about $4.4bn in non-convertible currency, mainly roubles.The cost of servicing the debt is estimated by the IMF to have amounted to 7%of export earnings (the debt-service ratio) and 11% of budget receipts in 1996.These are manageable levels, but in practice Vietnam has been allowing arrears toaccumulate and so its actual debt-service ratio was close to 6% in 1995. The cost ofdebt servicing is expected to rise significantly over the next several years as a result

48 Vietnam: Capital flows and foreign debt


of large inflows of foreign loans (to both the government and state-ownedenterprises). Vietnam is likely to be eligible for some further debt reductionunder the World Bank/IMF Highly Indebted Developing Country initiative,but this is likely to take three to four years to come to fruition.

Vietnam has followed a sequential approach to settling its debt problems. Sincethe end of 1993 it has renegotiated its debt with its bilateral and multilateralhard-currency creditors, through a mixture of reschedulings and an estimated$3.8bn of write-offs. It then negotiated settlements of its rouble debts to Po-land, Germany (on behalf of the former East Germany), Hungary and theCzech Republic, in which it seems to have settled on an exchange rate rangingfrom Rb5.5:$1 to Rb11:$1. In 1996 it reached an agreement with its LondonClub commercial bank creditors which would in effect write off about half ofVietnam’s true obligations to this group. However, disagreements over theprecise terms have delayed implementation of the agreement. The remaininguncertainty is about the terms of repayment of the outstanding Rb10.6bn owedto the former Soviet Union and now assumed by Russia. If an exchange rate ofabout Rb6:$1 is used, this would be valued at around $1.8bn, but Russia hasbeen seeking to have it repaid at the much higher rate of Rb0.56:$1, whichwould raise the value of the outstanding debt to an insupportable $18.9bn.(Reference table 26 contains World Bank data on Vietnam’s external debt; therouble component is converted at the Rb0.56:$1 rate, giving an unrealisticallyhigh value for the total debt stock.)

A final resolution of the outstanding debt issues would open the way forVietnam to borrow on world capital markets, although the World Bank hasstrongly recommended against this, largely on the grounds that Vietnam al-ready has access to plenty of foreign capital in the form of aid and FDI.

Foreign reserves and the exchange rate

A “managed float” hasbeen maintained—

After a number of steep devaluations in the mid- to late 1980s that brought thetwo rates more closely into line, in March 1989 the official and market exchangerates were unified. Except for a brief period in the second half of 1991 when thedong plummeted under the pressure of inflationary expectations, the State Bankof Vietnam (the central bank) was able to maintain a “managed float” aimedbroadly at keeping the nominal D:$ exchange rate stable. After stabilising in early1992, the dong has moved in the D10,800-D11,200:$1 range until recently.

By keeping the D:$ exchange rate stable, despite significant domestic inflation,the dong became somewhat overvalued. In late 1996 the State Bank widenedthe trading band from 1% to 5%, and began to allow the central (“pivot”) rateto depreciate slowly. The band was widened to 10% in October 1997 when theofficial and black market rates began to diverge, and the dong immediately fellto D12,293:$1. Around the same time the street price fell to D13,500:$1, a level23% below the exchange rate of a year earlier. In part the dong depreciationwas required after the sharp depreciations in some of Vietnam’s main compet-itor countries, including Indonesia and Thailand. The State Bank is hoping toallow the dong to depreciate enough to maintain Vietnam’s competitiveness,but not so much as to trigger high rates of inflation again.

Vietnam: Foreign reserves and the exchange rate 49


Foreign reserves, 1996(year-end; includes gold at national valuation)

Total Per head($ m) ($)

Vietnam 1,847 25

Indonesia 18,251 93

Philippines 10,030 139

Thailand 37,731 628Sources: World Bank, Vietnam: Fiscal Decentralisation and the Delivery of Rural Services; IMF, International Financial Statistics.

—helped by a build-up ofreserves

In August 1991 the State Bank established foreign currency centres in Hanoiand Ho Chi Minh City. An interbank foreign currency market began operationsin October 1994. The State Bank may intervene on any given day through itsForeign Currency Regulation Fund to prevent the rate moving outside thetrading band. It has been able to intervene successfully partly because of thebuild-up of the reserves in recent years, but when the reserves started drainingaway in mid-1997, the State Bank began to restrict access to foreign exchange,in an attempt to rebuild them. By late 1997 they were back up to about $2.3bn,enough to provide 2.7 months of import cover. (Reference table 27 gives figuresfor foreign reserves.)

Dollars and gold are still widely used in the free market. The government’sattempts to discourage their use include a decree issued in October 1994 regul-ating the type of transactions in which dollars may be employed. The dong isnot freely convertible, although there is an active kerb market. Vietnam hascommitted itself to meeting the partial convertibility conditions of the IMF’sArticle VIII by the end of the period of the current enhanced structural adjust-ment facility (ESAF) in 1998. (Exchange rates are given in Reference table 28.)

50 Vietnam: Foreign reserves and the exchange rate


Appendices

Sources of information

National statistical sources Chamber of Commerce and Industry of the Socialist Republic of Vietnam,Vietnam Business Handbook, 1991

General Statistical Office, Industrial Data 1989-93, Hanoi, 1994

General Statistical Office, Population Census 1989, Hanoi, 1991

General Statistical Office, Statistical Data of Agriculture, Forestry and Fisheries,1985-93, Hanoi, 1994

Socialist Republic of Vietnam, Public Investment Programme 1996-2000, Hanoi,June 1996.

Statistical Publishing House, The Population of Vietnam, 1992

The Statistical Yearbook (Nien Giam Thong Ke) was published in English in 1990for the first time as Statistical Data of the Socialist Republic of Vietnam, 1976-89.The latest edition is Statistical Publishing House, Statistical Yearbook 1996, 1997

International statisticalsources

Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries(annual)

Bank for International Settlements, International Banking and Financial MarketDevelopments (quarterly)

IMF, Direction of Trade Statistics (annual)

IMF, International Financial Statistics (monthly)

International Institute for Strategic Studies, Military Balance (annual)

OECD, Financing and External Debt of Developing Countries (annual)

OECD, External Debt Statistics.

OECD, Geographical Distribution of Financial Flows to Aid Recipients (annual),

UN, World Investment Directory: Asia and the Pacific (annual)

World Bank, Global Development Finance (annual)

World Bank, Social Indicators of Development (annual)

World Bank, Trends in Developing Countries (annual)

World Bank, World Development Report (annual)

World Bank, World Tables (annual)

Select bibliography Melanie Beresford, Vietnam: Politics, Economics and Society, London, 1988

The Constitutions of Vietnam, Hanoi, 1995

Nguyen Sinh Cuc, Agriculture of Vietnam, Hanoi, 1995

Vietnam: Sources of information 51


Dang Duc Dam, Vietnam’s Economy 1986-95, Hanoi, 1995

Nguyen Trong Dieu, Geography of Vietnam, Hanoi, 1995

William J Duiker, Vietnam: Revolution in Transition (2nd edition), Westview,Boulder, 1995

Economist Intelligence Unit, Vietnam Country Forecast (quarterly)

Economist Intelligence Unit, Vietnam Country Report (quarterly)

Economist Intelligence Unit, Vietnam Country Risk Service (quarterly)

Adam Fforde and Stefan de Vylder, From Plan to Market: The Economic Transitionin Vietnam, Westview, Boulder, 1996

Adam Fforde and Anthony Goldstone, Vietnam to 2005: Advancing on All Fronts,Economist Intelligence Unit, London, 1995

Dean K Forbes, Terence H Hull, David G Marr and Brian Brogan (eds), Doi Moi:Vietnam’s Renovation Policy and Performance, Canberra, 1994

Murray Hiebert, Vietnam Notebook, Review Publishing, Hong Kong, 1993

Institute of Economics/National Centre for Social and Human Sciences, Viet-nam’s Socio-Economic Development (quarterly)

Benedict J Tria Kerkvliet and Doug J Porter (eds.), Vietnam’s Rural Transforma-tion, Westview/ISEAS, 1995

Tran Hoang Kim, Economy of Vietnam, Reviews and Statistics, Statistical Publish-ing House, Hanoi, 1992

Tran Hoang Kim and Le Thu, Economic Sectors in Vietnam, Statistical PublishingHouse, 1992

Tran Thi Van Anh and Le Ngoc Hung, Women and doi moi in Vietnam, WomanPublishing House, Hanoi, 1997

Selection of Fundamental Laws and Regulations of Vietnam, Hanoi, 1995

State Planning Committee and UN Development Programme (UNDP), Reporton the Economy of Vietnam, 1990

Carlyle A Thayer and David G Marr (eds), Vietnam and the Rule of Law, Can-berra, 1993

Nguyen Khac Vien, Vietnam, A Long History, Hanoi, 1987

UNDP, Vietnam: Report on Poverty, Hanoi, 1995

UNICEF, Vietnam: Children and Women—A Situation Analysis, Hanoi 1994

Vietnam Business Journal (weekly in English), New York

Vietnam Courier (weekly in English), Hanoi

Vietnam Economic Times (weekly in Vietnamese; monthly in English), Hanoi

Vietnam Investment Review (weekly in English), Hanoi

World Bank, Vietnam: Economic Report, 1990

52 Vietnam: Sources of information


World Bank, Vietnam: Population, Health and Nutrition Sector Review, 1992

World Bank, Vietnam: Energy Sector Investment and Policy Review, 1993

World Bank, Vietnam: Transition to the Market, 1993

World Bank, Vietnam: Public Sector Management and Private Sector Incentives,1994

World Bank, Vietnam: Financial Sector Review, 1995

World Bank, Vietnam: Poverty Assessment and Strategy, 1995

World Bank, Vietnam: Environmental Programme and Policy Priorities for a SocialistEconomy in Transition, 1995

World Bank, Vietnam: Economic Report on Industrialization and Industrial Policy,1995

World Bank, Vietnam: Education Financing Sector Study, 1996

World Bank, Vietnam: Fiscal Decentralization and the Delivery of Rural Services,1996

World Bank, Vietnam: Deepening Reform for Growth, 1997

Reference tables

Reference table 1

Government finances(D bn unless otherwise indicated)

1992 1993 1994 1995 1996

Total revenue 21,023 30,696 42,125 53,370 60,920 Domestic 20,175 29,679 40,925 51,750 59,320 Foreign grants 848 1,017 1,200 1,620 1,600

Total expenditure 22,902 36,936 43,930 54,589 61,430

Balance –1,879 –6,240 –1,805 –1,219 –510

FinancingDomestic –794 2,514 1,565 2,709 560Foreign loans 2,673 3,726 240 –1,490 –50

Memorandum items (% of GDP)Revenue 19.0 22.5 24.7 23.9 23.6 of which: transfers from state enterprises 10.8 11.2 12.1 9.8 9.7Total expenditure 20.7 27.0 25.8 24.5 23.8 of which: capital expenditure 5.8 7.0 6.9 5.4 6.0Deficit 1.7 4.6 1.1 0.5 0.2Public savings 4.1 2.4 5.8 4.9 5.8Sources: World Bank, Vietnam: Deepening Reform for Growth.

Vietnam: Reference tables 53


Reference table 2

Money supply(D bn unless otherwise indicated; end-period)

1992 1993 1994 1995 1996

Net foreign assets 10,593 6,231 6,940 10,851 14,200

Net domestic assets 16,550 26,055 36,066 41,871 50,400 of which: domestic credit 17,122 27,079 37,951 47,071 55,300

Currency outside banks 6,419 10,579 14,218 18,624 19,170

Total liquidity (M2) 27,144 32,288 43,006 52,710 64,700

Memorandum items (% of GDP)Currency in circulation 9.6 10.4 10.9 8.6 8.7M2 24.6 23.6 25.3 23.7 25.0Domestic credit 15.5 19.8 22.3 21.1 21.4Sources: World Bank, Vietnam: Deepening Reform for Growth.

Reference table 3

Gross domestic product

1992 1993 1994 1995 1996

Total (D bn)At current prices 110,535 136,571 170,258 222,840 258,609At constant (1989) prices 33,991 36,736 39,982 43,797 47,888Real change (%) 8.6 8.1 8.8 9.5 9.3

Per head (D ’000)At current prices 1,593 1,924 2,348 3,013 3,432At constant (1989) prices 490 517 552 592 635Real change (%) 6.2 5.6 6.6 7.3 7.3Source: General Statistical Office, Statistical Yearbook.

Reference table 4

Gross domestic product by expenditure(% of total)

1992 1993 1994 1995 1996

Private consumption 78.7 76.1 68.6 66.7 70.3

Government consumption 7.6 9.8 14.7 14.3 13.7

National savings 13.7 14.1 16.6 19.0 16.0

Total investment 17.6 24.9 25.5 27.1 27.9

Exports of goods & services 31.9 32.9 34.5 35.8 n/a

Imports of goods & services –36.0 –37.3 –42.9 –46.6 n/a

Statistical discrepancy 0.2 –1.4 1.5 1.2 1.9

GDP 100.0 100.0 100.0 100.0 100.0Sources: Central Institute for Economic Management; General Statistical Office, Statistical Yearbook.

54 Vietnam: Reference tables


Reference table 5

Gross domestic product by sector(D bn at current prices; % of total in brackets)

1992 1993 1994 1995 1996

Agriculture, forestry & fisheries 37,513 40,796 48,865 63,219 70,334 (33.9) (29.9) (28.7) (28.4) (27.2)

Industry 23,956 29,371 37,535 50,912 61,419 (21.7) (21.5) (22.0) (22.8) (23.7)

Construction 6,179 10,101 12,946 15,892 18,092 (5.6) (7.4) (7.6) (7.1) (7.0)

Transport, postal services & telecommunications 4,662 6,036 6,924 8,747 10,634 (4.2) (4.4) (4.1) (3.9) (4.1)

Trade 15,281 17,549 23,072 29,198 33,974 (13.8) (12.8) (13.6) (13.1) (13.1)

Finance, banking & insurance 1,567 2,318 3,450 5,314 6,127 (1.4) (1.7) (2.0) (2.4) (2.4)

State administration 9,718 14,402 18,270 22,770 27,694 (8.8) (10.5) (10.7) (10.2) (10.7)

Other services 11,659 15,998 19,196 26,788 30,345 (10.5) (11.7) (11.3) (12.0) (11.7)

GDP 110,535 136,571 170,258 222,840 258,609 (100.0) (100.0) (100.0) (100.0) (100.0)


Reference table 6

Prices(% change; period averages)

1992 1993 1994 1995 1996

General consumer prices 17.5 5.2 14.4 12.7 5.6

Consumer goods 13.4 3.1 13.9 13.1 3.7

Food & foodstuffs 7.9 6.8 21.6 19.6 4.4

Services 35.1 17.5 12.3 9.8 8.5Sources: General Statistical Office, Statistical Yearbook; World Bank, Vietnam: Public Sector Management and Private Sector Incentives.

Reference table 7

Population(’000)

1992 1993 1994 1995 1996

Males 33,814 34,671 35,386 36,092 36,773

Females 35,591 36,355 37,123 37,867 38,582

Totala 69,405 71,026 72,510 73,959 75,355 of which: rural 55,075 56,318 57,326 58,342 59,079 urban 13,285 13,663 14,139 14,575 15,232

Total growth rate (%) 2.4 2.3 2.1 2.0 1.9

a Components may not sum to total because of exclusion of members of the armed forces and persons working abroad.




Reference table 8

Employed labour forcea

(’000)

1992 1993 1994 1995 1996

State sector 2,975 2,960 2,928 3,053 3,161 Government 1,242 1,256 1,232 1,206 1,308 Central 264 260 254 264 266 Local 978 996 978 942 1,042 State enterprises 1,733 1,704 1,696 1,847 1,853 Central 978 995 996 1,092 1,094 Local 755 709 700 755 759

Private & co-operativesb 28,844 29,764 30,736 32,461 32,399

Total 31,819 32,724 33,664 35,514 35,560

Productive sector 29,859 30,614 31,267 32,268 n/a of which: industry 3,210 3,322 3,366 3,497 n/a construction 637 818 960 996 n/a agriculture 22,867 22,935 23,000 23,521 n/a trade & supply 1,640 1,813 2,137 2,214 n/a

Non-productive sector 1,960 2,110 2,397 3,322 n/a of which: education 844 883 947 980 n/a health 250 260 271 279 n/a finance, insurance, banking 95 103 122 126 n/a

a Labour force as of July 1st of each year. b Combined private and co-operative employment from 1993 onwards.

Source: World Bank, Vietnam: Deepening Reform for Growth.

Reference table 9

Transport statistics

1992 1993 1994 1995 1996

RoadPassengers (m) 388.7 419.2 440.6 472.2 517.9Passenger-km (m) 10,621 10,601 11,150 12,775 14,919Freight (’000 tonnes) 40,120 45,970 49,440 55,952 62,440Freight-km (m tonnes) 2,075 2,437 2,646 2,968 3,238

RailPassengers (m) 8.7 7.8 7,9 8.8 8.9Passenger-km (m) 1,752 1,921 1,796 2,133 2,360Freight (’000 tonnes) 2,774 3,187 4,000 4,515 4,470Freight-km (m tonnes) 1,077 978 1,370 1,751 1,770

Inland waterwaysPassengers (m) 92.5 86.4 104.1 109.8 118.0Passenger-km (m) 1,145 1,311 1,412 1,428 1,460

Freight (’000 tonnes) 16,894 16,797 17,533 20,051 22,306Freight-km (m tonnes) 1,817 2,335 1,971 2,248 2,316

MaritimeFreight (’000 tonnes) 5,105 4,498 5,461 6,670 8,907Freight-km (m tonnes) 12,016 12,650 14,104 14,803 21,164

AirPassengers (’000) 900 1,100 1,776 2,435 2,787Passenger-km (m) 1,012 1,403 2,371 3,094 3,932Freight (’000 tonnes) 10 12 21 35 39Freight-km (’000 tonnes) 17,600 19,000 35,700 99,400 110,000Source: General Statistical Office, Statistical Yearbook.



Reference table 10

National energy statistics(m tonnes unless otherwise indicated)

1992 1993 1994 1995 1996

OutputElectricity (m kwh) 9,818 10,851 12,476 14,665 16,996Crude oil 5.5 6.3 7.1 7.6 8.8Coal 5.0 5.9 5.7 8.4 8.8

ExportsCrude oil 5.4 6.2 6.9 7.7 8.7Coal 1.6 1.4 2.0 2.8 3.6

ImportsPetroleum products 3.1 4.1 4.5 5.0 5.8Source: General Statistical Office, Statistical Yearbook.

Reference table 11

Banking statistics(D bn; end-period)

1990 1991 1992 1993 1994

Net domestic assets 9,701 13,595 16,549 26,678 31,880a

of which: State Bank of Vietnam 7,314 10,408 12,183 15,747 18258a

commercial banks 4,815 5,409 9,158 15,645 19,373a

Liabilities 13,787 22,525 31,935 37,002 44,230 State Bank of Vietnam 6,504 8,952 15,630 19,006 23,119a

Commercial banks 7,283 13,573 16,305 17,996 21,111a

Commercial bank creditb 5,822 10,054 15,093 23,181 29,219

State banks n/a 9,503 13,789 20,988 25,684 Other banks n/a 551 1,304 2,193 3,535

Domestic currency 4,970 8,187 11,117 15,766 18,650 Foreign currency 852 1,867 3,976 7,415 10,568

State enterprises n/a 9,049 12,350 15,511 18,380 Non-state sector n/a 1,005 2,743 7,670 10,838

a End-September. b Excluding credit to the government.

Sources: World Bank: Vietnam: An Agenda for Financial Sector Development; World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy.

Reference table 12

Retail trade sector(D bn)

1992 1993 1994 1995 1996a

State 12,371 14,650 21,556 27,367 33,800

Collective 564 612 753 1,060 1,200

Private 38,280 52,011 69,950 90,313 109,000

Total sales 51,215 67,273 92,259 121,160 144,000 of which: food & foodstuffs 18,194 22,198 n/a n/a n/a garments 4,662 6,876 n/a n/a n/a household goods 5,866 8,634 n/a n/a n/a fuel 2,751 3,231 n/a n/a n/a construction materials 2,584 4,904 n/a n/a n/a

a Official estimates.




Reference table 13

Tourism statistics1992 1993 1994 1995 1996

Visitor arrivals (’000) 440 600 1,000 1,360 1,600 of which: tourists n/a 243 n/a n/a n/a

Tourism earnings (D bn) n/a 3,588 4,000 n/a n/a of which: foreign exchange ($ m) n/a 88 270 n/a n/aSources: Dang Duc Dam, Vietnam’s Economy 1986-95; press reports.

Reference table 14

Structure of gross industrial output(% of total)

1991 1992 1993 1994 1995

Electricity & fuel 21.0 22.8 22.7 22.7 22.4

Metals 2.1 2.2 2.4 2.0 2.2

Chemicals 7.2 7.5 7.9 8.6 8.6

Machinery 7.6 7.1 7.5 8.0 7.8

Textiles & garments 10.0 9.7 9.5 9.4 8.9

Food products 34.8 33.9 33.5 30.5 30.1

Building materials 7.5 7.6 7.8 8.4 8.6

Forestry products 3.9 3.4 3.0 3.5 4.0

Paper & cellulose 1.9 1.9 1.8 1.9 2.1

Glass, earthenware & porcelain 1.2 1.1 1.2 1.2 1.1

Other 2.9 2.8 2.7 3.8 4.2Source: General Statistical Office, Statistical Yearbook.



Reference table 15

Main manufactures(’000 tonnes unless otherwise indicated)

1992 1993 1994 1995 1996a

Raw materials & machinerySteel 202 252 288 470 510 Chromium ores 4 7 6 25 n/a Metal-working machine tools (units) 844 1,517 1,538 1,358 1,408 Transformers (units) 2,310 3,756 5,881 6,186 4,861 Water pumps (units) 330 470 342 330 n/a Rice mills (units) 706 284 2,067 2,043 n/a Chemical fertilisers 530 714 841 931 965 Insecticides 11 14 14 16 15 Cement 3,926 4,849 5,371 5,828 6,251 Bricks (m units) 4,275 5,001 5,797 6,892 7,107

Consumer goodsGlass & glass products 37 51 38 77 n/a Porcelain (m units) 130 152 152 186 212 Matches (m packets) 184 145 145 143 n/a Paper 119 128 154 216 219 Salt 594 650 481 689 n/a Fish 148 135 139 149 n/a Sugar 365 369 364 517 589 Beer (m litres) 169 230 282 465 512 Cigarettes (m packets) 1,541 1,713 1,948 2,147 2,142 Tea 22 32 34 24 n/a Textile fibre 44 38 49 59 n/a Fabrics (m metres) 272 215 251 263 n/a Washing soap 72 88 97 106 n/a Radio cassettes 128 163 111 112 n/a Televisions (’000 units) 365 650 993 754 n/a Bicycles (’000 units) 158 324 286 236 n/a Bicycle tyres (’000 units) 8,458 8,479 9,446 9,703 8,381 Bicycle tubes (’000 units) 9,177 10,569 10,736 11,902 n/a Electric fans (’000 units) 244 217 334 370 317


Sources: General Statistical Office, Statistical Data; Statistical Yearbook.

Reference table 16

Gross output of agriculture(D bn; constant 1989 prices)

1992 1993 1994 1995 1996

Crops 12,331 13,186 13,801 14,786 15,553 of which: cereals 8,281 8,747 8,999 9,431 10,000 vegetables & beans 772 824 856 942 961 industrial crops 1,903 2,158 2,473 2,908 3,065 fruit 1,004 1,064 1,091 1,109 1,132

Animal husbandry 3,642 3,847 4,055 4,237 4,461

Total 15,973 17,033 17,856 19,023 20,014Source: General Statistical Office, Statistical Yearbook.



Reference table 17

Food crops output(’000 tonnes)

1992 1993 1994 1995 1996

Paddy 21,590 22,837 23,528 24,964 26,397 Spring 9,153 9,036 10,504 10,737 12,210 Autumn 4,910 5,633 5,630 6,501 6,879 Winter 7,527 8,168 7,395 7,726 7,309

Other cerealsa 2,624 2,665 2,670 2,607 2,821

Total foodgrainsa 24,215 25,502 26,199 27,571 29,218

Other food crops Maize 478 497 535 557 615 Sweet potatoes 405 387 344 305 303 Cassava 284 278 279 278 246

a Paddy equivalent.


Reference table 18

Industrial crop production and yields

1992 1993 1994 1995 1996

JuteArea (’000 ha) 11.6 14.4 6.6 7.5 8.0Yield (tonnes/ha) 2.20 1.62 1.94 1.97 1.88Production (’000 tonnes) 25.7 23.4 12.8 14.8 15.0

RushArea (’000 ha) 11.0 9.9 10.9 10.4 9.1Yield (tonnes/ha) 7.02 6.39 6.31 7.40 6.04Production (’000 tonnes) 77.2 69.5 69.1 75.6 55.0

MulberryArea (’000 ha) 20.2 26.7 24.1 21.3 n/aYield (tonnes/ha) 7.05 7.15 7.03 7.68 n/aProduction (’000 tonnes) 142.8 191.3 169.3 163.6 n/a

Sugar-caneArea (’000 ha) 146.5 143.2 166.6 224.8 237.0Yield (tonnes/ha) 43.94 42.56 45.33 47.64 47.98Production (’000 tonnes) 6,437 6,083 7,550 10,711 11,372

GroundnutsArea (’000 ha) 217.3 217.2 248.2 259.9 262.7Yield (tonnes/ha) 1.04 1.19 1.19 1.28 1.36Production (’000 tonnes) 226.7 259.3 294.4 334.4 357.7

SoybeansArea (’000 ha) 97.3 120.1 132.0 121.1 110.4Yield (tonnes/ha) 0.82 0.87 0.94 1.03 1.03Production (’000 tonnes) 80.0 105.7 124.5 125.5 113.8

CottonArea (’000 ha) 19.2 11.5 13.2 17.5 15.1Yield (tonnes/ha) 0.66 0.44 0.66 0.73 0.74Production (’000 tonnes) 12.8 5.2 8.7 12.8 11.2Source: General Statistical Office, Statistical Yearbook.



Reference table 19

Output and exports of main perennial industrial crops(’000 tonnes)

1992 1993 1994 1995 1996a

CoffeeOutput 119.0 136.0 180.0 218.0 253.0Exports 116.2 122.7 176.4 248.1 n/a

RubberOutput 67.0 96.9 128.8 122.7 146.0Exports 81.9 96.7 135.5 138.1 n/a

Cashew nutsExports 51.7 47.7 81.3 99.0 n/a

TeaOutput 36.2 37.7 42.0 40.2 n/aExports 13.0 21.2 23.5 18.8 n/a

CoconutsOutput 1,139.8 1,184.0 1,078.2 1,165.3 1,130.8


Sources: General Statistical Office, Statistical Yearbook.

Reference table 20

Animal husbandry(m head unless otherwise indicated)

1992 1993 1994 1995 1996a

Buffalo 2.9 3.0 3.0 3.0 3.0

Cattle 3.2 3.3 3.5 3.6 3.8

Pigs 13.9 14.9 15.6 16.3 16.9

Horses (’000 head) 133.1 132.9 131.1 126.8 126.0

Goats & sheep (’000 head) 312.3 353.0 427.9 550.5 512.8

Poultry 124.5 133.4 137.8 142.1 151.4


Sources: General Statistical Office, Statistical Data; Statistical Yearbook.

Reference table 21

Fisheries output(’000 tonnes unless otherwise indicated)

1992 1993 1994 1995

Sea fish 627.4 660.0 712.5 722.0

Aquaculture (fish) 135.5 139.7 178.4 222.7

Aquaculture (shrimp) 37.4 39.4 44.7 55.3

Total (D bn at constant 1989 prices) 1,622.2 1,780.0 2,224.2 2,475.0Source: General Statistical Office, Statistical Yearbook.



Reference table 22

Exports($ m; fob)

1992 1993 1994 1995 1996

Textiles & garments 221 336 550 800 1,600a

Petroleum 756 844 866 1,024 1,346

Rice 86 363 425 549 855

Marine products 302 427 551 620 651

Coffee 54 74 95 495 337

Rubber 54 74 133 181 163

Coal 47 70 71 81 115

Cashew nuts 41 44 59 130 n/a

Total incl others 2,475 2,985 4,054 5,198 7,330

a Estimate.

Sources: World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy; World Bank, Vietnam: Fiscal Decentralization

and the Delivery of Rural Services; World Bank, Vietnam: Deepening Reform for Growth.

Reference table 23

Imports($ m; cif)

1992 1993 1994 1995 1996

Machinery & spare parts 100 922 1,815 2,761 n/a

Petroleum products 615 614 696 856 1,079

Fertilisers 320 189 247 339 628

Steel 104 233 211 n/a 529

Wheat 59 51 52 60 n/a

Cotton textiles 23 54 55 96 n/a

Monosodium glutamate 53 70 44 32 n/a

Sugar 4 14 39 61 n/a

Total incl others 2,535 3,532 5,245 7,525 10,481Sources: World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy; World Bank, Vietnam: Fiscal Decentralization

and the Delivery of Rural Services; General Statistical Office, Statistical Yearbook.



Reference table 24

Balance of payments($ m)

1992 1993 1994 1995a 1996a

Trade balance –60 –547 –1,190 –2,345 –3,150 Exports 2,475 2,985 4,054 5,198 7,330 Imports –2,535 –3,532 –5,244 –7,543 –10,481

Net services & transfers 49 –220 4 422 668 of which: non-factor services n/a 78 19 159 n/a official transfers 64 194 135 150 150

Current-account balance –10 –767 –1,192 –1,923 –2,482

Capital-account balance 656 107 1,363 1,837 1,908 Disbursements 540 12 288 652 627 Scheduled amortisations –175 –695 –679 –826 –842 Net short-term loans –41 –133 124 –225 285 Foreign direct investment 333 923 1,631 2,236 1,838

Errors & omissions –378 –397 –580 –393 286

Overall balance 268 –1,057 –409 –479 –288

FinancingChange in reserves –463 477 –292 –179 –471 Net IMF credit 0 –39 175 92 178 Debt rescheduling 0 883 0 0 0 Change in arrears 195b –266b 526 566 581

a Trade data from 1995 based on customs data, which have broader coverage. b Net arrears accumulation plus debt rescheduling.

Sources: World Bank, Vietnam: Deepening Reform for Growth.

Reference table 25

Net official development assistancea

($ m)

1992 1993 1994 1995

Bilateral 474.0 224.0 585.6 549.1 of which: Sweden 59.7 44.1 21.1 34.0 Italy 26.4 32.2 92.3 3.5 France 19.6 31.3 179.8 94.1 Germany 27.7 28.6 52.7 120.4 Australia 8.4 19.6 33.7 39.8 Japan 281.2 11.5 79.5 170.2

Multilateral 109.3 34.0 311.2 279.7 of which: UNDP 19.9 19.2 15.1 10.9 UNICEF 11.2 16.6 15.1 18.9 WFP 12.2 15.9 15.0 12.8 UNHCR 15.0 15.4 12.1 0 IMF 0 –60.2 86.5 91.6 IDA/World Bank 0 –0.6 125.2 46.5

Total 583.3 258.1 896.8 828.8 of which: grants 269.5 301.8 644.4 575.8

a Disbursements minus principal payments on earlier loans. Official development assistance is defined as grants and loans with at least a 25%grant element, provided by OECD and OPEC member countries and multilateral agencies, and administered with the aim of promotingdevelopment and welfare in the recipient country.

Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients.



Reference table 26

External debt($ m unless otherwise indicated)

1991 1992 1993 1994 1995

Total external debt 22,435 23,891 24,856 25,571 26,495 Long-term debt 20,813 21,524 22,342 22,704 22,962 Short-term debt 1,520 2,269 2,414 2,584 3,156 of which: interest arrears on long-term debt 1,344 1,649 1,810 2,130 2,385 Use of IMF credit 102 98 100 282 377

Memorandum itemPrincipal arrears on long-term debt 3,118 5,517 5,492 7,222 9,292

Public & publicly guaranteed long-term debt 20,813 21,524 22,342 22,704 22,962 Official creditors 19,649 20,261 21,347 21,760 22,066 Multilateral 138 138 100 225 318 Bilateral 19,512 20,123 21,247 21,535 21,747 Private creditors 1,164 1,263 996 944 896 of which: bonds 0 0 0 0 0 banks 34 29 52 103 118

Total debt service paid 208 411 500 393 386 Principal 161 347 374 266 217 Interest 47 64 126 127 169 of which: short-term debt 15 19 26 32 46

Ratios (%)External debt/GNP 233.4 242.1 193.7 164.6 130.2Debt service paid/exports of goods & services 8.2 12.7 13.2 7.3 5.8Short-term debt/total debt 6.8 9.5 9.7 10.1 11.9Concessional long-term loans/total debt 86.0 81.5 83.1 81.9 80.5

Note. Long-term debt is defined as having an original maturity of more than one year.

Source: World Bank, Global Development Finance, 1997.

Reference table 27

Foreign reserves($ m; year-end)

1992 1993 1994 1995 1996

Total reserves incl gold 1,148 621 876 1,376 1,847Sources: World Bank, Vietnam: Economic Report on Industrialisation and Industrial Policy; IMF; press reports.

Reference table 28

Exchange rates(D per unit of currency; annual averages)

1992 1993 1994 1995 1996

$ 11,150 10,640 10,955 10,970 11,100

¥ 88.28 95.69 106.64 116.95 102.04

DM 7,160 6,436 6,717 7,676 7,376

Thai baht 440.2 420.3 433.4 441.7 438.0Sources: EIU; IMF, International Financial Statistics; World Bank, Vietnam: Deepening Reform for Growth.

Editor:All queries:

Anthony GoldstoneTel: (44.171) 830 1007 Fax: (44.171) 830 1023



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Vietnam - International University of Japan · Vietnam Basic data Land area 330,363 sq km Population 64.4 million (1989 census); 76.7 million (1997 estimate) Main towns Population