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Vietnam - Macroeconomic Business

Gross Domestic Product (GDP) and Other Macro-Indicators

After rapid growth in the mid-1990s, the Asian economic crisis and other factors slowed the Vietnamese economy's growth rates in 1998 and 1999 to 4.4 percent and 4.8 percent, respectively. Figure 44 shows GDP growth rates for 1992-1998. According to the Asian Development Bank, the economy grew 4.8 percent and is expected to grow at 6.0 percent in 2000 and 6.5 percent in 2001.

Figure 1. GDP growth rates, 1992-98

Source: World Bank

The GDP per capita has risen from US$1,111 in 1992 to US$1,689 in 1998.
The manufacturing sector has experienced the highest growth rates of the three main sectors, with an average of 11.8 percent annual growth between 1995 and 1999. For the same time series, the services sector averaged 6.4 percent annual growth and the agriculture sector averaged 4.2 percent. Figure 45 shows the annual sector growth rates.

Figure 2. Sector growth rates and CPI inflation, 1995-99 (in percent)

Source: Vietnam National Administration of Tourism (

The inflation rate for 2000 was expected to remain below three percent. However, inflation is likely to increase slightly to about 5 percent in 2001 (see Figure 46).

Figure 3. Annual inflation rate, 1998-2001*

Source: Asia Development Bank, "Asian Development Outlook 2000 Update"

* Forecasted growth for 2000 and 2001
The Vietnamese economy still has a large state-owned economic sector that accounted for 39.5 percent of GDP in 1999 (see Figure 47). The economic reforms have increased the private sector's share of GDP, but it only comprises a small portion of the total GDP.

Figure 4. Structure of GDP by ownership, 1999

Source: Vietnam Economic Times (

Vietnam relies heavily on the agricultural sector, which accounted for 22.5 percent of the country's GDP in 1998. The manufacturing sector is growing strong and comprised 17.3 percent of GDP in 1998, followed by wholesale and retail activities at 15.5 percent (see Figure 48).

Figure 5. Breakdown of GDP by main economic sector, 1998

Source: Vietnam Economic Times (

Main Economic Sectors


Agriculture, forestry, and fisheries

Agriculture, forestry, and fisheries combined are the dominant economic sector, accounting for nearly 26 percent of GDP and employing 70 percent of the work force. Vietnam is undertaking a concentrated upgrading of the agro-industry which has raised the country from struggling to achieve self-sufficiency to being a major exporter of rice and coffee in just a few years. Vietnam is now the world's second largest exporter of rice, behind only Thailand.

Figure 1. Agriculture sector annual growth rates

Source: World Bank

Vietnam has a coastline of 3,260 kilometres with 3,000 large and small islands and an exclusive economic zone (EEZ) of more than one million square kilometres. The country has an additional 1.4 million hectares of inland fishing waters. The fisheries sector employs more than three million people.

Oil, gas, and mining

Vietnam has the potential to become a regional oil and natural gas supplier. Ongoing exploration has led to several oil and gas discoveries in recent years.
(i) Oil
Vietnam has 600 million barrels of proven oil reserves and further discoveries are likely. Vietnam has no major oil refineries and therefore almost all of its oil production is exported. Export markets include Japan (the largest importer of Vietnamese oil), Singapore, the United States, and the Republic of Korea. Vietnam exported an estimated US$2 billion worth of oil in 1999 and oil exports are one of the country's largest foreign currency earners.
Most oil exploration and production activities occur offshore in the Cuu Long and Nam Con Son Basin. The Vietnamese government controls both the oil and gas upstream and downstream. For upstream activities, Vietnam Oil and Gas Corporation (Petro Vietnam), a government-owned company, is the only firm authorized to conduct petroleum operations in Vietnam on an individual basis. Any petroleum exploration and production activities by foreign investors must be conducted in co-operation with Petro Vietnam.
For downstream activities, several government-owned companies such as Petrolimex and Petec, under the Ministry of Trade, Petro Vietnam Trading Company (Petechim), under Petro Vietnam, SaigonPetro under Ho Chi Minh City People's Committee, and Vinapco, under Vietnam Airlines have been licensed to import oil and gas. Petrolimex imports most of the total value of imported petroleum products.
Vietnam has issued 37 investment licenses for oil and gas exploration since industry development began in 1998. About 30 companies, many of which are American or European, now operate offshore.
(ii) Natural gas and liquefied petroleum gas
Vietnam's natural gas consumption is rising, with further increases expected as gas fields come on stream. Natural gas reserves are approximately 6.8 trillion cubic feet. However, after major gas discoveries in 1996, production has moved more slowly than expected.
Vietnam is a growing consumer and exporter of liquefied petroleum gas (LPG). Japan is the major consumer of Vietnamese LPG exports, receiving the country's first export shipment in May 1999. Domestic consumption is increasing rapidly and is expected to reach up to 50 percent annual growth over the next few years. Vietnamese consumed an estimated 190,000 tons of LPG in 1999.
(iii) Coal and mining
Vietnam contains coal reserves estimated at 165 million short tons, the majority of which are anthracite. Production has increased dramatically in recent years as seen in the doubling of output between 1994 and 1998. This has resulted in an increase in exports (primarily to Japan) and an increase in coal stockpiles. Unfortunately Vietnam's export markets have been shrinking, which has exacerbated an over supply problem. The state coal company, Vinacoal, considered a nationwide halt in production to reduce the estimated four-million-ton stockpile, but instead it cut back on production in the second half of 1999.
The country is promoting the construction of coal-fired power plants. Vinacoal plans to build as many as 11 new power plants, ranging from 100 megawatts (MW) to 300 MW each. Two 100-MW plants in Na Duong and Cao Ngan are already under construction, and nine more are under consideration. Vietnam previously focused more on hydropower and the shift to coal marks an important change in its energy sector.
Vietnam is endowed with an abundance of other mineral resources such as coal (3-3.5 billion tons), bauxite (3 billion tons), iron ore (700 million tons), copper (600,000 tons), tin (70,000 tons) and chromate (10 million tons).
The country is also rich in granite, marble, clay and silica sand. Almost all of these resources remain largely untapped. Foreign investment in the extraction and processing of these minerals, particularly the mining and processing of those minerals used in infrastructure projects such as steel, is strongly encouraged by the government.


The manufacturing sector employs about 12 percent of the country's work force and generates about 17 percent of GDP. Light manufacturing, particularly in food processing, textiles, and footwear comprises the bulk of manufacturing activities.
The textile and garment industry presently accounts for around 16 percent of industrial output but is a key source of employment and one of the country's major export industries.
Heavy industry makes up a small portion of output, and like light industry it currently suffers from the prevalence of old, obsolete machinery and technology.


Vietnam's natural beauty, coupled with its open-door policy, has propelled the tourism industry into a high rate of growth. Vietnam has 62,000 tourist hotel rooms with 116,300 beds. The occupancy rate in 1999 was 55 percent. Visitor arrivals in 1999 were 1,781,754, up 17 percent from 1998. However, the rapid increase in tourist arrivals has exposed the inadequacies of the sector in terms of infrastructure and services. As a result, major investment is required in the areas of transportation, training and tourism service industries. In the first quarter of 2000, there were 530,000 visitors, an increase of 14.2 percent over the same period of the previous year. Turnover in the public tourism sector in 1999 was 7,400 billion dong.
Vietnam forecasts that the country will receive 8.7 million foreign and 15-18 million local  tourists in 2010. The sector's share of GDP is expected to increase to 15.4 percent in 2010 from four percent in 1984.
For services in general, the sector achieved some impressive growth rates in 1995 and 1996, followed by a decline in the subsequent years. Figure 50 shows the growth rates for the services sector.

Figure 2. Services sector annual growth rates

Source: World Bank

International Trade



Vietnam has integrated itself into the global trading system since its economic reform movement took hold and as the government sought to expand its trading partners. Vietnam's trade patterns have shifted from the former Eastern Bloc countries to Asia, Western Europe, and even the United States. After five years of negotiations, Vietnam signed a Bilateral Trade Agreement (BTA) with the United States in July 2000, to be implemented over the next few years. The BTA will operate on two main fronts: First, each country will grant the other Most Favored Nation (MFN) status with respect to trade in goods, services, and investment. This means, for instance, that the average US rate of duty on imports from Vietnam will drop from 40 percent to three percent. Second, the BTA obliges Vietnam to phase in a wide range of market-oriented reforms designed to open Vietnam's domestic market to foreign investment and competition.
The signing of the BTA should also bring Vietnam closer to receiving additional trade benefits offered by the United States to developing countries under its Generalized System of Preferences (GSP). The process of negotiating and implementing the BTA, and gaining some measure of support from the United States should also bolster Vietnam 's prospects of joining the World Trade Organization (WTO) within the next few years.
Once the BTA comes into effect, it will remain in effect for only three years, but will automatically be extended for successive terms of three years unless terminated by either party at least 30 days before the end of a term.
Vietnam's exports rose between 15 and 35 percent throughout much of the 1990s until the effect of the Asian economic crisis was felt in 1998, when exports grew only 1.9 percent. Table 1 shows trade data for the 1990s.

Table 1. Exports, imports, and trade deficits, 1990-1999

Year Export 
(US$ million)
Increased, Decreased (%) Import 
(US$ million)
Increased, Decreased (%) Trade Deficit (US$ million) 
Rate of Trade Deficit (%) 
est. 1999 
Source: Vietnam National Administration of Tourism (

While the country's exports grew at impressive rates in the 1990s, its imports rose rapidly as well until the Asian economic crisis struck. As seen in Table 2, Vietnam experienced a trade deficit throughout the decade except for 1992. Overall the export sector performed strongly in 1999, helping to shrink the trade deficit to US$113 million from US$2.1 billion in 1998.
However, the trade deficit will likely worsen for 2000 because of the dramatic rise in prices of imported petroleum and related products. Vietnam paid about US$746 million for imported petroleum products in the first five months of 2000, an increase of 129.5 percent from the previous year.


Exports were expected to rise 23 percent in 1999 over 1998. Much of the increase can be attributed to the depreciation of the Vietnamese currency, the dong. The export turnover for 2000 was expected to reach US$10.7 billion.
The main export items, as seen in Figure 51 include crude oil, rice, garments and footwear, computers and parts, coffee, rubber, and marine products, especially frozen shrimp.

Figure 1. Major Vietnam exports by commodity, 1999 (US$ million)

Source: EXIM Bank of Thailand

Footwear companies earned nearly US$1.4 billion in exports in 1999, up 30 percent over 1998, making them one of the top foreign exchange sectors. The United States is the largest footwear export target following the recent signing of a trade pact between Hanoi and Washington. In 2000, Vietnam 's footwear industry was expected to export US$1.45-1.50 billion worth of products. Currently the EU remains the largest importer, accounting for 80 percent of the volume.
Vietnam's 1999 rice exports amounted to 4.5 million tons and exceeded US$1 billion. In 2000, total exports of 4.3 million tons of rice were projected. Of this total, 2.9 million tons will be exported from Ho Chi Minh City and the Mekong Delta, 1.2 million tons by stateowned companies and foreign investment enterprises, and the rest by large businesses in all economic sectors. The Asian market accounts for 54.5 percent of Vietnam's rice exports, with Africa taking 22.8 percent and the Middle East around 12 percent.
Vietnam exported 378,872 tons of coffee beans in 1999, an increase of 41 percent over the previous year. The United States tops the list with imports of 78,546 tons, followed by Germany with 51,150 tons; Italy with 40,909 tons; Belgium with 33,329 tons; and Spain with 30,642 tons.
In the nine months prior to July 2000, Vietnam exported 508,970 tons of coffee, an increase of 54.43 percent. However, due to world market prices, export earnings during the same period dropped 4.73 percent to US$446.86 million. With an expected coffee output of between 450,000 tons to 500,000 tons in the 2000 crop season, Vietnam will take over from Indonesia as the biggest coffee producer in the world. Currently Vietnam has 350,000 hectares under cultivation for coffee.
Vietnam's major trade partners are in East Asia, demonstrating the importance attributed to regional trade (see Figure 52). While the United States only comprised 4.4 percent in 1999, the normalization of trade relations should benefit Vietnam's exports immensely over the next couple of years. The World Bank has estimated that Vietnam 's exports to the United States (mostly footwear, coffee, seafood, and oil) will increase to US$800 million (more than double 1999 levels) in the first year the BTA comes into effect. Most of the growth will come from footwear and textile exports, since coffee and seafood are already exempt from United States import duties.

Figure 2. Major Vietnam export markets, 1999

Source: EXIM Bank of Thailand


Major import items are petroleum products, machinery, tractors, tires, steel and iron products, electronic goods, cotton, textiles, and fertilizers. Figure 53 shows the key imports for 1999.

Figure 3. Major Vietnam imports by commodity, 1999 (in US$ million)

Source: EXIM Bank of Thailand

As with exports, Vietnam imports most of its goods from East Asia (see Figure 54). From outside the region, the United States sends the most goods to Vietnam.

Figure 4. Major Vietnam import markets, 1999

Source: EXIM Bank of Thailand


Foreign direct investment (FDI) grew rapidly from 1991-1996 as many of the economic reforms and implementation of the Foreign Investment Law (1987) took shape. However, FDI has fallen sharply over the past few years from US$8.6 billion in 1996 to an estimate of US$1.6 billion in 1999 (see Figure 55). The main causes of the decline are the fallout from the regional economic crisis, intense worldwide competition for attracting investment, and slow implementation of further structural reforms of the Vietnamese economy.

Figure 1. Foreign direct investment in Vietnam

Source: ASEAN Secretariat

Table 2 shows a breakdown of total investment (foreign and domestic) in Vietnam from 1995 to 1999. Although the FDI appears to be fairly stable over between 1995 and 1998, the depreciation of the dong actually meant a decline in investment.

Table 2. Investment capital in Vietnam, 1995-99 (in billion Vietnamese dong)

   1995 1996 1997 1998 est.1999
1. State-owned capital 26,047.8 35,894.4 46,570.4 51,600.0 64,000.0
      a. State budget 13,575.0 16,544.2 20,570.4 20,700.0 26,000.0
      b. Credit budget 3,064.0 8,280.2 12,700.0 14,800.0 19,000.0
      c. Budget from owner companies 9,408.8 11,070.3 13,300.0 16,100.0 19,000.0
2. Other sector's capital 20,000.0 20,773.0 20,000.0 20,500.0 21,000.0
3. Foreign direct investment 22,000.0 22,700.0 22,700.0 24,300.0 18,900.0
Total 68,047.8 79,367.4 96,870.4 96,400.0 103,900.0
Source: Vietnam National Administration of Tourism (

The major sources of FDI are shown in Table 3. In terms of dollar value, Singapore heads the list with US$5.8 billion. For the number of projects, Taiwan Province of China leads with 634. Nearly 3,000 foreign investment projects have been approved in Vietnam. According to the ASEAN Secretariat, by the end of August 1999 US$15.2 billion worth of foreign investment projects had been implemented, representing 42% of the total registered capital. 

Table 3. Capital investment in Vietnam by different countries (Jan 1, 1998 to July 31, 2000)

Country No. of Projects Capital Investment (US$ billion)
Singapore 249 5.8
Russia 61 5.0
Taiwan Province of China 634 4.9
Japan 324 3.6
Hong Kong, China 323 3.4
France 157 2.1
British Virgin Islands 94 2.0
United States 116 1.3
Great Britain 39 1.1
Malaysia 86 1.1
Republic of Korea 292 1.0
Australia 97 1.0
Thailand 125 1.0
Panama  9 0.675
Netherlands 40 0.626
Source: Vietnam Ministry of Planning and Investment (MPI)

Ho Chi Minh City attracts the most investment both in terms of the number of projects and the amount of capital. The capital city, Hanoi, ranks second in these categories (see Table 4).

Table 4. Capital investment by provinces in Vietnam (Jan 1, 1988 to July 31, 2000)

Province No. of Projects Capital (US$ million)
Ho Chi Minh City 1,053 11,000
Hanoi 445 7,500
Dong Nai 294 3,200
Ba Ria - Vung Tau 99 2,500
Binh Duong 319 2,000
Hai Phong 112 1,400
Quang Ngai 8 1,300
Quang Ninh 52 870
Lam Dong 50 866
Da Nang 61 786
Hai Duong 27 493
Ha Tay 31 444
Thanh Hoa 8 425
Vinh Phuc 26 318
Khanh Hoa  52 290
Source: Vietnam Ministry of Planning and Investment (MPI)

In the initial few years after the Law on Foreign Investment came into effect, much of the FDI in Vietnam aimed at oil and gas exploration and exploitation, and construction of hotels and office buildings. The pattern has changed to where manufacturing industries are now attracting a great deal of the FDI. Table 5 shows a breakdown of FDI according to sectors.

Table 5. Capital investment in the different industrial sectors in Vietnam (Jan 1, 1988
to July 31, 2000)

Sector No. of Projects Capital (US$ billion)
Heavy Industry 578 6.2
Hotels/Tourism  199 5.0
Light Industry 866 4.0
Construction 272 3.5
Urban Construction 3 3.3
Post & Telecommunications 136 3.2
Oil & Gas 62 3.0
Offices for lease 105 3.0
Food 191 2.2
Agriculture/Forestry 267 1.1
Other services 160 0.838
Culture/Health/Education 91 0.525
Sea-products 95 0.344
EPZ/ Industrial Zone 5 0.302
Banking-Finance 35 0.243
Other sectors 4 0.27
Total 3,069 37
Source: Vietnam Ministry of Planning and Investment (MPI)

The number of workers employed by foreign-investment businesses increased from 267,000 in 1997 to 296,000 in 1999, which indicates that the foreign-funded sector has undergone significant production expansion. Furthermore, the foreign-funded sector's export value rose to nearly US$2.6 billion in 1999, representing an increase of 30 percent over 1998. The sector now contributes 10.3 percent of the country's GDP.
A significant amount of investment emanates from the overseas Vietnamese, known as the Viet Kieu. A surge in Viet Kieu investments could follow some key rule changes. Inter-ministerial Circular 10/2000/TTLT has removed some major obstacles faced by Viet Kieu and expatriates who possess certificates of permanent residence in Vietnam. Viet Kieu have traditionally preferred to invest under the name of relatives in order to avoid dual pricing and to access better tax rates.
Officially, 50 Viet Kieu projects worth US$200 million operate under the FIL. Additionally, there are 370 businesses with a registered capital of US$28.6 million established under the Law on Encouraging Domestic Investment. However, some observers believe that, taking into account unofficial investments, Viet Kieu have invested at least US$1.2 billion in the homeland, mainly in property, software, aquaculture and fishery-processing.
The latest circular stipulates that Viet Kieu and resident expatriates can now invest through Amended Decree 51 on Encouraging Domestic Investment. The circular is effective from September 1, 2000 and will allow these investors to receive the same land tax rate and land rent incentives as domestic investors.
The circular also applies the one price mechanism for land rents, raw materials, fuel, and a number of other services. Viet Kieu and resident foreign investors will pay the same price for accommodation, travel, water, electricity, medical treatment, telecom, education, and training as Vietnamese.
As for outward investment, in the fiscal year ending April 2000 Vietnam carried out 11 projects abroad with a total investment capital of US$4.9 million, the highest figure ever recorded by the country. Also in the past year, overseas projects expanded to include financial and banking joint ventures, software industry, wooden products, and handicrafts.
In order to put the recent achievements in their proper perspective, from August 1989 when Vietnam started to make investments abroad until early 1999 the country had only 18 projects licensed by other countries with a combined investment capital of nearly US$8 million. Of these earlier overseas investments, 12 projects with 70 percent of the total investment capital were involved in aquatic products processing and sea transport.
The increased investment abroad is due to the government Decision 22/1999/ND-CP on investment outside of Vietnam that took effect on April 29, 1999. The decision not only creates a legal framework for investment abroad but also encourages Vietnamese businesses to integrate into the regional and world markets.


The Vietnamese dong, like so many currencies in East Asia, depreciated in relation to the US dollar over the past few years. In January 1998, the exchange rate was US$1 for 12,293 dong, but by January 17, 2001 the exchange rate stood at 14,578. Table 1 contains a summary of the dong's depreciation since January 1998.

Table 1. Selected exchange rates for the dong (based on US$1)

Date Exchange rate Trends, 1/98 to 1/17/01
January 1, 1998 12,293 Average rate: 13,808
December 31, 1998 13,894 High: 14,578
December 31, 1999 14,030 Low: 12,280
December 31, 2000 14,566   
January 17, 2001 14,578   

National Economic Policies and Priorities

Before the Asian economic crisis began in mid-1997, Vietnam 's economy had been growing rapidly. Between 1990 and 1997, it experienced an average annual GDP growth rate of eight percent. The financial crisis had a negative impact on the economy, which is not predicted to resume high growth rates without continuing reforms.
The government's "2000 Socioeconomic Development Masterplan" highlights key areas for attention. The country should "gear itself to overcome the current economic growth slowdown" and create sustainable development. This strategy should also increase production efficiency and competitiveness, improve investment usage, stabilize the macro-economic environment and make financial operations more transparent.
The government is committed to "tackling important social issues and popularizing educational, medical, cultural, sports and games facilities and it will gradually improve the salary system." To reach these goals, the master plan focuses on the following areas:
First, concentration on agricultural production and the rural economy with priority for irrigation work, anti-natural disaster projects, and the application of advanced technology, such as high-yield plant seeds and animal strains. Measures will be taken to settle outstanding legal issues that might hinder agricultural production or the marketing of products. State management should be united in the whole production process as well as the export of farm, forest, and aquatic produce. Differences between supply and demand will also be tackled.
Second, the government will tackle difficulties in industrial production and services, encourage in-depth investment projects, technical renewal and management reform or restructuring to minimize production costs and improve product quality. This will increase competitiveness as well as boost enterprises’ production, marketing, and export capacities.
Third, domestic markets need to expand, especially in remote rural and mountainous areas.
Farmers require greater assistance in selling their goods domestically. Measures that might increase purchasing power in production, construction, and consumption so as to increase domestic sales are also necessary.
Fourth, there is a strong need to stimulate national investment as well as increase the efficiency of capital, especially capital investments from the State budget.
A fifth area of attention is to implement the national financial policy in line with the orientation to promote demand in construction, production, and consumption.
Sixth, Vietnam needs to conduct scientific research to apply new technology to production and the service industry.

The National Assembly set the following targets for 2000:
• GDP growth: 5-5.6 percent
• Industrial growth: 10.5 percent
• Agricultural growth: 3.5 - 4 percent
• Food output in rice equivalent: 33.5 – 34 million tonnes
• Growth in industrial output value: 10.5 – 11 percent
• Growth in services: 5 - 5.5 percent
• Growth in exports: 11 –12 percent
• Inflation rate: to be held at six percent
• Budget deficit: not exceeding five percent
• Employment: for 1.2 – 1.3 million people
• Vocational training: for 780,000 people
• Reduction in poor households: to 11 percent
• Reduction of birth rate: by 0.5 percent
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