Vietnam Profile

A busy intersection in downtown Hanoi.

A busy intersection in downtown Hanoi.

Introduction

Located in Southeast Asia, Vietnam is a long, thin coastal country that shares borders with China, Laos, and Cambodia. Vietnam’s total area is 331,210 square kilometers with an estimated population of around 90 million. The majority of Vietnam’s population lives in a narrow strip along the lowland, coastal region with minority groups typically living in the mountainous inland. Vietnam has 54 ethnic groups, with the Viet (also known as Kinh) comprising 87% of the population.

The two main areas of development and population are based around two river systems: the Red River and the Mekong River. The Red River Delta is located in the northern part of the country and is home to the capital city of Hanoi. The Mekong River Delta is located at the southern end and provides critical economic support to Ho Chi Minh City (commonly known as Saigon). The populations of these two areas are also predominantly Kinh. The mountainous northeastern, northwestern, and central highlands, are mostly populated by ethnic minorities and have experienced the least amount of development. Vietnam fully emerged as a country following the end of the unification war in 1975. The unified country is known today as the Socialist Republic of Vietnam.

vietnam_rel01

Link to Economic Data

Link to Environment and Resource Data

Political System

Vietnam’s political system is dominated by the Communist Party of Vietnam (CPV). The CPV was founded in 1930 by Ho Chi Minh under the name of Vietnam Communist Party. The CPV permeates all aspects of the State administration from the central to provincial levels with Party members and accompanying Party bodies, as well as assigning security party committees to security and armed forces, to ensure that decisions and programs are in compliance with Party guidelines. The CPV is headed by General Secretary Nguyen Phu Trong.

Vietnam political structure

 

Economic Profile

The Socialist Republic of Vietnam’s economy was originally a centrally planned economy.  Early economic efforts were focused on the reduction of starvation. The economy experienced some growth as localized factories and manufactured goods emerged, and the Vietnam State Bank was founded along with printing of Vietnamese currency. However, due to the war of unification, both parts of the country were left devastated as infrastructure and farmlands were destroyed. The rebuilding process following the unification of the country in 1975 was slow with little progress as food shortages and inflation were high. The State constructed several trade agreements with other socialist states but was unable to export a sufficient amount to offset the import and foreign aid costs. The State continued to run the economy with its central planning and it provided subsidies in the form of food and housing for workers. Minor reforms occurred between 1975 and 1985, but very little economic progress was made.

GDP growth

 

The economy began to improve dramatically during the Doi Moi period, a period characterized by economic and social reforms, not unlike China’s 1979 Opening and Reform period, which set Vietnam on the path to development with particular emphasis on agricultural reforms. In 1986, the central government, based upon previous years of experimentation and minor reforms, decided to transition from central-planning and subsidizing to a multi-sector economy approach. Following China’s footsteps, another major reform in 1988 granted farming collective members full rights to lands and products to be used and sold at their personal discretion.  These reforms helped to reduce inflation and dramatically increase agricultural output so that for the first time Vietnam was exporting rice out of the country in 1989.

VN GDP breakdown vietnam gdp by sector

Since these and subsequent reforms and trade treaties enacted in the 1990’s, Vietnam has experienced tremendous growth in its agricultural and industrial sectors leading to increased GDP, reduced poverty, increased employment, and improved livelihoods.  Vietnam’s economy has improved since 2011 as inflation has declined, foreign investment has increased, and the textile and electronics exporting industries are performing admirably. In 2011, Vietnam replaced Thailand as the world’s largest rice exporting country.  Along with rice, textiles, electronics, and oil, Vietnam plans to increase export of pepper in response to growing global demand. Vietnam is already the world’s largest producer of black pepper exporting to over 80 countries and territories.

Vietnam inflation Vietnam total trade

In 2004, Vietnam’s Prime Minister announced a framework for the country’s development up to 2020. The four main points of this framework are “maintaining rapid and sustainable economic growth; changing the production-consumption model towards an environmentally friendly direction; carrying out “clean industrialization”; aiming at sustainable agriculture and rural development.”  Following this announcement, development targets and goals were set for Vietnam’s three main economic zones.

 

Hoan Kiem Lake, Hanoi

Hoan Kiem Lake, Hanoi

Achieving  energy independence and sustainability

Three recent steps toward economic progress and modernization are the Son La hydropower plant, the beginning construction of Vietnam’s second oil refinery, and the approval of the Dak Nong development plan. Construction of the Son La hydropower plant began in 2005 and was finished in 2012. It is the largest hydropower plant in Southeast Asia capable of producing an estimated 2,400 megawatts. The dam was originally designed to be much larger, but was downsized by request of the National assembly over concerns about social and environmental costs of the project. The dam is seen as an important step in securing Vietnam’s future energy security and renewable resource use, especially since 36.04% of Vietnam’s total energy was hydropower in 2009.  Furthermore, the downsizing of the dam due to environmental concerns indicates the National Assembly’s intent to pursue the “environmentally friendly” Vietnam spoken of in the 2004 announcement.

 

Vietnam total energy profile

Vietnam energy consumption

On October 25, 2013, a commencement ceremony for Vietnam’s second oil refinery took place. The refinery will be located in Thanh Hoa in northern Vietnam. The refinery will be able to process an estimated ten million tons of crude oil during first phase of operation and twenty million tons during second phase. While this project does not embrace the environmentally friendly direction of the 2004 decision, it does enhance future energy security as well as international cooperation. The two main partners for the oil refinery project are Idemitsu Kosan and Kuwait Petroleum. The refinery is contracted to process oil provide exclusively by Kuwait petroleum. This is a significant step as Vietnam is already the third largest oil producer in Southeast Asia.

Vietnam electric power profile

Development Challenges

The Dak Nong socio-economic development plan was approved on October 24, 2013 by the Prime Minister. The plan focuses on the development of Dak Nong Province in the central highlands of Vietnam. The goals of the project are to raise the province’s GDP per capita to $3,100 USD by 2020 and to reduce the number of impoverished households by an annual rate of 5-7%. To do this the government plans to develop human resources and infrastructure. The planned economy will be led by industry and construction, with agriculture following close behind and the service industry last. This is significant because the central highlands are the least developed area of the country and primarily populated by ethnic minorities. Two reasons for stunted development in the central highlands are the difficulties of infrastructure in mountainous terrain, and the area was one of the most heavily bombed during the unification war.

In a recent address on the 2013 fiscal year, Prime Minister Nguyen Tan Dung discussed the achievements and shortcomings of the past year in accordance with the 2011-2015 five-year plan. The 2011-2015 five-year plan is intended to focus upon curbing inflation, maintaining a sustainable growth rate, stabilizing the macro-economic situation and integration, and as always ensuring social security and welfare. The achievements that he commented upon were policies that helped to stabilize the macro-economy, control inflation, minor growth and recovery of the domestic market, initial progress of economic restructuring in state-owned enterprises, agriculture, and banks, and developing social security and welfare. Improvements were also perceived regarding resource management, environmental protection, national defense, and reduction of corruption. The weaknesses and obstacles to the plan that the Prime Minister addressed were a not yet stabilized macro-economy and fully controlled inflation, prevalent bad debt and non-returning loans, slow plan implementation, rate of poverty among ethnic minorities remains high and the divide between rich and poor is widening, environmental pollution has not improved in many areas as well as several hydroelectric projects failing to abide by regulations, and pervasive corruption remaining.

A typical night in downtown Ho Chi Minh City: urban consumption is on the rise

A typical night in downtown Ho Chi Minh City: urban consumption is on the rise

After reporting on the 2013 year, the Prime Minister outlined objectives for 2014 and 2015. The objectives to be reached by 2015 are an average growth rate of 6%, increased GDP per capita to $2,200 USD, increased exports and foreign investment, creation of some 3 million jobs, reduction of impoverished households, and increased forest cover. To fulfill objectives for 2014 and 2015, Vietnam will continue to focus upon stabilizing the macro-economy and controlling inflation through fiscal and monetary policies, regulating interest rate, securing the value of the Vietnam Dong, strengthen exports and control imports, and develop stock market. The government will also remove barriers to operating businesses and aim to limit bad debt.

A local trader crosses from China into Vietnam at the Hekou-Lao Cai border crossing.  The last decade has seen a huge increase in border trade between China and Vietnam.

A local trader crosses from China into Vietnam at the Hekou-Lao Cai border crossing. The last decade has seen a huge increase in border trade between China and Vietnam.

Regional Relations

Since the retreat of colonial powers from Southeast Asia, Vietnam has had diverse relations with the other GMS countries. Originally perceived as hostile or a threat by some, Vietnam is now working with other GMS countries and Southeast Asian nations to create a stable region for peace and development. Vietnam became a member of ASEAN in 1995 and is a member of the Mekong River Commission, and a trading partner and investor in development for GMS nations. It enjoys a particularly close relationship with Laos due to Vietnam’s support for Laos communist party led struggle for independence. A history of border disputes with Cambodia and the 1979 invasion of Cambodia has led to a tenuous relationship with Cambodia.  Thailand, the economic giant of the region, holds peaceable economic relations with Vietnam. Finally, Vietnam has been supportive towards Myanmar’s slow introduction to the global community.

vietnam trade profile

Vietnam and Laos are considered to have a special relationship that dates back to President Kaysone Phomvihane of Laos and President Ho Chi Minh of Vietnam some 50 years ago. Their long history of cooperation is a source of pride for them as they perceive such a strong relationship to be rare in the world. The relationship has taken on new light as both countries cooperate to develop and integrate with the global economy. Vietnam is one of the largest foreign investors in Laos’ development with a focus on mining, agriculture, electricity, and services sectors. The two countries aim to increase their trade to $2 billion USD in 2015. In 2012, the Laos and Vietnam celebrated the 35th anniversary of their 1967 Agreement on Friendship and Cooperation.

Vietnamese relations with Cambodia were established in 1967. Relations were originally tense due to border disputes and ethnic tensions. In 1979, Vietnam invaded Cambodia on humanitarian grounds to depose the Khmer Rouge and end the atrocities of the Killing Fields.  Vietnam oversaw the installation of a new government in Cambodia and an agreement for the removal of direct Vietnamese governance and military presence in Cambodia was not reached until 1991.  Vietnam’s actions in Cambodia despite humanitarian claims were widely condemned by the West and to punish Vietnam for its actions in Cambodia, China waged a bloody three month war with Vietnam in 1979. Currently Vietnam is Cambodia’s tenth largest foreign investor and its third largest trading partner among ASEAN countries. Trade relations between the two countries took off following a new bilateral trade agreement in 2007 and reduced trade between Thailand and Cambodia in 2008 caused by border tensions. Vietnam and Cambodia share special economic zones along their common border and plan to increase the amount of border economic zones in the coming years. Trade between Vietnam and Cambodia is projected to reach $7 billion USD in 2015.

Sunset at Chau Doc on the Vietnam/Cambodia border.  In the late 1970s, clashes here sparked the Vietnamese invasion of Cambodia.

Sunset at Chau Doc on the Vietnam/Cambodia border. In the late 1970s, clashes here sparked the Vietnamese invasion of Cambodia.

Diplomatic relations between Vietnam and Thailand initially began in 1976, but greater progress toward solidifying relations occurred after Vietnam joined ASEAN. Thailand is the third largest foreign investor in Vietnam. The two countries have cooperated on rice exportation, often being trade places as the world’s top rice exporter.  Bilateral trade is quite powerful between the two, reaching $8.6 million USD in 2012. Recently in June of 2013, the two countries agreed on a strategic plan to improve their relationship that would focus upon political relations, defense and security ties, economic cooperation, regional and international cooperation, and cultural relations.

Vietnam initiated relations with the Union of Myanmar in 1947 and ambassadorial relations in 1975.  Currently, Myanmar enjoys favorable relations with Vietnam. Vietnam supported naming Myanmar to chair ASEAN in 2014, and the two countries intend to raise their bilateral trade to $500 million USD in 2015. The Vietnam-Myanmar Joint Committee aims to direct cooperative development in trade, agro-forestry development, industry, healthcare, tourism, and communications. During the visit by Myanmar’s Vice President Nyan Tun to Vietnam in March 2013, both parties recommitted themselves to peaceful and cooperative relations.

Floating markets provide critical commercial connections on the Mekong Delta in Can Tho

Floating markets provide critical commercial connections on the Mekong Delta in Can Tho

As the host of the Mekong River Delta, Vietnam is subject to consequences of China’s and other upstream countries’ development plans for the Mekong River. According to studies complied by the Mekong River Commission, upstream dam development will result in altered flow patterns and water levels, trapping of sediment, and salinization of the delta. These changes will negatively impact Vietnam’s economy and food supply because half of Vietnam’s rice production occurs in the Mekong Delta area. Altered flow patterns and water levels will affect irrigation capacity and timing for planting as water supply becomes scarce or unstable. Sediments that are normally carried along the river to replenish the delta and fertilize the soil for agriculture will be trapped thus affecting the ability to produce rice. The lack of sediments and altered flow pattern or river volume will also play a part in salinization of the delta. Salinized water will be unusable for humans and crops, and will have the potential to leak into groundwater. Fisheries will also be affected as fish populations decline due to limited migration paths and spawning grounds. Furthermore as the last country to come into contact with the Mekong, Vietnam will not only feel all the effects of river development but also be unable to prevent them. To combat this impotency, Vietnam has called for greater regional cooperation and for China to respect the rights of the Lower Mekong River countries.

 

 

Basic country profile completed by Nicholas Limburg, November 2013

 

Bibliography

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Socialist Republic of Vietnam Government Portal. Accessed October 20, 2013.

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