September 9, 2000	atimes.com

Special Reports Vietnam: Trading on more investment CHAPTER 3: ECONOMIC CLIMATE Currency: Dong Official exchange rate (12/18/98): US$1 = 14,026 dong Gross Domestic Product (GDP, nominal, 1999e): $34.2 billion External Debt (1999e): $33.5 billion (2000e):$35.9 billion 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 gross domestic product (GDP) growth rate of eight percent. The financial crisis has had a negative impact on the economy, which is not predicted to resume high growth rates without extensive reforms. However, there are signs of renewed economic growth; exports grew 20 percent in 1999, bolstered by rising oil prices and growth in manufactured export markets. In December 1999, multilateral and bilateral donors pledged US$2.1 billion in development assistance for Vietnam in 2000. A similar amount was pledged for 1999, but much of the development assistance funding went untapped, as the disbursement of funds was dependent on reforms that remain forthcoming. Major difficulties are emerging in economic performance. Many domestic industries, including coal, cement, steel, and paper, have reported large stockpiles of inventory and tough competition from more efficient foreign producers. Some explanations for the economic problems include: Spill over from Asian financial woes Lack of convertible currency No adequate banking system Rise of excessive ultra nationalist spirit among Vietnamese Leadership's threat to return to hard line communism Economic ignorance on part of populace Privatization of state enterprises is mired in political controversy, while the country's private sector often denied both financing and access to markets. Prime Minister Phan Van Khai has gone so far as to stress in the National Assembly that "Vietnam does not yet have a market economy". It was the first time such a frank admission has been made, and the prime minister vowed to speed up reforms in the banking sector - considered one of the riskiest in the world - and to introduce "better state planning for uniform production and processing of goods and services, and provide greater state investment in education, health care, culture, and vice suppression". The government's "2000 Socioeconomic Development Masterplan" highlights key areas for attention. The country should "gear itself to overcome the current economic growth slow-down and create sustainable development. The 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 commited to "tackling important social issues and popularize educational, medical, cultural and sports and games facilities, and it will gradually improve the salary system." To reach these goals, the masterplan focuses on the following areas: First of all, concentration on agricultural production and the rural economy with priority for irrigation works, 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 should also be tackled. Second, the government must 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 should be expanded, especially in remote rural and mountainous areas. Farmers should be helped to sell more. Measures that might increase purchasing power in production, construction and consumption, so as to increase domestic sales, should also be taken. This should be coupled with and effort to reduce prices to clear stocks. Fourth, stimulate national investment as well as increase the efficiency of capital, especially that funded by the State budget. Fifth, implement the national financial policy in line with the orientation to promote demands in construction, production and consumption. Sixth, to conduct scientific research to apply new technology to production and the service industry. Seventh, to settle burning social issues. Eighth, strengthen national defence and security as well as social order. The official achievements in 1999 as reported by the National Asembly were as follows: Gross domestic production grew by five percent (Outsiders say it was closer to 3.5 percent.) Agricultural production increased by 5.5 percent Rice-equivalent food output reached 33.8 million tonnes Industrial production grew by 10.3 percent Export turnover grew by 22 percent. More investments were concentrated in agriculture, and in rural and remote areas The number of poor households was reduced. Progress was made in education, scientific and technological, culture and information, public health care and sports areas. People's life was stable. People's council elections at all levels were concluded with good results. International relations were expanded National defense and security were ensured. Bright spots were reflected in the slowing down of the population growth rate, wiping out of illiteracy and universalization of primary education, vaccination and child and health care were praised by the international community. The national target program created jobs for 1.2 million people. Funds for job support provided loans to 11,000 projects and created jobs for 300,000 people. The 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 Chapter 4 (Special to Asia Times Online)

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