General information about Vietnam's economy
The 1987 Foreign Investment Law was the first legal document that helped form the legal framework for the Vietnamese market economy. In 1991, the Private Enterprise Law and Corporate Law were introduced. The amended 1992 Constitution affirmed the existence and development of a multi-sector economy under a market mechanism, including the foreign-invested sector. This was followed by the promulgation of a number of laws essential for the formation of the market economy, including Land Law, Tax Law, Bankruptcy Law, Environment Law, and Labour Code etc. Hundreds of ordinances and decrees were enacted by the Government to guide the implementation of these laws, which help ensure national socio-economic development.
Along with the law-making process, market economy institutions have also been established. It is Government policy to eliminate the central planning mechanism, emphasize monetary - market relations, focus on economic management measures and establish an array of financial institutions, banks and basic markets for money, labour, goods and land, etc. The administrative reform was promoted so as to improve economic competitiveness and to help create a more favourable business environment and mobilize all resources for economic growth. The political will of the Vietnamese Government is also reflected in the strategy for administrative reform in 2001-2010, which emphasizes the simplification of administrative procedures, amendment of laws and improvement of economic management. These changes will help establish a dynamic institution to meet the development requirements of the country in the new context.
Overall, tremendous economic reforms taking place over nearly two decades of Doi Moi have yielded encouraging results.
During 20 years of Doi Moi, GDP of Vietnam saw a sustained growth, which stood at 8.2% in 1991-1995 as compared to 3.9% in 1986-1990. This rate dropped to 7.5% in 1996-2000 due to the impacts of the Asian financial crisis. Since 2001, GDP growth recovered on a year-on-year basis, reaching 6.9%, 7%, 7.3% and 7.7% for 2001, 2002, 2003 and 2004 respectively. The figure for 2005 was 8.4%.
The proportion of the industry and construction rose from 38.13% in 2001 to 41.03% in 2005; the service from 36.63% up to 38.08%; and only the agriculture, forestry and fishery from 23.24% to respectively.
As Vietnam’s GDP continuously increases, the economic structure has also witnessed notable changes. From 1990 to 2005, the contribution of agriculture sector dropped from 38.7% to 20.89% , whilst that of the industry and construction was up from 22.7% to 41.03% . The service sector stayed relatively constant, 38.6% in 1990 and 38.08% in 2005. In each sector, the structure has also positively shifted. The agriculture sector has seen a decline in the role of agriculture and forestry from 84.4% to 77.7% during the period 1990-2003, while fishery gained a higher share. In the industrial sector, the proportion of the processing industry was up from 12.3% in 1990 to 20.8% in 2003 with improved product quality. In the service sector, the share of high-quality services such as finance, banking, insurance and tourism, etc. is increasing rapidly.
The economy is well on the road to a multi-sector model operating according to market mechanism and state regulations. This means that the private sector enjoys freedom to develop in all areas not specifically forbidden by law. The legal framework has been revised to facilitate gradual shift from the former centrally-planned economy to a market one, which unleashes production capacity, mobilizing resources effectively and creating a momentum for economic growth and development.
Upon the amendment of the Enterprise Law in 2000, private businesses have enjoyed strong encouragement for development. This Law institutionalized the freedom of all individuals to do business in areas not prohibited by law. It also removed administrative obstacles that hampered enterprises such as complex licensing procedures or fees, etc. In the 2000-2004 period, 73,000 private enterprises were registered, up by 3.75 times against the period 1991-1999. By 2004, the total number of private enterprises operating under the
With a view to raising the productivity of the state-owned sector, policies were formulated with concrete measures to adjust and reorganize SOEs. The management of SOEs' finance and state equity in SOEs was strengthened and the process of SOEs’ equitization well monitored. As the multi-sector economy has further developed, the proportion of SOEs in GDP decreased from 40.1% in 1991 to 38.3% in 2003. The collective sector dropped from 10.2% to 7.9% during the same period. In 2002 and 2003, 1,655 SOEs were listed for reorganization and reform. The figure for 2004 and 2005 were 882 and 413 respectively.
Foreign trade and international economic integration: The policy of openness and industrialization has opened up new opportunities for
The structure of exports has also seen a positive change. During the 1991-1995 period, major exports of
The policy of "multilateralization and diversification" of international relations has helped
Following the introduction of
Foreign Direct Investment: In December 1987, the Foreign Direct Investment Law of Vietnam was introduced to help form the basic legal framework for foreign investment activities in
In recent years and especially in 2005, the Vietnamese Government made a number of adjustments and conducted reforms to create more incentives for foreign investors. They are now supported in tackling business obstacles. The Law on Personal Income Tax has been amended in favour of the tax payers. The one-stop-shop policy has been promoted, telecommunication tariffs lowered to gain competitiveness over other countries in the region. Infrastructure has been improved. More areas, including those previously closed to foreign investors, such as telecommunication, insurance and supermarkets, etc. are now open to investment. As such,
The aforesaid measures were conducive to recovery and rapid increase of the FDI inflows in 2005. The sharp rise of FDI is also attributed to political, economic and security stability, high economic growth rate, continuation of economic reform in accordance with market economy principles, improved living standards leading to higher domestic demand, greater international integration and the emergence in the international market of Vietnamese trademarks and Vietnam’s growing reputation.
Over the past years,