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In 1986, the Sixth Party Congress of the Communist Party of Vietnam formally abandoned its centralized planned economy and began introducing market elements as part of a broad economic reform package called "đổi mới" ("Renovation"). In many ways, this followed the Chinese model and achieved similar results. On one hand, Vietnam achieved around 8% annual GDP growth from 1990 to 1997 and continued at around 7% from 2000 to 2002, making it the world's second-fastest growing economy. Simultaneously, investment grew three-fold and domestic savings quintupled. On the other hand, urban unemployment has been rising steadily in recent years due to high numbers of migration from the countryside to the cities, and rural unemployment, estimated to be up to 35% during non-harvest periods, is already at critical levels. Layoffs in the state sector and foreign-invested enterprises combined with the lasting effects of a previous military demobilization further exacerbated the unemployment situation. The country aims to become a member of the WTO, perhaps as soon as October 2006. In May 2006, Vietnam negotiated a bilateral trade agreement with the US that marked the completion of the bilateral negotiations with WTO members the country needed to qualify for accession to the organization. Among other steps taken in the process of transitioning to a market economy, Vietnam in July 2006 updated its intellectual property legislation to comply with TRIPS. Vietnam is still a relatively poor country with GDP of US$43 billion (est., 2004). This translates to US$2700 per capita. Inflation rate is estimated at 14% per year in 2004. This figure has been scaled down by the Government to 9.5% per annum to avoid the ‘double digit’ classification. The spending power of the public has noticeably increased. The reason lies in the high prices for property. In Hanoi, the capital, property prices can be as high as those in Tokyo or New York City. This has amazed many people because the average income per capita of this city is around US$1,000 per annum. The booming prices have given poor land owners the opportunity to sell their homes for inflated prices. Tourism has become an increasingly important industry in Vietnam. Some of the over 3 to 3.5 million annual visitors are Vietnam War veterans. |
Vietnam Information: Inside
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