becoming a French colony, while the northern and central provinces were administered
as French protectorates, and the Vietnamese king was allowed to maintain some
administrative authority in Central Vietnam only.
By the time Second World War broke out, the entire country’s administrative, legal,
and economic systems had been thoroughly modified by the French influence. After
the world war ended, the country had to endure another 30 years of warfare (including
the Vietnam War) and separation before being re-unified (under the Communist
system) in 1975. Despite recent economic liberalizations it is one of the few countries
where the Communist Party has continued to maintain political control.
Vietnam is a developing economy, with a gross domestic product (GDP) per-capita
level (in purchasing power parity terms and 2010 prices) of around US$3,100 in 2010
(CIA, 2011). It began to experiment with limited economic liberalizations from the
late-1970s; by the mid-1980s, these had deepened, thus placing the economy firmly on
a transitional path from the socialist planning model to the market system.
As part of this process, domestic private investors and foreign investors have been
allowed to own resources and participate in the economy. The number of state-owned
enterprises (SOEs) has been sharply reduced, although the authorities have made it
clear that the state would continue to play a major role in economic activities. Some
SOEs have been “equitized”; i.e. they have become joint-stock companies whose
shares may be owned by private investors and companies. Further, a large number of
private companies have been established, although most of them tend to be rather
small. Foreign investors and companies are allowed to own all or parts of enterprises,
subject to some restrictions.
Table I displays historical movements in the shares of GDP accounted for by the
three sectors of enterprise ownership. As can be seen clearly from the table, while
the foreign-invested sector more than doubled its share of total output (from 7.4 to
17.0 percent) between 1996 and 2006, much of this occurred at the expense of the
domestic private sector, whose share declined from 52.7 to 45.7 percent), while
the share of the state sector fell only slightly, from 39.9 to 38.3 percent.
The Vietnamese economy has made a number of noteworthy achievements during
the past two decades or so. Growth in real GDP was around 7.5 percent per year
during the period 1990-2008. As a result, real GDP per capita and living standards rose
substantially. The proportion of people living under the poverty line declined rapidly,
from around 37 percent in 1998 to around 15 percent in 2007 (CIA, 2011). Inflation
was brought down sharply, from triple-digit annual rates during the late-1980s to
a single-digit rate in 1993; it then remained quite well under control until 2007. The
value of international trade (in US dollars) grew by more than 20 percent per year
during the period 1992-2008. Foreign direct investment (FDI) inflows were
approximately US$11.5 billion and $10 billion in 2008 and 2009, respectively
becoming a French colony, while the northern and central provinces were administeredas French protectorates, and the Vietnamese king was allowed to maintain someadministrative authority in Central Vietnam only.By the time Second World War broke out, the entire country’s administrative, legal,and economic systems had been thoroughly modified by the French influence. Afterthe world war ended, the country had to endure another 30 years of warfare (includingthe Vietnam War) and separation before being re-unified (under the Communistsystem) in 1975. Despite recent economic liberalizations it is one of the few countrieswhere the Communist Party has continued to maintain political control.Vietnam is a developing economy, with a gross domestic product (GDP) per-capitalevel (in purchasing power parity terms and 2010 prices) of around US$3,100 in 2010(CIA, 2011). It began to experiment with limited economic liberalizations from thelate-1970s; by the mid-1980s, these had deepened, thus placing the economy firmly ona transitional path from the socialist planning model to the market system.As part of this process, domestic private investors and foreign investors have beenallowed to own resources and participate in the economy. The number of state-ownedenterprises (SOEs) has been sharply reduced, although the authorities have made itclear that the state would continue to play a major role in economic activities. SomeSOEs have been “equitized”; i.e. they have become joint-stock companies whoseshares may be owned by private investors and companies. Further, a large number ofprivate companies have been established, although most of them tend to be rathersmall. Foreign investors and companies are allowed to own all or parts of enterprises,subject to some restrictions.Table I displays historical movements in the shares of GDP accounted for by thethree sectors of enterprise ownership. As can be seen clearly from the table, whilethe foreign-invested sector more than doubled its share of total output (from 7.4 to17.0 percent) between 1996 and 2006, much of this occurred at the expense of thedomestic private sector, whose share declined from 52.7 to 45.7 percent), whilethe share of the state sector fell only slightly, from 39.9 to 38.3 percent.The Vietnamese economy has made a number of noteworthy achievements duringthe past two decades or so. Growth in real GDP was around 7.5 percent per yearduring the period 1990-2008. As a result, real GDP per capita and living standards rosesubstantially. The proportion of people living under the poverty line declined rapidly,from around 37 percent in 1998 to around 15 percent in 2007 (CIA, 2011). Inflationwas brought down sharply, from triple-digit annual rates during the late-1980s toa single-digit rate in 1993; it then remained quite well under control until 2007. Thevalue of international trade (in US dollars) grew by more than 20 percent per yearduring the period 1992-2008. Foreign direct investment (FDI) inflows wereapproximately US$11.5 billion and $10 billion in 2008 and 2009, respectively
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