The Economy of Vietnam - Essay Example

The Economy of VietnamGoing into the year 2000, the economy of Vietnam was stagnating through a period of slow growth, rising unemployment, and an inability to benefit from the regional recovery that was underway after the Asian crisis. In a series of articles compiled by Henry Nguyen titled "Vietnam's Economy: Pat, Present, and Future", the author points to the slow pace of government reform as a hindrance to economic development. The failure to implement liberalized trade policies had resulted in a steady decline in the service sector and manufacturing output.

The article illustrates how foreign direct investments (FDI) have been hit especially hard as the level had dropped from $2 billion in 1997 to just $600 million in 1999. In 2000, the Communist Party implemented "timely and workable guidelines and policies" which began a period of rapid expansion. The GDP growth rate grew to 6.7% and was anticipated to continue this trend for the next few years. That same year, Vietnam committed to a 10-year program of economic and social improvements to develop reforms and partnerships.

The ten-year socio-economic development strategy addressed issues such as environmental, social welfare, and international partnerships. These programs laid the groundwork for their qualification in the WTO. By the year 2006, the changes that Vietnam began in 2000 had begun to show their impact. Their expanding GDP had made Vietnam one of the world's fastest growing economies. Their efforts have culminated in their recent admission to the World Trade Organization (WTO). An article in the Washington Post titled "WTO Plan Reshapes Vietnam's Economy", author Alan Sipress reports that the progress may have come as a mixed blessing.

The author reports that while most Vietnamese are looking forward to the entry, others are skeptical.Though many of the changes have been positive in their move towards WTO membership, there are many changes yet to come and there is some anxiety in the marketplace. Sipress reports that the textile industry in Vietnam currently accounts for only 3.2% of the US imports and the elimination of quotas could have a positive effect on that number. Other industries, such as pharmaceuticals and fertilizer may suffer due to a reduction on import tariffs and the entry of foreign competitors.

Companies that have come to rely on government subsidies and centralized sales will have to undergo dramatic change. A recent reshuffling in the political structure may also point to economic improvements. The addition of younger leadership and a shift of power to the more industrialized south may be able to further spur FDI. Intel's recent $300 million dollar chip factory is located in the south and may indicate another Asian technology center in the works.The changes that Vietnam began in 2000 resulted in more liberalized policies and made Vietnam's growth, and eventual admission to the WTO, possible.

It demonstrates the impact that government trade policies can have on the economic climate of a country. It further shows the influence that the WTO has of global issues such as the environment and full employment. As Vietnam moves toward a more global presence, some industries will suffer hardships while others will flourish. Industries that are heavily reliant on domestic trade will have to learn to compete with imports while exporting industries will have access to an expanded market. Vietnam could not have experienced the rapid growth without liberalizing trade.

Going forward, the entrance into the WTO will have an overall beneficial effect for Vietnam. There may be some shakeout as industries are forced to become more competitive. This could lead to consolidation in some industries, which could be accelerated by the increase in FDI. The overall outlook for Vietnam's economy is bright and reflects that positive efforts they have made since 1999. Works CitedNguyen, Henry. "Vietnam's Economy: Pat Present and Future." Saigon Info. Jan. 2001. Saigon Info. 8 Feb. 2007 Sipress, Alan.

"WTO Plan Reshapes Vietnam's Economy." Washington Post 15 July 2006, foreign serv ed.. 8 Feb. 2007 .