Surfs up with the Vietnam Economy

By Christian Losche, Research Associate for GLOBAL ID, LLC

Vietnam, in past years, has been posting economic growth rates consistently around eight percent. With inflation above 25 percent, the stock market taking a hit, and labor strikes, people are wondering if it was too much to fast. These are unusual events seeing as how a year ago Vietnam was predicted to be one of the top economies in the world. It would make sense with their population, low labor costs, and available resources. The inflation is not only due to imports, however; it would seem other elements contributing to the incredibly high rate are increased lending and government spending. This inflation rate has created problems for factory workers on minimal salaries, contributing to the labor strikes. With the inflation rate, labor strikes, and the stock market at a two-year low, people are seeing the true volatility of the economy. Considered to be the next emerging and extraordinarily successful market, Vietnam must now ride the wave of uncertainty and hope the economy reaches a balancing point.

Vietnam: Humble Beginnings, Brighter Future

It was inconceivable that Vietnam could ever catch up to the rest of the world’s major economic players. From being ravaged by war and post war conditions such as government collectivization of land and businesses, the country has made tremendous efforts to recovery. Through implementation of privatization, direct foreign investment, and deregulation, economic activity continues to rise. The country resumes preparing for international integration by educating its workforce and through investments in manufacturing technologies and infrastructure. Vietnam has positioned itself as a vital partner in the global marketplace. Its ability to produce low cost manufacturing yet high quality products has attracted companies from all over the world and will ever increase. As a member of the ASEAN Free Trade Area and the World Trade Organization, Vietnam reaffirms its commitment to economic liberalization. According to the Ministry of Foreign Affairs, this country’s GDP increased by a staggering 7.2% in 2005. At this remarkable rate, Vietnam has the potential to emerge as the world’s top outsource destinations.

By Trisha Le, Research Intern for GLOBAL ID, LLC.
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The Textile Industry of Vietnam

The largest sector in Vietnam is industry, accounting for 41.8% of GDP. One of the top industries in Vietnam is the textile industry. Vietnam exported $5.8 billion worth of textiles in 2006, and expects to reach $7 billion in 2007. This industry is Vietnam’s second biggest exporter, behind crude oil, and accounts for about 15% of the country’s export value in merchandise. Over 50% of Vietnam’s textile exports go to the U.S., and over 15% to the EU.

A drastic increase in U.S. textile imports from Vietnam occurred in 2001, after the U.S.-Vietnam Bilateral Trade Agreement was signed. In 2003, however, a U.S.-Vietnam Textile Agreement was put into place. This agreement set base quotas for 26 different categories of U.S. imports of Vietnamese textiles and garments, increasing at a rate of 7% annually. The Vietnam Textile and Apparel Association works to keep the Vietnamese textile industry expanding by aiding its member companies. The association supports its members by promoting their trademarks both domestically and in foreign markets. Diversification of products to meet specific markets as well as expansion into Africa and Eastern Europe is also being encouraged by the Vietnam Textile and Apparel Association.

Written by Carl Phelps, Research Associate, GLOBAL ID LLC

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“Vietnam enters the WTO” – What could this mean for Your Company?

· Vietnam has the fastest growing economy in Southeast Asia, with a recorded growth of 8.4% in 2005 and a GDP growth of almost 50% over the last 5 years. The opening of the Vietnamese economy will create extensive opportunities for US companies.
· WTO accession requires the Vietnamese government to promote transparency and eliminate corrupt practices in its effort to participate in the global rules-based system – effectively reducing your investment risk.
· Vietnam has finalized intellectual property regulations and legislation that is concurrent with the TRIPs (Trade and Related aspects of Intellectual Property Rights) agreement administered by the WTO – safeguarding foreign companies from IP violations
· US companies will be able to pursue their rights through WTO dispute settlement and other WTO operations – promoting accountability and efficient dispute resolution process.
These are only some of the implications of Vietnam's accession to the WTO that could tremendously benefit your organization.

Written by Yeukayi Nenjerama - Facilitator of Sales and Marketing in Asian Cultures for Study Aboard.

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The Vietnamese Economy

The countries of Eastern Asia are some of the most exciting economies in today's world. Businesses around the world are looking towards this area for new growth opportunities. Vietnam has one of the leading economies of the Southeast Asia area, and one of the fastest growing economies in all of Asia. The country boasts a GDP growth rate of 8.2%, exceeding all other ASEAN nations (see chart). This is very impressive, as only China has a higher GDP growth rate in all of Asia. Vietnam has the lowest unemployment out of all the ASEAN nations, at 2%. This, however, is offset by the relatively high inflation rate of 7.5%. The high inflation rate is the weakest element of Vietnam's economy, and is the result of the political practices in the country.

Vietnam also has an industrial production growth rate of 11.3%, which is the third highest among all ASEAN nations, and higher than the industrial growth rate of the United States or Japan. Developing countries typically desire industrial growth as it helps stimulate the economy and leads to improvements in country infrastructure. Some of Vietnam's major exporting industries are Crude Oil, Electronics, Plastics, and Footwear. The United States is the biggest importer of Vietnamese products, followed by Japan, China, Australia, and Singapore. Vietnam is one of the most prominent emerging markets in the world, however, its citizens have very few political rights and the country is ranked 109th in the world in terms of Human Development.

Written by Carl Phelps, Research Associate for GLOBAL ID
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