Vietnam Leaps Economy over Hedge in 2004
Despite unfavourable factors such as increased world prices of essential materials and goods, and the outbreak of avian influenza in many localities, Vietnam reaped remarkable economic achievements in 2004. They included high growth in gross domestic product (GDP), export and foreign investment, and great economic and trade deals signed with major partners.
Vietnam posted economic growth of 7.69 per cent in 2004, compared to its target of 7.5-8 per cent, announced the country’s General Statistics Office. This is a high and stable growth rate, given that the country gained 7.24-per cent growth in GDP, which was VND605.5 trillion (US$38.8 billion) in 2003, ranking second in the world after China. Vietnam’s agricultural production and seafood production increased 4.2 per cent and 11.2 per cent, respectively, in 2004.
In 2004, Vietnam's industrial production rose 16 per cent year-on-year, with slightly bigger contributions from the manufacturing and processing industry, and smaller contributions from the natural resource exploitation industry. The proportion of the natural resource exploitation industry dropped to some 26.5 per cent from 27.7 per cent in 2003, which shows that the industrial sector is operating more effectively and beneficial to the country's development progress.
The proportion of the agricultural, forestry and fishery sector in Vietnam's economic structure also declined to about 20.4 per cent in 2004 from 21.8 per cent in 2003. Meanwhile, the proportion of the service sector, which decreased for three straight years, climbed to 38.5 per cent from 38.2 per cent. Notably, services with high grey matter content such as banking, finance and insurance grew faster than previous years.
Vietnam saw a 28.9 per cent increase in export revenue in 2004 to over US$26 billion, the highest growth rate over the past eight years. In addition to the four traditional biggest hard currency earners, namely crude oil, garment, footwear and seafood, the country had two new exports with a turnover of US$1 billion, woodwork and computers and electronics products. Its goods also found new markets in Africa, Latin America and Eastern Europe, while having stronger footholds in the four biggest ones, including Northeast Asia, the European Union (EU), members of the Association of Southeast Asian Nations (ASEAN) and the United States.
Like exports, foreign direct investment (FDI) flowing into Vietnam in 2004 far exceeded the country's target of US$3.3 billion, or 6.5 per cent increase against 2003, to stand at more than US$4.1 billion. The better investment environment is mainly attributed to the stronger FDI flow.
Vietnam is expected to lure some US$5 billion worth of FDI in 2005. The country has planned to permit foreign investors to participate more actively in several fields, including important ones such as cement and electricity. It has already opened a wider door to such fields as vocational training. Under the Circular No. 20 issued by the Ministry of Planning and Investment and the Ministry of Labour, Invalids and Social Affairs, more entities, including foreign investors, foreign-invested enterprises and overseas Vietnamese are to enjoy preferential treatment when they put investment into offering vocational training in industries.
Regarding external economic relations and integration, Vietnam, in 2004, vigorously multilateralised and diversified the ties, and proactively integrated into the regional and international economies. Most notably, its successful hosting of the fifth Asia-Europe Meeting (ASEM 5) on October 8-9 has ushered in a new development era for beefing up cooperation between Vietnam and other ASEM members and the two continents at large.
Vietnam inked cooperation and sponsorship agreements, projects and contracts totalling around US$2 billion during ASEM 5. Meanwhile, the EU and Vietnam concluded their bilateral negotiations about the latter's entry into the World Trade Organisation (WTO), paving the way for the country to conclude negotiations with other major partners, including China, the United States and Australia. On December 3, the EU and Vietnam signed an agreement, under which the former will eliminate export quotas imposed on Vietnam's garments and textiles from January 1, 2005.
The import-export turnovers the EU and Vietnam was estimated at 6.4 billion euros (US$8.6 billion) for 2004 with the country earning nearly five billion euros (US$6.7 billion) from exporting goods, mainly garments, textiles, seafood, footwear and handicrafts, to the block. It is expected to increase to over seven billion euros (US$9.4 billion) in 2005, partly due to the quota removal.
In 2004, many important Vietnamese industries were badly affected by the increased world prices of essential goods such as petroleum, oil, steel and fertilizers. The country's consumer price index stood at 9.5 per cent in the year, according to the General Statistics Office.
To realize its major economic targets, including GDP growth of 8.5 per cent and export revenue increase of 16 per cent in 2005, Vietnam will focus on stepping up economic growth both quantitatively and qualititatively, and strengthening the macro economic stability. Specifically, it will focus on tapping intensive growth factors such as management, productivity, product quality, cost reduction and technology, not just on extensive factors like natural resources and cheap labour.
Prime Minister Phan Van Khai said at the 11th National Assembly's 6th session that the country will focus on enhancing the efficiency of state investment, facilitating private and foreign-owned sector, turning out market-oriented products, revitalizing services, and stepping up international economic integration and export.
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