Vietnam yet to Escape Low Income Status

According to economic experts, investors are optimistic about the fact that Vietnam is considered as the second Asian economy to gain a high growth rate, just behind China. According to statistics of the Vietnamese Government, since 2000 the Vietnamese economy has gained an annual growth rate of 7.5 per cent. It gained a growth rate of 8.4 per cent in 2005 alone and has become an ideal destination for foreign investors.

 

The world is aware of Vietnam’s renovation process. UNDP even considers Vietnam one of the most successful examples of a transitional economy. The renovation process has brought changes for the better to the whole economy.

 

In their reports to the Consultative Meeting last year, experts from WB spoke highly of the successes of Vietnam with a high economic growth rate in recent years, despite difficulties and negative impacts from outside.

 

WB country director Klaus Rohland said that the Vietnamese economy was on track and its economic growth in 2005 proved that Vietnam had done a good job.

 

Apart from a high economic growth rate, Vietnam has witness a strong increase in its investment to GDP. In the 2002-2004 period, Vietnam’s investment to GDP ratio reached 34.2 per cent on average, just behind Azerbaijan (45.6 per cent) and China (43.2 per cent).

 

Vietnam’s investment to GDP ratio has seen a stable increase over the past ten years. Concretely, the ratio was put at 26.9 per cent in the 1994-1996 period, and 29.5 per cent in the 1999-2001 period, before occupying the third place.

 

This was achieved thanks to Vietnam’s policies on investment promotion with the amendment of important laws, such as the Enterprise Law and the Investment Law, and the continuity of administrative reform, spearhead product development and economic, trade and investment region formation.

 

Among changes in investment in flows, more capital has been poured intoed developing countries with Vietnam being an important destination. Thanks to better macroeconomic management policies and improved international integration capability, the governments, including the Vietnamese, have adapted themselves quickly and attracted more investment capital.

 

ODA capital granted for Vietnam has increased steadily over the past years, making a contribution to socio-economic development in Vietnam. In the 1990-1999 period, Vietnam was not in the top ten countries attracting ODA in the world. However, in the later period, Vietnam has always been in the top group.

 

Concretely in the 2000-2002 period, Vietnam occupied sixth spot among the top ten countries in ODA attraction. Since 2003 and 2004, Vietnam has occupied fifth spot, just behind Iraq, the Democratic Republic of Congo, Afghanistan and China.

 

Rich countries have promoted their aid to help developing countries to further get involved in trade liberalisation, thus helping reduce barriers to their products in entering the developing markets. Aid for developing countries helps rich countries to have bigger voice trade talks with other partners.

 

Developing countries, in turn, have become more active in attracting ODA capital. For the Vietnamese case, the result was recorded thanks to foreign investors’ trust in a bright future of the Vietnamese economy after having witnessed the achievements of years of renovation.

 

Despite its achievements, in WB’s report, Vietnam remains in a group of low income earning countries alongside Cambodia, the People’s Democratic Republic of Korea, Laos, Myanmar, Mongolia and East Timor...

 

The group consists of countries in the Sahara region in Africa, Central and South Asia and the Middle East, which are in war. India, an emerging economy is also in the group.

 

Meanwhile, Vietnam’s neighbouring countries, such as China, Indonesia, Thailand and the Philippines, have escaped the group to join a group of fair income earning countries.