A New Economic Tiger in Southeast Asia

                 by Vuong Tran

  

     Vietnam is a country located in Southeast Asia , a country rich in natural and human
resources, which was traditionally an agricultural society.  However, in the 1980s and before
that
decade, Vietnam experienced serious economic difficulties with food shortages and low production of consumer goods due to waste, inefficient productivity and old industrial
equipment.  To solve these problems and to improve production, Vietnam undertook a series
of measures, such as a new agricultural policy, investments in industry, and reliance on foreign investments and international loans and cooperation, all of which have contributed to
substantial economic growth.

    First, in 1990 the Vietnamese Government launched a new agricultural policy that distributed
land to farmers. The farmers, laboring on farm land assigned to them, were now allowed to
enjoy their own harvests after paying taxes, and they could borrow money from state- owned
banks such as the Agricultural Development Bank and the Farming Production Credit, to pay for
all farm-related expenses.  As a result, the farmers concentrated all their efforts on their crops
and obtained very successful harvests. The Government, in turn, made big investments to
improve the irrigation system, to produce all agricultural equipment that was needed, to give assistance to farmers in terms of professional advice and training, and to expand the acreage dedicated to farming.
After some years of implementing this policy, agricultural production
increased significantly. Crops were sufficient for domestic needs and provided rice for export,
making Vietnam an important producer of rice, the second in the world.

      Next, in the field of industry, Vietnamese leaders chose to invest in light industry like
textiles and the manufacturing of consumer goods like clothes, shoes, foods and beverages, and
in heavy industry for the production of domestic and electrical appliances and agricultural
machinery. These investments yielded good results. These sectors improved and satisfied
domestic and regional markets. From its exports, especially rice, Vietnam had hard currency
for the purchase of new equipment for its selective industrial areas.

     Then, in the late 1980s, Vietnam invited foreign investments. Laws and regulations were
 passed that gave special treatment to investors, such as tax free status for the first five years
and 50% tax reduction for the following five years, low rent on land for building factories,
etc. To attract more investments, the Vietnamese Government set up a score of special
economic zones throughout the country where investors could enjoy tax reductions if they
would produce goods for export or if they would use a large percentage of local laborers. 
With a population of 83 million, two thirds of which are still young, Vietnam has a large
labor force that is active, diligent, intelligent, skilled, and hard working. Accustomed to earning
low wages, this
labor force is very attractive to foreign investors.  These workers are also quite
disciplined.  In addition, Vietnam has had a stable system of Government and is a country
where its people are friendly and hospitable.  These are factors that foreign investors like most
and that make it a good and secure place to do business.  The early foreign investors coming to Vietnam and making investments were Asian neighbors from Singapore and Malaysia followed by Koreans, Japanese, and finally the Americans. The latter have been the biggest investors,
most notably Santa Clara based Hewlett Packard amounting to $1 billion, and Philadelphia ’s AMD Althorn Co, $1.4 billion. Of the total $10 billion investment flowing into Vietnam last year,
$7 billion was from American investors, who have invested in all sectors of Vietnam ’s economy,
including heavy and light industries and in service areas with very profitable results.

    Moreover, various international organizations such as the World Bank, International Monetary
Fund, the Asia Bank, and the Overseas Development Administration all have granted
substantial long term low interest rate loans to Vietnam to improve its infrastructure and
banking system in order to make Vietnam stronger.  And full co-operation with Japan and
especially the United States has made Vietnam a strategic partner, to which the United States
gave Permanent Normal Trade Relationship status in December 2006.  All of the above factors
have brought about significant economic gains.  Vietnam ’s GDP has averaged a 7.5% annual
growth rate, and it was 8.2% in 2006.

               In conclusion, based on the steady rise of Vietnam ’s economy, economists
believe Vietnam is going to be a new economic tiger in the region in the near future. Vietnam‘s
strong economy will benefit its Government, its people, and foreign investors.  It will improve
the standard of living of Vietnamese, who will be better-off each year.  There is reason to
believe that Vietnam will finally transform itself and continue to become an economic power.