Vietnam Economy

I. Introduction The world is witnessing the decisively drastic changes of the global economy, especially in recent years of the new century – globalization era. Overcome the difficulties and financial crisis which has left chronic consequences needed years to surmount. The global economy is more and more developed which express new face together with the process of global integration is more and more increasing.

The trend of global integration, over the challenges that countries have to face is bringing a unique opportunity for the development and integration into the global economy as well as empowering all nations, especially developing countries. Vietnam has become a member of the World Trade Organization (WTO) in the early 2007. In this new status, Vietnam is attempting to accelerate the integrated process more extensive, comprehensive and swift into the world economy and the region.

The position as Membership of WTO created equal development for Vietnam and the ability to access to new more favorable opportunities and development in the future. Proudly, Vietnam has already for receiving both such challenges and chances. In our research, we make every effort to analyze two big issues on the future of Vietnam’s economy. Firstly, we are going to clarify which opportunities for explosive development opened to Vietnam within the broad environment of deep integration in the coming years.

Secondly, we also categorize what Vietnam need to apply innovative policies to take advantages of opportunities for remarkable development effectively. II. Discussion of findings 1. International context and the prospect for a breakthrough of Vietnam 1. 1. A shift to knowledge economy Firstly, the presence of a new productive force plays a decisive role in the development of the modern world. It is knowledge – human intelligence.

Instead of land, natural resources – natural advantages which have a decisive role in the economy of traditional agriculture, and instead of financial capital, which is decisive advantage in the classically industrial economy; in the knowledge economy, basic advantage of any economic entity is human intelligence. Unlike most resources that become depleted when used, information and knowledge can be shared, and grown through application. Which country develops faster and in more informative knowledge economy will tend to make great advances in development. Second, the operation of a knowledge economy is based on a new principle: high-speed.

In the modern world, speed is a dominant attribute. High speed opens up many opportunities. But on the other hand, it is associated with the unpredictability of the process. It requires entities to have thinking capacity at the level of national strategy, quick reaction and the ability to adjust in the rapid change in any circumstances. High speed of the transformation means a quick shift of the structure and technologies. In the face of rapid technological change, an economy or a company may take a shortcut. This is an opportunity for less developed countries to catch up more developed ones.

Companies in Vietnam need to choose that strategy to boost the development. (Cong Thuong, 2009). However, the “catch up” by taking shortcuts also contains risks. This situation stems from a conflict between the demands for jump, which are great financial potential, high level of ability to access to technology, intelligent and effective government, powerful business systems, and one side is the and effective government, powerful business systems, and one side is the insufficient capacity of less developed countries to meet the requirements (including Vietnam).

The sooner of these steps in the process of industrialization and modernization, the greater the degree of risk. 1. 2. New system of international labor division and capability of developing in global network. Globalization creates a new structure for the development process – the structure of global economic networks. Prior, the specific production process is conducted in each country. The difference now is that the processes occur on the basis of a global network and increasingly dominated by global rules, regulations.

With such structure, globalization is seen as a great opportunity to countries to rapidly join in modern eveloping orbit, early access to the highest achievements of mankind to solve problems of their development (growth, employment, improve technology and techniques). Characteristic of modern economic network is global connection. This network has four basic characteristics: new markets, new tools, the new characters and the new rules. Thanks to modern technology, modern economic network has a structure of a “global space network”, in which each “node” will serve as an equal center of the network connection (J.

Naisbitt, 1998). This is a new structure of the modern world. The world is moving from division of labor between enterprises of different countries (mainly takes place within a country) to form the division of labor in sequence, based on global comparative advantage. To survive and thrive in the global network economy, the economy must satisfy two conditions. The first is to mobilize and develop under same principle, same orbit with the global economic system. For an economy that is transforming into market economy, the stronger market reforms, the quicker it becomes the modern market, the greater the chance of development.

This outlook is directly related to one of the basic conditions for Vietnam’s WTO accession, which is Vietnam will only be recognized as a market economy by 2018. (Highbeam, 2010) This implies that in order to take advantage of integration opportunities and create breakthrough development, Vietnam should further promote the market-oriented reform, consider it both as a basic task and priority strategy. Secondly, the economy must always prove to have competitive advantages and ability to survive in network.

This requires the economy to establish and develop a firm but flexible economic structure, enough to cope with the impacts of the global economic system which is changing rapidly. 1. 3. The development of China’s and India’s Economy and the new development situation in East Asia Business trend in East Asia East Asia became one of the largest economic and the most modern industrial centers by the help of the strong rise of China and the quick recovery process after economic crisis in 1997-1998 of region economy. Industrial outputs, especially produced by the medium technology , have big percentage in global industrial production.

Before the economic crisis in 1997 – 1998, the East Asia’s Economy developed in sequential way that could reduce the risk of competition, especially for less developing countries. However, in the twenty-first century, under the impact of the crisis and the transition of foreign investment flow direction, the powerful rise of China economy, in large-scale, in diversification of level and developed capibility, creat a new process in econimic development in East Asia. Firstly, developing in sequential way keeps doing its effect, but in higher speed, so that the developmet gap between region economy is narrowed.

Secondly, a new industrial development model is the ”value-added chain” division of labor between countries in region. This trend creats a basis to more closely joint development. In principle, all economies, will have many opportunities to get traction of the region’s development. East Asia has a long-term propects and large opportunities for regional development. Condition of access and ability to take advantage of opportunities is the difference between each economy in region, weaker market has to face with more difficult challenges and bigger arduousness.

In this situation, the regional economic intergration is important condition to help the weaker econimies narrow the development gap with the stronger econimies. The development of China’s and India’s Economy: new opportunities and new challenges The strong rise of China and India is creating opportunities tremendous growth for the whole world. Firstly, it’s market opportunity, created by the explosive growth of two economies with 2,5 billion people, average GDP growth rate is 8-9% per year. Secondly, economic explosion of China and India leads to the shift of FDI flow, both amount and system.

China and India, two key elements, are re-orienting the global FDI flow. They attract FDI in their two economies, simultaneously, exert pervasive investment in both East and South Asia. Vietnam will certainly benefit from the shift of these investment flows. But how many benefits we get depending on our effort to create the business environment, our attitutes and policy. In addition, Vietnam, with “Indochina” geographical location, is considered to be a geographical- economic advantage, and directly affected by two strongly effective development situations. ASEAN is the most potential area that China want to invest.

In the ASEAN econimies, for various reasons such as adjacent geograhy, cheap source of labor, culturalinteraction…Vietnam will be one of investment destination noticed by Chinese investors. Vietnam is an address that strongly attracts investment. In the process of modernization, industrialization, Vietnam has to pay attention on system more than amount of investment. 2. Strength, weaknesses as well as opportunities and challenges of Vietnam’s economy After the process of reformation over 20 years, VVietnam has been getting a lot of advances for the economy.

The most important thing to get the best is that, we must observe the whole reality of our economy conditions. The anlysis the map of SWOT will help us have the comprehensive eye in seeing our economy and take more advantages in international business are. Initially, the strengths of Vietnam economy can be seen through the trend of open-market economy, integration & the stable politic and social environment. Vietnamese government improved the process of economic reformation with more policies to support for the economic operation easily.

We also have potential advantages to develop the economy. In the context of the globalization, especially economic globalization, the stability of potitic and society become the most atractive conditions for foreign investors and internatinonal trade. It can be illustrated in term of the economic crisis during 1997-1998. It made most of countries hurt, in contemporary, it increased the attraction of VietNamese forward foreign in vestors. One more thing is the advantage of geo-strategic position of Vietnam.

It is located as the cross button of the most active economy with the highest economic growth speed in the world-East Asia. It is on the important maritime routes of the Pacific Ocean, have the China sea with rich and various mineral resouces. Besides, we must consider the weaknesses of our economy. After 20 years of economic reformation, Vietnam economy still is not a quite mature one. Since Vietnam has particiapated WTO, we also coped with many difficulties. The whole economy has appeared its weaknesses. The first is the poor of infrastructure, and obsolete technology.

The secondly is that recently, even the economy has gotten the markable number of economic growth about 7-8% per year, however Vietnamese people can not see significant change of our economy. Especially, when Vietnam involves the international business, its economy is presenting the weak competitive ability in the international era. According to the analysis of profesor Michael Porter, Vietnam majorly attract investors by the low price worker, however, in the context of economic fluctuation invironment, it does not ensure for the stable development of the economy.

The lastly is the inefficency operation of the stae enterprises block and the small scale of private interprises. The State enterprises are more favoured, but they only contributes about 25% of GDP, this number does not appropriate with the major role in the whole economy; while the private interprises contributes to GDP with 50%. It can be seen in the graph below: [pic] Finally, the exchange rate of VND also is the weakness of our economy. With the current exchange rate, VND is overvalued more than China currency, Vietnam’s merchandise is almost impossible to compete with the same product from China.

This means that the supporting material can not has the way to grow. |Figure 1: Exchange rate | |Exchage rate |Current |Real |Real/current | |USD/VND |19. 500 |22. 425 |15% | |USD/RMB |6,93 |4,85 |-30% | |RMB/VND |2. 815 |4. 625 |64% | Next come, we must consider Vietnam economy’s opportunities. The participation in WTO (2006) brings to Vietnam a lot of opportunities to develop. From the reality of many countries showed that taking the advantages of free trade and open market economy made them get successes of development.

First of all, our economy is acessed with the other markets in the world with low tariff. With an open economy like the economy of our country, exports gets over 60% of GDP, this is a particularly important factor is to ensure economic growth. Secondly, With the completation of the law system made our economy become more efficient. We have more opportuinities to study new technological advance and mangement. In addition, with the flexibility of economic envirnoment, it is the attracting region for investors and FDI, creates many jobs for local people.

Recent years, it is clearly shown that foreign investment plays an important role in our economy, in 2006, it contributed nearly 56% of exports and 15% of GDP of the economy. Thirdly, The participation in WTO promote the internal reform process in our country and make it be come more efficient. It also increase our national position in the world as most of others. Providing the new image of Vietnam is that a friendly and open nation for the world. Besides of all things, the challenges in the new context of the world also is observed carefully. The first origins from our desire, which want to get the stable and quick development.

The open market always go along with the higher competition with the huge competitors, for example China, India and so on. The competition does not only appear on the product with product, firm with firm…. but also, widerly, it become the competition between the state and state, especially the development strategies to promote domestic resources and attract investment from outside. The success depends on whether the development strategies is to be promote the comparative advantage or not; the ability to reflect ahead changes of the world or not.

The second is, the more the economy developed, the more lager the gap of rich and poor become. The firms of weaker nations also are more hurt by the economic crisis and changes. Finally,the economic integration put more stress on invironment preservation issues, traditional and cultural value of our country. How to cope with the challenges and take opportunities depend much on internal ability of our country. 3. Strategy for a jump in development post – WTO To have a sudden and sustainable development, a solid orientation in process planning is needed.

However, development orientation is only one of phrases in development policy to boost Vietnamese economic in globalization process. A breakthrough in development has to put in its logical development generalization. Hence, in making policy, analyzing the right “nutshell” and find the solution to handle it have to be made in whole context of development process. Furthermore, the breakthrough development strategy must not conflict with other policies in legislature system (Tran Dinh Thien, 2009). Moreover, these strategies should be a buffer step in building and enforce the contemporary legal system.

With all the analysis above, general policy is suggested to enhance industrialization and modernization in the foreseen future. Firstly, it has a fundamentally dramatic change in ideology of development in this integration process in Vietnam in post- WTO Change in market boundary: Joining WTO means that Vietnam has the equal right and better condition to come closer to 149 countries as well as open Vietnamese market for 149 countries to enter. WTO is a foundation helping Vietnam approach deeper and in a higher level through bilateral and multilateral relation (Nguyen Xuyen, 2005) Vietnam has signed the “Manrine strategy from 2010- 2020”.

This is the first economics strategy of Vietnam which will expand new national geography with more than 1. 000. 000 km2. This expansion is crucial since it open a new international and mandarin vision (instated of national vision) for development and in modernization and industrialization. Secondly, the development process in globalization also defines a new norm of the self- independence in politic and economic. 1. Pushing up industrialization, modernization, economic transition, increase industry proportion and services in GDP.

On the other hand, emphasize the vital role of agriculture sector in a long term policy to ensure food security and people’s living standard. (TH? THANH va VAN H? C, 2005 ). Food security became a major concern for each nation, Vietnam – with the long-term strength in exporting agriculture production should be more flexible in dealing with world food crisis to take advantage as well as ensure the stability in domestic market 2. Restructure the production and service sector which focus on high quality services and auxiliary industry, to produce more competitive product in market network.

Simultaneously, building an agriculture product chain with high technology to increase productivity and quality, more effective product distribution. (Ha Nguy? n, H? i Vu, 2008) 3. Concentrating on domestic market by increase distribution chanel to dominate this market and make dometic market bacome a foundation to go further in international market. (vietbao, 2011) . Vietnamese company is less competitive compared to other TNCs/MNCs in its own main market. Hence, to create a strong business foundation will help them for further investing globally. 4.

As Ho Chi Minh has said ” culture enlighten people’s road” . the development orientation has to emphasize the development in all-side and in harmony with economic development, solve flexibly between economics and society. Put the basic national education as priority to enhance the quality of civilians. This is a major criteria to fix the problems and weakness that occurred prior. the new strategy also has to concern with some global problems that the world are now facing with : global warming, shortage of natural resources, alternative energy… ( egov. laocai. gov. vn, 2010) III. Conclusion:

Vietnam’s approach to the concept of “development” in the context of international integration – overcoming the challenge is a prerequisite to turn the chances to development reality, leading Vietnam to be not behind economically and catches up with the world’s development. In conclusion, it can be affirmed that our economy is entering the period of overall breakthrough, in terms of historical meaning- the era of the development process. That is why we need dramatic change in the thinking of development as well as a new approach to industrialization and modernization strategy and growth model.