Pestle Vietnam

COUNTRY ANALYSIS REPORT
Vietnam
In-depth PESTLE insights
Publication Date: August 2011
OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal, and environmental (PESTLE) structure in the
Vietnam. Each of the PESTLE factors is explored in terms of four parameters: current strengths, current challenges, future
prospects, and future risks.
Summary
Key findings
The Communist Party of Vietnam has adopted a progressive approach; however, land seizures could lead
to civil unrest
The ruling CPV has not recently faced any serious threats to its power, and this situation is expected to remain the same
over the coming few years. The previous elections to the National Assembly were held in May 2007, and the cabinet was
instated in July 2007. Nong Duc Manh was re-elected as general secretary. Recently, the CPV of Vietnam held its congress
in January 2011, Nguyen Phu Trong replaced Nong Duc Manh as the new general secretary of the CPV. The latter retired
after 10 years in the post. The new general secretary of the CPV has said that tackling the economic problems in the
country is a priority. Nguyen Tan Dung, the current prime minister, is a reformist, and has been reappointed for another five
year term. However, the CPV is expected to keep its stranglehold on the country's political landscape for the foreseeable
future. The CPV is committed to combating the increasing levels of corruption, an attitude that is expected to show positive
results in the near term.
However, protests against land seizures are still put down ruthlessly by the country's security forces, increasing resentment
towards the government. Furthermore, there is civil unrest in the Central Highlands, which is home to a large number of
ethnic minorities. The Vietnamese government seizes land for development projects, often without paying adequate
compensation. This could fan widespread discontent, as the CPV does little to accommodate political grievances.
Country Analysis Report: Vietnam Published 08/2011
© Datamonitor. This brief is a licensed product and is not to be photocopied Page 1

Overview
Despite Vietnam's accession to the WTO, the possibility of state-owned enterprises defaulting is a cause
for concern
Vietnam’s accession to the World Trade Organization (WTO) in 2007 was the result of 12 years of negotiations, and was of
some political significance given that it marked the country's entry into the global economy. WTO membership has reduced
tariffs and restrictions on Vietnam’s exports to other member states, which has benefited the country. Vietnam has also
been better able to attract foreign direct investment since its accession. WTO membership has boosted the country’s
exports and helped it to become part of the international economy.
However, the Vietnamese government is coming under increasing pressure due to problems relating to debt repayment by
large state-owned enterprises. For example, in December 2010 Vinashin defaulted on the scheduled repayment of a
$600m syndicated loan received from international lenders. The government made a decision not to bail out the company
(being under no legal obligation to do so), and in adopting this approach has sent out a strong message to other state-
owned enterprises. However, the default by Vinashin has severely dented the image of the country in international financial
markets. The lenders might have thought Vinashin's structure meant it had an implicit state guarantee. The default is likely
to have a negative impact on the country, making it difficult for other state-owned enterprises to borrow in international
markets.
The country enjoys low unemployment levels, but the government continues to stifle religious freedom
Vietnam has consistently maintained low unemployment levels. The global financial crisis affected the country’s gross
domestic product (GDP) and increased unemployment from 2.3% in 2007 to 6.5% in 2009. Despite the increase, the
average rate of unemployment during 2002–09 was 3.1%, which is very low considering the massive growth of the
country’s population. This low unemployment rate is a significant achievement for Vietnam.
However, the government continues to deny Vietnamese citizens the right to freely practice their religion. Catholics from
Hanoi's Thai Ha parish in Vietnam protested in order to demand the return of property expropriated by communists in the
1960s. During this demonstration, the Vietnamese police are alleged to have assaulted activists who were participating in
peaceful prayer vigils. Such events have been a feature of the Vietnamese landscape for many years, with demands for the
return of confiscated property often quickly followed by state repression.
High-tech production is shifting to Vietnam; however, high piracy rates could deter investment
Manufacturers are choosing North Vietnam to manufacture products meant for the world market and, in particular, for
Southeast China. This is due to production costs being predicted to increase far more rapidly in the latter region than in the
former over the next 10 to 20 years. The first signs of this shift were seen in November 2006, when Intel Corporation
declared that it would increase its investment in an assembly-and-test facility outside of Ho Chi Minh City from the previous
figure of $300m to $1bn. This facility is expected to be the largest single factory in the Intel network. Production began in
2009, and the factory could employ as many as 4,000 highly skilled workers.
However, Vietnam has high rates of piracy, which could deter investment in research and development (R&D)-intensive
areas. The International Intellectual Property Association (IIPA) has put Vietnam on its watch list for allowing intellectual

Overview
property rights violations, which result in huge losses for companies. According to IIPA estimates, business software losses
came to $123m in 2008, up from $120m in 2007. This amount of piracy could deter investment in areas which involve high
levels of R&D.
Registering property is easy in Vietnam, but the state still has monopolies in many sectors
According to the World Bank’s 2011 Doing Business report, the number of procedures required to register a property in
Vietnam is nine, higher than the East Asia and Pacific regional average of 7.8. On the plus side, the number of days
required to register a property is 57, compared to the regional average of 86.7, and the cost of registering a property is
0.6% of its value, much lower than the 4.1% average. In this area, the country has done reasonably well compared to other
countries in the region.
However, Vietnam is still emerging from being a centrally planned socialist economy, with state-owned enterprises holding
monopoly positions. In industries such as electricity, aviation, and telecommunications government-run companies have
powerful monopolies, with market shares of at least 80%. The cement, sugar, banking, and petroleum sectors are also
heavily regulated, with state-owned entities having market shares of 10–40%. In all of the sectors where government-run
organizations enjoy a monopoly, prices tend to be exorbitant and the companies tend to be inefficient and uncompetitive.
The government must initiate measures to reduce regulations in some of these sectors, and actively support privatization in
order to foster competition and efficiency.
While Vietnam has a large forest area, the lack of concerted environmental action and awareness remains a
problem
A large percentage of the country’s land is covered with forests. In 2005, Vietnam’s natural forests were estimated at 9.5
million hectares, while planted forests are believed to extend to over 2.9 million hectares; altogether, forest covers 38% of
the land. In 2007, the government set an ambitious target of planting 200,000 hectares of new forests per year. This is
expected to increase the forest cover in the country significantly.
However, Vietnam lacks environmental integration at the planning and programmatic levels, a fact that can clearly be seen
in both the public investment planning process and in regional plans for land and resource use. A lack of awareness of the
environmental damage caused by sustained economic growth is cause for concern. There are no means available for
stakeholders to make government agencies accountable, which is another major challenge the country faces.
PESTLE highlights
Political landscape
Vietnam is a one-party communist state, and is led by a troika made up of General Secretary Nguyen Phu Trong,
President Truong Tan Sang, and Prime Minister Nguyen Tan Dung.
The Vietnamese government is growing concerned with the activities of Bloc 8406, a pro-democracy dissident
group. The group was named for the day on which it was founded: April 8, 2006. The group counts young,
educated professionals among its members.

Overview
Economic landscape
The global economic slowdown reduced GDP growth to 5.3% in 2009, before it recovered to 6.8% in 2010.
Datamonitor forecasts indicate that the growth rate is expected to decline marginally, dropping to 6.2% in 2011.
Rising oil and food prices increased inflation to 9.4% in 2010. Inflation reached 22% in July 2011, which poses a
serious threat to Vietnam’s economic stability.
Social landscape
Vietnam's GDP per capita increased at an average annual rate of 5.9% during 2001–06 in real terms. However,
income inequality remains high, and the country's Gini coefficient rose from 0.345 in 1990 to 0.432 in 2006.
Vietnam remains a predominantly rural country, although urbanization has increased following the initiation of the
Doi Moi ("renovation") economic reforms. In 2004, about 25% of Vietnam’s population was urban and 75% rural,
down from 85% in the early 1980s.
Technological landscape
A new technology research center will be built in Hanoi, with a projected investment of $350m sourced from
Japan’s Official Development Assistance program. The center will aim to effectively implement the country’s
space technology research and application strategy by 2020.
Vietnamese Prime Minister Nguyen Tan Dung has approved an investment of VND1.7tn ($87.2m) for the national
program on IT application in state agencies by 2015. The program targets IT infrastructure for the development of
e-governance and the provision of information and public services.
Legal landscape
Vietnam has differential tax rates ranging from 0% to 40%, and there are separate rates for Vietnamese and
foreign workers.
Environmental landscape
With the rapid development the country has experienced in the last few years, carbon dioxide emissions have
consistently increased. Indeed, emissions rose from 104.1 million metric tons in 2008 to 108.3 million metric tons
in 2009.

Overview
Key fundamentals
Table 1: Vietnam – key fundamentals
2009 2010 2011 2012 2013 2014 2015
GDP, constant 2000 prices ($bn) 58.8 62.8 66.7 71.2 76.2 81.7 87.7
GDP growth rate (%) 5.3 6.8 6.2 6.8 7.0 7.2 7.4
GDP, constant 2000 prices, per capita ($) 683.7 722.0 758.4 801.2 848.1 900.1 957.4
Inflation (%) 6.9 9.4 13.8 6.9 5.7 5.1 5.1
Exports, total as a percentage of GDP 66.7 64.2 65.3 66.4 67.5 68.5 69.4
Imports, total as a percentage of GDP 80.6 82.7 82.9 83.1 83.3 83.5 83.7
Mid-year population, total (million) 86.0 87.0 87.9 88.9 89.8 90.7 91.6
Unemployment rate (%) 6.2 5.1 4.8 5.0 5.0 5.0 5.0
Mobile penetration per 100 people 122.8 148.4 163.3 172.1 180.3 184.7 188.9
Source: Datamonitor DAT AM ONIT OR

Table of Contents
TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Key Facts and Geographic Location 10
Key facts 10
Geographical location 11
PESTLE Analysis 12
Summary 12
Political analysis 13
Economic analysis 16
Social analysis 19
Technological analysis 22
Legal analysis 24
Environmental analysis 27
Political Landscape 30
Summary 30
Structure and policies 31
Performance 33
Outlook 34
Economic Landscape 35
Summary 35
Evolution 35
Performance 38
Outlook 48
Social Landscape 49
Summary 49
Evolution 49
Performance 52
Outlook 52

Table of Contents
Technological Landscape 53
Summary 53
Evolution 53
Performance 54
Outlook 55
Legal Landscape 57
Summary 57
Evolution 57
Performance 59
Outlook 59
Environmental Landscape 60
Summary 60
Evolution 60
Performance 60
Outlook 61
Appendix 62
Ask the analyst 62
Datamonitor consulting 62
Disclaimer 62

Table of Contents
TABLE OF FIGURES
Figure 1: Map of Vietnam 11
Figure 2: Vietnam – political events timeline 30
Figure 3: Vietnam – key political figures 31
Figure 4: Vietnam – historical GDP growth, 1991–2010 37
Figure 5: GDP and GDP growth rate in Vietnam, 2004–14 39
Figure 6: GDP composition by sector in Vietnam, 2010 40
Figure 7: Agricultural output of Vietnam, 2005–10 41
Figure 8: Industrial output of Vietnam, 2005–10 42
Figure 9: Services output of Vietnam, 2005–10 43
Figure 10: External trade of Vietnam, 2006–10 45
Figure 11: Consumer price index and consumer price index-based inflation in Vietnam, 2004–14 46
Figure 12: Unemployment and unemployment rate in Vietnam, 2004–14 48
Figure 13: Vietnam – composition of religion 51
Figure 14: Growth rate of mobile and fixed line subscribers in Vietnam, 2002–12 54
Figure 15: Internet users and usage growth rate in Vietnam, 2003–13 55
Figure 16: Carbon dioxide emissions in Vietnam, 2003–10 61

Table of Contents
TABLES
Table 1: Vietnam – key fundamentals 5
Table 2: Vietnam – key facts 10
Table 3: Analysis of Vietnam’s political landscape 13
Table 4: Analysis of Vietnam’s economy 16
Table 5: Analysis of Vietnam’s social system 19
Table 6: Analysis of Vietnam’s technology landscape 22
Table 7: Analysis of Vietnam’s legal landscape 24
Table 8: Analysis of Vietnam’s environmental landscape 27
Table 9: Mid-year population by age, 2010 50

Key Facts and Geographic Location
KEY FACTS AND GEOGRAPHIC LOCATION
Key facts
Table 2: Vietnam – key facts
Country and capital

Full name The Socialist Republic of Vietnam
Capital city Hanoi
Government
Government type Single-party communist state
Chief of state and head of government President Truong Tan Sang (since January 19, 2011)
Vice president Nguyen Thi Doan (since July 25, 2007)
Population 86,116,560
Currency Dong
Gross domestic product per capita (purchasing power parity) $3,100
Internet domain .vn
Demographic details
Life expectancy 72.18 years (total population)
69.72 years (men)
74.92 years (women)
Kinh (Viet) 86.2%, Tay 1.9%, Thai 1.7%, Muong 1.5%, Khome 1.4%,
Ethnic composition Hoa 1.1%, Nun 1.1%, Hmong 1%, other 4.1%
Buddhist 9.3%, Catholic 6.7%, Hoa Hao 1.5%, Cao Dai 1.1%,
Major religions (1999 census) Protestant 0.5%, Muslim 0.1%, none 80.8%
Country area 329,560 sq km
Languages Vietnamese (official), English (increasingly favored as a second

language), some French, Chinese, and Khmer; Mon-Khmer and
Malayo-Polynesian (mountain area languages)
Exports Crude oil, marine products, rice, coffee, rubber, tea, garments, shoes
Imports Machinery and equipment, petroleum products, fertilizer, steel
products, raw cotton, grain, cement, motorcycles
Source: Central Intelligence Agency (CIA), The World Factbook DAT AM ONIT OR

PESTLE Analysis
Geographical location
Vietnam is located in Southeast Asia. The country shares sea borders with the Gulf of Thailand (to the southwest), the
South China Sea (to the southeast), and the Gulf of Tonkin (to the east). Cambodia and Laos lie to the west of Vietnam,
while China lies to the north.
Figure 1: Map of Vietnam
Source: CIA, The World Factbook DAT AM ONIT OR

PESTLE Analysis
PESTLE ANALYSIS
Summary
Vietnam has moved on considerably since the Vietnam War ended in a communist victory in the mid-1970s. A program of
liberal economic reforms dating back to the mid-1980s led to a strong growth performance during the 1990s. On the other
hand, political reform has been slower to materialize, with the communists’ monopoly on power still firmly in place. The
pace of economic reform received a boost in 2001 when the country signed up to a comprehensive package of reform
measures created in conjunction with the Bretton Woods international financial agreements. The same year also marked
the signing of a historic trade agreement with the US, finally normalizing trade between the erstwhile enemies. More
recently, the determination of the authorities to implement structural and economic reforms in the buildup to the country's
accession to the World Trade Organization (WTO), mixed with rising exports, contributed towards the economy recording a
compound annual growth rate (CAGR) of 13% during 2001–06. However, the global financial crisis impacted upon the
country, with the GDP growth rate dropping to 6.3% in 2008 and to 5.3% in 2009. The economy recovered in 2010, when
growth of 6.8% was recorded.
The global financial crisis also affected the country’s GDP, with unemployment increasing from 4.7% in 2007 to 4.8% in
2008. The average rate of unemployment during 2002–09 was 5.3%, which is low considering the massive growth of the
country’s population. With regards to technology, Vietnam has decided to build a new technology research center in Hanoi,
with a projected investment of $350m sourced from Japan’s Official Development Assistance (ODA) budget. The center will
aim to effectively implement the country’s space technology research and application strategy by 2020.
Corruption is perceived as widespread in the country. Transparency International’s 2007 Corruption Perceptions Index
ranked Vietnam in 123rd out of 180 nations, and in 121st position in 2008. The 2010 index ranked the country 116th out of
178 countries with a score of 2.7 (0 equates to highly corrupt, and 10 equates to free from corruption). The country faces a
serious challenge in that it lacks an independent judiciary. The CPV selects judges and vets them for political reliability. The
party also seeks to influence the outcome of cases involving perceived threats to the state or to the party’s dominant
position. Forests constitute 38% of the land area in the country, and in 2007 the government set an ambitious target of
planting 200,000 hectares of new forests per year. This is expected to increase forest cover in the country significantly.

PESTLE Analysis
Political analysis
Overview
Since the unification of Vietnam in 1976, the CPV has been in charge of the country. The government does not allow any
political dissent in the country, and jails political activists on a regular basis. Its decisions constitute national policy, which
the executive (Central Committee) and the legislature (National Assembly) branches are required to follow. The CPV has
not faced any serious threat to its power in the last few years, and is expected to continue to rule the country in the near
future. Previous General Secretary Nong Duc Manh was a supporter of pragmatic economic reforms. The party held its
national congress in January 2011. There have been reports that there is a struggle for power ongoing between
conservatives and reformers in the CPV.
Table 3: Analysis of Vietnam’s political landscape
Current strengths Current challenges

▪ Political stability and commitment to fight corruption ▪ Stifling of dissent
▪ Pro-democracy movements
Future prospects Future risks
▪ Improving ties with Cambodia ▪ Land seizures could lead to civil unrest
▪ Struggle for power between conservatives and reformers
Current strengths
Political stability and commitment to fight corruption
The ruling CPV has not recently faced any serious threats to its power, and this situation is expected to remain the same
over the coming few years. The previous elections to the National Assembly were held in May 2007, and a cabinet was
instated in July 2007. Nong Duc Manh was re-elected as general secretary. During his first term, which ran from 2001 to
2006, he focused on fostering unity and stability within the party, and he continued with the same policies in his second
term. Mr Manh was a supporter of reform, and sought to counter any attempt to roll back progressive motions by
conservatives within the party. The CPV is committed to combating the increasing levels of corruption, an attitude that is
expected to show positive results in the near term.
The CPV of Vietnam held its congress in January 2011, Nguyen Phu Trong replaced Nong Duc Manh as the new general
secretary of the CPV. The latter retired after 10 years in the post. The new general secretary of the CPV has said that
tackling the economic problems in the country is a priority. Nguyen Tan Dung, the current prime minister, is a reformist, and

PESTLE Analysis
has been reappointed for another five year term. However, the CPV is expected to keep its stranglehold on the country's
political landscape for the foreseeable future.
Current challenges
Stifling of dissent
Political dissent is suppressed in communist Vietnam. Six democracy activists were sentenced to up to six years in prison
for spreading propaganda against the government, by hanging pro-democracy banners on a road bridge in October 2009.
They were accused of being part of the banned pro-democracy group Bloc 8406. In December 2009, pro-democracy
activist Tran Anh Kim received a five-and-a-half-year jail sentence for subversion, after allegedly publishing pro-democracy
articles on the Internet. Tran Anh Kim was a former army officer and a member of the Democratic Party of Vietnam and
Bloc 8406, both of which are banned. Four activists, including prominent human rights lawyer Le Cong Dinh, were jailed on
charges of trying to overthrow the government in January 2010. Internet entrepreneur Tran Huynh Duy Thuc received the
longest sentence of 16 years. This is being viewed by human rights groups as a sign of an increasing clampdown on
freedom of expression. The suppression of political dissent – and the negative impact it has on the country in terms of the
global arena – continues to be a major challenge to the country.
Pro-democracy movements
The Vietnamese government is growing concerned with the activities of Bloc 8406, a pro-democracy dissident group. The
group was named for the day on which it was founded: April 8, 2006. The group counts young, educated professionals
among its members, and entered the limelight with the release of its Manifesto on Freedom and Democracy for Vietnam at
the time of the CPV's 10th national congress. Some of the demands of the group include the establishment of opposition
political parties, the demand for civil liberties, the drafting of a new constitution, and democratic elections for the National
Assembly. There are reports that the group has collected thousands of signatures in an online petition for political reforms.
Members of Bloc 8406 have been punished by the government, and some have been jailed by the country’s courts for
expressing dissent. However, its members continue to protest peacefully against the communist government.
Future prospects
Improving ties with Cambodia
Vietnam and Cambodia have agreed to expand their co-operation in trade, investment, mining, and transportation, and to
boost bilateral trade so that it could reach $2bn by 2010. According to the Vietnamese Embassy’s Trade Promotion Office,
bilateral trade in 2010 reached $1.8bn, up from $1.3bn in 2009. The two countries also decided to co-operate in preventing
terrorist acts, transnational crimes, contraband, and drug and human trafficking. The prime ministers of the two cou ntries
were present when, in November 2008, five agreements were signed relating to visa exemption, goods transits, the linking
of railways, co-operation between the Vietnamese Ministry of Information and Communication and Cambodia's Ministry of
Information, and a pact between Voice of Vietnam and Cambodia's National Radio. Vietnam’s exports to Cambodia
increased by around 36% in 2010, reaching $1.5bn, up from $1.14bn in 2009; meanwhile, bilateral trade is expected to
reach the target figure in 2011. Improving trade ties with other countries in the region is especially important considering the
deepening financial crisis in the US and Europe.

PESTLE Analysis
Future risks
Land seizures could lead to civil unrest
Protests against land seizures are put down ruthlessly by the country's security forces, a situation that is leading to
increased resentment towards the government. Furthermore, there is civil unrest in the Central Highlands, which is home to
a large number of ethnic minorities. The Vietnamese government seizes land for development projects, often without
paying adequate compensation. If this continues, it could fan widespread discontent, as the CPV does little to
accommodate political grievances.
Struggle for power between conservatives and reformers
There have also been reports of a struggle for power between conservatives and reformers, following changes in the upper
echelon of the CPV. The party has reportedly become ridden with factionalism, which is not related to any specific ideology
but more about grabbing positions of power. Prime Minister Nguyen Tan Dung is said to be a reformer, and has so far
enjoyed the support of the party; however, the progress of economic reforms could slow down significantly if the balance of
power shifts to the conservatives, and any such development would be detrimental to Vietnamese companies.

PESTLE Analysis
Economic analysis
Overview
The global financial crisis impacted upon the country. The slowdown reduced GDP growth to 6.3% in 2008, down from
8.5% in 2007, and to 5.3% in 2009. The country’s economy recovered in 2010, growing at a rate of 6.8%. Vietnam has
grown rapidly since the CPV turned away from central planning in the late 1980s under its Doi Moi policy. It acceded to the
WTO in 2007 after years of negotiations, signaling the integration of Vietnam into the global economy. The country's state-
owned commercial banks are generally inefficient compared to the smaller joint stock (private and part-private) commercial
banks. Talks aimed at establishing a free trade agreement between the European Union (EU) and the Association of
Southeast Asian Nations (ASEAN) have broken down; however, the EU has expressed its willingness to recommence
negotiations in the future. The frenetic pace of credit expansion is expected to increase the volume of non-performing
assets in the country. Vietnam is dependent on its exports, which accounted for around 64% of its GDP in 2010, and the
country’s economy is likely to suffer in the medium term due to difficult external conditions.
Table 4: Analysis of Vietnam’s economy

▪ Accession to the WTO ▪ Inefficient state-owned banks
▪ Economic reforms ▪ Default on international loans

▪ Free trade agreement with the EU ▪ Downward pressure on the dong
▪ Tight credit conditions ▪ Dependence on exports
Current strengths
Accession to the WTO
Vietnam’s accession to the WTO in 2007 was the result of 12 years of negotiations, and is a politically significant
development, as it indicates the country's entry into the global economy. WTO membership has reduced tariffs and
restrictions on Vietnam’s exports to other members, which has benefited the country. In addition, Vietnam has been better
placed to attract foreign direct investment (FDI). WTO membership boosted the country’s exports, and helped it to become
part of the global economy.
Economic reforms
Economic reforms began in Vietnam with the aim of improving living standards and encouraging foreign investment through
more open economic policies in 1986. The CPV initiated economic reforms under its Doi Moi policy in the late 1980s.

PESTLE Analysis
During the 1990s, enhanced institutional support and steadily improving infrastructure made Vietnam’s growth rate one of
the highest in the region. This growth brought about impressive gains in income and quality of life for the Vietnamese
people. The government decided to permit foreign investors to acquire up to 49% of total equity in unlisted c ompanies in
the country, up from the previous figure of 30%. The move was implemented on June 1, 2009. The government has also
embarked on Project 30, which focuses on simplifying all national and sub-national regulations that dampen business
activity.
Current challenges
Inefficient state-owned banks
State-owned commercial banks dominate the Vietnamese banking sector. Such institutions are generally inefficient
compared to the smaller joint stock (private and part-private) commercial banks, and while the government has injected
funds into the former in an attempt to improve their operations, much-needed restructuring has not been undertaken.
Consequently, the country's banking system lacks credibility, and does not generally follow the Basel norms. Furthermore,
the state-owned commercial banks are not audited by reputed international firms, which create doubts about their future
sustainability, especially considering the fact that the government has pushed these banks to lend aggressively. The
banking system could collapse if non-performing assets increase.
Default on international loans
The Vietnamese government is coming under increasing pressure due to problems relating to debt repayment by large
state-owned enterprises. For example, in December 2010 Vinashin defaulted on the scheduled repayment of a $600m
syndicated loan received from international lenders. The government made a decision not to bail out the company (being
under no legal obligation to do so), and in adopting this approach has sent out a strong message to other state-owned
enterprises. However, the default by Vinashin has severely dented the image of the country in international financial
markets. The lenders might have thought Vinashin's structure meant it had an implicit state guarantee. The default is likely
to have a negative impact on the country, making it difficult for other state-owned enterprises to borrow in international
markets.
Future prospects
Free trade agreement with the EU
Vietnamese foreign policy focuses on improving the country’s economic situation through an increase in investment and
external trade. Therefore, it follows a pragmatic approach that aims to develop friendly relations with all nations. The
Vietnamese government has shown an eagerness to enter into free trade negotiations with a number of countries and
regions, which indicates its commitment to a reform agenda. Despite the suspension of negotiations between the ASEAN
and the EU, the latter has shown a willingness to make deals with individual countries. Vietnam would gain from a free
trade agreement with the EU, which would provide a significant boost to its exporters, as import duties are expected to drop
to zero. The EU’s October 2008 announcement that it will negotiate individual agreements with South Asian countries
including Vietnam bodes well, as it will open up new markets for the country.

PESTLE Analysis
Tight credit conditions
The government is aiming to slow the pace of domestic credit in 2011 to 20%. Domestic credit rose by 28% in 2010 after a
significant increase of 45% in 2009. The frenetic pace of credit expansion is expected to increase the volume of non-
performing assets in the country, particularly because lending in Vietnam is more due to political allegiances rather than
financial viability. The government removed the long-term cap on lending rates in March 2010, which resulted in an
increase in the interest rate from 12% to around 19%, leading to a fall in credit offtake. All of these factors indicate that the
credit situation in Vietnam is likely to remain tight in the medium term.
Future risks
Downward pressure on the dong
Vietnam has witnessed strong demand for the US dollar, which is due to a large trade deficit and high inflation. This has
resulted in considerable downward pressure since late 2009, which pushed the State Bank of Vietnam to devalue the
country's currency on many occasions. The devaluation of the dong against the US dollar amounted to 5% in November
2009, and in February 2010 a devaluation of 3% took place. The dong was devalued by 8.5% in February 2011, when the
official rate fell by 8.5%. Overall, during 2008 to early 2011 the value of the dong fell by more than 18%. Accelerating
inflation in the first half of 2011 has put even more pressure on the currency, which could result in the central bank
devaluing it further still. Devaluation is likely to make exports expensive, and servicing of debt in foreign currencies would
also become more costly. Vietnam’s manufacturing sector could be affected, as it imports intermediate goods that will
become more expensive were devaluation to continue apace. The downward pressure of the dong and the subsequent
devaluations pose a significant risk to the country in the medium term.
Dependence on exports
The global economic slowdown reduced GDP growth to 6.3% in 2008, down from 8.5% in 2007, and to 5.3% in 2009. The
Vietnamese economy recovered in 2010 to register a growth rate of 6.8%. The economies of the US, Japan, and the EU,
which together receive 60% of Vietnam’s exports, are not in great shape. Vietnam is dependent on its exports, which
accounted for around 64% of its GDP in 2010. If the economies of the US, Europe, and Japan do not improve, the country’s
economy is likely to suffer in the medium term.

PESTLE Analysis
Social analysis
Overview
The poverty rate in Vietnam has experienced a sharp fall over the past few years, although it remained at over 20% in
2007. The country managed to keep unemployment below 3% during 2002–07; however, the unemployment rate climbed
to above 4% in 2008. The median age in the country is below 30 years, which indicates that it has a young population.
Consequently, unlike many advanced countries Vietnam will not be faced with the problems of an aging population and
rising social expenditure in the near future. Despite an improvement in Vietnam's relations with the US, the persecution of
individuals with religious beliefs has led the US Department of State to put the country on its list of Countries of Particular
Concern, for violations of religious freedom. In addition, the Japanese government has put its ODA on hold after revelations
of corruption surfaced. This could delay improvements to the Vietnamese transport and sewerage systems.
Table 5: Analysis of Vietnam’s social system

▪ A young society ▪ Lack of religious freedom
▪ Low wages in the private sector ▪ Shortage of doctors in the Central Highlands

▪ Initiative to improve educational quality and raise awareness of ▪ Rapid growth in slums
sustainable development
▪ High unemployment coupled with high inflation
▪ Japanese ODA
Current strengths
A young society
In Vietnam, 25.3% of the population is in the 0–14 age group, 69.3% of the population belongs to the 15–64 age group, and
just 5.5% of the population is in the 65+ age group. According to Central Intelligence Agency World Factbook estimates,
Vietnam had a median age of 27.8 years in 2011, which means that half of the population is below this age. While many
developed nations are faced with the problem of an aging population and rising social expenditure, Vietnam’s demographic
structure works in its favor, as there are regular additions to its labor force.
Low wages in the private sector
Vietnamese workers have not benefited by taking up work in industrializing urban areas. This is because the wages offered
by private companies in Vietnam are far lower than in the public sector. A wave of labor strikes before 2005 led to the
government attempting to formalize labor codes and make them more efficient in terms of arbitration and implementation.
The government was also forced to raise the minimum wage by nearly 40% due to a surge in industrial action during 2005.

PESTLE Analysis
However, wages in private factories continue to be below those in state-owned companies. For instance, in a Taiwan-
owned factory that witnessed 20,000 workers strike in April 2008, the employees – who produce Nike-branded apparel –
are paid an average monthly wage of $89. In comparison, the minimum wage at state-owned enterprises is 35% higher,
and 134% higher for newly skilled employees. Workers at another Taiwan-owned footwear factory near Ho Chi Minh City
went on strike in April 2010 to demand better pay and benefits. Furthermore, workers at state-owned enterprises get a
share in the company's profits through a bonus system and welfare funds.
The workers at state-owned cement plants earn an average of $200–250 per month, and government paper mills workers
earn $120–180, both figures considerably higher than the amount paid at the strike-hit Taiwan-owned factory. Low wages
are coupled with the fact that many workers at foreign factories are required to work up to 1,000 hours overtime a year,
often in poor if not abysmal working conditions. Although many Vietnamese individuals have been lifted from poverty after
gaining employment in factories owned by external investors, they continue to earn less than those working for state-owned
enterprises, which is increasing resentment toward foreign companies.
Current challenges
Lack of religious freedom
The government continues to deny Vietnamese citizens the right to freely practice their religion. Catholics from Hanoi's Thai
Ha parish in Vietnam protested in order to demand the return of property expropriated by communists in the 1960s. During
this demonstration, the Vietnamese police are alleged to have assaulted activists who were participating in peaceful prayer
vigils. Such events have been a feature of the Vietnamese landscape for many years, with demands for the return of
confiscated property often quickly followed by state repression.
Catholics are the not the only group facing oppression in the country. According to the US Commission on International
Religious Freedom report released in August 2008, the government has been accused of a range of abuses, including the
banning of indigenous religions such as Hoa Hao and Cao Dai and the continual harassment of followers of the Unified
Buddhist Church of Vietnam. Moreover, local governments in many regions of the country continue to bar students from
religious families from attending school, and there are still cases where believers are forced to renounce their faith. The
lack of freedom to practice one’s religion and the persecution of citizens with religious beliefs continues to be a major
problem in the country.
Shortage of doctors in the Central Highlands
The rural areas in Vietnam are not able to attract doctors in sufficient numbers, which is leading to a crippling shortage of
medical staff in village healthcare centers. The health officials from the Central Highland provinces of Dak Nong, Dak Lak,
Lam Dong, Gia Lai, and Kon Tum have maintained that it is very difficult to attract doctors to rural hospitals. For example, in
the Dak Nong province the doctor/patient ratio stood at 4.7 doctors for 10,000 individuals in 2007, which is very low.
Furthermore, only 30% of villages in this province have doctors; health officials have pointed out that there is a shortage of
doctors at all levels. Although the government sanctioned the spending of $63.5m on 19 health projects in the Central
Highlands provinces in 2007, the situation remains grim, as doctors prefer to work in the cities.

PESTLE Analysis
Future prospects
Initiative to improve educational quality and raise awareness of sustainable development
The United Nations Educational, Scientific, and Cultural Organization's (UNESCO's) Asia Pacific education office praised
Vietnam’s efforts in implementing the United Nations Decade of Education for Sustainable Development 2005–14
framework in July 2007. UNESCO stated that Vietnam was one of the first countries to establish a national action
committee on the issue of sustainable development. A National Action Program has been initiated to improve the quality of
education in the country, and also seeks to raise student awareness of sustainable development issues. Vietnam’s efforts
to improve educational quality and to raise awareness of sustainable development are important first steps towards the
country’s long-term progress.
Japanese ODA
In January 2011 the Japan International Cooperation Agency (JICA) signed an agreement with the Vietnamese government
to provide a loan of JPY58.18bn ($740m) for three projects. In FY2010, JICA signed loan agreements for a total of
JPY18.38bn ($229m) for two projects in May 2010, and a loan agreement in June 2010 for up to a total of JPY10bn
($127m) for one project, bringing the total for the year up to JPY86.5bn ($1.1bn) for six projects. Since resuming aid to
Vietnam in 1981, Japan has taken the lead in providing ODA to fund Vietnam’s crucial infrastructure projects. Rising ODA
from Japan is crucial to improve the social landscape in the country.
Future risks
Rapid growth in slums
Vietnam’s rapid growth has resulted in increasing urbanization. However, there have been no significant investments in the
country's infrastructure. A large proportion of the urban population lives in slums, with inadequate water and poor sanitary
conditions. Furthermore, most of these slums do not have paved roads, which makes transportation extremely arduous
during the rainy seasons. Around 300,000 people lived in slums and squatter settlements in 2009 in Ho Chi Minh City,
where neither the government nor private developers are able to provide the housing needed for the estimated 50,000 new
migrants that move there every year. Consequently, most of these new migrants end up in the city's rapidly growing slum
settlements. The rapid growth of slums is a serious cause for concern.
High unemployment coupled with high inflation
Vietnam has consistently maintained low unemployment levels in the country. The global economic crisis affected the
country’s GDP, and increased unemployment from 4.7% in 2007 to 6.1% in 2009, before the rate declined slightly to 5.1%
in 2010. The country faced higher inflation of 9.4% in 2010, and this rate is likely to increase to 13.8% in 2011, according to
Datamonitor forecasts. High inflation along with high unemployment is likely to cause problems in the medium term.

PESTLE Analysis
Technological analysis
Overview
Vietnam is slowly moving into high-tech production, as manufacturing costs have been increasing far more rapidly in
Southeast China. The government issued a decree in July 2010 regulating investment and co-operation with foreign
partners in the area of science and technology. The country has introduced a number of initiatives designed to foster e-
governance in the country. However, its IPR implementation remains poor, and the IIPA reports that the country suffers
from high rates of piracy; Indeed, the IIPA has put Vietnam on its watch list for allowing violations that cause huge losses to
companies. Vietnam continues to face challenges in terms of access to computers, which are available in less than 40% of
provinces and small cities.
Table 6: Analysis of Vietnam’s technology landscape

▪ Decree to regulate science and technology deals ▪ Low IT usage
▪ High-tech production facilities
▪ New center in space technology ▪ High piracy rates

▪ Agreement with Korean Invention Promotion Association
Current strengths
Decree to regulate science and technology deals
The Vietnamese government issued Decree No 80/2010/ND-CP on July 14, 2010, which regulates investment and co-
operation with foreign partners in the area of science and technology. The decree covers co-operation in science and
technology organizations, research, and training. It requires agreements in this space to be either written or else a
memorandum of understanding, the execution of which must be reported to the relevant state authority within 15 days from
the date of execution. The agreements must be approved in writing by the provincial People's Committee in which the
headquarters of the organization are located, and must also meet environmental requirements. This decree is expected to
facilitate investment in science and technology in the country.
High-tech production facilities
Manufacturers are choosing North Vietnam to manufacture products meant for the world market and, in particular, for
Southeast China. This is because production costs are predicted to increase far more rapidly in the latter country than in
the former over the next 10–20 years. The first signs of this shift were seen in November 2006, when Intel Corporation
declared that it would increase its investment from the previous figure of $300m to $1bn in an assembly-and-test facility

PESTLE Analysis
outside Ho Chi Minh City. The new facility is expected to be the largest single factory in the Intel network. Production began
in 2009, and the facility could employ as many as 4,000 highly skilled workers.
Current challenges
Low IT usage
According to the Ministry of Information and Communication, around 68% of employees in central government agencies
had access to a computer in November 2008. Meanwhile, in provinces and small cities computer access stands at around
40%. In November 2008, six provinces out of 64 did not have a website, those being Quang Ninh, Dak Nong, Lai Chau,
Yen Bai, Hoa Binh, and Dien Bien. Two Vietnamese government ministries are also without a website. The government is
encouraging IT usage as a key part of its administrative reforms to connect the government with the people; however, it has
to do a lot more to increase the use of computers.
Future prospects
New center in space technology
A new technology research center will be built in Hanoi, with a projected investment of $350m sourced from Japan’s ODA.
The center will aim to effectively implement the country’s space technology research and application strategy by 2020. It
will be located at the Hoa Lac Hi-Tech Park, which is expected to include a satellite manufacturing plant, an integrating and
testing center, a magnetic field testing area, a satellite control center, and an observatory model. Work on the new center is
expected to begin in 2010 and to be completed by 2017.
Agreement with the Korean Invention Promotion Association
The Ho Chi Minh City Department of Science and Technology signed an agreement with the Korean Invention Promotion
Association on August 10, 2010 to boost co-operation in the field of science and technology. The agreement is expected to
help Vietnam access updated technologies, as well as improving product quality and productivity. The association will also
support Vietnam in terms of the training of human resources technology transfer in high-tech areas. This agreement is
expected to improve the innovation scenario in Vietnam.
Future risks
High piracy rates
Vietnam has high rates of piracy, which could deter investment in R&D intensive areas. The IIPA has put Vietnam on its
watch list for allowing IPR violations that cause huge losses to companies. According to IIPA estimates, business software
losses totaled $211.8m in 2009, up from $154m in 2008. The Business Software Alliance and International Data
Corporation Global Software Piracy Study covers the pirated software that runs on personal computers including desktops,
laptops, and ultra-portables. According to the study, countries with high levels of PC sales from non-brand name vendors
have high rates of piracy. The study concludes that 85% of the packaged software in the country is pirated, which puts the
country among the global top 10. High levels of piracy could deter investment in areas which involve high levels of R&D.

PESTLE Analysis
Legal analysis
Overview
The legal landscape in the country has been improving since its bid to become a member of the WTO. According to the
World Bank's Doing Business indicators, it is easy to register property in the country compared to elsewhere in the region.
Vietnam is a centrally planned socialist economy with state-owned enterprises in monopoly positions, and needs to do
more in terms of easing restrictions to promote competition. The country’s judiciary is under the control of the CPV, and the
party exercises sufficient power to influence the outcome of cases involving perceived threats to the state or to the party’s
dominant position. The government has created the National Steering Committee for Corruption Prevention and Control,
headed by the prime minister, in an attempt to tackle corruption in the country.
Table 7: Analysis of Vietnam’s legal landscape

▪ Favorable foreign investment scenario ▪ Monopolies of state-owned companies
▪ Lack of independent judiciary
▪ Lifting of capital account restrictions ▪ Rising power of trade unions

▪ High level of corruption
Current strengths
Favorable foreign investment scenario
Vietnam maintains a policy of encouraging foreign investment. A crucial element in its long-term development strategy has
been its continued ability to attract and utilize relatively large amounts of overseas capital, in the form of both FDI and ODA.
For 2006–10, the government of Vietnam established targets in its Socio-Economic Development Plan for FDI at $17.5–
19.5bn in disbursements from existing and newly licensed foreign investments, and for approximately $10bn in ODA
disbursed by foreign donors, amounting to a total of $28–32bn from foreign sources. These levels of FDI and ODA are
required to support the government’s GDP growth target of 7.5–8% per year.
Current challenges
Monopolies of state-owned companies
Vietnam is still emerging from being a centrally planned socialist economy with state-owned enterprises holding monopoly
positions. In the electricity, aviation, and telecommunications industries government-run companies have a complete
monopoly, with market shares of at least 80%. The cement, sugar, banking, and petroleum sectors are all heavily

PESTLE Analysis
regulated, and as a result state-owned entities have market shares of 10–40%. In all of the sectors where government-run
organizations enjoy a monopoly, prices tend to be exorbitant and the companies tend to be inefficient and uncompetitive.
The government must initiate measures to reduce regulations in some of these sectors, and actively support privatization in
order to foster competition and efficiency.
Lack of independent judiciary
Vietnam lacks an independent judiciary, in part because the CPV selects judges and vets them for political reliability.
Furthermore, the party seeks to influence the outcome of cases involving perceived threats to the state or to the party’s
dominant position. In an effort to increase judicial independence, the government transferred the authority of local courts
from the Ministry of Justice to the Supreme People’s Court in September 2002. However, there is little evidence to suggest
that this move has improved the autonomy of judges. Vietnam’s judiciary is also hampered by a shortage of lawyers and
undeveloped trial procedures. The CPV’s influence over the judiciary is a major challenge to the country.
Future prospects
Lifting of capital account restrictions
Vietnam’s membership of the WTO, which took effect in January 2007, should ensure that the government will continue
with its policy of liberalization. Despite its continued support for protectionist policies, the government is expected to ease
capital account restrictions. However, it is unlikely that Vietnam will introduce full capital account liberalization in the near
term. The removal of tariff and non-tariff barriers is expected to be a long and drawn-out process, especially considering the
imposition of monitoring measures on garment exports by the US and the EU’s decision to impose anti-dumping measures
on leather shoes. Vietnam is likely to continue with its policies of liberalization, albeit rather slowly.
Future risks
Rising power of trade unions
Trade unions are a powerful political force in the country. Vietnam is attracting increas ed foreign investment, and so the
protection of workers’ rights is considered to be more important than it was previously. In April 2010 workers went on strike
at a Taiwan-owned footwear factory near Ho Chi Minh City to demand better pay and benefits. In another incident in April
2008 more than 20,000 Vietnamese workers went on strike, demanding a 20% increase to their $89 monthly salaries at a
Taiwanese-owned factory that makes shoes for US apparel giant Nike. The scale of the protests is potentially damaging to
the Vietnamese government’s efforts to emerge as a favorable destination for FDI. In 2008 there were over 700 strikes,
compared with 541 in 2007. The number of strikes dropped by 70% in 2009 to 216; however, high inflation is creating
tensions, as workers are asking for higher wages in order to keep pace with the increased cost of living. Most of the strikes
take place at foreign-owned enterprises, and involve workers protesting against poor working conditions and meager
wages. The rising power of the labor unions will dent the credibility of the country as a viable destination for FDI.
High level of corruption
Vietnam has dangerously high levels of corruption. The National Assembly approved the Anti-Corruption Law in November
2005, which came into effect in June 2006. To tackle corruption at the highest levels, the National Steering Committee for
Corruption Prevention and Control, headed by the prime minister, was created. However, the committee lacks full

PESTLE Analysis
independence, which has raised questions about the impartiality of investigations. The committee will be placed in a very
tight spot with regards to cases involving CPV politicians. Transparency International’s 2010 Corruption Perceptions Index
ranked Vietnam 116th out of 178 nations – a marginal improvement from the 121st position the country recorded in 2008 –
with a score of 2.7 (0 equates to highly corrupt, and 10 equates to free from corruption). Corruption is perceived as being
widespread in the country. The country is well behind other nations in the region, including Malaysia (56th), China (joint
78th), Thailand (joint 78th), and India (87th). Vietnam has to take measures to alleviate corruption in the country, as it can
act as an impediment to potential foreign investors.

PESTLE Analysis
Environmental analysis
Overview
A large part of Vietnam’s land is covered with forest. The country lacks integration at the planning and programmatic levels,
and suffers from a lack of environmental awareness. The World Bank has approved a loan to fund a community-based
natural disasters risk management program in Central Vietnam during 2011–15. Rapid growth in industrial production has
led to increasing pollution, especially as most of the production units have poor environmental records. The country has
initiated many projects to increase forest cover, including nationwide afforestation programs, but the government has
struggled to achieve its targets.
Table 8: Analysis of Vietnam’s environmental landscape

▪ Hydropower project to reduce emissions ▪ Lack of environmental integration and awareness
▪ Wastewater treatment project
▪ Natural disaster risk management ▪ Rising deforestation

▪ Clean water initiative
Current strengths
Hydropower project to reduce emissions
In November 2008, the Japan Bank for International Cooperation (JBIC) signed an agreement to sanction a loan totaling up
to JPY11bn with Vietracimex Lao Cai Electric Joint Stock Company, a government-guaranteed Vietnamese corporation.
The loan was co-financed by Sumitomo Mitsui Banking Corporation, with JBIC providing assurance for its portion. This is
the first loan that JBIC has extended to Vietnam. It will finance the construction and operation of a 60 MW hydropower
station in the Lao Cai province of North Vietnam, a Clean Development Mechanism (CDM) project from which Japanese
companies will acquire Certified Emission Reductions. The loan will support the promotion of CDM projects in Vietnam,
which will not only help Japan to achieve its Kyoto Protocol targets, but will help curb Vietnam's growing greenhouse gas
emission levels.
Wastewater treatment project
The World Bank has decided to fund an urban water supply and wastewater treatment project worth $200m for the 11
provinces that were approved by the prime minister. Of the total, $150m will be sourced from the International Development
Association, with the remainder coming from the International Bank for Restructure and Development, under the auspices

PESTLE Analysis
of the World Bank. The provinces of Binh Duong, Nghe An, Thanh Hoa, Quang Nam, Ninh Binh, Lam Dong, Quang Tri,
Dak Lak, Kien Giang, Quang Ninh, and Binh Phuoc are all expected to benefit from the project, which will be implemented
during 2010–13, and is expected to improve the urban water supply and increase the treatment of wastewater.
Current challenges
Lack of environmental integration and awareness
Vietnam lacks environmental integration at the planning and programmatic levels, a fact that can clearly be seen in both the
public investment planning process and in regional plans for land and resource use. Furthermore, a lack of awareness of
the environmental damage caused by sustained economic growth is cause for concern. For example, authorities in Hai
Duong Province found that the Chinese-owned East Asia Aluminum discharged untreated waste into local waterways,
destroying paddy fields in early 2010. Sewage samples at the factory showed organic compounds nearly four times higher
than the allowed levels, while the amount of oxygen available for aquatic and plant life in the local waterway was far too
low. There are no means available for stakeholders to make government agencies accountable, which is a major challenge
for the country to address.
Future prospects
Natural disaster risk management
The World Bank has approved a loan in July 2011 to fund a community-based natural disasters risk management program
in Central Vietnam during 2011–15. Vietnam has been subjected to various natural disasters such as floods, landslides,
droughts, tropical storms, and hail on a regular basis. According to the Ministry of Natural Resources and Environment,
natural disasters will claim 500 Vietnamese lives and caused a loss of around VND14.5tn ($695m) during 2010–15. The
loan is expected to improve the government’s response to disasters in the country.
Clean water initiative
Saigon Water Corporation, the key supplier of tap water in Vietnam’s Ho Chi Minh City, aims to provide clean water to
nearly 92% of the city’s population and to increase daily capacity from the current level of 1.3 million cubic meters to 2.39
million cubic meters by 2015, and to reduce the rate of water leakage to 30–32% by 2014, down from 40% in 2009. By
2009, 1.03 million households in Ho Chi Minh City had access to clean water, an increase of 349,717 compared to 2005.
Access to drinking water is expected to rapidly increase as a result of this initiative.
Future risks
Rising deforestation
A large percentage of the country is covered with forest. In 2005, Vietnam’s natural forests were estimated at 9.5 million
hectares, while planted forests are believed to extend to over 2.9 million hectares; altogether, forest covers 38% of the
land. The country has initiated many projects to increase the forest cover, including a nationwide afforestation program
costing VND31.6tn ($1.56bn) that was approved in 1997. The project, however, failed to meet its target of planting 5 million
hectares of forests by 2010, with afforestation being achieved in just 2.45 million of hectares by 2010, or 49%. Vietnam is
estimated to lose around 200,000 hectares of forest every year due to factors such as nomadism (which will account for

PESTLE Analysis
60,000 hectares), fires (50,000 hectares), and logging activities (90,000 hectares). The government has to do a lot more to
increase the forest cover in the country.

Political Landscape
POLITICAL LANDSCAPE
Summary
Vietnam remains a one-party state, dominated by the Communist Party of Vietnam (CPV). In recent years, the party has
moved towards a modernizing agenda, particularly with regards to the economy. However, international partners and
human rights groups remain critical of abuses of minority rights and religious freedoms, as well as the continuation of the
system of one-party rule. The CPV is headed by a triumvirate consisting of a president, a prime minister, and a general
secretary. The authorities pay lip service to international pressure on democracy and human rights, and appear to foresee
a more influential role for the legislature in the process of governance. However, fundamental political reform seems some
way off.
The significant political events in Vietnam are shown in Figure 2.
Figure 2: Vietnam – political events timeline
1930−54 1955−68 1969−79 1980− 2001 2002 onwards
• Ho Chi Minh f ounded • The communist • Ho Chinh Minh died in • Vietnamese troops • In 2007, President
the Indochinese insurgency began in 1969 and President withdrew f rom Nguyen Minh Triet
Communist Party (ICP) South Vietnam in 1957. Nixon started Cambodia in 1989. made the f irst ever visit
in 1930. withdrawing troops. to the US by a
• American aid to Diem • A new constitution was Vietnamese head of
• In response to
was increased in 1960. • A ceasef ire agreement adopted and certain state.
Japanese invasion in
was signed in Paris economic f reedoms
1941, ICP f ormed the • Prime Minister Nguyen
• Viet Cong, the and the US troops were given in 1992.
Viet Minh. Tan Dung was
communist guerrillas were pulled out by
reappointed in 2007 and
• The Viet Minh seized operating in South March 1973. • US lif ted its 30-year
he promised to usher in
power and announced Vietnam, def eated the trade embargo in 1994.
economic ref orms.
Vietnam’s South Vietnamese Army • North Vietnamese
independence in 1945. and overthrew President troops invaded South • Vietnam became a f ull • Vietnam took up a two-
Diem in 1963. Vietnam and took member of the year, non-permanent
• Viet Minh f orces
control of the whole Association of seat on the UN Security
attacked an isolated
• A US destroyer was country in 1975. Southeast Asian Council in January
French military outpost
attacked triggering Nations in 1995. 2008.
in the town of Dien Bien
bombing raids on North • Socialist Republic of
in 1954. • China and Vietnam
Vietnam in 1964. Vietnam was • The US and Vietnam
resolved the border
• In the same year, the proclaimed in 1976. normalized their trade
dispute, in December
French government • The US troops reached relations in 2001.
2008, 30 years af ter
agreed to peace talks in 500, 000 in 1967. • Vietnam invaded
1979 war.
Geneva. At the Geneva Cambodia and ousted • In the same year, the
conf erence, Vietnam • A combined assault by the Khmer Rouge Communist Party
was split into North and Viet Cong and the North regime of Pol Pot in chose Nong Duc Manh
South at the 17th Vietnamese army on US 1979. as its new leader.
Parallel. positions began in 1968.

Political Landscape
Structure and policies

Key political figures
The key political figures in Vietnam include:
President Truong Tan Sang
Prime Minister Nguyen Tan Dung.
Figure 3: Vietnam – key political figures
Truong Tan Sang became the president of the country after gaining the parliamentary approval
in July 2011. He is expected to support market-oriented policies. The president is a ceremonial
head in Vietnam and the prime minister oversees the daily working of the government.
Nguyen Tan Dung became the prime minister on the approval of the national assembly in
2006. He was a governor of the state bank of Vietnam between 1998–99. He joined the
Communist Party of Vietnam on June 10, 1967 and then joined the army as a full-fledged
fighter. He was subsequently elected a member of the Party’s Politburo at the eighth, ninth and
tenth national party congresses.
Structure of government
Vietnam is a one-party communist state and is currently led by a troika consisting of General Secretary Nguyen Phu Trong,
President Truong Tan Sang, and Prime Minister Nguyen Tan Dung. In early 1975, North Vietnamese military forces began
a major offensive in the south of the country, inflicting great damage on the region's forces. The communists took Saigon
on April 30, 1975 and announced that they would reunify the country. The Democratic Republic of Vietnam (the north)
absorbed the Republic of Vietnam (the south) to form the Socialist Republic of Vietnam on July 2, 1976. The CPV has been
in charge ever since unification. The national policy of the country is decided by the orders of the party’s leadership, which
the executive (Central Committee) and the legislature (National Assembly) are required to follow. At provincial and city
levels, people’s committees have considerable influence as their approval is a prerequisite f or all development projects and
expenditure within their jurisdiction. The party secretariat comprises 14 Politburo and 160 Central Committee members,
and deals with day-to-day policy. Key issues are put forward for the consideration of the Central Committee. Major policies
have to be ratified by the party congress, which meets every five years.

Political Landscape
Key political parties/figures
The Secretariat of the CPV formulates the major policies, and is made up of 14 Politburo and 160 Central Committee
members. The Central Committee considers key policy issues, and five-yearly party congresses ratify major policy
changes. The 10th party congress, held in April 2006, led to significant changes in the party leadership, although Nong Duc
Manh retained the key position of general secretary. The National Assembly’s June 2006 session subsequently confirmed a
new government leadership, including a new president, prime minister, and key cabinet ministers. The new government
includes some relatively young ministers, and is considered to have been the first step towards installing a new generation
of leaders.
Vietnam’s human rights record is gradually improving. Government monitoring and control of all facets of the political,
social, economic, and religious lives of the people is reducing in some areas, but is still intrusive and at times erratic.
Satellite television and the Internet are now available, although the latter is extensively monitored. Religious and media
freedoms are closely controlled, and political pluralism is yet to be accepted. There is strong asymmetry between the
Vietnamese markets that are being opened up and the country's centrally controlled political system. Vietnam remains a
communist one-party state, ruled by President Truong Tan Sang, Prime Minister Nguyen Tan Dung, General Secretary
Nguyen Phu Trong, and a close circle of others within the CPV. The CPV tolerates little criticism and restricts the basic civil
and political freedoms of its citizens, meaning that while the country's economic transition has proceeded at a rapid pace,
the political realm lags far behind in terms of development.
Key policies
Economic policies
During the 1990s, enhanced institutional support and steadily improving infrastructure made Vietnam’s growth rate one of
the highest in the region. This growth brought about impressive gains in terms of income and quality of life of the
Vietnamese people. The government decided to permit foreign investors to acquire up to 49% of total equity in unlisted
companies in the country, up from the previous figure of 30%. The move was implemented from June 1, 2009. The
government has embarked on Project 30, which focuses on simplifying all national and sub-national regulations that
dampen business activity.
The government struggles to control inflationary pressures as it continues to aim for fast growth. The interest rate subsidy
scheme for medium- and long-term loans was extended until the end of 2010. However, it now provides a subsidy of only
two percentage points, compared to the subsidy that was equivalent to four percentage points in 2009. This subsidy was
also applied to short-term loans. This measure has provided firms with working capital and has thus boosted economic
activity; however, this has resulted in rapid growth in domestic credit, which has increased inflationary pressures.
Poor domestic investment by the government and inefficient state-owned enterprises remain a concern, however. The
Vietnamese government has initiated measures to reform state-owned enterprises in order to improve their financial
situation, but the pace at which these reforms are taking place is slow. A key problem with large and inefficient state-owned
enterprises is that they have been lent large amounts of money from state-owned banks. Consequently, the banks have
accumulated a large percentage of non-performing loans in their balance sheets.

Political Landscape
Social
The number of people living below the poverty line came down remarkably during 1993–2006. This was achieved due to
the Doi Moi process, which has included land reform, price liberalization, and agricultural de-collectivization. Vietnam's
record on poverty reduction is excellent: the proportion of people living in poverty (on less than $1 per day) fell from 58% in
1993 to 15% in 2007. A social security plan provides old age, disability, and survivorship benefits, as well as work-based
injury and medical insurance coverage, which is compulsory for public sector employees and employees of companies with
more than 10 employees. Pensions are funded by 5% of employee wages, by 15% of employer payroll, and by government
contributions. Women in Vietnam get maternity benefits with full wages for 120 days. The 10th CPV congress in April 2006
approved the five-year Socio-Economic Development Plan 2006–10, supporting Vietnam’s intention to become a middle
income country by 2010.
Foreign
Vietnam has reached out to the world since the early 1990s after decades of isolation. The country joined the Association
of Southeast Asian Nations (ASEAN) in 1995, which was a historic moment for the nation. In 2004, the fifth Asia-Europe
Meeting of world leaders was held in Hanoi. Vietnam hosted the Asia Pacific Economic Cooperation summit in November
2006, and joined the World Trade Organization in January 2007. The country became a member of the United Nations
Security Council in January 2008. Vietnam's relations with its largest neighbor China are intricate. The country was
subjected to 1,000 years of Chinese rule in what is now North Vietnam, ending in the 10th century. Chinese rule had a
deep impact on Vietnamese culture, and relations between the two countries remain unpredictable. Despite being a
communist state, Vietnam is wary of China. There have been disagreements over the sovereignty of the Spratley Islands in
the South China Sea, and disputes regarding the border between the two countries have led to occasional demonstrations
such as those in Hanoi and Ho Chi Minh City at the end of 2007. Vietnam has close relations with ASEAN member
countries such as Laos and Cambodia.
Performance
Governance indicators
The World Bank report on governance uses voice and accountability, political stability and absence of violence,
government effectiveness, regulatory quality, rule of law, and control of corruption as indicators for 212 countries and
territories over 1996–2009. The study was carried out by Daniel Kaufmann and Massimo Mastruzzi of the World Bank
Institute, and Aart Kraay of the World Bank Development Economics Research Group. For any country, a percentile rank of
0 corresponds to the lowest possible score and a percentile rank of 100 corresponds to the highest possible score.
In 2009, Vietnam was given a percentile rank of 7.6 on voice and accountability. This parameter measures the extent to
which a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom
of association, and freedom of the media. In comparative terms, Vietnam scored much lower than the Philippines, which
received a percentile rank of 45.5. The CPV does not allow any form of dissent in the country, and the media is firmly
controlled by the state.
Vietnam was assigned a percentile rank of 51.4 in terms of political stability in 2009, which is higher than the Philippines’s
10.8. The CPV has a firm grip on the country, and there seems to be no threat to its power in the near term.

Political Landscape
In terms of government effectiveness, Vietnam received a percentile rank of 46.2 in 2009. Government effectiveness
measures the quality of public and civil services, the degree of governmental independence from politic al pressures, the
quality of policy formulation and implementation, and the credibility of the government's commitment to such policies. The
Philippines is well ahead in terms of government effectiveness, as it registered a percentile rank of 50.0 in 2009.
Vietnam’s percentile ranking in terms of regulatory quality was 31.0 in 2009. Regulatory quality measures the ability of the
government to formulate and implement sound policies and the existence of regulations that permit and promote private
sector development. Vietnam’s performance on this parameter is lower than that of the Philippines, which had a percentile
ranking of 52.4 in 2009.
Vietnam received a percentile rank of 41.5 in the rule of law index. Rule of law measures the extent to which agents have
confidence in and abide by the rules of society – and in particular the quality of contract enforcement, the police, and the
courts – as well as the likelihood of crime and violence. Vietnam is ahead of the Philippines in terms of rule of law, with the
latter achieving a percentile rank of 35.4 in 2009.
Vietnam’s percentile ranking in terms of control of corruption was 36.7 in 2009, having increased from 32.5 in 2003. The
country has been troubled by widespread corruption, and enforcement of anti-corruption laws has been ineffective and
inconsistent. No institution of the country, including the judiciary, the executive, and the legislature, is perceived to be
beyond the reach of corruption. The Philippines’s percentile ranking in terms of control of corruption was 27.1 in the same
year, lower than Vietnam's.
Outlook
The CPV continues to reject demands for political reform, and the citizens of the country have no say in the formation of the
government. Vietnam's media is not free, and the people do not have freedom of association or expression. That is why the
country had a percentile rank of just 7.6 in the voice and accountability parameter of the World Bank’s 2009 governance
indicators. For instance, two reporters were arrested in May 2008 and charged with abusing their position and power while
discharging their public duty, following their coverage of a major corruption scandal. This has led to renewed criticism of
Vietnam, and has confirmed the belief that the government does not tolerate any dissent.
Vietnam has been strengthening its ties with the US in terms of trade and investment. The US granted Vietnam permanent
normal trade relations status in late December 2006. Despite high-level exchanges between the two governments, relations
continue to be tenuous due to human rights violations and the persecution of citizens with religious beliefs. The US
Department of State put Vietnam on its list of Countries of Particular Concern for violations of religious freedom in 2010.
Vietnam was previously placed on the list in 2004, which embarrassed Hanoi and put pressure on it to release many
religious prisoners. The country was removed from the list in 2006. The Vietnamese government has a track record of
stifling opposition, and the courts regularly punish people for dissent. The improvement in the country's relations with the
US could stall due the differences between the US and Vietnam on the issues of human rights and suppression of religious
freedom.

Economic Landscape
ECONOMIC LANDSCAPE
Summary
The Vietnamese economy witnessed strong growth throughout the 1990s, as liberal economic reforms instituted from the
mid-1980s onwards bore fruit. International trade and investment flows received a substantial boost from the lifting of the
US trade embargo in 1994. The economy was hit by the regional financial crisis in 1997–98, although the comparatively
underdeveloped financial sector offered a degree of insulation from the full impact of these events. Gross domestic product
(GDP) growth between 2005 and 2007 was the highest it had been since the Asian Financial Crisis of the late 1990s,
peaking at 8.5% in 2007. A rise in exports and petroleum price hikes were largely responsible for this robust performance.
Developments in 2006 included the successful completion of a bilateral trade agreement with the US, followed by the
gaining of World Trade Organization (WTO) membership.
The global economic slowdown reduced the country's GDP growth rate to 6.3% in 2008 and to 5.3% in 2009. Vietnam
initiated a stimulus package worth $8bn in 2009, with $5.2bn to be used for infrastructure and development projects, $1.6bn
for tax breaks for enterprises and individuals, and $400m for social welfare. In early 2009, the government announced that
it would inject $1bn to subsidize bank loan interest for businesses. The stimulus package fostered growth in the midst of the
worldwide financial crisis, and the country grew at a healthy 6.8% in 2010.
Evolution
1950–90
Significant economic events during this period included:
Following reunification in 1975, Vietnam’s economy was overwhelmed with problems such as imbalances in
supply and demand, inefficiencies in distribution and circulation, soaring inflation rates, enormous difficulties in
production, and rising debt problems.
At the Communist Party of Vietnam's (CPV's) second plenum in April 1987, measures were introduced designed
to give greater scope to the private sector, reduce the budget deficit, and boost the output of agricultural and
consumer goods in order to raise market supplies and exports.
1991–2010
The Vietnamese economy witnessed strong growth throughout the 1990s, as liberal economic reforms instituted from the
mid-1980s onwards bore fruit. International trade and investment flows received a substantial boost from the lifting of the
US trade embargo in 1994. The economy was hit by the regional financial crisis in 1997–98, although the comparatively
underdeveloped financial sector offered a degree of insulation from the full impact of these events.
In recent years, the economy has continued to perform well. The authorities have sped up economic reforms since
agreeing a comprehensive timetable for liberalization with the International Monetary Fund and the World Bank in 2001. In
addition, the goal of WTO accession has given impetus to economic and structural reforms over the past few years.
Reductions in trade and investment barriers, improvements to macroeconomic policymaking, and restructuring in the

Economic Landscape
financial sector have all proceeded well. However, less progress has been made with regards to the reform of the bloated
state-owned enterprise sector, and the privatization process is at an embryonic stage.
In addition, the poverty rate, although declining, still remains high, and the prospect of rising unemployment cannot be ruled
out over the short term as the population continues to grow (at a rate of just below 1% in 2008) and the inefficient state-run
sector retrenches workers. However, the recent WTO accession could potentially encourage more foreign companies to
invest in Vietnam, thus creating new jobs and helping to increase the income of its population beyond the current average
of around $620 per head per year.
At over 8.5%, GDP growth in 2007 was the highest since the Asian Financial Crisis of the late 1990s. A rise in exports and
petroleum price hikes were largely responsible for this robust performance. Developments in 2006 included the successful
completion of a bilateral trade agreement with the US, followed by the gaining of WTO membership. The authorities have
updated intellectual property right regulations to comply with the Trade Related Intellectual Property Rights agreement,
adding to Vietnam’s potential to attract further investment. New laws on investments and enterprises were brought into
effect during 2006 in an attempt to synchronize the investment climate for both domestic and foreign investors. The
country's economy grew by 8.2% in the same year, and by 8.5% in 2007. The global economic slowdown reduced the GDP
growth rate to 6.3% in 2008 and to 5.3% in 2009. Inflation hit a high of 23% in 2008, which was due both to shortsighted
domestic macroeconomic policies and global economic turbulence. Inflation came down to 6.8% in 2009, before climbing to
9.4% in 2010. Inefficient state-owned enterprises and poor domestic investment by the government remain a concern.

Economic Landscape
Figure 4: Vietnam – historical GDP growth, 1991–2010
9.0
8.0
7.0
6.0
Growth rate (%)
5.0
4.0
3.0
2.0
1.0
0.0
1991 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year

Financial authorities and regulators
President Ho Chi Minh gave his assent to the establishment of the Vietnam National Bank on the basis of the new
economic and financial policy set out in the second congress of the Vietnam Workers’ Party in February 1951. The bank
was to implement the party's directions and policies during the period of modernization and industrialization. During 1975–
85, the national bank of the Republic of Vietnam (in the south) was nationalized and unified with the State Bank of Vietnam,
and new banknotes of the Socialist Republic of Vietnam replaced the old notes in both the north and the south in 1978. The
State Bank of Vietnam did not adopt market-oriented policies until late in the 1980s. It monitors and supervises banking
activities, controls credit activities, and handles all monetary and banking violations in accordance with law. Moreover, the
bank formulates national monetary plans for the government to submit to the National Assembly for approval.
The State Securities Commission (SSC) of Vietnam was incorporated in 1996. The duties and responsibilities of the SSC
include the following:
developing the capital markets in Vietnam

Economic Landscape
issuing licenses to participating companies
drafting and implementing rules and regulations.
The SSC receives assistance from the International Finance Corporation for the creation of regulations in the country.
The Ho Chi Minh City Securities Trading Center (HoSTC) was located in Ho Chi Minh City, and was previously known as
the Stock Trading Center of Vietnam (STC). It was incorporated in 2000, and on August 8, 2007, it was renamed and
upgraded to the Ho Chi Minh Stock Exchange (HOSE). HOSE functions as an authorized body of Vietnam's SSC. As of
2006, there were 13 licensed securities companies. Of these, nine were licensed to conduct a full range of securities
services (including underwriting, brokerage, custody, research, portfolio management, and trading). The market
capitalization of HOSE came down from $165m in 2007 to $42m as of December 31, 2008. The market capitalization
reached VND537.4tn ($28bn) as of July 2010.
The Hanoi Securities Trading Center is based in the capital. It was incorporated in 2005, and deals with the buying, selling,
and auctions of shares and bonds. It was established five years after the STC was first founded.
Key policies
During the 1990s, enhanced institutional support and a steadily improving infrastructure made Vietnam’s growth rate one of
the highest in the region. This growth brought about impressive gains in the income and quality of life experienced by the
Vietnamese people. The country is among the fastest-growing economies in Asia, with a consistently high GDP growth rate
that has been maintained at around 8% in recent years.
Poor domestic investment by the government and inefficient state-owned enterprises remain a concern, however. The
Vietnamese government has initiated measures to reform state-owned enterprises in order to improve their financial
situation, but the pace at which these reforms are taking place is slow. A key problem with large and inefficient state-owned
enterprises is that they have been lent large amounts of money from state-owned banks. Consequently, the banks have
accumulated a large percentage of non-performing loans in their balance sheets.
Performance
GDP and growth rate
At over 8.7%, GDP growth in 2007 was the highest since the Asian Financial Crisis of the late 1990s. A rise in exports and
petroleum price hikes were largely responsible for this robust performance. In 2006, the economy grew at a rate of 8.2%,
which decreased to 6.3% in 2008. The global economic slowdown reduced GDP growth to 5.3% in 2009, before it
recovered to 6.8% in 2010. Datamonitor forecasts indicate that the growth rate is expected to decline marginally, to 6.2% in
2011.

Economic Landscape
Figure 5: GDP and GDP growth rate in Vietnam, 2004–14
90.0 10.0
80.0 8.0
6.0
70.0
4.0
60.0
Growth rate (%)

$ billion
2.0
50.0
0.0
40.0
-2.0
30.0
-4.0
20.0
-6.0
10.0 -8.0
0.0 -10.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year
GDP Real GDP growth rate
GDP composition by sector
The industrial sector – which includes mining and quarrying, manufacturing, electricity, gas, water supply, cement,
phosphate, and steel – makes the most significant single contribution to the country’s GDP, at 41.1%. The services sector
contributes 38.3%, while agriculture contributes 20.6%.

Economic Landscape
Figure 6: GDP composition by sector in Vietnam, 2010
Agriculture, 20.6%
Services, 38.3%
Industry, 41.1%
Agriculture
The country’s agricultural output dropped from around 43% in 2008 to 6% in 2009. However, the sector recovered in 2010,
registering growth of 15%. The country's main agricultural products are paddy rice, coffee, rubber, cotton, tea, pepper,
soybeans, cashew nuts, cane sugar, peanuts, and bananas.

Economic Landscape
Figure 7: Agricultural output of Vietnam, 2005–10
450.0 50.0
400.0 45.0
40.0
350.0
35.0
300.0
Growth rate (%)

30.0
VND trillion
250.0
25.0
200.0
20.0
150.0
15.0
100.0
10.0
50.0 5.0
0.0 0.0
2005 2006 2007 2008 2009 2010
Year
Agriculture output Growth rate
Note: sectoral breakdown given in local currency due to exchange rate fluctuations and their impact on growth figures.
Industry
Vietnam’s industrial sector contributes 41.1% to the country's GDP; the main segments include food processing, garments,
shoes, machine-building, mining, coal, steel, cement, chemical fertilizer, glass, tires, oil, and paper. The country’s industrial
output dropped from 25.7% in 2008 to 13.7% in 2009, due to the global economic slowdown. Industrial output recovered in
2010, recording growth of 19.4%.

Economic Landscape
Figure 8: Industrial output of Vietnam, 2005–10
900.0 30.0
800.0
25.0
700.0
600.0 20.0
Growth rate (%)

VND trillion
500.0
15.0
400.0
300.0 10.0
200.0
5.0
100.0
0.0 0.0
2005 2006 2007 2008 2009 2010
Year
Industry output Growth rate
Services
Vietnam registered double-digit output growth during 2002–08, registering an average increase of 16.8%. However,
services output declined from a robust 30.1% in 2008 to 15.3% in 2010.

Economic Landscape
Figure 9: Services output of Vietnam, 2005–10
800.0 35.0
700.0 30.0
600.0
25.0
Growth rate (%)

500.0
VND trillion
20.0
400.0
15.0
300.0
10.0
200.0
100.0 5.0
0.0 0.0
2005 2006 2007 2008 2009 2010
Year
Services output Growth rate
Fiscal situation
In June 2011 the Ministry of Finance stated that Vietnam had a budget deficit of VND27.78tn ($1.33bn) during January and
June 2011, which is less than the VND30.65tn deficit recorded one year previously. Vietnam’s budget deficit was estimated
to be around VND68.6tn ($3.52bn) for 2010, which constituted 5.8% of GDP. The country's budget deficit was less than the
National Assembly’s full-year estimate of 6.2%. The budget deficit for 2009 was around 8% of GDP. The fiscal deficit was
recorded at 5.5% in 2007 and at 4.7% in 2008. In January 2010 the government took action to bolster its fiscal position by
issuing only its second international sovereign bond, in the form of a 10-year $1bn bond. The bond issue was fully
subscribed, indicating that the government is not facing any major difficulties when it comes to accessing international debt
markets. However, the bond issue was tendered at a yield of 6.95%, higher than other comparable issues by Indonesia and
the Philippines.

Economic Landscape
Current account
The country consistently witnessed a current account deficit during 2002–08. The current account deficit increased from
$0.3bn in 2006 to around $7bn in 2007 (or from 0.5% to 10.3% as a percentage of GDP), before climbing further to $12.7bn
in 2008 (which is 15.5% of the country’s GDP). Vietnam had a current account deficit of around $2bn in 2010, which was
lower than the estimated figure of $4bn.
Meanwhile, the country’s trade deficit was around $17.9bn for 2010, higher than the figure of $12.3bn recorded in 2009.
Exports and imports
Vietnam had recorded increased exports every year since 2003 until the global economic crisis led to a decline in 2009.
The country’s exports came down to $59.5bn in 2009, from $67bn in 2008. Exports recovered in 2010 to reach $62.2bn.
Similarly, imports came down from $85bn in 2008 to $72bn in 2009, before recovering to $80bn in 2010. Total trade in the
country dropped from $152bn in 2008 to $131.4bn in 2009, before recovering to $142.4bn in 2010. Vietnam’s major exports
include crude oil, marine products, rice, coffee, rubber, tea, garments, and shoes. In 2010 Vietnam's major export partners
were the US (which accounted for 20% of Vietnamese exports), Japan (10.7%), China (9.8%), and South Korea (4.3%).
Vietnam’s major imports include machinery and equipment, petroleum products, fertilizer, steel produc ts, raw cotton, grain,
cement, and motorcycles. In 2010 Vietnam's major import partners were China (which accounted for 23.8% of Vietnamese
imports), South Korea (11.6%), Japan (10,8%), Taiwan (8.4%), Thailand (6.7%), and Singapore (4.9%).

Economic Landscape
Figure 10: External trade of Vietnam, 2006–10
160.0 152
142
140.0 131
119
120.0
85
100.0 72
90 67 80
$ billion
80.0
48 67
62
60
60.0 52
43
40.0
20.0
0.0
2006 2007 2008 2009 2010
Year
Exports Imports Total trade
Source: DAT AM ONIT OR
External debt
The country’s external debt increased from $27.8bn as of December 31, 2009 to $33.4bn as of December 31, 2010.
International investment position
Total foreign investment
According to the United Nation Conference on Trade and Development, foreign direct investment inflows into the country
dropped from $8bn in 2008 to $4.5bn in 2009.
Credit rating
Recently, Standard & Poor’s (S&P) lowered Vietnam's foreign currency rating from BB to BB-, and lowered its local
currency rating from BB+ to BB. Furthermore, S&P maintained a negative outlook on the Southeast Asian nation's long-
term credit ratings. It maintained short-term credit ratings at B. These lower ratings are expected to increase borrowing
costs to both Vietnam and its domestic companies, and the country’s increasing lending growth offers serious cause for
concern. S&P has warned that if lending growth continues unchecked, then Vietnam runs the risk of further downgrading.

Economic Landscape
Monetary situation
Key monetary indicators
Inflation
The country recorded inflation of 7.5% in 2006, which rose to 8.1% in 2007 before reaching a staggering 23.1% in 2008.
This upward trend was due to an increase in the cost of foodstuffs in the first half of 2008. As a result of declining food and
fuel prices, inflation came down to 6.8% in 2009; however, rising oil and food prices increased inflation to 9.4% in 2010.
Inflation reached 22% in July 2011, a figure which poses a serious threat to Vietnam’s economy. The government has to
restore macroeconomic stability, and must remain committed to slowing down lending growth.
Figure 11: Consumer price index and consumer price index-based inflation in Vietnam, 2004–14
300.00 25.00
250.00
20.00
Consumer price index
200.00
Inflation (%)
15.00
150.00
10.00
100.00
5.00
50.00
0.00 0.00
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year
Consumer price index Inflation
Interest rate
The State Bank of Vietnam raised two of its key interest rates in March 2011, in order to counter increasing inflation, which
could become a major threat to the country's macroeconomic stability in the future. The rediscount rate (which is the rate
the central bank pays commercial banks on their surplus funds) was raised from 7% to 12% in March 2011. The rate for

Economic Landscape
recapitalizing banks was also raised, from 11% to 12%. The central bank has kept its benchmark lending rate unchanged at
9% since November 2010, and opted to cut the reverse repo rate from 15% to 14% in July 2011. This is expected to lower
the cost of funds for banks through open market transactions.
Banking sector
The central bank is not independent, as it is under the control of the government and, ultimately, the CPV. There are 37
joint stock commercial banks, five state-owned commercial banks, four joint venture banks, 35 foreign-invested branches,
and 43 representative offices. The four primary state-owned banks controlled 70% of lending in 2007. Foreign banks may
now open 100%-owned subsidiaries, branches, or representative offices, and are allowed to provide almost all of the
services provided by Vietnamese banks. Lending by state banks is still used as an arm of government policy, particularly in
terms of subsidized interest rates and debt relief to farmers and large state-owned enterprises.
Unemployment
The industry sector employs around 43% of the population, followed by the services sector and the agriculture sector with
shares of 38% and 19% respectively. Unemployment increased from 4.7% in 2007 to 6.1% in 2009. The unemployment
rate dropped to 5.1% in 2010 after the country registered improved GDP growth.

Economic Landscape
Figure 12: Unemployment and unemployment rate in Vietnam, 2004–14
3.50 7.0
3.00 6.0
Number of unemployed (million)
Rate of unemployment (%)

2.50 5.0
2.00 4.0
1.50 3.0
1.00 2.0
0.50 1.0
0.00 0.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year
Total unemployment Rate of unemployment (%)
Outlook
Vietnam has to maintain macroeconomic stability by lowering credit growth and inflation. The country has already been
downgraded by most rating agencies, and there remains the possibility of further downgrades if the government is unable
to tackle its increasing trade deficit and credit lending. Vietnam has witnessed strong demand for the US dollar, which is
due to a large trade deficit and high inflation. This has resulted in considerable downward pressure since late 2009, which
pushed the State Bank of Vietnam to devalue the country's currency on many occasions. The devaluation of the dong
against the US dollar amounted to 5% in November 2009, and in February 2010 a devaluation of 3% took place. The dong
was devalued by 8.5% in February 2011, when the official rate fell by 8.5%. Overall, during 2008 to early 2011 the value of
the dong fell by more than 18%. Accelerating inflation in the first half of 2011 has put even more pressure on the currency,
which could result in the central bank devaluing it further still. Devaluation is likely to make exports expensive, and servicing
of debt in foreign currencies would also become more costly. Vietnam’s manufacturing sector could be affected, as it
imports intermediate goods that will become more expensive were devaluation to continue apace. The downward pressure
of the dong and the subsequent devaluations pose a significant risk to the country in the medium term.

Social Landscape
SOCIAL LANDSCAPE
Summary
Vietnam has a high rate of disability, and the Ministry of Labor, War Invalids, and Social Affairs administers welfare in the
country. The country has a young population, as more than half of its citizens are below 27.8 years old. The country’s
population remains predominantly rural, although the percentage of the population living in urban areas has been
increasing since the initiation of the Doi Moi economic reforms in 1986.
Evolution
The country's welfare system focuses on the victims of the Vietnam War (1954–75), such as individuals disabled in combat
or by toxic chemicals and the families of fallen combatants. Around 5 million Vietnamese – which amounts to more than 6%
of the population – were in the disabled category in 2005. The Ministry of Labor, War Invalids, and Social Affairs
administers welfare in the country, which has a social insurance system with provisions for old age, disability, and death;
sickness and maternity; and workplace-related injury. Coverage is mandatory for state employees, non-state enterprises
with more than 10 employees, and foreign-invested enterprises. Special programs exist for government civil servants and
armed forces personnel.
The government of North Vietnam established a public health system in 1954 that reached down to the village level. This
system was extended to the south after reunification in 1976. However, in the late 1980s the quality of healthcare began to
decline as a result of budgetary constraints, a shift of responsibility to the provinces, and the introduction of charges.
Inadequate funding has led to delays in planned upgrades to water supply and sewerage systems. As a result, almost half
of the population has no access to clean water in 2005, a deficiency that promotes such infectious diseases as malaria,
dengue fever, typhoid, and cholera. Inadequate funding also has contributed to a shortage of nurses, midwives , and
hospital beds.

Demographic composition
Composition by age and gender
In Vietnam, 25.2% of the population is in the 0–14 age group, 69.3% of the population belongs to the 15–64 age group, and
5.5% of the population is in the 65+ age group. According to Central Intelligence Agency World Factbook estimates,
Vietnam had a median age of 27.8 years in 2011, which means that half of the population was below this age. Vietnam’s
demographic structure works in its favor, as there are regular additions to its labor force. The gender ratio in the country is
around 1.11 males per female. The infant mortality rate in the country is around 20.9 deaths per 1,000 live births. The life
expectancy of the total population is around 72.18 years.

Social Landscape
Table 9: Mid-year population by age, 2010
Age Female Male

0–4 3.3 3.6
5–9 3.5 3.7
10–14 4.0 4.3
15–19 4.4 4.7
20–24 4.4 4.6
25–29 3.7 3.9
30–34 3.5 3.5
35–39 3.2 3.1
40–44 3.0 2.9
45–49 2.7 2.4
50–54 2.0 1.7
55–59 1.4 1.1
60–64 0.9 0.7
65–69 0.9 0.7
70–74 0.8 0.5
75–79 0.6 0.4
80+ 0.7 0.3
Urban/rural composition and migration
Vietnam is a predominantly rural country, one that has become increasingly urbanized since the Doi Moi economic reforms
were introduced in 1986. These reforms successfully boosted income and employment opportunities in Vietnamese cities.
In 2008, 27.8% of the country's population was urban and 72.2% was rural, down from 85% in the early 1980s. Urban
areas such as Ho Chi Minh City, Hanoi, Da Nang, and the Central Highlands have attracted significant numbers of
migrants, who are continuing to move from the north of the country to the southern region.
Religious and ethnic composition
According to the 1999 census, the country’s population is comprised of the following religious groups: Buddhist (9%),
Catholic (7%), others (4%), and none (80%).

Social Landscape
Figure 13: Vietnam – composition of religion
Others
Buddhist
4% 9%
Catholic
7%
None
80%
Health
Vietnam spent around 5.1% of its gross domestic product (GDP) on healthcare (both public and private expenditure) in
2001, which is twice as much as neighboring Laos. In Vietnam, only one-quarter of health spending is from the public
sector, with the rest coming from private sources. Compared to Vietnam, only Cambodia has a lower share of public-to-
private spending in the region; despite higher operating costs in remote areas, most healthcare spending in such locations
has benefited from richer households, according to an International Monetary Fund report. The low percentage of
government healthcare spending in Vietnam is a cause for concern. Given that the country has witnessed GDP growth in
excess of 7% since 2002, the rich have been able to bear out-of-pocket healthcare expenses, but the poor continue to lack
access to medical services.
Social welfare
Social welfare policies
The Ministry of Labor, War Invalids, and Social Affairs administers welfare in Vietnam. The country has a social insurance
system with provisions for old age, disability, and death; sickness and maternity; and workplace-related injury. Coverage is

Social Landscape
mandatory for state employees, non-state enterprises with more than 10 employees, and foreign-invested companies.
Special programs exist for civil servants and armed forces personnel.
Performance
Healthcare
Income distribution
Vietnam's GDP per capita increased at an average annual rate of 5.9% during 2001–06 in real terms. However, income
inequality remains high; the country's Gini coefficient rose from 0.345 in 1990 to 0.432 in 2006. As a measure of income
inequality, the Gini coefficient takes a value of 0 to 1, with values closer to 1 indicating a higher inequality in terms of
income distribution. Income varies widely across regions. Data show that during 1999–2004, the average monthly income
per capita rose by VND45,500. However, the Central Highlands registered the lowest increase, while the southeast region
recorded the maximum increase of VND305,200 in per capita income.
Education
Although five years of primary school education are considered compulsory and 92% of eligible children were enrolled in
primary school, only two-thirds completed the fifth grade in 2000. The cost of tuition, books, and uniforms and the need to
supplement family income are the two main reasons children drop out. A huge disparity exists between primary school
enrollment in cities and the rural parts of Vietnam. In some rural areas, only 10 to 15% of the children progress beyond third
grade, whereas almost 96% of pupils in Ho Chi Minh City complete fifth grade. The total literacy rate was estimated to be
93.4% in 2006. According to the World Bank, public spending on education was around 5.4%of GDP in 2008.
Outlook
The United Nations Educational, Scientific, and Cultural Organization's (UNESCO's) Asia Pacific education office praised
Vietnam’s efforts in implementing the United Nations Decade of Education for Sustainable Development 2005 –14
framework in July 2007. UNESCO stated that Vietnam was one of the first countries to establish a national action
committee on the issue of sustainable development. A National Action Program has been initiated to improve the quality of
education in the country, and also seeks to raise student awareness of sustainable development issues. Vietnam’s efforts
to improve educational quality and to raise awareness of sustainable development are important first steps towards the
country’s long-term progress.

Technological Landscape
TECHNOLOGICAL LANDSCAPE
Summary
Vietnam’s telecoms sector is growing quite fast, and the Internet has become very popular in the country. The number of
Internet users doubled during 2005–06. In addition, at the start of the new millennium the country decided to embark upon
the creation of Millennium Science Institutes (MSIs). However, the country was granted no patents in 2006 and just one in
2007. The Central Committee of the Communist Party of Vietnam recognizes the importance of biotechnology, and has
initiated steps to foster its development in the country. Japan is funding Vietnamese power projects based on renewable
resources so that it can receive required Certified Emission Reduction credits.
Evolution
Mobile telephony continues to grow at some speed despite severe price constraints. Vietnam is mirroring China and India
on a smaller scale, with Western-educated Vietnamese citizens returning to the country to add foreign management and
technical experience to the low-cost workforce. Vietnam is one of the fastest growing markets for technology of any sort –
and telecoms in particular – as large infrastructure projects continue to attract investment and consumers. The Internet is
becoming very popular in the country, and the number of users jumped from 5.9 million in 2005 to 14.7 million in 2006, a
rate of around 150%.

The Ministry of Science and Technology is responsible for technological and scientific initiatives in the country. Vietnam
embarked upon the development of a series of MSIs starting from 2000. These institutes will have the following
characteristics:
They will be efficient, small in size, and usually located within existing institutions.
Their principal activity will be scientific research, and their principal product will be educated individuals.
Each institute will have a small permanent scientific staff of very high quality, a flow-through of junior scientists,
and numerous visiting scientists.
Institutes will be autonomous with regards to local institutional structures. At the same time, they will have links to
other institutions, the private sector, the government, and one another.
Each institute will feature a leader of major scientific stature, with entrepreneurial qualities and charisma, who is
able both to work at the frontiers of research and to serve local needs.
Institutes should be flexible in concept and design, and adapted to local conditions.
Intellectual property
There is practically no innovation in Vietnam. The country was granted no patents by the US Patent and Trademark Office
in 2006, and just one in 2007.

Performance
Telecom
Vietnam has witnessed rapid growth rates in terms of both mobile and fixed line users. Mobile penetration per 100
individuals increased from 44.4 in 2007 to 72.1 in 2008, and then to 94.7 in 2009, which indicates that the country
witnessed strong growth over the period. The country recorded impressive mobile penetration growth rates of 51% and
62% in 2007 and 2008 respectively, and mobile subscription growth rates stood at 61.6% in 2006 and 32.6% in 2007. The
number of fixed line subscribers grew at a rate of 16.7% in 2006 and 13.8% in 2007.
Figure 14: Growth rate of mobile and fixed line subscribers in Vietnam, 2002–12
140.0
120.0
100.0
Growth rate (%)
80.0
60.0
40.0
20.0
0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Year
Mobile phones growth Fixed line growth
Internet
The number of Internet users increased from 21 million in 2008 to around 25 million in 2009. Vietnam registered a growth
rate of around 19% in 2009, having previously recorded an exceptional growth rate of 150% during 2005 and 2006.

Figure 15: Internet users and usage growth rate in Vietnam, 2003–13
40.00 160.00
35.00 140.00
30.00 120.00
Number of users (millions)
Growth rate (%)

25.00 100.00
20.00 80.00
15.00 60.00
10.00 40.00
5.00 20.00
0.00 0.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Number of users Growth rate
Biotechnology
In June 2005, the Central Committee of the Communist Party of Vietnam issued decree number 50 regarding the
development and application of biotechnology in the country, followed by the prime minister's decision on the promulgation
of the government’s action plan to pave the way for mastering key biotechnologies and their application in agriculture,
fisheries, production, environmental protection, and security and defense.
Outlook
Vietnamese Prime Minister Nguyen Tan Dung approved an investment of VND1.7tn ($87.2m) for the national program on
IT application in state agencies by 2015. The program targets IT infrastructure for the development of e-governance, the
expansion of IT applications in the state sector, and the provision of information and public services. The country also plans
to build a database center to link central and local information systems, and to build national database centers focused on
people, natural resources and the environment, finance and economics, industry, and trade in order to boost e-governance
in the public sector. It intends to introduce video-conferencing between government, ministerial, and local representatives,
and expects state agencies to open up their websites and offer online public services.
In December 2008, the deputy prime minister affirmed that the state is ready to invest $20.8m to solve pressing issues in

agriculture relating to seeds, new breeds, and post-harvest technology. A new technology research center will be built in
Hanoi, with a projected investment of $350m sourced from Japan’s Official Development Assistance program. The center
will aim to effectively implement the country’s space technology research and application strategy by 2020. It will be located
at the Hoa Lac Hi-Tech Park, which is expected to include a satellite manufacturing plant, an integrating and testing center,
a magnetic field testing area, a satellite control center, and an observatory model. Work on the new center is expected to
begin in 2010 and to be completed by 2017.

Legal Landscape
LEGAL LANDSCAPE
Summary
The judiciary of the country is not independent, as it is under the control of the Communist Party of Vietnam (CPV). The
country’s accession to the World Trade Organization (WTO) has eased regulations in sectors including law, banking, and
engineering. Prospective judges are vetted by the CPV to ensure that only supporters of the party are employed to the
available positions. The judicial system in the country is two-tiered, with courts of first instance and courts of appeal.
Vietnam has differential tax rates, which also vary for Vietnamese citizens and foreigners. According to the World Bank's
Doing Business indicators, Vietnam lags behind the Southeast Asian average in terms of the number of procedures and
days that are required to start a business.
Evolution
The judicial system of Vietnam is under the control of the CPV. The Constitution of 1980 is explicit when it states that the
CPV is to be "the force leading the state and society." Regulatory conditions in the country have constantly improved since
the government’s decision to join the WTO in January 2007. Furthermore, the 2000 bilateral trade agreement came into
effect in December 2001. Vietnam has allowed 100% foreign-owned companies in sectors such as law and engineering
since January 11, 2007. The country’s accession to the WTO has led to the opening up of the banking and non-insurance
industries. Foreign commercial banks have been able to establish representative offices, branches, and commercial joint
venture banks (with foreign capital contributions not to exceed 50% of chartered capital) since April 1, 2007. The foreign
credit institution must have total assets of more than $10bn at the end of the year prior to application in order to establish a
100%-foreign-invested finance company or a joint venture finance company.

Judicial system
The judicial selection process favors supporters of the CPV. Extra-judicial prison sentences are frequently imposed through
administrative procedures without due process of law, and these decisions are not subject to judicial review. Trials are
generally open to the public, and defendants have the right to be present at the trial, the right to an attorney, and the right to
cross-examine witnesses.
Structure of the system
The country has a two-tier court system, which includes courts of first instance and courts of appeal. Judgments are
susceptible to further reviews under special circumstances. The court system consists of the Supreme Court, the provincial
people's courts, and the district people's courts. There are specialized courts at the Supreme Court and at the provincial
levels; these include the criminal court, civil court, economic court, administrative court, and labor court.

Legal Landscape
Legislation affecting business
Establishing operations as a foreign enterprise
There are five main means available to a foreign enterprise to start its operations in Vietnam. Those are wholly foreign-
owned companies; joint ventures; business-co-operation contracts (which are used in sectors where participation is
restricted, such as the oil, gas, and telecommunications industries); build-operate-transfer projects; and foreign investment
shareholding companies, also known as joint stock companies. The latter allow for the transformation of existing foreign-
investment enterprises through public trading of shares on the bourse.
Tax regulations
Income tax
Vietnam has differential tax rates from 0% to 35%, and there are varying rates for Vietnamese employees and foreigners.
Non-residents are subject to a flat 20% tax on their income from Vietnam. From January 1, 2009, a personal deduction
worth VND4m per month has been granted to each taxpayer, and VND1.6m per month is granted to each dependent. This
government initiative serves to reduce taxable income, giving more disposable cash to Vietnamese citizens.
Corporate tax
The corporate income tax rate was lowered from 28% to 25% as of January 1, 2009, with an additional 30% reduction in
the corporate income tax bill for eligible small- and medium-sized enterprises.
Capital gains tax
Foreign companies’ gains on the transfer of interests in a foreign-invested or Vietnamese enterprise (a "capital
assignment") are subject to a flat tax of 28%.
Withholding tax
Vietnam does not levy withholding tax on dividends paid to residents or non-residents. A 10% withholding tax is imposed on
interest payments on offshore loans, unless the rate is reduced under an applicable tax treaty.
Value-added tax
Value-added tax is applied at three different rates: a standard rate of 10% and reduced rates of 0% and 5%. The 0% rate
applies to exports of software and services to firms operating in export processing zones. The 10% rate applies to 16
specific categories of goods and services
Corporate governance
Most enterprises in Vietnam have inspection committees. The inspection committee is responsible for overseeing all
operations and business activities of the company on behalf of the shareholders, according to Enterprise Law 1999. The
law also specifies that an inspection committee is required for any company that has more than 11 shareholders. In
practice, however, many such committees in Vietnam lack the adequate authority to perform their roles to the fullest extent.

Legal Landscape
The members of an inspection committee are often subordinate to the company's senior management, and therefore lack
sufficient confidence or authority to identify and challenge any malpractice that they see occurring. Vietnam has weak
internal corporate controls that guard against related party transactions that could be detrimental to the firm and its
shareholders and potential conflicts of interest for management. The majority of firms surveyed have no written guidelines
on either of these issues and are therefore susceptible to abuse.
Performance
Effectiveness of the legal system
According to the World Bank's 2011 Doing Business report, Vietnam lags behind other countries in the Southeast Asian
region in terms of starting a business. The number of procedures required to start a business in Vietnam is nine, higher
than the East Asia and Pacific regional average of 7.8. In terms of the number of days required to start a business, it takes
an entrepreneur 44 days to do so in Vietnam, which is higher than the regional average of 39. The overall rank of the
country in terms of doing business was 78 in 2011, an improvement over its 2010 rank of 88.
Outlook
Vietnam’s membership of the WTO took effect in January 2007, and will ensure that the government continues with its
policy of liberalization. Despite ongoing support for protectionist policies, the government is expected to ease capital
account restrictions. However, it is unlikely that Vietnam will introduce full capital account liberalization in the near term.
The removal of tariff and non-tariff barriers is expected to be a long and drawn-out process, especially considering the
imposition of monitoring measures on garment exports by the US and the EU’s decision to impose anti-dumping measures
on leather shoes. Vietnam is likely to continue with its policy of liberalization, albeit rather slowly.

Environmental Landscape
ENVIRONMENTAL LANDSCAPE
Summary
Despite starting late in terms of recognizing the environment as a separate legal domain, Vietnam has fairly comprehensive
environmental laws. The country is party to various international agreements and pacts; however, it has witnessed rapid
development in the last few years, which has led to an increase in carbon dioxide emissions. The country’s carbon fuel
usage has also increased in recent years.
Evolution
Environment law did not exist as a separate legal domain or a separate legal branch before 1993. This was mainly because
of the fact that the state’s leading priorities were to heal the wounds of wars and to rebuild the economy. The National
Assembly passed the Environmental Protection Law, the country’s first ever environmental law, on December 27, 1993.
After 12 years, a new Environmental Protection Law was passed by the National Assembly on November 29, 2005.

Environmental regulations
The country has various ecological laws, such as the Mineral Law, the Law on Protection of Public Health, the Forest
Protection and Development Law, the Petroleum Law, the Land Law, the Water Resources Law, and the Enterprise Law.
Moreover, even the Civil Code and the Penal Code contains provisions on environmental protection. In 2003, the
government established the Ministry of Natural Resources, and approved the National Strategy for Environmental
Protection. In 2004, the Environmental Impact Assessment requirements for project approvals were increased , and the
Strategy for Sustainable Development (Agenda 21) was adopted.
Participation in global efforts/agreements/pacts
The major international pacts and agreements that Vietnam is party to are: Biodiversity, Climate Change, Climate Change-
Kyoto Protocol, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea,
Ozone Layer Protection, Ship Pollution, and Wetlands.
Performance
Environmental impact
Industrial production in Vietnam has increased at an extremely fast pace. However, the enterprises responsible have poor
environmental records due to the obsolete equipment they use and their inadequate treatment of wastewater and air
emissions. Many industrial pollutants have the potential to do considerable damage to the health of the country’s citizens.
For instance, Vedan (Vietnam) Enterprise Corp., a unit of Taiwan's Vedan Group, makes monosodium glutamate. The
company was caught illegally discharging untreated wastewater from its monosodium glutamate factory in Dong Nai
province into Thi Vai River in 2008, affecting individuals living along the river. It agreed to pay a VND218.9bn ($11.5m) fine
as compensation for the environmental damage it caused to three provinces in South Vietnam. The government of Vietnam
introduced a penalty for water pollution in early 2007; however, enforcement continues to be erratic.

Environmental Landscape
Despite the decision of the prime minister to close down polluting units if they fail to adopt cleaner technologies, the
situation has not improved, as environmental policies tend not to be enforced. Although Vedan was penalized, Vietnam
continues to be plagued by ineffective enforcement, meaning that unabated pollution will continue in the medium term.
With rapid development over the last few years, Vietnam's carbon dioxide emissions have consistently increased.
Emissions rose from around 93.7 million metric tons in 2008 to around 100.3 million metric tons in 2010. The growth rate
for carbon dioxide emissions was 4.0% in 2009 and 2.4% in 2010, with the average increase of 7.8% during 2003–10.
Figure 16: Carbon dioxide emissions in Vietnam, 2003–10
120.0 30.0
25.0
100.0
20.0
80.0
Million metric tons
Growth (%)
15.0
60.0
10.0
40.0
5.0
20.0
0.0
0.0 -5.0
2003 2004 2005 2006 2007 2008 2009 2010
Year
Volume Growth rate
Outlook
The Ho Chi Minh City authorities agreed to spend around VND54bn ($2.77m) from its budget to protect the water quality of
a section of the Dong Nai River basin in 2011. The money will be used to build automatic monitors of water quality, and to
increase supervision of water discharge into the river by industrial parks, residential localities, and trading facilities.
Currently, wastewater from domestic usage has reached nearly 1.2 million cubic meters, which is released into the
environment every day. The city authorities plan to build a total of nine large wastewater treatment facilities by 2020, in
order to reduce the direct release of wastewater.

Appendix
APPENDIX
Ask the analyst

Datamonitor’s Country Analysis Practice consists of a team of economists, analysts and researchers, all with expertise in
their given fields. For any questions or comments about this report you can contact the author directly.
countryanalysis@datamonitor.com
Datamonitor consulting
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Datamonitor’s consulting capabilities, please contact us directly at consulting@datamonitor.com.
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COUNTRY ANALYSIS REPORT

Publication Date: August 2011

Country Analysis Report: Vietnam Published 08/2011

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 1

Country Analysis Report: Vietnam Published 08/2011

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 2

Country Analysis Report: Vietnam Published 08/2011

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 3

Country Analysis Report: Vietnam Published 08/2011

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 4

Table 1: Vietnam – key fundamentals

2009 2010 2011 2012 2013 2014 2015

Inflation (%) 6.9 9.4 13.8 6.9 5.7 5.1 5.1

Source: Datamonitor DAT AM ONIT OR

Country Analysis Report: Vietnam Published 08/2011

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 5

Key Facts and Geographic Location 10

Structure and policies 31

Structure and policies 37

Structure and policies 49

Country Analysis Report: Vietnam Published 08/2011

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Structure and policies 53

Structure and policies 57

Structure and policies 60

Ask the analyst 62

Country Analysis Report: Vietnam Published 08/2011

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 7

Figure 2: Vietnam – political events timeline 30

Figure 3: Vietnam – key political figures 31

Figure 4: Vietnam – historical GDP growth, 1991–2010 37

Figure 5: GDP and GDP growth rate in Vietnam, 2004–14 39

Figure 6: GDP composition by sector in Vietnam, 2010 40

Figure 7: Agricultural output of Vietnam, 2005–10 41

Figure 8: Industrial output of Vietnam, 2005–10 42

Figure 9: Services output of Vietnam, 2005–10 43

Figure 10: External trade of Vietnam, 2006–10 45

Figure 12: Unemployment and unemployment rate in Vietnam, 2004–14 48

Figure 13: Vietnam – composition of religion 51

Figure 16: Carbon dioxide emissions in Vietnam, 2003–10 61

Country Analysis Report: Vietnam Published 08/2011

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Table 2: Vietnam – key facts 10

Table 3: Analysis of Vietnam’s political landscape 13

Table 4: Analysis of Vietnam’s economy 16

Table 5: Analysis of Vietnam’s social system 19

Table 6: Analysis of Vietnam’s technology landscape 22

Table 7: Analysis of Vietnam’s legal landscape 24

Table 8: Analysis of Vietnam’s environmental landscape 27

Table 9: Mid-year population by age, 2010 50

Country Analysis Report: Vietnam Published 08/2011

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KEY FACTS AND GEOGRAPHIC LOCATION

Country and capital

Gross domestic product per capita (purchasing power parity) $3,100

Internet domain .vn

Country area 329,560 sq km

Languages Vietnamese (official), English (increasingly favored as a second

Country Analysis Report: Vietnam Published 08/2011

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Figure 1: Map of Vietnam

Source: CIA, The World Factbook DAT AM ONIT OR

Country Analysis Report: Vietnam Published 08/2011