From Communism to
Capitalism
Vietnam’s Economic
Transformation
Group 3
Hong Sa
M987Z231
Sonny
M987Z261
Rahul
M987Z207
Mai
M987Z243
Contents
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Introduction
History of Vietnam’s economic expansion & GDP growth
through 2008.
Present Day Vietnam Economic Conditions
Doing business in Vietnam

Where is the FDI going?
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Potential and Risk
The Official and Unofficial Economy
How things changed after the economic transformation
Discussion Question 1
What is the future of Vietnam’s economy?
Discussion Questions 2 & 3
Conclusion
Q&A
General situation of Vietnam economy
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1990s, Vietnamese problems of
macro-leading are poverty
alleviation and economic
restructuring in the direction of
flow access to the region and
internationally.
For a decade, united Vietnam’s
economy was plagued with
inefficiency and corruption in
state programs, poor quality and
underproduction and restriction
on economic activities and trade.
It also suffered from the trade
embargo from the US and most
of Europe after the Vietnam War.
Hanoi, before 1975
General situation of Vietnam
economy
 Economic variables in Vietnam period 1997
- 1998 under the influence spread from the
financial crisis-the currency of East Asia, as
a member of the regional economy.
But a decade later, 2007 - 2008, inflation
and declining growth occurred almost
simultaneously with the global credit crisis,
derived from "problem" loans below the
houses in the United States and quickly
soon negatively impact on the international
financial system, including Vietnam.
General situation of Vietnam
economy
 In October 2001, United States President
George Bush signed an agreement that created
a United States – Vietnam free trade area. The
signing marked yet another milestone along
Vietnam’s path toward a more open market,
the timeline for which includes the following:
 In 2/ 1994, United State President Bill Clinton
ended America’s 19-year economic embargo of
Vietnam and opened the door for US
companies to target the world’s 12th most
populous country.
 In 7/1995, President Clinton re-establish
diplomatic relations with Vietnam.
General situation of Vietnam
economy
 In 1995, Vietnam joined the Association
of Southeast Asian Nations.
 In 1998, the White House announced
that it would exempt Vietnam.
 In 7/2000, US President Bill Clinton
signed a trade pact with Vietnam.
 In 11/2006 the Asia-Pacific Economic
Cooperation Summit was held in Hanoi.
 In 2007, Vietnam joined the WTO
GDP growth of Vietnam economy from 1984
to 2008
VIETNAM –PRESENT
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GDP : $256 billion (2009 est.)
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GDP - real growth rate:
4.4% (2009 est.)
6.2% (2008 est.) 8.5% (2007 est.)
GDP - per capita:
$2,900 (2009 est.) $2,800 (2008 est.)
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GDP - composition by sector:
agriculture: 21.4%
industry: 39.9%
services: 38.7% (2009 est.)
Labor force:
47.66 million (2009 est.)
Labor force - by occupation:
agriculture: 55.6%
industry: 18.9%
services: 25.5% (July 2005)
Unemployment rate:
6.5% (2009 est.)
4.7% (2008 est.)
Population below poverty line:
7.8% (2009 est.)
North Dame Cathedral, HCMC
VIETNAM –PRESENT
Investment (gross fixed):
36.2% of GDP (2009 est.)
Budget:
revenues: $21.89 billion
expenditures: $30.42 billion
(2009 est.)
Inflation rate (consumer
prices):
7.3% (2009 est.)
23.1% (2008 est.)
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Commercial bank prime
lending rate:
15.78% (31 December 2008)
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$25.89 billion (31 December
2008 est.) Stock of direct
foreign investment - at
home:
$47.37 billion (31 December
2009 est.)
$40.34 billion (31 December
2008 est.)
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note: data are in 2009 US
dollars
VIETNAM –PRESENT
Discussion Question #1
 Assess the market
opportunities in
Vietnam for both
consumer-products
companies and
industrial-products
companies. What
is the nature of the
opportunity?
Typical street in Hochiminhcity
MARKET OPPORTUNITY IN
VIETNAM
 Nature of the opportunities for foreign
companies:
 Young population make large workforce with
cheap labor cost, set-up cost and material cost
 Potential market with most players are local
companies which small capital
 Numerous economic laws and regulations have
been changed to attract FDI
 Although the legal process is complicated, stable
political (1 Party) and economical environment is
one of Vietnam strong point.
MARKET OPPORTUNITY IN VIETNAM
 For consumer-products
companies:
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Huge potential market
with population of
85,789,573 (2009)
Purchasing power parity:
$241.7 billion (2008
est.)
 Industrial-products
companies
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Under-developed
infrastructure, the need
to support
Before joining WTO,
most of industry
companies were
Government owned, now
it’s opened as a
promising land for world
giant corporations.
 Year 2007
Ease of doing business in Vietnam
Foreign Direct Investment
Registered FDI capital
 2009: US $21.48 billion
Where is this investment going?
 Top 3 provinces attracts
FDI in Vietnam:
 Baria-Vung Tau (6.73 bil.
$US, in which 2.857
bil.$US of 12 new licensed
projects)
 Quang Nam (4.174, 4.150,
1)
 Binh Duong (2.502, 2.152,
95)
 Hochiminh City and Hanoi
are ranked number #7 and
#8 accordingly.
Typical industrial park
Official & Unofficial Economy
 Most of company has 2 parallel system of
accounting: 1 fake financial report for the
taxation, 1 for the Board of management
only.
 In Government owned companies, only
relatives or trusted person of the director
hold key positions, even the recruitment is
public.
 Although the Gov is trying to prevent,
corruption is there.
 Illegal foreign exchange transaction is
everywhere, with exchange rate sometimes
8x higher than the central bank's mid-point
reference rate.
How things changed after economic
transformation
 With the presence of most MNCs, bring
more jobs and income for Vietnamese
people, also they’re now are brandoriented, they have more choices from
local goods to famous brand goods.
 Instead of limited to just Gov-owned
companies, employees now become
more active to join international
workforce.
 With new technologies, people living
standard is higher
 With the joining of WTO, international
banks, healthcare and education could
enter the sectors that belong only to
Gov before, which bring
competitiveness and lots of benefits
for local people
Opera view Bldg- HCMC
Future of Vietnam Economy Some Highs
There is considerable debate about the economic future of Vietnam. Pessimists
focus on the country's inadequate physical infrastructure and its powerful state
bureaucracy which makes doing business in Vietnam complex and difficult. They
also point to persisting ambiguities in Vietnam's evolving legal structure and issues
of corruption
 First, Vietnam has the good fortune of having access to Pacific ports and being
strategically and centrally located near China, India, and Indonesia, all among the
world's largest countries. These are potentially huge markets for possible
Vietnamese exports.
 Second, with its Confucian traditions, Vietnam has demonstrated a strong
commitment to education and human resource development. The country's overall
literacy rate is an impressively high 93.7 percent
 Third, Vietnam shares a number of common characteristics with Japan and now
seems in a number of ways similar to Japan during its post-war phase of
development, though, of course, Vietnam does not have the industrial pre-war
base that Japan had however both were highly motivated to rebuild their societies
and economies after suffering from war.
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Fourth, Vietnam has excellent tourism potential which can be a valuable
source of foreign exchange. It also benefits from substantial and
increasing international remittances of overseas Vietnamese
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Fifth, in fighting the Chinese, the French, and then the United States,
the Vietnamese demonstrated impressive courage, determination,
flexibility, and creativity. These traits bode well for the entrepreneurial
potential of Vietnam.
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Sixth, the October 2001 approval by the U.S. Congress of a trade
agreement between the 2 countries will provide Vietnam with greatly
improved export access to the large U.S. market for a wide variety of
products. Here there is also a parallel with the earlier economic history
of Japan.
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Membership in the WTO, in theory, will bring three main benefits to
Vietnam’s economy:
Firstly Vietnam will gain increased access to export markets, including
the United States and Europe, secondly Vietnam will be in a better
position to attract foreign direct investment and thirdly There will be
increased pressure for economic and administrative reform.
Future of Vietnam Economy Some Lows
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First is that workers will still not have the means to protect their
rights. Foreign companies will establish operations in Vietnam to gain
access to inexpensive labor. The priority of these companies will not be
the rights or employment conditions of Vietnamese workers.
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Second is that the benefits from economic integration will be
concentrated within the ruling minority. Cooperation between authorities
and “red capitalists” will mean that peasants and small, privately-owned
businesses, which do not form part of this exclusive network, will not
enjoy a level playing field.
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Third is that certain industries that face intense competition inevitably will
be hurt. When Vietnam’s markets open, all domestic firms will need to
compete on equal terms with foreign companies. It is likely that the
Government will provide financial assistance and subsidize losses for
state-owned enterprises. Meanwhile private enterprises that have only
just emerged will not benefit from the same protectionist policies. This
will mean that many domestic firms may incur substantial financial losses
or face insolvency, because of their inability to compete effectively.
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Fourth is the risk of environmental degradation, which will have long
and lasting consequences for later generations of Vietnamese. Current
policy trends indicate that the leadership in Vietnam will adopt a
development program, similar to that of China’s, which is not geared
toward environmentally sustainable development, but only has short
term benefits in mi
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Fifth and most important is that that the Vietnamese Communist Party
continues to consciously hinder the nation from progressing forward.
This is the most difficult of all challenges. Guided by the objective of
maintaining power and serving the interests of the ruling minority, the
Vietnamese Communist Party’s policies will continue to hinder the
nation’s ability to fully integrate into and benefit from the global
economy, specifically because:
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The Vietnamese Communist Party continues to abuse the legal
system for its own ends at all levels of government. In addition to the
economic costs, this is an environment in which various forms of
corruption thrive
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The Vietnamese Communist Party continues to control all forms of
media to restrict the people from accessing information and
knowledge, particularly through the Internet.
Discussion Question #2
 #2: Nike and several other
well-known American
companies are sourcing
some of their production in
Vietnam, thereby taking
advantage of a labor force
that is paid the equivalent of
$2 per day or less. Are
goods labeled "Made in
Vietnam" likely to find
widespread acceptance
among American
consumers?
Cyclo in Hanoi
#2 Answer

Nike was one of the first US companies to shift its manufacturing from China to
Vietnam. With this move came increased criticism of worker exploitation and
poor working conditions. Nike spends an enormous amount of money on
marketing their products while seeking the lowest possible cost of production. As
a capitalist study, the company does well. However, consumers are exposed to
reports of these practices and often respond to the pressure by avoiding Nike
products. The effect is short term as Nike answers the criticism with proactive PR
campaigns that seek to re-establish consumer trust. American consumers are
notorious for their short attention spans, and with each athlete endorsement or
innovative marketing move, their opinion quickly shifts to a more neutral or
positive perception of Nike.
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In recent years, many other companies have followed Nike's lead and this has led
to even more expansion in Vietnam. The textile industry produces high quality
products that are sold to American consumers through a variety of brands and
retailers. Has the "Made in Vietnam" label caused concern? Yes, some
consumers do reject the products and choose to purchase products that are
produced in the USA or in companies they feel more comfortable with. However,
the majority of consumers are more value and brand conscious, and readily
purchase products made in Vietnam. Furniture, textiles, and more electronic
goods are produced in Vietnam as every year passes, and American consumers
pressured by a decline in purchasing power and choosing to spend their money
on what is perceived as the best value. With major retail chains like Target and
Wal-Mart stocking these goods, the decision is more often than not based on the
price of the product and not where it originates from.
#2 Answer
 This is a list of some popular clothing
brands being produced in Vietnam.
Discussion Question #3
 Some critics have
argued that Cuba
is more deserving
of diplomatic and
trade relations with
the United States
than Vietnam.
What are some of
the factors behind
this argument?
Rice field in Sapa
#3 Answer
 Cuba vs. Vietnam: Doesn't Cuba deserve the
same favorable relationship with the United
States? The question of Cuba is a strange one.
The American policies toward Cuba have
remained hostile for 50 years. As Castro grew
in power and influence, Cuba became the one
country in the Caribbean that the USA or
Europe could no longer dominate. By resisting
American pressure and avoiding assassination,
Castro moved Cubans down a socialist path
that led to high rates of literacy and some
measure of self-sufficiency. Cubans enjoy free
medical care, education, and public
transportation.
#3 Answer
Yet by American standards, Cuba is far
from prosperous and humanitarian
groups have pushed for improved
relations. Strangely though, the
American government continues to treat
Cuba as an enemy and state sponsor of
terrorism. Vietnam in contrast exists in
a neighborhood of countries where
American colonialism is absent. Cuba is
David to the American Goliath, and until
all traces of Castro's government are
replaced with a "friendly" regime, the
exclusion of Cuba will likely continue.
Conclusion
 We believe the economy in Vietnam will continue to
grow quickly as the world recovers from the current
economic dip.
 As the workforce in VN is young and educated, we
also expect that environmental responsibility will
grow as well. The population is becoming globally
aware and understands the value of maintaining
ecological balance and preservation of the
environment.
 Trade with the USA and Europe will expand as well
as trade with other ASEAN partners. As the
domestic market matures, VN will continue to
modernize their infrastructure and move quickly to
compete with countries such as Thailand and others
in the region.
Thank You!
Q&A
Halong Bay, Vietnam