In 2007, Vietnam continued to achieve good results in terms of social development, the economy and environment. Twenty out of 23 criteria reached or exceeded the yearly plan. Of the figure, ten criteria exceeded the 2006-2010 period's plan.

The Vietnamese economy's stable and high growth rate of 8.5%, the highest figure in a decade, was the striking feature in 2007. This was driven by high growth rate in the industrial and construction sector, which registered an increase of 10.6%, and services, with 8.7%.

Gross domestic product (GDP) reached VND 1,144 trillion (or US $71 billion) and per capita GDP stood at VND 13.4 million, or US $835, double the figure of 2001, and equal to 92% of that of average income earning countries. This represents a momentum for Vietnam to record higher achievements in the coming year.

In 2007, Vietnam's investment environment witnessed a significant improvement. As a result, Vietnam was hailed by international organisations in terms of capability of attracting investment.

Vietnam has emerged as a reliable destination for business and investment. According to the first quarter report in 2007 by the Japan External Trade Organisation (JETRO), Vietnam ranked third in Asia, behind China and Thailand, in terms of investment environment.

VND 465,000 billion (or US $29 billion) were mobilised in 2007 as social investment, up by 16.4% in comparison with that of 2006 and equal to 40.6% of GDP. Of the figure, investment capital from the private sector accounted for 34.4% and registered an increase of 19.5%.

Furthermore, Vietnam made great steps forward in external economic relations. The total amount of official development assistance (ODA) capital signed between Vietnam and its donors in 2006 and 2007 reached US $6.5 billion, accounting for 40% of total amount estimated for the 2006-2010 period.

At the Consultative Group Meeting recently held in Hanoi, donors committed a record US $5.4 billion ODA capital for Vietnam in 2008.

2007 was the third consecutive year in which the disbursement of ODA capital exceeded the yearly plan. The figure was estimated to have reached more than US $2 billion, or 5% higher than the yearly plan.

An impressive increase was seen in foreign direct investment attraction as total registered investment capital in 2007 alone stood at US $17 billion, bringing total amount of 2006 and 2007 to US $29 billion.

In 2007, Vietnam's import and export turnover reached more than US $109 billion. Of the figure, export turnover saw an increase of 21%. The country's export markets have been expanded with more new potential markets.

Macro-economic balance was achieved in 2007, creating favourable conditions for the Vietnamese economy to stably develop.

Budget balances were stable in 2007 with budget revenues and expenditures reaching or exceeding the yearly plan. State budget revenues accounted for 25% of GDP while the budget deficit was limited to 5% of GDP.

International balance of payment witnessed a high surplus, resulting in stable foreign exchange rates and increasing reserves. Government debt remained at a safe level. Total national foreign debt was equal to 30% of GDP, much lower than the limit of 50%, while the Government's debt accounted for 36% of GDP.

Social field continued to be an important column in Vietnam's socio-economic development.

National target programmes on poverty reduction and socio-economic infrastructure development for remote areas in difficulties and soft loans for the poor achieved significant results.

Accordingly, the number of poor households dropped from 17.2% in 2006 to 14.7% in 2007. Surveys on people's living standard over the past 13 years (1993-2006) show that Vietnam has reduced poverty rate of 42% of its population, equal to 35 million people.

Vietnam's human development index improved as the country moved up four ranks, from 109th to 105th among 177 countries.

Administrative reform was implemented strongly with a focus on reorganising the Government apparatus with the formation of ministries, which manage multi-field groups. The fight against corruption and waste continued to be promoted with a concentration given to the perfection of legal documents and sanctions. As a result, big cases of corruption were brought to light in an open and transparent manner.

Social and political stability, and national security and defence were maintained to facilitate the mobilisation of all resources at home and abroad, such as investment from the private and foreign investment sectors for the economy to develop in a rapid and sustainable manner.

Apart from these above mentioned achievements, there are still weaknesses which should be settled in the coming time.

Vietnam’s economy remains small with a low per capita GDP. Productivity, quality, effectiveness and competitiveness of the whole economy, each sector, each enterprise and each product are still low. Compared with other countries in the region, Vietnam’s economic scale and per capita income are lower. According to the World Bank’s report, Thailand has a GDP of US $193.7 billion and a per capita GDP of US $2,990. The figures are put at US $141.4 billion and US $5,490 for Malaysia, US $120.2 billion or US $1,420 for the Philippines, and US$315 billion and US$1,420 for Indonesia. Vietnam remains in a group of 53 low income earning countries with per capita GDP of US $905.

Furthermore, according to the World Bank’s reports, Vietnam’s investment environment, despite having improved, is still rated lower than other countries, including Singapore, which ranks top; Thailand, 15th; and Malaysia, 24th. Vietnam is 91st among 178 countries and territories. Vietnam’s rankings are low in tax payment procedures (128th), enterprise dissolution (128th) and investor protection (165th).

In 2007, Vietnam saw a trade deficit of US$12.5 billion, equal to a quarter of its export turnover. This is the highest deficit in years. The high trade deficit was driven by the import of machines and equipment to meet the development and investment expansion requirements, a cut in import taxes and high increase in prices in the world market. However, it should be admitted that apart from markets in which Vietnam earns trade surplus, there are markets in which Vietnam suffers from a deficit. China is an example as Vietnam suffers from a trade deficit of US$7.5 billion, equal to 60% of Vietnam’s total.

In addition, the country’s consumer price index increased sharply. This occurred partly due to improper monetary policies, and poor market and price control work, apart from the effects of prices in the world market.

The disbursement of State investment capital remained slower than in 2006, especially with capital mobilised from the Government bonds and State credit capital. Construction management and supervision were still poor. Some large-sized works have yet to meet the design and technical requirements, leading to a high level of waste of the State's capital. Corruption, bureaucracy and complicated administrative procedures have yet to be cracked down.

Even though the average living standards have improved, the daily life of people in remote mountainous areas, overly affected by natural disasters, remains difficult.

The number of traffic accidents have not fallen but increased sharply.

Environmental pollution, including air, water and waste pollution caused by factories, industrial parks, urban areas and hospitals, became more serious, but the settlement measures were still slow in being resolved.

2008 is of important meaning as a transitional year for the completion of the country’s 2006-2010 socio-economic development plan.

Vietnam’s socio-economic development targets for 2008 are to continue to maintain a high and sustainable economic growth rate, to improve the economy’s competitiveness in combination with the improvement of the people’s living standards. Moreover, Vietnam will strive to escape the definition of being a low income earning countries in 2008. In particular, the country will exert itself to gain an economic growth rate of between 8.5 and 9%.

To that end, Vietnam should continue to improve its business and investment environment by perfecting its legal system on the market economy, building comprehensive institutions to develop and operate all markets, such as capital, labour, real estate and technological ones.

Administrative reform will be promoted, so as to create more equal and favourable business and investment environment for enterprises of different sectors.

In addition, economic policies and solutions should be implemented comprehensively to maintain macroeconomic balance.   

Enterprise pricing should follow the development of supply and demand and in accordance with the law.

State management should be organised for prices of monopoly goods and services in accordance with the market and principles of international integration.

At the same time, measures should be taken to cut production costs and to deal with complicated developments in the market.

Resources should be mobilised and concentrated to promote the development of infrastructure facilities. The disbursement and reception of capital, especially foreign investment, should be boosted.

The implementation of major projects, in particular projects on the building of national works, should be promoted to be completed in a timely manner.

On a basis of guaranteeing macroeconomic balance, the issuing of Government bonds should continue to have capital for the upgrading of schools, and building roads and irrigation systems.

Moreover, master plans should be approved and policies should be issued on developing socio-economic infrastructure projects of investment encouragement, so as to attract local and foreign investors in various forms, such as build-operate-transfer (BOT), build-transfer (BT) and build-transfer-operate (BTO). Foreign investment attraction should be boosted, especially to infrastructure and hi-tech projects.

The preparation for 30 strategic communication projects throughout 2020 and the building of lists of important projects for all sectors should be accelerated.

Vietnam should actively implement its international commitments during the period of its international economic integration. Vietnam should perform well its tasks as a non-permanent member of the UN Security Council, and implementing other commitments within WTO, AFTA and APEC as well as other multilateral and bilateral commitments.

Co-operation with other countries in the region should be boosted for a rapid implementation of co-operation programmes and projects in the Mekong Greater Subregion and the economic corridors.

Policies and measures should be taken properly to protect domestic production in accordance with international principles, regulations and commitments.

Solutions should be carried out comprehensively to improve the quality of human resources as an important factor in attracting investment and a comparative advantage for the economy. Accordingly, enterprises and investors should be encouraged to provide high quality human resources, capable of meeting present production requirements.

Focus should also be given to the building of universities, colleges and vocational training schools of international standard.

Soft loans should be given to encourage vocational training at all levels, so as to increase the rate of trained labour force.

In addition, environmental protection should be focused on, so as to implement successfully the Law on Environment and the National Environmental Protection Strategy, considering it an urgent task for a sustainable development and the improvement of people’s living standard.

Investment should also be encouraged in the field, especially in waste gathering and treatment.

Reforestation and forest protection should be strengthened.

Environmental protection should be supervised more closely and pollution and environmental destruction should be seriously punished.

Finally, administrative reform should be accelerated while the fight against corruption and waste should be promoted through the improvement of supervision work by the National Assembly, the People’s Councils and the Fatherland Front at all levels, and other mass organisations.

Dr Cao Viet Sinh
Deputy minister of planning and investment