Economics

Vietnam

Background

• Was French colony

• War for independence began in 1955 >>> rebels took control of North (recognized by USSR and China). US/France took control of South

• Vietnam war – US left in 1973. Unification of South and North in 1975.

• Estimated 2m-4m Vietnamese dead, 1/2m Cambodians

• War crimes – napalm, agent orange, bombing of villages, atrocities by US and S. Vietnam government

Contemporary impact

• 1000s still killed by unexploded ordnance

• 10% population disabled

• Much of agricultural land still contaminated

• Agent orange >>> relatively high rates of cancer and birth defects

Post-war

• Established socialism

• Most enterprises state owned

• Emulation of China – workers paid in-kind, poor but little inequality

• Population mostly rural

• Most trade with USSR and China

Doi Moi

• Breakup of USSR and shift to markets in China >>> economic crisis

• World Bank offered $1.5b grants if SOE’s privatized, but government refused

• Began Doi Moi - reforms to create “market socialism” in late 1980s - mid-1990s

• Reforms gradual

• Sold 1/3 SOEs

• Allowed FDI and majority foreign ownership of domestic firms

Doi Moi

• Decollectivization of agriculture and distribution of land to rural households, though land still owned by state (similar to China)

• SOEs remained, though could retain profits and make decisions independent of planning agencies

• Most prices decontrolled

• Loss of jobs in SOEs

Market socialism

• Communist party wanted to “advance socialist relations of production commensurate with the development of productive forces.”

• Hoped that, as long as could maintain high levels of investment, could unite both pro- market and communist partisans

• Retained state ownership in:

• Finance (state banks hold 94% of bank assets) • Telecommunications • Transportation • Heavy industry • Land and natural resources • Good that affect broad economy (cement, steel, oil)

Economy today

• Over last decade, average annual GDP growth – 5% • Per-capita GDP (PPP) around $8000 (same as India) • Tripled since 1990 • Exports increased since 2000 10x • Exports: • Oil, fisheries and primary agricultural products • Mfd goods – 40% Samsung phones, other electronics, footwear, garments • 2000 – Normalized relations with US

• 2007 – Joined WTO • 2015 – Joined ASEAN Economic Community

• Most X to China, Korea, Japan, Australia

• Imports machinery and industrial inputs

• CAB > 0, mostly due to primary product exports

• Unlike Bangladesh, Vietnam has sought out FDI and most mfd goods produced by subsidiaries of foreign firms, not by local sub-contractors

• Intel, Nike, Canon, Samsung all active in Vietnam

• Privately owned local firms mostly small or medium scale enterprises

Labor

• Minimum wage = $180/month. 3/4 living wage for individual in industrial areas.

• Avg. manufacturing wage about the same.

• Wages have doubled since 2007 and increased by 25% in last 4 years.

• Unemployment rate = 2.2%

• 42% population employed in agriculture, 25% manufacturing, 33% services

Labor standards

• Government passed Vietnam Labor Code in 1994 • Ratified most ILO conventions and others adopted in Labor Code

• 48-hour work week, 8 hours/day. Max. 30/month overtime with 1-1/2 pay (more for holidays and regular days off.)

• Government encourages skill development and requires minimum 5% increase in pay with acquisition of new skill.

• Unions allowed in law, but most workers belong to Vietnamese General Confederation of Labor (VGCL)

• VGCL provides legal education for workers, labor laws and rights.

• Strike wave in early 2010s, but education in labor law reduced strikes • Most strikes against foreign firms.

• Labor laws are enforced, in keeping with some continued adherence to socialist ideals, but effort to attract FDI >>> conflict

Social Conditions

• Social indicators exceed most countries at similar level of development. Much improvement occurred before Doi Moi, when health clinics and schools established in most villages

• Gini index = 36

• Life expectancy = 76 (WHO)

• Poverty rate (World Bank) = 6% (highest in rural areas)

• Infant mortality = 17/1000

• 87% children immunized

• 95%(urban)/75%(rural) improved water and sanitation

• 99% have electricity

Education

• 97% youth literacy

• 96.5M/93.5F literacy

• 97% youth in primary ed/81% in secondary ed

• Over past decade has doubled number of colleges

• Recent efforts to privatize some schools (and child care centers) faced wide opposition

Social spending

• 10% GDP on health and welfare

• 87% covered by national health system. Costs $0.33/month

• 70% covered by public pensions which replace 75% of prior wage after 30 years working.

Status of women

• Ranks 87/153 on gender gap index

• High in economic factors:

• Female LFPR = 79.1. Ranks #1 in % female professional and technical workers and #8 in income earned by women.

• #1 in % women enrolled in college

• Fertility rate = 1.8 (so aging population)

• 112M/100F at birth

• Ranks near bottom in political representation of women

Environment

• According to World Bank, Hanoi and Saigon are among the top 10 worst cities affected by air pollution

• Mining and aftermath of war >>> water and soil pollution.

• Timber and fishery industries becoming unsustainable

• Recently, gov’t making large investments in wind power