Macroeconomics Term Paper

Name 1

Name ECN 2025.102947 T/Th 10:00 – 11:20 AM I. Summary:

II. Introduction:

A. Will use social process triangle as a model to identify and explain the different cultural, political, and

economic forces in the country of Vietnam as they relate to the sugar industry

III. Cultural Forces:

A. Population:

1. 91,519,289 as of July 2012

2. 89,000,000 (UN, 2011)

3. 82,689,518 as of July 2008

B. Growth Rate:

1. Population:

a. 1.054% est. 2012

2. Birth Rate

a. 16.83 per 1000 people

3. Mortality rate

a. 5.95 per 1000 people

C. Literacy:

1. Total population: 94%

a. Male: 96.1%

b. Female: 92%

D. Education:

1. Skill Level:

Name 2

a. The proportion of labor force with higher education is still low compared to other East

Asian countries

b. 22 percent of firms have a shortage of workers with adequate skills and education.

2. Educational Expenditures:

a. 5.3% of GDP (2008)

3. School Life Expectancy:

a. Total: 10 years

b. Male: 11 years

c. Female: 10 Years

4. Higher Education:

a. Beyond the reach of the majority

b. The overall state of the physical and social sciences is poor due to a lack of funding

E. Social Structure:

1. Organized into classes and castes

a. Majority is poor

2. Symbols of Social Stratification

a. motorcycle

b. mobile phone

c. refrigerators

d. televisions

e. video players

f. gold jewelry

g. imported luxury goods:clothing, liquor

3. Gender roles and status

a. Women

Name 3

i. perform most of the essential tasks for running the household

ii. dominate the business of petty trading

iii. often secretaries or waitresses, occupying lower level service positions

b. Men

i. perform the majority of public activities, such as business, political office or

administration, and occupations that require extended periods away from home

ii. control the most prestigious religious roles

iii. physically demanding activities like plowing and raking are mostly performed

by men.

F. Family Roles

1. Family

a. Life revolves around the family

b. Consists of extended family as well as nuclear

c. Father is head of family

d. Authority within the household is exercised by the eldest male although his wife will

often have an important say in family matters.

e. Residence in most homes is organized around the male line

i. Sons stay in the parent's home, and after marriage their brides move in with

them

ii. The eldest son will usually remain in the home, while younger sons might leave

to set up their own household a few years after marriage

f. Women of all generations tend to such matters as cooking, cleaning, and caring for

children, though these responsibilities tend to fall on the younger wives

2. Inheritance

Name 4

a. General custom is for the eldest son to inherit the parental home and the largest portion

of the family property, particularly land

b. Younger sons will often inherit some land or other items, such as gold

c. In rare cases daughters receive small items

d. Many parents like all of their children to receive something in order to prevent discord

G. Value System

1. Based on Confucianism

2. The concept of face is very important

3. Collectivism

a. The individual is seen as second to the group

4. Hierarchy

a. Age and status important

b. The oldest person in a group is greeted or served first

5. Etiquette

a. Polite behavior is highly valued

b. important for the young to show respect to elders

c. People of different genders, especially if they are not married or related, should not

have physical contact

d. In general woman are expected to maintain greater decorum than men by avoiding

alcohol and tobacco, speaking quietly, and dressing modestly

H. Customs

1. Food consumption is a vital part of ritual celebrations

a.held feasts after the conduct of rites dedicated to village guardian spirits

b. Feasts held after weddings and funerals remain large and have increased in size

c. popular feast items are pork, chicken, and vegetable dishes served with rice

Name 5

d. Feasts are socially important because they provide a context through which people

maintain good social relations

2. The most important ritual event in Vietnamese society is the celebration of the Lunar New

Year

3. The first and fifteenth of every month in the twelve month lunar year are also important

occasions for rites to ancestors, spirits, and Buddhist deities.

4. the fifteenth of the third lunar month when family members clean ancestral graves

5. The vast majority of Vietnamese hold that a person's soul lives on after death

6. All rituals associated with death have a tremendous moral significance in Vietnamese society

I. Industry

1.There is a large population of workers from which to hire, although they are not very skilled.

This would mean training may be necessary, however since Vietnam is still mainly agricultural,

most of the population may have agricultural knowledge.

IV. Economic Forces

A. GDP

1. GDP figures

a. $303.8 billion USD (2011)

b. $286.9 billion USD (2010)

c. $268.7 billion USD (2009)

2. Official exchange rate

a. $122.7 billion USD (2011)

3. Real growth rate

b. Targeting in the 5% range in 2012

a. 4 % in the first quarter of 2012

b. 5.9% (2011)

Name 6

c. 6.8% (2010)

d. 5.3% (2009)

4. Per capita

a. $3,400 USD (2011)

b. $3,300 USD (2010)

c. $3,100 USD (2009)

5. Composition by sector

a. Agriculture: 22%

b. Industry: 40.3%

c. Services: 37.7%

6. Investment

a. 34.6% (2011)

7. Taxes and other revenue

a. 26.7% (2011)

8. Public debt

a. 57.3% (2011)

b. 57.1% (2010)

9. Military expenditures

a. 2.5% (2005)

10. State owned enterprises produce around 40% of GDP

B. Selling US Goods and Services

1. Different methods for establishing a business exist

a. Agent or Distributor

b. Establish an Office

c. Franchise

Name 7

d. Direct Marketing

e. Joint Ventures/Licensing

f. Selling to the Government

g. Electronic Commerce

2. Pricing

a. Vietnamese consumers expect to pay a premium for a foreign label or brand, in

practice, the actual number of consumers who are willing to pay the higher price is

limited.

b. One important pricing cycle to note is linked to the Christmas Holiday and the Lunar

New Year “Tet” celebration

3. Selling Factors/Techniques

a. Rely on marketing, branding and a reputation for quality, safety and reliability.

b. Awareness of brands comes from word of mouth, the Internet, market promotions and

advertising.

c. Geography is a key factor in segmenting

d. Foreign companies in Vietnam utilize trade fairs, product seminars, product

demonstrations, and point-of-sales materials, as well as print and broadcast advertising

e. Successful brands typically must adapt to local tastes, particularly consumer goods

f. Detailed product information in the Vietnamese language should be provided to agents

and distributors, and companies to establish websites in Vietnamese

h. Hands-on involvement is required to achieve commercial success in Vietnam

4. Trade Promotions and Advertising

a. More than 1,000 domestic ad companies, of which about 700 are operating in Ho Chi

Minh City

Name 8

b. Many foreign brand managers make heavy investments in television advertising

campaigns.

i. Over 90 percent of Vietnam’s urban population own televisions.

c. There are over 400 newspapers and other publications in Vietnam

d. Outdoor advertising ranges from billboards and signboards to public transport,

building walls, bus stations, and wash and service stations,

e. Radio advertising is not yet widely used for product promotion, but radio ad volume is

growing.

C. Distribution systems

1. Physical infrastructure

a. Airports

i. 44 total

ii. 37 with paved runways

1. 9 with over 3,047 m

2. 6 between 2,438 to 3,047 m

3. 13 between 1,524 to 2,437 m

4. 9 between 914 to 1,523 m

iii. 7 without paved runways

1. 1 between 1,524 to 2,437 m

2. 3 between 914 to 1,523 m

3. 3 with less than 914 m

b. Heliports: 1

c. Pipelines

i. 28 km for condensate

ii. 10 km for condensate/gas

Name 9

iii. 216 km for gas

iv. 206 km for refined products

d. Railways

i. 2,632 km

e. Roadways

i. Total: 180,549 km

ii. Paved: 133,899 km

iii. Unpaved: 46,650 km

f. Waterways

i. 17,702 km

ii. 5,000 km navigable up 1.8m draft

iii. 6 major ports

2. Telecommunication system

a. Much effort is being made to modernize the Telecommunication system

b. Government controls all broadcast media

c. 9 television channels, law limits access to satellite TV, but many able to access through

home satellite equipment

d. 6 radio stations

D. Financial Services

1. Currency stability & Exchange Rate Mechanisms

a. Exchange Rates (Dong per US dollar)

i. 20,509.75 (2011)

ii. 18,612.92 (2010)

iii. 17,799.6 (2009)

iv. 16,548.3 (2008)

Name 10

v. 16,119 (2007)

2. Interest Rates

a. 16.95% as of 31 December 2011

b. 13.135% as of 31 December 2010

3. Inflation

a. has fallen for the ninth consecutive month — from a peak of 23 percent in August 2011

to 8.3 percent in May 2012.

b. 18.7% (2011)

c. 10% (2010)

E. Capital Resources

1. Production capabilities

a. Growing industrial climate

2. Technology

a. Industrialization of industries

b. Computers

c. Factories

F. Property Ownership

1. Government does not recognize private land ownership

G. Workforce

1. 46.48 million (2011)

2. By occupation

i. Agriculture: 48%

ii. Industry: 22.4%

iii. Services: 29.6%

3. Unemployment Rate

Name 11

i. 2.3% (2011)

ii. 2.9% (2010)

H. Industry

1. There is high inflation

2. Low unemployment rate

3. Most people work in agriculture

4. Does not have a very good infrastructure

V Political Forces

A. Balance of payments

1. Balance of trade

a. Exports

i. $95.32 billion USD in 2011

ii. $72.19 billion USD in 2010

b. Imports

i. $97.83 billion USD in 2011

ii. $77.34 billion USD in 2010

2. Current Account

a. -$1.896 billion USD in 2011

b. -$4.287 billion USD in 2010

3. Vietnam is currently the 45th largest export market for U.S. goods.

4. The stock of U.S. foreign direct investment (FDI) in Vietnam was $623 million in 2010 (latest

data available), up from $525 million in 2009.

B. Political Stability

1. Expropriation

a. No recent instances of expropriation reported

Name 12

2. War/Terrorism

a. Large measure of stability since the late 1970s

C. Trade regulation & standards

1. Tariffs

a. Vietnam significantly reduced its tariff rates

b. The vast majority of U.S. exports now face tariffs of 15 percent or less

c. High tariffs on selected products remain

i. The Ministry of Finance raised ten tariff lines up to their WTO ceiling rates

1. Shelled walnuts from 20 percent to 30 percent

2. Tomato ketchup and other tomato sauces from 30 percent to 35 percent

3. Tobacco from 30 percent to 50 percent

4. Cast iron from 32 percent to 36 percent

2. Non-tariff trade barriers

a. Vietnam has eliminated many quantitative restrictions on imports and other non-tariff

measures, such as quotas, bans, permits, prior authorization requirements, licensing

requirements, or other restrictions having the same effect

D. Laws regarding trade/commerce

1. Intellectual property protection

a. Has made progress, but enforcement efforts have not kept pace with rising levels of

IPR infringement and piracy in the country

b. Piracy rates for software are estimated to be 82%.

2. Antitrust

a. Government owns the majority of businesses

3. Transparency

Name 13

a. The evolving nature of regulatory regimes and commercial law in Vietnam, combined

with overlapping jurisdiction among Government ministries, often result in a lack of

transparency, uniformity and consistency in Government policies and decisions on

commercial projects.

b. Corruption and administrative red tape within the Government has led to a lack of

transparency and has been a vast challenge for Governmental consistency and

productivity.

c. Vietnam has improved its process for making and publicizing laws, particularly with

major national laws and regulations

4. Dispute settlement

a. Hierarchy of Vietnamese courts includes: (1) Supreme Court; (2) Provincial Courts;

and (3) District Courts.

b. Parallel to the court systems is the People’s Procuracy, which is responsible for

supervising the operation of judicial authorities. The People’s Procuracy can protest a

judgment or ask for a review of a case

c. Has a system of independent arbitration centers

5. Investment climate

a. Investors often find poorly developed infrastructure, high start-up costs, arcane land

acquisition and transfer regulations and procedures, and a shortage of skilled personnel.

b. Financial markets remain weak and poorly regulated

c. The banking sector is underdeveloped

d. The Vietnamese stock market includes two stock exchanges: Ho Chi Minh City Stock

Exchange (HOSE) and Hanoi Stock Exchange (HNX)

E. Government procurement

Name 14

1. Vietnam's 2006 Law on Procurement provides for greater transparency in procurement

procedures

2. Decentralization of procurement decision making to the ministries, agencies, and local

authorities; appeal processes; and enforcement provisions.

F. Corruption

1. Corruption and administrative red tape within the Government have led to a lack of

transparency and has been a vast challenge for Governmental consistency and productivity.

2. Corrupt officials illegally sell land-use rights or seize it for personal uses

G. Foreign exchange controls

1. Foreign exchange regulations of Vietnam require all transactions within the country and

between Vietnam residents

2. The laws also prescribe the number and type of transactions which the FIE can conduct in

foreign currencies. Frequently conducted transactions include payment for purchases of goods

and services from individuals and organizations outside Vietnam.

H. Industry

1. Relatively peaceful; good business environment

2. Slowly eliminating tariffs

3. No ownership of land

VI. Opportunities/ Threats

1. Advertising remains heavily regulated by the Vietnamese Government

2. The overriding factor in pricing for the Vietnam market is the low level of per capita income.

3. Financial markets remain weak and poorly regulated

4. Competition from State Owned Enterprises

5. High inflation

6. Communist government strictly regulates everything

Name 15

VII. Conclusion

1. Vietnam has many benefits

2. It also has drawbacks

3. Overall, the sugar industry should do well