Socialist Republic of Vietnam

As the year 2004 comes to an end, Thanh Nien newspaper has selected the ten most important events of the year that had the strongest impact on Vietnam’s economy.
This year saw many ups and downs in Vietnam’s economic development, but in general the country’s economy became more integrated into the global economy and its stature grew, according to economists.

Vietnam’s economic growth in 2004 was 7.7 percent, the second-fastest growing economy in Southeast Asia.

Here are the top ten events:

Foreign investment breaks record

In 2004, foreign investment into Vietnam rose to a seven-year high of more than $US 4.1 billion, a new record since the Asian financial crisis of 1997-1998.

In the 17 years since the foreign investment law went into effect, the country has attracted a total investment of over $US 58.4 billion.

Vietnam close to WTO entry

Many international economists have said that Vietnam is only a stone’s throw away from entry into the World Trade Organization, following bilateral negotiations with the European Union.

The ninth round of multilateral talks, conducted on December 15 in Geneva, saw significant progress, according to experts. This year Vietnam also successfully completed bilateral negotiations with six WTO members, including the EU and Singapore.

Talks with the U.S., Canada, Australia and several other partners are underway. Vietnam is expected to officially join the Geneva-based global trade watchdog in December 2005.

Textile industry: ups and downs

The EU and Canada in December decided to remove quota restrictions on textile imports from Vietnam as of January 1, 2005. The move is of great significance to the textile industry as Vietnam is not a WTO member.

This year, the country’s textile exports saw a larger-than-expected growth, hitting $US 4.3 billion, higher than its set target. Textiles are Vietnam’s second-largest export earner after crude oil.

However, this year also saw the exposure of a huge quota graft scandal in the country’s textile industry, leading to the arrests of several senior Ministry of Trade officials including Deputy Minister Mai Van Dau.

The officials were accused of alleged involvement in a graft ring that controlled the Ministry’s quota allocation system, forcing textile producers to pay huge bribes to secure export quotas to the U.S. market.

Resumption of direct Vietnam-U.S. commercial flights

On December 9, a United Airlines jetliner from San Francisco, California arrived in Ho Chi Minh City, marking the first landing of an American commercial airliner on Vietnamese soil in 30 years.

This first flight from the U.S. to Vietnam since 1975 took place on the third anniversary of the Vietnam-U.S. Bilateral Trade Agreement, proving that the relationship between the two countries is blossoming.

Also, the country’s national flag carrier Vietnam Airlines is planning to launch direct flights to the U.S. in late 2005.

Shrimp anti-dumping lawsuit

This year, a group of U.S. shrimp producers filed an anti-dumping lawsuit against shrimp exporters from Vietnam and five other countries, saying Vietnam sold shrimp in America at below-market prices.

In July, the U.S. Department of Commerce in a preliminary decision slapped penalty duties on Vietnamese shrimp and on December 1 decided to uphold the imposition of anti-dumping tariffs but dropped the rate from 25.76 to 4.13 percent, much lower than the initial ruling.

The lawsuit has hurt the domestic shrimp industry, resulting in a shrimp-price slump and a noticeable drop in shrimp exports. The case could affect up to 3.5 million people working directly and indirectly for the industry.

More transparent property market

This year the government issued four decrees to enforce the land law. As a result, the real estate market has become more transparent.

The decrees provide a proper legal framework for land transactions and management. New land price tags set by the government following the issue of the decrees established land prices at levels close to market prices.

Clear regulations on land taxes and land-use costs also help facilitate tax collection and encourage land owners to fulfill their financial duty and prevent tax losses.

Gold prices soar, U.S. dollar slides

This year the price of gold in Vietnam rose to new record highs, almost hitting an unheard-of nine million Vietnamese dong per tael of gold after repeated price surges in the international gold market.

Soaring gold prices led to a freeze in gold-related transactions, especially property deals.

Meanwhile, although the U.S. Federal Reserve raised interest rates five times this year, the U.S. dollar still slid to new record lows against the Euro and the Japanese yen.

This situation affected the business operations of Vietnamese importers and exporters.

Rising consumer prices

This year, the Ministry of Finance raised the retail price of gasoline in the second half of 2004 as world oil prices continued to sky-rocket, leaping to a new record high of $US 57 per barrel.

The price of cooking gas also fluctuated unpredictably because of changing global gas prices.

High fuel prices contributed to soaring consumer prices.

In addition, the cost of steel and iron spiraled in the first half but started to stabilize in July when the Finance Ministry slashed import duties.

Food prices, which make up nearly half the country’s price basket, rose 17.1 percent this year as bird flu outbreaks devastated the country’s poultry supplies.

As a result the Vietnamese Consumer Price Index, a barometer of inflation, leapt up to a nine-year high of 9.5 percent.

Discovery of new oil fields in northern Vietnam

In October, a consortium of four oil companies, including the Petroleum Investment and Development Company of Vietnam, discovered two blocks of oil and gas reserves in the Yen Tu Fields, about 70 kilometers offshore the northern port city of Hai Phong.

This was the first discovery of oil in the waters of northern Vietnam. The two blocks are expected to yield between 700 and 800 million barrels of oil.

In 2004, Vietnamese crude oil exports hit $US 5.6 billion, making up nearly 22 percent of the country’s total export income. Crude is still Vietnam’s largest export earner.

Large-scale infrastructure built

In September, construction of the longest cable-stayed suspension bridge in Southeast Asia began in the Mekong Delta. Investment for the facility was estimated at over 4.8 trillion dong.

The longest bridge in Central Vietnam and four other big bridges on Vietnam’s Highway 1 also went into operation. The Mekong Delta started construction of a 40-kilometer eight-lane highway with an estimated investment of about 6.5 trillion dong.

Also, a new power plant was opened, increasing the country’s electrical capacity by 10 percent.

These infrastructures will facilitate the country’s socio-economic development, economists said.

Reported by Thanh Nien economics reporters – Translated by Hieu Trung.
Story from Thanh Nien News
Published: 30 December, 2004, 23:01:34 (GMT+7)
Copyright Thanh Nien News