Vietnam

Politics:

• Analysis

  Vietnam politics: Quick View - An unwelcome cooling-off period

  Event

  Vietnam and the US are struggling to find enough common ground to pursue their annual dialogue on human rights, to the extent that this year's event has been postponed. The failure to agree a date underscores the extent to which the issue has the potential to undermine the relationship between the two previous foes.

  Analysis

  Towards the end of each year, diplomats from Vietnam and the US usually hunker down to discuss the issue of human rights, a tradition that began in 2006. It is a prickly topic for leaders of the ruling Communist Party of Vietnam. They do not tolerate any challenge to their political authority at home, and have a woeful record of sentencing dissidents, bloggers and other activists to long prison sentences if they are seen as posing a threat to the status quo. At the same time, they don't want to alienate the US government, which is becoming an increasingly important ally as China continues to expand its commercial and military influence over South-east Asia and, in particular, the South China Sea. In recent years, however, Vietnamese and US government representatives have made slow progress in these talks. In 2012 the two sides have failed even to agree a date for their discussions, highlighting a cooling of ties.

  Vietnam's human rights record has long been the biggest threat to the bilateral relationship, and with Myanmar embarking on a transition towards a more democratic system and Thailand again governed by a democratically elected government, the country's neighbours are highlighting Vietnam's unflattering treatment of dissidents. On December 13th, for example, a court in the north of the country sentenced four Hmong to up to seven years in prison for allegedly attempting to overthrow the government. With some influential members of the US Congress now encouraging the administration of the president, Barack Obama, to take a tougher line with Vietnam, human rights abuses could cause the relationship between the two countries to falter-and further weaken Vietnam's ability to resist China's growing dominance in the region.

  December 17, 2012

• Background

  Vietnam: Key figures

  Nguyen Tan Dung

  Mr Dung, a southerner, rose rapidly up the party and government ranks, ascending to the position of prime minister following the party's tenth congress, in 2006; he is the youngest person to be appointed to the post. Following the election of the 13th National Assembly (NA, legislature) in May 2011, Mr Dung was confirmed as prime minister for a second term. During the 11th national congress of the Communist Party of Vietnam (CPV), held in January 2011, he came under criticism for his management of the economy. Despite having retained the post of prime minister, Mr Dung's authority appears to have diminished, and he will spend much of the rest of his term unwinding the economic policies that he spent his first period in office advocating. His ability to manage those with divergent interests will be tested by the government's attempts to streamline the state-owned sector and shore up the country's banks.

  Truong Tan Sang

  A senior member of the CPV's politburo, Mr Sang is seen as a highly influential member of the party's conservative bloc. In July 2011 he was elected by the NA as president, succeeding Nguyen Minh Triet. Although the role is largely ceremonial, Mr Sang will nevertheless still be able to exert considerable influence as a leading politburo member. He is expected to continue to head a crackdown on the media, and in particular on journalists investigating corruption within the CPV.

  Nguyen Phu Trong

  The general secretary of the CPV and a senior politburo member, Mr Trong is from the capital, Hanoi, and was formerly a professor of linguistics and a long-serving editor of the party organ, the Communist Review. He became a member of the CPV's Central Committee in 1994, joined the politburo in 1999 and served as party secretary from 2000. He occupied the position of chairman of the legislature in 2006-11. The choice of Mr Trong, who is widely regarded as a moderate, as general secretary may have been a compromise, providing a degree of balance to the rivalry between Mr Dung and Mr Sang.

  September 14, 2012

• Structure

  Vietnam: Political structure

  Official name

  Socialist Republic of Vietnam

  Form of state

  One-party rule

  The executive

  The cabinet is constitutionally responsible to the National Assembly, which is elected for a five-year term

  Head of state

  The president, Truong Tan Sang

  National legislature

  The unicameral 493-member Quoc Hoi (National Assembly) meets biannually and typically serves a five-year term. The current chairman is Nguyen Sinh Hung. The assembly appoints the president and the cabinet

  Local government

  Centrally controlled provinces and municipalities are subdivided into towns, districts and villages, which have a degree of local accountability through elected People's Councils

  Legal system

  The regional people's courts and military courts operate as courts of first and second instance, with the Supreme Court at the apex of the system

  National elections

  An election for the National Assembly took place in May 2011; the next is due in 2015

  National government

  The Communist Party of Vietnam (CPV), and in particular its politburo, controls both the electoral process and the executive

  Main political organisations

  The CPV (general secretary: Nguyen Phu Trong); the Vietnam Fatherland Front

  Main members of the cabinet

  Prime minister: Nguyen Tan Dung

  Deputy prime ministers:

   Nguyen Xuan Phuc

   Hoang Trung Hai

   Nguyen Thien Nhan

   Vu Van Ninh

  Key ministers

  Agriculture & rural development: Cao Duc Phat

  Construction: Trinh Dinh Hue

  Culture, sports & tourism: Hoang Tuan Anh

  Education & training: Pham Vu Luan

  Finance: Vuong Dinh Hue

  Foreign affairs: Pham Binh Minh

  Industry & trade: Vu Huy Hoang

  Information & communications: Nguyen Bac Son

  Justice: Ha Hung Cuong

  Labour, war invalids & social affairs: Pham Thi Hai Chuyen

  National defence: Phung Quang Thanh

  Natural resources & environment: Nguyen Minh Quang

  Planning & investment: Bui Quang Vinh

  Public health: Nguyen Thi Kim Tien

  Public security: Tran Dai Quang

  Transport: Dinh La Thang

  Central bank governor

  Nguyen Van Binh

  December 10, 2012

• Outlook

  Vietnam: Key developments

  Outlook for 2013-17

  • The Communist Party of Vietnam (CPV) will maintain a firm grip on power in the forecast period. There is no prospect of major internal instability, despite factional splits between conservative hardliners and reformers.
  • The poor performance of the economy in 2011-12 has forced reformers to concede ground to conservatives. The influence of the prime minister, Nguyen Tan Dung, is set to wane in the early years of the forecast period.
  • Vietnam will continue to make strides in strengthening its ties with the West, and particularly with the US. Relations with China will remain strained over competing claims to the Spratly and Paracel islands in the South China Sea.
  • A subdued global economy has exerted a drag on Vietnamese GDP growth in 2012 and will continue to do so in 2013. Subsequently, a more favourable climate will lead to healthy real GDP growth averaging 6.9% a year in 2014-17.
  • Annual inflation has slowed since mid-2011, and will average 6.8% in 2013-14 before accelerating to 8.4% on average in 2015-17.
  • The ability of the authorities to support economic growth through monetary policy will be limited by upward price pressures in 2013-17.
  • The current-account deficit will be modest in 2012, but it will grow in 2013-14 as import expansion causes the trade deficit to widen. Inflows of foreign direct investment will strengthen in the forecast period.

  Review

  • The National Assembly (the legislature) has decided to hold regular confidence votes for top officials, including the prime minister. The move is intended to make leaders more accountable for economic policy mistakes.
  • A regional summit in mid-November made no progress towards resolving territorial disputes in the South China Sea. Tensions flared again in early December, after a Chinese ship harassed a Vietnamese oil-exploration vessel.
  • The government has signed a deal to borrow US$487m from international lenders to fund investment aimed at improving electricity supply and distribution.
  • The external sector posted a deficit of US$500m in October, pushing the trade balance for January-October well into the red. Electronics imports soared year on year in the ten months, while exports of rice, rubber and steel fell.
  • Foreign investment totalled US$10.5bn in January-October, amounting to just 75% of the total in the year-earlier period.
  • Inflation continued to accelerate in November. Consumer prices rose by 7.1% year on year, compared with 7% in October and 6.5% in September.

  December 10, 2012

Economy:

• Background

  Vietnam: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	88.7	Population growth	1.0
  GDP (US$ bn; market exchange rate)	122.8b	Real GDP growth	6.5
  GDP (US$ bn; purchasing power parity)	300.0	Real domestic demand growth	7.4
  GDP per head (US$; market exchange rate)	1,385	Inflation	13.2
  GDP per head (US$; purchasing power parity)	3,383	Current-account balance (% of GDP)	-6.6
  Exchange rate (av) D:US$	20,649b	FDI inflows (% of GDP)	8.4
  a Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: For much of its history Vietnam has fought off domination by outside powers. In 1945 Ho Chi Minh declared independence from France after nearly 60 years of colonial rule. Vietnam was divided between the communist north and the US-backed south in 1954. The country's war of independence finally ended in 1975 with victory for the north. The Vietnamese invasion of Cambodia in 1978-79 led to more than a decade of isolation from the West and to dependence on the Soviet Union. This state of affairs ended with the Cambodian settlement of 1991, which allowed Vietnam to implement more fully the government's policy of economic renovation (doi moi).

  Political structure: Vietnam is one of the few surviving communist countries to be organised along traditional Leninist lines. It is a one-party state, within which the Communist Party of Vietnam maintains a tight grip on power. Efforts are under way to make local government more accountable and transparent and to restructure government ministries to reduce bureaucratic inefficiency, but broader political change is not on the agenda.

  Policy issues: The government has made progress on reducing poverty, but tough challenges lie ahead, notably in terms of ensuring the stability of the economy, improving the conduct of monetary policy and strengthening the legal framework. The government will continue to focus on supporting the domestic economy, keeping inflationary pressures in check and shoring up confidence in Vietnam's currency, the dong. Economic reforms will improve the operating environment for local and foreign investors, as will Vietnam's membership of the World Trade Organisation. Reform of state enterprises is emerging as an important focus for the government, but making progress will be difficult.

  Taxation: A reformed personal income tax system was introduced in 2009. The new income tax structure applies uniform tax rates to Vietnamese and foreign workers and has broadened the tax base significantly. A corporate tax rate of 25% applies to both domestic and foreign-invested enterprises. Certain preferential rates still apply.

  Foreign trade: On a balance-of-payments basis, exports totalled US$96.9bn in 2011, up from US$72.2bn in 2010, while the import bill rose to US$97.4bn, from US$77.4bn in the previous year. As a result, the merchandise trade deficit narrowed to US$450m in 2011, from US$5.1bn in 2010.

  Major exports 2010	% of total	Major imports 2010	% of total
  Textiles & garments	15.6	Machinery, equipment & parts	16.1
  Footwear	7.1	Steel	7.4
  Crude oil	6.9	Refined petroleum	6.9
  Crude oil	6.9	Materials for textile industry	6.4
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  US	17.6	China	30.7
  Japan	11.0	South Korea	14.3
  China	10.6	Singapore	10.8
  South Korea	4.8	Japan	10.1

  Download the numbers in Excel

  Download text file (csv format)

  December 10, 2012

• Structure

  Vietnam: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 10, 2012

• Outlook

  Vietnam: Country outlook

  Vietnam: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The ruling Communist Party of Vietnam (CPV) will maintain a firm grip on power in the next five years. There is no prospect of major instability within the party, although the existence of factional splits between conservative hardliners and relatively reformist moderates is clear. The leadership that emerged from the party's national congress in January 2011 appeared to be evenly balanced. In July of that year the prime minister, Nguyen Tan Dung, was formally re-elected to his post by the National Assembly (NA, the legislature). Meanwhile, two of his main rivals were chosen for other important positions: Truong Tan Sang, formerly the head of the CPV secretariat, was picked as the country's president, while an outgoing deputy prime minister, Nguyen Sinh Hung, became chairman of the NA. Since the congress, however, Vietnam's disappointing economic performance and growing evidence of corruption among state employees has strengthened the hand of conservatives and weakened the prime minister, who in October 2012 took the highly unusual step of apologising to the nation for the government's poor performance. It is believed that Mr Dung's political future had been up for debate at a meeting of the CPV's central committee earlier in the month.

  ELECTION WATCH: Vietnam is a one-party communist state, and elections do not play a major role in its political life. Appointments to CPV posts take place behind closed doors, with votes conducted to confirm decisions that have already been made. NA delegates are chosen by popular vote; the most recent election took place in May 2011, and the next poll is due to be held in 2015. Candidates are carefully vetted by the Vietnam Fatherland Front, a CPV-controlled umbrella body that includes all of the country's "mass organisations", and only those deemed suitable are allowed to stand. At the 2011 election only 42 of the 500 people elected to the NA were non-CPV members.

  INTERNATIONAL RELATIONS: Vietnam will continue to make strides in strengthening its ties with the West, and particularly with the US. Vietnamese-US diplomatic relations have been bolstered by high-level exchanges in recent years, and the economic relationship between the two countries has developed rapidly. The US defence secretary, Leon Panetta, courted Vietnam as a potential location for a rotation of US troops while on a visit to Cam Ranh Bay in June 2012. Despite these trends, US concerns over human rights and religious freedom in Vietnam will remain an intermittent source of bilateral tension.

  POLICY TRENDS: Policymakers took steps to tighten fiscal and monetary policy in 2011 in response to a rapid acceleration in inflation. However, concerns persist about whether the political will exists to implement the tougher measures that may be needed to stabilise prices in the medium term, particularly if such moves risk compromising GDP growth at a time of weak global demand. The government's policy bias favours economic expansion over price stability, and this tendency lay behind the spikes in inflation that occurred in 2008 and 2011. Following a slowdown in GDP growth in 2011, the State Bank of Vietnam (SBV, the central bank) has cut interest rates five times in 2012, lowering its main rates by 500 basis points. The annual inflation rate slowed for 12 months from September 2011 but began to accelerate again in September of this year. Another period of rapid price increases would further erode confidence in the Vietnamese authorities' policymaking abilities. The government has given the SBV the task of improving banking sector stability in 2013-17. The authorities are focusing on the need to address a rapid increase in the value of bad debts, but resistance to this process is expected from politically well-connected state­owned banks. Recent turbulence in the sector, including the arrest or resignation of top executives, has reflected worries about Vietnam's financial sector. The government's push to improve the efficiency of state-owned enterprises will continue, but such efforts will make only limited headway in 2013-17.

  ECONOMIC GROWTH: GDP growth in 2011 was unspectacular by Vietnam's standards, at 5.9%, and we expect the rate of economic expansion to slow further in 2012, to 4.9%. A period of spiralling inflation in 2011 changed consumer expectations, and this has led to unimpressive private consumption growth of 5.1% this year, down from an average of 7.5% annually in 2007-11. Furthermore, ambiguous policymaking has led to lacklustre growth in inward foreign investment, which was previously one of the main drivers of economic growth. The SBV has adopted a loose monetary policy stance, but a longer period of slower and steadier inflation will be required to allay the concerns of consumers and investors. Combined with a forecast subdued global economic performance that will cause external demand to remain weak, this underlies our forecast that GDP growth will pick up only moderately in 2013, to 5.4%. A more benign climate from 2014, both at home and externally, will enable Vietnamese GDP growth to accelerate to 6.9% a year on average in 2014-17.

  INFLATION: Following average consumer price rises of 18.7% in 2011, year-on-year inflation decelerated for 12 consecutive months from September 2011, reaching a low of 5% in August 2012. However, inflation began to rise again the following month, and stood at 7.1% in November. Sequential data also point to strengthening inflationary pressures, given that prices rose by 0.9% month on month in October and by 0.5% in November. Accordingly, we estimate average inflation at 9.1% in 2012. We expect the rate of price increases to slow to 6.8% a year on average in 2013-14, as global prices for many commodities will remain fairly stable. However, stronger upward price pressures will re-emerge in 2015-17, when inflation will average 8.4%. In the forecast period the cost of doing business in Vietnam will rise rapidly, increases in the cost of living and strong employment growth will support continued wage growth, and land prices will escalate sharply.

  EXCHANGE RATES: Vietnam will continue to operate a crawling-peg system, allowing the dong's exchange rate against the US dollar to adjust to changing market conditions. In reaction to strong downward pressure on the dong, the SBV devalued the currency on four occasions between November 2009 and February 2011, resulting in a cumulative drop of almost 13% in its value against the US dollar. Vietnam's meagre foreign-exchange reserves mean that the SBV will not be able to counteract downward pressure by intervening in the currency markets. IMF data show that foreign reserves stood at US$20.8bn in mid-2012, providing two months of import cover; reserves were up from US$14bn at end-2011 but below their high of US$26.7bn in early 2008. A slowdown in annual inflation has reduced the downward pressure on the currency in 2012, but we expect the dong to end the year slightly weaker. As inflation continues to slow and exports expand, the dong will perform better against the US dollar in 2013-14, when the pace of depreciation is expected to decelerate further. Stronger growth in imports in 2015-17 will put the currency under renewed pressure, and we expect it to end the forecast period at D24,079:US$1.

  EXTERNAL SECTOR: The current account is on course to return to deficit in 2012, although the shortfall will be minuscule. From 2013, assuming that inflation is back under control, import growth will accelerate and the current-account deficit will expand, to stand at the equivalent of 2.3% of GDP in 2014. Greater economic stability will entice foreign investment back to Vietnam, in turn supporting a rise in imports of capital goods. This, coupled with strong growth in imports of consumer goods, will ensure that the trade account remains in deficit in 2013-14. However, global prices for several exported commodities, including oil, will remain high in historical terms, and this will move the current account back into the black from 2015. Tourism receipts are expected to rise steadily, boosting services exports. However, Vietnam will remain reliant on a host of imported services. The deficits on the services and income accounts will be partially offset by a continuing large surplus on the current transfers account, supported by remittances from overseas Vietnamese.

  December 07, 2012

• Forecast

  Vietnam: Country forecast summary

  Country forecast overview: Highlights

  • The Communist Party of Vietnam will maintain a tight grip on power. Despite factional splits between conservative hardliners and relatively reformist moderates, there is no prospect of major instability within the ruling party. Political apathy and the regime's intolerance of dissent make it unlikely that any opposition movement will gain traction.
  • Ties with the West, and particularly the US, will continue to strengthen. Diplomatic and military links between the two countries have been bolstered by high-level exchanges in recent years, and their economic relationship has also developed rapidly. Vietnam's relationship with China will be more difficult, as consensus on sovereignty over island groups in the South China Sea, or even on joint development of energy resources in the area, remains out of reach.
  • The rate of consumer price inflation has slowed over the past year, and the Economist Intelligence Unit estimates that it will average 9.1% in 2012, down from 18.7% in 2011. The rate of price rises will then decelerate further in 2013-14, to an average of 6.8% a year. Renewed increases in global commodity prices will see inflation pick up to 8.4% a year on average in 2015-17.
  • Concerns persist over whether there is sufficient political will to keep inflation under control. The State Bank of Vietnam (the central bank) is expected to succeed in ensuring that average annual inflation remains below 10% in the forecast period, but it has succumbed to political pressure to loosen monetary policy substantially, and the risk of another inflationary surge remains.
  • The fiscal position will remain poor over the forecast period, owing to high spending on infrastructure, social-welfare programmes and the restructuring of ailing state-owned enterprises. The budget deficit is estimated at the equivalent of 4.8% of GDP in 2012 and will remain around this level in 2013-17.
  • Although Vietnam's long-term economic growth prospects remain positive, the early part of the forecast period will see a continuation of the economy's recent unspectacular expansion. GDP growth will stand at 5.4% in 2013 and 6.1% in 2014, before accelerating to 7.2% a year on average in 2015-17.
  • The current account is set to return to deficit in 2012, but the shortfall will be modest. From 2013, assuming that inflation is brought back under control, import growth will accelerate and the current-account deficit will widen to the equivalent of 2.3% of GDP in 2014. The current account will record a series of surpluses from 2015 as Vietnam's terms of trade improve.

  

  December 10, 2012

Country Briefing

Land area

331,051 sq km

Population

86m (2009, General Statistics Office estimate)

Main towns

Population (of province) in '000 (2009)

Ho Chi Minh City: 7,165

Hanoi (capital): 6,472

Haiphong: 1,842

Climate

Tropical monsoon; north cool and damp in winter (November-April), hot and rainy in summer; south more equable; centre most subject to typhoons. The rains are highly unpredictable

Weather in Hanoi (altitude 216 metres)

Hottest month, June, 26-33°C; coldest month, January, 13-20°C; wettest month, August, 343 mm average rainfall; driest month, January, 18 mm average rainfall

Weather in Ho Chi Minh City (altitude 9 metres)

Hottest month, April, 24-35°C; coldest month, January, 21-32°C; wettest month, September, 335 mm average rainfall; driest month, February, 3 mm average rainfall

Language

Vietnamese (spoken by about 90% of the population); English (increasingly favoured as a second language); some French; a little Russian and German; minority languages such as Hmong, Thai, Khmer in more remote rural areas

Weights and measures

Metric system. Local land measurement: 1 mau = 3,600 sq metres (north); 1 mau = 5,000 sq metres (centre)

Currency

Dong (D). Average exchange rate in 2011: D20,649:US$1

Time

7 hours ahead of GMT

Public holidays

January 1st (New Year's Day; holiday taken on January 2nd); January 23rd-26th (Tet, Lunar New Year); March 31st (Gio To Hung Vuong Day); April  30th (Liberation of Saigon); May 1st (Labour Day); September 2nd (National Day)

March 13, 2012