What Kind of Economy is Vietnam?
When it comes to economics, Vietnam is not an easy place to understand. The political system does not differentiate clearly along policy lines, and a struggle over control of resources can be masked by policy terms. While there are many reasons for this, the most significant one is the lack of information about the country’s economic situation.
A socialist-oriented market economy is a form of economic development based on a socialist rule of law. The government manages the market economy to provide employment and income for the population. The socialist-oriented market economy is designed to develop a society where people are rich and prosperous. It is a model of development that works well in the real world.
In the 1990s, poverty in Vietnam was endemic. A survey of households in 1993 estimated that 58% of the population was poor. By 2008, this figure had dropped to 15%. And the number of people living in extreme poverty has decreased from 25% in 1993 to 5%. The economic growth has helped Vietnam move up the world rankings.
The socialist-oriented market economy in Vietnam has a number of benefits. Despite its shortcomings, it is based on market laws and is a multi-sector commodity economy with a state-controlled market mechanism. Its objectives are to make people rich, develop a strong country, and create a civilized society.
A socialist-oriented market economy in Vietnam is a form of economy in which the state plays a vital role in society. The state shapes the economy and other economic sectors, regulates the development of socialist orientation, and promotes a new progressive production mode. This mode is based on the socialist-oriented market economy in Vietnam.
The socialist-oriented market economy has many similarities and differences with a capitalist market economy. The first is the fact that it is a socialist system, with multiple ownership systems. The second is that it is regulated by the state and has many forms of distribution.
Dependence on agriculture
Despite the country’s growing middle class, Vietnamese agriculture remains heavily dependent on exports. It accounts for about 15 percent of Vietnam’s GDP and employs 40 percent of the labor force. Vietnam exports billions of dollars’ worth of goods to the global marketplace every year, and imports massive quantities of agricultural products from all over the world. The United States is the second largest exporter of agricultural products to Vietnam, after China. This gives American producers an opportunity to expand their presence in the Vietnamese market.
However, the Vietnamese agricultural sector is faced with several challenges. These include institutional failures, poor capacity to generate information in a transparent manner, and a lack of skilled and young people to manage the sector. Despite these challenges, the Vietnamese experience can offer valuable lessons to low-income agrarian economies.
The Vietnamese government has taken steps to increase agricultural exports. During the past 30 years, the country has opened its international markets to the world and has signed various multilateral trade agreements. International market integration is a powerful force in boosting the agriculture sector. While the old generation of trade agreements focused on tariff reduction, custom procedures, and sanitary and phytosanitary requirements, the new generation of trade agreements is aimed at providing greater opportunities to the sector.
The government has taken measures to increase farm productivity, but farm size has remained relatively static. The average farm size in Vietnam remains small. This is likely a consequence of government regulations and slow distribution of land use certificates. Increased yields may be offset by fewer inputs, including labor, but still, it does not reduce overall productivity.
Industrialisation
In 1986, the Vietnamese government began reforming the socialist-oriented economy to a market economy. The government saw the role of the private sector as crucial to the economy’s future development. However, the lack of skilled labour in Vietnam hampers the development of private domestic firms. In addition, the coupling of foreign firms with domestic firms has only limited productivity gains. Despite the presence of multinational Japanese and German companies in the country, spillovers have been limited.
Recent studies have found that increasing skill mismatch has been one of the impediments to industrialisation and economic growth in Vietnam. These studies have largely attributed this to the impact of supply-side initiatives based on human capital theory. However, such an approach is incomplete and may not account for the true nature of Vietnam’s skill formation model. In this thesis, we aim to examine the perceptions of skilled workers in a key sector that is expected to lead higher-value-added industrialisation: the machine manufacturing industry.
However, the rapid industrialisation in Vietnam has posed a number of environmental challenges. The rapid industrialisation of the country has meant increased land and energy consumption. To overcome these, the government is planning for a more sustainable economy by focusing more on energy-efficient and low-carbon technologies. While Vietnam is performing well compared to other low-income countries, there is room for improvement in environmental quality, green employment and green innovation.
Overcrowding in high-level health facilities is a concern in Vietnam’s health system. This poses an economic burden to households, especially for those without adequate health insurance. Furthermore, health insurance is not sufficient to cover the cost of treatment, making this a major source of financial risk. Using a semi-structured interview design, participants were asked about their experiences of the reforms and their perceptions of the impact of the reforms on maternal health services.
Inefficient use of capital
Vietnam’s economy is experiencing inefficiency in the use of capital and physical resources. As the country’s Investment-to-GDP ratio shows, the country’s output productivity has declined in recent years. In the critical phases of 2001-2005, the ratio rose to nearly 40%. From 2006 to 2011, it remained below 40%, a level that would suggest a major deterioration of the country’s productivity.
Vietnam’s funding market is heavily skewed toward short-term investments. Most bank savings tools are marketed to customers as instruments to invest in the short-term. One example is term deposits, which are popular with customers. A recent regulatory cap on interest rates may further exacerbate the problem. However, limiting interest rates may improve Vietnam’s competitiveness and bring hidden foreign reserves back into the official economy.
The US Trade Representative (USTR) recently announced that it was investigating Vietnam’s undervaluation of its currency and the harm it is doing to US trade. The Office of US Trade Representative (USTR) announced the investigation into the country on 2nd October 2020. If the investigation proves to be valid, Vietnam may have to make significant adjustments to its economic structure.
