Vietnam Economic in 2006

12 Economic Highlights in Vietnam in 2006

The year 2006 was a historic year for Vietnam. Here are 12 of the major Economic highlights for the year. The definition for selection was that the events were the most meaningful events, which not only vastly influenced the Vietnamese Economy in 2006, but also in the long term.

1. Vietnam became the 150th member of WTO
On November 7, 2006, Vietnam was approved to be the 150th member of WTO (the official joining date will be January 11, 2007). In addition, during December, the U.S re-evaluated the trading relationship and granted (PNTR) with Vietnam. Granting of WTO and PNTR status to Vietnam increases Vietnams status as a stable and profitable site for investment in SE Asia.

2. Vietnam successfully organized the 14th APEC Conference
Vietnam succeeded in organizing the 14th Asia Pacific Economic Conference, with meetings of many leaders, and Senior Officials of 21 member economies of the world. The APEC Meeting was seen by many as a coming out party for a new revitalized Vietnam.

3. The 10th Conference of Vietnam’s Communist Party met April 18 to April 24, 2006
The 10th Conference of Vietnam’s Communist Party approved a new leadership team for the country which seems destined to further accelerate economic development. The Conference also approved policies which promote steady reform and development.

4. Vietnam achieves the highest level of Direct Foreign Investment to date
Foreign Direct Investment in 2006 – USD 10 billion - showed the highest rate since Vietnam started to accept FDI. The rate was also higher than the rate of 1996 (before the Asian Financial Crisis when FDI reached USD 8.6 billion).

5. Exports increased 22% in 2006, Highest level to date
Vietnam exports in 2006 achieved the highest rate of increase till now. Exports were USD 39.6 billion, an increase of 22.1% compared to 2005. Thus, GDP growth rose to 8.2%, about the same with 2005. The statistic of consumer spending in 2006 also increased 6.6%, but this figure was 1.8% less than the increase rate in 2005 which showed that inflation was cooling.

6. Country of the Year
The U.S. Trade and Development Agency (USTDA) has named Vietnam as its 2006 Country of the Year based on Vietnam’s strong and growing partnership with the agency. According to a USTDA statement, Vietnam is the fastest growing economy in Southeast.

7. The unexpected development of the Vietnamese stock market exceeds expectations but market is highly volatile. As of December 26, 2006: The Vietnamese stock market had increased from USD 460 million (32 trading companies) in the beginning of the year to USD 8.7 billion (92 trading stock companies). However, market prices were not yet consistent, and continued to vary widely. For example, the VN-Index was vastly changed, from 304 points at the beginning of the year, it passed through 800 points on December 20, but then slid back to 747.82 points on December 26.

8. Establish new laws and rules for business investment
Two new business enterprise and investment laws were established by the national congress on December 12, 2005 and were issued and valid on July 1, 2006. The new laws marked Vietnam’s continuing progress in developing rule of law and predictability of business

9. Corruption Targeted by Government
Various bribery scandals were reported, investigated, and started legal processing in 2006. In particular, the bribe of PMU18, the bribe of dividing properties to different governors in Do Son province, and other corruption involving land and abuse of authority were disclosed. The new leadership of the government has come out strongly against corruption and further investigations are moving forward.

10. Nation suffers losses by natural disasters and diseases
Natural disasters struck Vietnam in 2006. These included the storms Chanchu, Typhoon Xangsane and Typhoon Durian. In addition, Vietnam experienced problems with bird flu, the ulcerous disease of domestic animals, and the brown cereal pest and other pests destroying crops in several regions.

11. Many protests happened in the beginning of the year – 2006
There were a number of big labor protests in 2006, which primarily struck foreign-invested enterprises primarily owned by Hong Kong, Korean and Taiwanese investors: approximately 150 strikes with 160,000 people joining were recorded. Labor unrest of this magnitude has been rare in Vietnam. The main reasons noted for the unrest were – workers were unsatisfied with low wages and lack of basic labor benefits. The government solved the unrest by increasing the rate for minimum wages, which had remained unchanged for several years and negotiating with some companies that weren’t meeting legal minimums on pay and benefits.

12. Easier Rules for Foreign Invested Enterprises
The Ministry of Trade decided to abolish the import plan approval and certification of tariff exemption for machinery imports by foreign-invested enterprises (FIEs). In an official letter issued in December 2006, the Ministry of Trade says FIEs can import materials and machinery for local production without having to ask for ministry approval as previously. They can complete import-export procedures directly at local customs offices without the need for approval letters from agencies authorized by the ministry, such as local trade departments and industrial park management boards. For tax exemption, FIEs are responsible for making customs declarations on their own. The ministry will issue a circular, providing guidelines for import-export by FIEs. The Vietnam Association of Foreign Invested Enterprises has hailed the new decision, saying the foreign business community sees it as a positive step to streamline administrative procedures to make life easier for FIEs

About the Author:

Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)

Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations. Mr. Runckel is one of only two non-Ambassadors to receive this award in the 200-year history of the U.S. diplomatic service.