Planned Economy: Vietnam (Jordi) 

Intro: The Socialist Republic of Vietnam, more commonly known as Vietnam, is a country located in the East of Asia. In 2016, Vietnam had about 94.6 million inhabitants, making it the 15th most populated country in the world. Vietnam borders Cambodia, Laos, China and the North China Sea. Vietnams capital city is Hanoi while the most populated and biggest city is Ho Chi Min (britannica.com). According to the Economy Complexity Index, Vietnam is the 21st biggest export economy and the 83rd most complex economy in the world. 

                                                                                                                    

Vietnam has a Gross Domestic Product of 223 billion US dollars even though the GDP per capita is 6.78 thousand U.S. dollars (OEC). The trade balance of Vietnam is at 2.5%. This is because they are exporting more goods than they are importing (Forbes). Vietnam is also at an unemployment rate of 2.2% while the inflation is currently at 3.5% (Forbes). The currency used in Vietnam is the Dong (VND). 

According to Trading Economics, the public dept. of the country is at 61.5% of the country's GDP which is the highest in Vietnams history (as shown in the image below). 

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                                                                           Fig. 2, Vietnam GDP Since 2010 (tradingeconomics.com) 

                

According to OEC, Vietnam’s biggest imports are integrated circuits (7.6%), telephones (5%) and electrical parts (2.3%) while their biggest exports are broadcasting equipment (14%), telephones (6.8%) and integrated circuits (6.6%). Their largest export partners are the United States (21%), China (18%), and Japan (8.2%). Vietnams largest importers are China (35%), South Korea (23%) and Japan (6.4%).  

                                                                                                      

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Apart from the US, Vietnam most commonly trades with countries within Asia. Surprisingly,

the countries bordering Vietnam are not included in their top 10 trade partners. Through

globalization, Vietnam does not depend as much on its bordering countries for trade because

goods and services can be shipped very cheaply and efficiently to more distant countries (OEC). 

Vietnam was not allowed to trade with the states for 19 years following the Vietnam war

where the North Vietnamese recaptured Saigon, also known as Ho Chi Minh City. The ban

was put in place until 1997 where former US president Bill Clinton removed the ban in

order to learn the fate of the American prisoners of war in Vietnam (history.com). Vietnam

also had trade bans with the allies of the Americans during that time period. Apart from

that, Vietnam has not had any other trade bans with any other countries. 

                                                                                                                                                  Fig 3. Vietnam Biggest Trading Partners (Mark Manyin) 

 

How did the 2008 market crash affect the Vietnamese Economy? 

In 2008, a market crash almost as dreadful as the Great Depression took place. The 2008 market crash began in 2007 with a major crisis with the subprime mortgage in the US which later led to the financial collapse of Lehman Brothers on September 15, 2008. Since then, 4 countries are still in recession and crisis. These countries being Greece, Japan, Russia and Italy (Kimberly Amadeo). 

            

 

 

 

 

 

 

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                                                                                                                                                               Figure 4, Stock Market Crash (Kimberly Amadeo) 

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In May 2008, Vietnam started to feel the effects of the stock market crash, but it was nowhere near as bad as other countries who suffered drastically. The GDP growth of Vietnam was supposed to be about 8.5% - 9% but it ended up being only a 6.23% GDP growth. Although Vietnam’s economy did not suffer nearly as badly as other countries, the connection with Vietnam and other international financial markets were met with setbacks. International banking and financial transactions had also majorly decreased which affected the short-term loans from the Vietnamese banks to private enterprises. Finally, due to many banks had a short-term profit decrease while other smaller banks even reported financial loss (Pham Thanh Tan). The import-export market fluctuated negatively as well, especially with the American and European market as they were the ones being mostly affected.  

 

What did Vietnam do to solve this problem? 

According to the World Bank, Vietnam was one of the only South East Asian emerging economies to not go in recession, so the problem was not as bad as some other countries. Yet, Vietnam still suffered some setbacks which are explained in the paragraph above. Vietnam did not go into recession because of the rapid labor force and productivity gains coming from the ‘Demographic Dividend’. This meant that the number of hours spent working per capita increased while the wages also increased. But due to the lack of solid data, no approximate estimate was crated for this time period.  

 

Vietnam’s Economic Switch 

Vietnam was a centrally planned economy unitil the mid 1980s. This meant that the Vietnamese government had total control of economic decisions (Will Kenton). But over the past 30 or so years, Vietnam has moved away from the centrally planned economy and has moved towards a mixed economy which uses 5-year plans to arrive at the numbers and statistics they would like to see (Le Dang Doanh). The positive aspects about this change towards a mixed economy is that the people had a say in the way the economy was to be treated. So instead of the government making the decisions all by themselves, the decisions are now 50/50 and are agreed on between government and citizens. Another positive aspect is that mixed economies can improve equality and can give a safer environment that will prevent people in any country from having to go through poverty (Will Kenton). The negative aspects of having a mixed economy is that it poses a greater challenge in finding equality. This means that finding a balance between market freedom and wealth equality. This could eventually lead to a wide-scale poverty (Kenton). The other negative aspect of implementing a mixed economy is that the government is at risk of going too far. Especially if the government manages the economy poorly, which eventually leads to any of the government's involvements being wrong. An example of mixed economy failing is Zimbabwe. From 2003 to 2009, Zimbabwe’s economy suffered a 231 million percent hyperinflation. This occurred because the government was printing money to respond to the high national debt, the decline in economic output, and other more detailed reasons (Tejvan Pettinger). 

 

 

Vietnam has been given a B on the overall country rating which was provided by Coface. This meant that Vietnam has various economic and political uncertainties and on occasion, businesses would affect corporal payment behavior (Coface). Coface also states that Vietnam has good quality and inexpensive labor, agricultural potential and an economy that isn't majorly affected by the sway Chinese or the American economy. They also stated that there is a lack of infrastructure, the business climate is very unpredictable, there is an increase in inequality and the banking system is very fragile. But as Vietnam is a developing country with a relatively new economic system, there is a lot of potential for Vietnam to reach new heights that it has never seen before.