Vietnam development strategy

General goals of the 2006-2010 period

The general goals of the five-year socio-economic development plan in 2006-2010 are: Boost the economic growth rate, achieve important changes in the orientation of efficient and sustainable development, quickly bringing the country out of the low development state. Significantly improve people’s material, cultural and spiritual life. Create foundations to boost the industrialization and modernization process, develop the knowledge-based economy, and basically turn Vietnam into a modern and industrial country by 2020. Stabilize politics, orders, and social security. Firmly protect our independence, sovereignty, territory, and national security. Improve Vietnam’s status in the region and the world

Economy:
According to price comparison, Gross Domestic Product (GDP) in 2010 is 2.1 times higher than that in 2000. Annual average growth rate per capita for the period of 5 years 2006-2010 will be 7.5% to 8%, trying to achieve more than 8%. GDP scale in 2010 will be 94 to 98 billion USD and GDP per capita will be about 1,050 to 1,100 USD. Agriculture, forestry, and fishery will increase by 3 to 3.2%, industry and construction will increase by 9.5 to 10.2%, and services will increase by 7.7 to 8.2%. Economic sector structure in GDP in 2010 will be: Agriculture, forestry, and fishery products be about 15-16%, industry and construction be about 43-44%, and services be about 40-41%. National budget revenue will be about 21-22% of GDP. Total export turnover is expected to increase by 16% annually, reaching the amount of 770 to 780 USD per capita in 2010, which is twice as much as that in 2005. Total social investment will be about 140 billion USD (2005 prices), accounting for to 40% of GDP, 65% of which is domestic capital and 35% is foreign capital.

Society:

By 2010, the population size is at about 89 million; the population growth rate is from 1.1% to 1.2% annually. In terms of labor, jobs are generated for over 8 million laborers (i.e. an average of over 1.6 million per annum, 50% of which is female). Vocational training is offered to 7.5 million people, in which 25 – 30% receives long-term training. Trained labor rate reaches 40% of the total social labor by 2010.  By 2010, the universalization of lower secondary school is completed in all provinces and cities, and tertiary education is provided to 200 per 10,000 populations. By 2010, agricultural labor accounts for 50% of the labor force. In terms of health, Vietnamese life expectancy is about 72 years of age. The rates of infant mortality, malnutrition, maternity mortality and birth-related mortality will decrease. The HIV/AIDS transmission rate will be controlled. The number of doctors reaches 7 per 100,000 populations, pharmacist with university degrees 1 to 1.2 per 10,000 populations, hospital beds 26 per 10,000 populations. Till the end of 2010, the rate of poor households will be reduced to 10-11%. 90% of the children in difficult circumstances will be taken care of. The average housing area will be ensured to be at 14-15 m² per person by 2010.

The environment:

By 2010, the forest coverage will be increased to 42- 43%. Strive to achieve 100% of cities which are of level 3 or upper. 50% of level-4 cities and all newly-built production establishments must apply clean technology or be equipped with population minimization facilities and ensure waste treatment. 50% of production and business establishments satisfy environmental standards. By 2010, 100% of industrial zones, processing zones are equipped with waste water treatment systems. 90% of solid waste, 80% of hazardous waste and 100% medical waste will be collected and treated. Try to make 95% of urban population and 75% of rural population have access to clean water.

Forecasts of major balances of the economy

According to the growth scenario, the total GDP created in the five year period from 2006 to 2010 is about 6,528 – 6,674 thousand billion VND (according to current price). The total consumption fund in the five years may reach 4,440-4,490 thousand billion VND, accounting for 67.5-68% of GDP. The ratio of consumption per GDP tends to reduce faster than in the 2001-2005 period. The total accumulation in the five years reaches 2,530-2,610 thousand billion VND, equivalent to 38.5-39% of GDP and has the rising trend. The total domestic savings per GDP increases from 30.2% in 2005 to 32.3-33.5% in 2010. The possibility of mobilizing domestic savings for investment reaches about 85%.

In order to achieve the above objectives and ensure the economic growth rate of 7.5-8% per annum, the investment rate per GDP has to reach 40%. The total social investment in 5 years from 2006 to 2010, according to 2005 prices, is to reach about 2,200 billion VND, equivalent to 140 billion USD (according to current price, 160 billion USD), with the increase rate of 17.2% per annum. 65% of the investment capital is from the domestic sources and 35% is from foreign sources. Of the total social investment capital, 20.2% is investment from the State budget, 9.3% from the State preferential credit sources,15.1% from state-owned enterprises, and 34.4% from private sector, 17.1% (equivalent to 24 billion VND) from foreign direct investment, and 3.8% from other sources. 19 billion USD of ODA is expected to be mobilized in the 2006-2010 period. 11 billion USD of ODA will be disbursed, 85% of which will be put into investment. Investment in economic sector is expected to account for 69.9% of the total social investment, in which agriculture, forestry and fishery accounts for 13.5%, industry and construction 44.5%, transportation and postal services 11.9%.  Investment in social sector occupies 28.3%, of which 4.6% is in education and training, 2.7% is in health and 2.3% is in culture and sports.

With the objective of a positive budget balance, the total state budget revenue in the 2006-2010 period is expected to reach 1,447 billion VND, equivalent to 21-22% of GDP. The average budget revenue increase is 10.8% per annum. The State budget expenditure is about 1,815 billion VND, equivalent to 27.5% of GDP with the increase rate of 11.2% per annum. The State budget spending structure is expected to shift towards ensuring more spending for investment in infrastructure development. Over-expenditure rate is forecasted to account for 5% of GDP and can be compensated for through 2 sources: domestic borrowing and foreign loans.

In terms of current payment balance: On the basis of export-import forecasts, trade balance in the five year period of 2006-2010, the surplus is 0.8 billion USD because of the slow increase of import quantity. In this period, the deficit of service and investment income balance is expected to be 22.8 billion USD. The surplus of official and private money transfer balance will be about 19 billion USD. Thus the current payment balance is expected to suffer from an annual deficit of 2.9 billion USD.

In terms of capital balance, it is forecasted that it is possible to have 13.8 billion USD of FDI and 19.9 billion USD of foreign loans disbursed in the 2006-2010 period. However about 16.6 billion USD of debts will need to be reimbursed. Thus the capital balance for the period of 2006-2010 will have a surplus of 17.2 billion USD.

In terms of foreign loans and reimbursement, in the five year period from 2006 to 2010, the total new loans may reach 14.4 billion USD, including the Government’s new loans of 8.4 billion USD and enterprises’ new loans of 6 billion USD. The total foreign debt reimbursement, including both the principal and interest, will reach 11 billion USD, in which reimbursement of the Government’s debts is 5.4 billion USD and of enterprises’ debts is 5.6 billion USD. Outstanding foreign loan balance of the entire economy is expected to increase from 16.7 billion USD to 24.4 billion USD in 2010 and remains stable at 35.9% of GDP. The export turnover drops from 51.5% in 2005 to 35.9%.

Development orientation of all sectors and fields

Agriculture, forestry, fishery, and rural development:

Create quality change in agricultural production and strongly develop rural economy, satisfy domestic demands and increase export turnover. Build up a diverse and clean commodity agriculture, with fast and sustainable development, high quality, productivity and competitiveness. Transform agricultural and rural economic structure in the orientation of industrialization and modernization, improved efficiency and technology through the application of scientific and technological advances to production, preservation, and processing. Transform the agricultural and rural economic structure towards industrialization, and modernization. Increase the effiency and improve technological level by applying science and technology to production, preservation and processing. In terms of food, increase production at reasonable rate to ensure national food security, and export of 3 to 4 million tons per annum. Diversify the fruits and vegetables, industrial crops of high advantage such as tea, cashew, pepper, rubber, and coffee… by increasing productivity, quality and building product brand name. Develop animal husbandry, aquaculture and concentrate on planting and protecting forest.

The added value of agriculture, forestry and fishery is to increase by 3 – 3.2% per annum and the production value incease is by 4.5% per annum.

Industry:

Continue to maintain high growth rate together with product quality improvement and industrial production efficiency, increase competitiveness of the industrial sector in order to sustain and expand domestic and international market shares by selecting potential sectors, reasonably planning industrial development, developing industrial zones and intensifying industrial cooperation and production division in the region and the world. Ensure supply-demand balance of the economy in terms of essential industrial products such as electricity, gas, steel for construction, oil, cement, and fertilizers on the basis of strong domestic production, satisfying domestic demands for consumer goods.

Try to record an industrial production value increase of 15-15.5% per annum on the average, industrial value added growth of 9.5 – 20.2% per annum. By 2010, exploitation industry accounts for 7.6% of industrial production value, processing industry 88.6%, and energy industry 3.8%. The average growth of exploitation industry is expected to be 11% per annum, of processing industry is 16.1% and of energy industry is 5.1%. By 2010 the exported industrial products will account for 76% of the total export turnover, 65 to 70% of which is processed industrial products.

Services:

Facilitate the outstanding development of services, in favor of highly potential and competitive ones such as tourism, air transportation, marine transportation, finance, banking, retail distribution and so on, and extend new services, especially those with high intellectural proportion and those for business support. Continue to develop trade and services, fully using the potential of each region, enhance capacity and quality, and increase the competitiveness of goods and services with the participation of many economic sectors. Try to increase the annual growth rate of GDP in services sector in the period 2006-2010 to 7.7%-8.2%. Continue the structural shift, increase the ratio of services in GDP to 40-41% in 2010.

Export

Develop the export business with high and sustainable growth rate as a momentum for GDP growth. Boost the production and exportation of goods and services with competitive advantages as well as develop potential products into new key exports to improve the export efficiency. Shift the export structure in the orientation of accelerating the exportation of high value added goods, increase processed and manufactured products and those with high proportion of intellect and technology while gradually reduce the ratio of raw ones. Try to reach the total goods export turnover valued at 259 billion USD in the 2006-2010 period, with the annual average growth rate of 16% per annum. In the total export turnover, the export turnover of the foreign investment sectors is expected to reach 106.5 billion USD, with an annual average increase of 22.3%. Heavy industrial items and minerals are estimated to reach 86 billion USD, with an annual average increase of 13.2%. Light industrial items and handicraft are estimated to reach 111.2 billion USD, with an annual average increase of 18.4%. Forestry crops and aquatic products are estimated to reach 61.5 billion USD, with the average annual growth rate of 15.6%.

Import

Control excessive imports, and try to reasonably balance import and export. Give priority to the import of materials, advanced equipment and techonologies from countries with source technologies, rapidly reduce and limit the import of backward or intermediary technologies as wwell as goods, materials, equipment and consumer goods available domestically. The average annual import growth rate for the period 2006-2010 is estimated to reach 14.8%. The total import turnover for this period is 286.5 billion USD.

Source: Ministry of Planning and Investment

Tags: Vietnam economy, Vietnam investment consultancy