2000-present
The July 13, 2000, signing of the Bilateral Trade Agreement (BTA) between the United States and Vietnam was a significant milestone for Vietnam's economy. The BTA provided for Normal Trade Relations (NTR) status of Vietnamese goods in the U.S. market. Access to the U.S. market will allow Vietnam to hasten its transformation into a manufacturing-based, export-oriented economy. It would also concomitantly attract foreign investment to Vietnam, not only from the U.S., but also from Europe, Asia, and other regions.
In 2001 the Vietnamese Communist Party (VCP) approved a 10-year economic plan that enhanced the role of the private sector while reaffirming the primacy of the state. In 2003 the private sector accounted for more than one-quarter of all industrial output, and the private sector's contribution was expanding more rapidly than the public sector's (18.7 percent versus 12.4 percent growth from 2002 to 2003). Growth then rose to 6% to 7% in 2000-02 even against the background of global recession, making it the world's second-fastest growing economy. Simultaneously, investment grew threefold and domestic savings quintupled.
In 2003 the private sector accounted for more than one-quarter of all industrial output. Despite these signs of progress, the World Economic Forum's 2005 Global Competitiveness Report, which reflects the subjective judgments of the business community, ranked Vietnam eighty-first in growth competitiveness in the world (down from sixtieth place in 2003) and eightieth in business competitiveness (down from fiftieth place in 2003), well behind its model China, which ranked forty-ninth and fifty-seventh in these respective categories. Vietnam's sharp deterioration in the rankings from 2003 to 2005 was attributable in part to negative perceptions of the effectiveness of government institutions. Official corruption is endemic despite efforts to curb it. Vietnam also lags behind China in terms of property rights, the efficient regulation of markets, and labor and financial market reforms. State-owned banks that are poorly managed and suffer from non-performing loans still dominate the financial sector.
Vietnam had an average growth in GDP of 7.1% per year from 2000 to 2004. The GDP growth was 8.4% in 2005, the second largest growth in Asia, trailing only China's. Government figures of GDP growth in 2006, was 8.17%. According to Vietnam's Minister of Planning and Investment, the government targets a GDP growth of around 8.5% for 2007.
On January 11, 2007, Vietnam became WTO's 150th member, after 11 years of preparation, including 8 years of negotiation. Vietnam's access to WTO should provide an important boost to Vietnam's economy and should help to ensure the continuation of liberalizing reforms and create options for trade expansion. However, WTO accession also brings serious challenges, requiring Vietnam's economic sectors to open the door to increased foreign competition.
Although Vietnam's economy, which continues to expand at an annual rate in excess of 7 percent, is one of the fastest growing in the world, the economy is growing from an extremely low base, reflecting the crippling effect of the Second Indochina War (1954–75) and repressive economic measures introduced in its aftermath. Whether rapid economic growth is sustainable is open to debate. The government may not be able to follow through with plans to scale back trade restrictions and reform state-owned enterprises. Reducing trade restrictions and improving transparency are keys to gaining full membership in the World Trade Organization (WTO), as hoped by mid-2006. The government plans to reform the state-owned sector by partially privatizing thousands of state-owned enterprises, including all five state-owned commercial banks.
Read more about this topic: Economic History Of Vietnam