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| >> Regional Overview >> Vietnam Overview | |||||||||||||||||||||
IntroductionWith a population of 76 million, Vietnam is the second-largest country in Southeast Asia, and the 13th largest in the world. Its people are young, well-educated and hard working. But after 1975, following the communist victory, Vietnam was closed to the world outside the Soviet bloc. Only in the late 1980s did the country open the door to the West and initiate its domestic economic reform program.The Vietnamese struggle to achieve economic modernization and prosperity in line with its neighbors fits overall U.S. strategic goals to promote economic prosperity through the development of markets and business opportunities for U.S. businesses. Vietnam shows the potential of becoming a significant trading partner and emerging market for U.S. products and services. The U.S. also shares Vietnam's humanitarian concerns for disadvantaged groups such as those at high risk of contracting HIV/AIDS, the disabled, displaced children, and those susceptible to annual floods. USAID's objectives to enhance the environment for trade and investment and to improve access to services for selected vulnerable groups are consistent with Mission Performance Plan (MPP) goals in open markets, economic development, humanitarian assistance and health. The Development ChallengeA 1999 World Bank study indicated that Vietnam has made steady progress in reducing poverty in the 1990s, but still has a long ways to go. To its credit, from 1993-1998 Vietnam succeeded in decreasing the proportion of the population below the poverty line from 58% to 37%. However most of the population (76%) is rural where the poverty level reaches 45%. Per capita income remains very low at approximately $338. There are signs that the ability of the economy to absorb the growing labor force is weakening as urban unemployment climbed from 5.9% in 1996 to 7.4% in 1999, and in rural areas it climbed from 26.6% in 1996 to around 30% in 1999. According to the United Nations Development Program (UNDP), the infant mortality rate is 45 per thousand live births while the proportion of malnourished children under five is an astounding 45%. There are a number of vulnerable groups that are particularly hard hit: minorities in remote areas; victims of the annual floods that were particularly severe this year; victims of injuries from the war or the mines that were left behind; orphans and displaced children; and those that are at high risk of contacting HIV/AIDS.Vietnam's economic success over the last decade is now threatened. The economic renewal program, initiated in the late 1980s, yielded unprecedented levels of Gross Domestic Product (GDP) growth--8 % per year on average between 1990 and 1997--and an impressive reduction in the share of the population living in acute poverty. This momentum of development is now threatened from two sources. First, the regional financial crisis has led to a halving of foreign direct investment flows and a sharp fall in export growth in 1998. Second, growth momentum has been slowing over the past three years as the vigor of the reform program has slackened, and the growth impact of the earlier reforms has faded. As a result, over the last two years Vietnam has experienced relatively low growth--around 4%--which has led to significant declines in employment, enterprise profitability, and public revenues, and is threatening the very progress made in poverty reduction. To restore prior levels of economic growth, Vietnam will need to accelerate its economic reform program, modernize its economy, and become a competitive trading partner in the regional and world economy. Vietnam's transitional economic status and its uncertainty in the way in which it can move from a socialist to a market economy are further reasons why the United States must encourage and provide support for this transition. USAID can play a significant role in helping Vietnam modernize. USAID can help Vietnam develop as a member of the world economy, open and liberalize its markets by learning and adopting principles of democracy, and buttress health and humanitarian support that improves the quality of life for the poor and disadvantaged. Other DonorsIn the 1999 Consultative Group meeting in Hanoi, donors pledged approximately $2.1 billion to Vietnam and indicated pledges could be increased up to $2.8 billion if Vietnam accelerates its economic reforms. Japan, the largest donor ($887 million), provides assistance primarily in infrastructure including highways, bridges, ports, hospitals, power generation and telecommunications. World Bank programs ($400 million) cover structural reform, irrigation and river basin management, power generation, agriculture and reforestation, primary education, and financial sector modernization. The Asian Development Bank programs ($260 million) include agricultural development, rural credit and financial sector reform, and road improvement. France ($97 million) emphasizes education, training, and water and solid waste management. The United Nations programs ($85 million) include humanitarian and food aid, health and family planning, rural development, public administration, and poverty alleviation. In 2000, the United States ranks twelfth in a group of 29 donors, with a contribution of $21.9 million, including $10 million P.L.480 Title I, $5 million from the Overseas Private Investment Corporation (OPIC), and $6.9 million grant assistance, primarily from USAID.
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