Service Sector Growth In 2002 example essay topic

Vietnam Case Study Sittipron Suksawang 11 A History // Background Vietnam is a poor, densely populated country that has had to recover from the ravages of war. In 1975, Vietnam organized their economy following the Soviet Unions Planned economy. In the late 1980's, it was recognized that the plan had completely failed. They had set unrealistic production targets, they weren't able to match the requirements which created a breakdown in the plans operation. They also had a low productivity whereas the population was increasing, which made food shortages, starvation and hyperinflation.

They were at a serious crisis point. Economic strategies In 1986, Nguyen Van Linh marked a new era in Vietnam. He had the idea of improving Vietnam's economy by making it Socialism. He wanted to reduce the role of government planning and become more market orientated like allowing private companies to operate.

He also wanted western investments. Foreign investment projects include hotels and tourism, oil and gas, services and transport, communications, agriculture, fisheries, finance and banking. They also need to develop a commercial culture, a suitable legal system, modern infrastructure and financial institution, more efficient enterprises and export growth and a reduction in inequalities. He was also eager to improve relations with the US. This plan was called the 'renovation' or "Doi Moi".

Update Performance over last 12 months After a sluggish early 90's with respect to export performance, the Vietnamese economy grew strongly in the last quarter and the overall economic performance was consistent with that of 2001. United States and Vietnam reached an agreement in 2000 to provide easier access to each others markets. Growth was led by domestic demand and private business development. International risk ratings agencies all increased their ratings for Vietnam in 2002, reflecting a better perception of the investment environment. With an estimated 6-7% growth in GDP, Vietnam remained one of Asia's fastest growing economies in 2002. Domestic demand remained the main source of growth, with gross fixed investment increasing for the fourth year in a row to 31% of GDP, and retail sales up to 13% of GDP (9% in 2001).

Thus Vietnam has weathered the short-run dip in US GDP and world trade growth, and should reap benefits from increases in both during and after 2003. Higher rice prices coupled with increased output helped the agriculture sector to post 2.8% growth for 2002. Strong growth in the output of high-value seafood products also drove growth in the fisheries sector to 6.0%. Around two million tourists visited Vietnam during the first nine months of 2002, up 2% on 2001, and contributing to 6% services sector growth for the whole year.

Vietnam is now perceived as one of the safest tourist destinations in the region and there has so far been no negative impact resulting from the Bali atrocity. Service sector growth in 2002 was also driven by 7.6% growth in financial services. But there are signs that Vietnam are vulnerable such as weak demand from key Asian markets, a lack of competitiveness in many industries, and low commodity prices (particularly rubber and coffee). The country is also at a high level of international debt, in the hope for long term investments.

Values and objectives Vietnam's economic values are to improve their materials and living standards. Their society values learning, sincerity, courage and perseverance. Village life is dominated by Buddhism. Ownership and resources The state owns most of the industry and land in the country.

Over 6000 state-owned enterprises, from steel mills to coal mines to salt makers. People are allowed to own private properties but they have to buy and sell leases to operate their business such as farms and trading land use. They must sell them at an output of the market price. Productivity has increase because the people have become more motivated in making their profit. Resource allocation They are no running under a market economy. Market is the key in determining how goods and services are delivered to the consumers.

Prices are subjected to the demand and supply. There has been an increase of private sector but mostly on a small scale, based around family businesses. State-owned enterprises have greater freedom in decision-making about production investments and prices but are under pressure to lighten their performance. Agriculture represents around one-quarter of national output. Around 80% of the population lives in the country, mainly being in the industry of rice growing. Their service providence are growing in importance.

Their main industries are food processing, garments, shoes, machine building, mining, cement, chemical fertilizer, glass, tires, oil, coal, steel, paper. Distribution of resources The government are encouraging overseas individuals and companies to invest in Vietnam. They also want to develop a good trade relationship with the western world. Their main location of resource distribution have been shown as Japan 18.1%, China 10.6%, Australia 8.8%, Singapore 6.1%, Taiwan 5.2%, Germany 5.1%, US 5.1% in 2000.

Major influences on decision making The communist party's Politburo is the decisive force in Vietnamese decision-making. Key bureaucrats and army officers are also having influence. Foreign company are having problem trying to deal business with the country's underdeveloped commercial law. Relationship of Vietnam's economy with Australia's Australia's relationship between Vietnam are sound.

They are close as Australia ranks 5th of Vietnam exporter. Australia's investment occurs in a variety of areas like mining, hotels, banking, energy development, food processing, building and construction, medical services. They are insisting on expanding trade and investment links between the two countries.