Final-Group Assignment, Presentation, Dr. Dash, 25,11,2010 (0524)

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BUILD BRIGHT UNIVERSITYGROUP ASSIGNMENT

“Analyze the Economic and Non-Economic factor of Environment in VN”How far the Environment is Supportive to foreign Investors?

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Table of ContentsTable of ContentsI- Introduction II- Objectives of the PaperIII- Methodology of the PaperIV- Discussion of the Topic 1-Discuss about Economic Factor of Environment in Vietnam 1-A-Economic Growth 1-B-Exchange Rate 1-C-Inflation 1-D-Unemployment

1-E-Balance of Payment 2-Discuss about Non-Economic Factor of Environment in Vietnam

2-A-Political 2-B-Social Cultural 2-C-Legal 2-D-Technological 2-E-Geographical 3- Discuss about Challenge and Supportive Factor to Foreign

Investors 3-A- Challenge to Foreign Investors 3-B- Supportive Factor to Foreign InvestorsV- Conclusion and RecommendationsVI- References:

“Analyze the Economic and Non-Economic factor of Environment in VN”

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* Vietnam is now among the fastest-growing economies in Asia.* 2009, Vietnam still recorded GDP growth of 6.20%.* Long term investors maintain that Vietnam's long term prospects are good, providing that the government sticks to its reform plans, overcomes skills and infrastructure challenges, and tackles corruption.


I- Introduction

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II- Objectives of Paper: The objective of this paper is to find out and discuss about the economic and non-economic factor of environment in Vietnam and to find out also the challenge and supportive factor to foreign investors.

III- Research Methodology:Base on this research paper on discuss about the economic and non-economic factor of environment in Vietnam and to find out the challenge and supportive factor to foreign investors, we will use only secondary data by doing research and collect data from Prof. (Dr.) T.R. Dash's material, some books and internet websites. The study is relatively descriptive and explanatory in nature.


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IV- Discussion of the Topic: 1- ECONOMIC FACTOR


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Vietnam joined member of WTO in January 2007. Vietnam is one of the best performing economies in the

world over the last decade . Real GDP has on average grown by 7.3 percent per

year during 1995-2005 and per capita income by 6.2 percent per year.

A New Socio-Economic Development Plan for 2006-2010 was approved by the National Assembly in June 2006.

The SEDP aims at rapid development, carefully balanced between its four pillars of economic, social, environmental development, and improved governance and institutions.


1-A-Economic Growth:


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Growth performance was solid in 2007. Economic growth accelerated slightly, to 8.5 percent, making 2007 the third consecutive year above the 8-percent benchmark. GDP growth rate of Vietnam from 2006 to 2010

Year GDP Real Growth

2006 8.20%

2007 8.50%

2008 7.50%

2009 6.20%

2010 6.5% (Est.)

1-A- Economic Growth (Continued)



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GDP (purchasing power parity): GDP - per capital (PPP):

- $256.90 billion (2009 est.) - $2,900 (2009 est.) * Rank: 42 * Rank: 167 - $ 243.90 billion (2008 est.) - $ 2,800 (2800 est.)- $ 229.50 billion (2007 est.) - $ 2,700 (2007 est.)

GNI Per Capita 2009 and PPP GDP - composition by sector:

- $2,850 - Agriculture: 21.3%- Rank: 160 - Industry: 40%

- Services: 38.7% (2009 est.)

REMARK:

ECONOMIC FACTOR OF ENVIRONMENT IN VIETNAM

Economic Growth (Continued)


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- Vietnam is a two-currency country.- Both Vietnamese dong and US dollars are legal tender in the country. But most of the places like market, hospital, small restaurant,…. are preferred DONG rather than USD.

- The urgent government’s meeting on November 3 evening ended at 9 pm. Several measures were put forward to deal with the uncertainties on the foreign market and prevent high inflation.

Exchange Rate on November 15, 2010

-1 USD = 21000 Dong- 1 Riel = 5.181 Dong



1-B-Exchange Rate

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1-C-Inflation

- Inflation is a general and sustained increase in prices.- It is quoted as a percentage annual figure. - Vietnamese inflation slowed for a second month in May 2010, giving policy makers room to spur growth by boosting credit and encouraging market interest rates to fall.- According to figures from the General Statistics Office in Hanoi, consumer prices climbed 9.05% in May from a year earlier.- The inflation rate in April was 9.23 percent. Prices rose 0.27 percent in May from the previous month.



25/11/2010 11Inflation rate (consumer prices):

7% (2009 est.)country comparison to the world: 168


Inflation (Continued)


Year Inflation

2002 4.079

2003 3.303

2004 7.895

2005 8.394

2006 7.503

2007 8.349

2008 23.115

2009 7

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1-D-Unemployment-The rate of unemployment can have a major effect on the economy.-The more people who are out of work, the less money that is circulated into the economy through the purchase of goods and services. -Vietnam becomes an export based developing country once it joined ASEAN Free Trade Area (AFTA) in 2001.-Exporting labor to wealthier parts of the world has long been something in which Vietnam has lagged behind its Asian neighbors, but the government hopes to change that soon.



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Last year, Vietnam exported nearly 22,000 workers, who sent home some US$220 million.

Most of workers were sent to countries like Japan, Taiwan, South Korea and Libya.

Employed in construction, industry, sea transport, seafood processing, health care and agriculture.

Vietnam government is trying best to open up labor services to private business in the country.


Unemployment (Continued)


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YearUnemployment rate Rank

Date of Information

2003 25.00 % 34 2002 est.

2004 6.10 % 135 2003 est.

2005 1.90 % 12 2004 est.

2006 2.40 % 21 2005 est.

2007 2.00 % 14 2006 est.

2008 4.30 % 53 2007 est.

2009 4.70 % 58 2008 est.

2010 6.50 % 61 April 2009 est.

Remark:6.5% (April 2009 est.)- country comparison to the world: 61


Unemployment (Continued)


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1-E-Balance of Payment

- 2010 Socio-Economic Report recently announced by Ministry of Planning and Investment, Vietnam balance of payment in 2010 may run a deficit of $4 billion.

- Lecturer of Fulbright Economics Teaching Programme said a powerful solution is needed in order to solve the deficit problem of the total balance of payment




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Balance of Payment (Continued)

Year Import (Billion US$) Export (Billion US$)

2009 68.83 56.584

2010 17.525 14.014 * From Jan to Mar

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2-A-Political In VN

-Form of Government:The Communist state.

-Legal system: based on communist legal theory and French civil law system

-Political parties and leaders: Monopoly party - Communist Party of Vietnam (CPV) (Nong Duc Manh, general secretary)

-Political Ideology: Though formally Marxist-Leninist, Moved towards market reforms in the economy and has permitted a growing private sector. the party retains a monopoly on power.


2-Non-Economic factor of Environment in VN

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-Role of government: Planning is a key characteristic of centralized, economic

development guidelines for all its regions.

The first phase, from 1976-1980, incorporated Second Five-Year Plan (1976-80) the First Five Year Plan (1960-65) applied to North Vietnam only.

The second phase, called "socialist industrialization," was divided into two stages: from 1981-1990 and from 1991-2005.

The third phase, covering the years 2006-2010, was to be time allotted to "perfect" the transition.



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-Political Stability In VN

The smooth change in leadership reflects the country's recent track record.

efficiently resolving socio-economic issues, strengthening national defense, security, expanding foreign relations, actively participating in international integration.

New Prime Minister Nguyen Tan Dung: marks the most dramatic transfer of mantle to a younger leader. Mr. Dung received over 92% of the N.A, fight against corruption. his new post rich experience of managing not only security issues but also economic affairs.



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2-B-Social Cultural-Language: Vietnamese, for business:

English. French, Russian, Chinese, Japanese, German, South Korean.

-Education In 2003 Vietnam’s literacy rate was 94%.

-Attitudes:Behaviors in the workplaceTraditional Vietnamese organizations operate strict hierarchies. Individuals have defined roles, report to an immediate superior who will direct his or her work



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2-B-Social Cultural-Behavior in societycorrect deference must be paid to the representatives of authority. Police officers, bureaucrats, public officials, should be given an appropriate gratuity for services rendered.

-Social groups• Changes in lifestyle for different social groups• Subject to ruler• Son to father• Wife to husband• Younger brother to elder brother• Mutual respect between friends



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2-C- Legal

Is based on communist legal theory, French civil law. In 1981 major reforms were made to the judicial and legal system.

Vietnamese legal thought with regard to the treatment of criminals is the result of three major influences: classic

Confucianism, the Napoleonic Code, and Marxism-Leninism.



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2- Non-Economic Environment (Cont.)

Implementation of the digital mapping technology, including digital aero-triangulation and digital mapping.

Implementation of DGPS techniques to promote hydrographic survey and cadastral mapping. For this purpose, the first permanent GPS station for MSK DGPS technology was established in Hai Phong and its control station in Hanoi.


2-D. Technology

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Using GPS-controlled aerial photography to secure timely high quality air photos for map production and other users, including the implementation of a GPS-navigation system for photo flight and a GPS system for the determination of the coordinates of the photo projection center.

Upgrading the existing geodetic network using precise GPS-measurement techniques.


2-D. Technology (Cont.)2- Non-Economic Environment (Cont.)

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There are four geographic sections in Vietnam, ranging from rugged mountains to marshy fertile flatlands.

Vietnam's "S" shape takes it from China, in the north, the Gulf of Thailand in the south.

In the north, there are mountains that extend up to 3.143 m at Fan Si Pan, the highest point in Vietnam; the east and southeast consists of the Red River Delta, an alluvial plain; south of this Delta is the Truong Son (Annam Highlands) which is considered to be the backbone of Vietnam.

A plateau (Central Highlands) also occupies this area and can be found between Cambodia and the South China sea.

The Mekong Delta is located in the southernmost portion of Vietnam and makes up a fertile, marshy flatland that goes from the Central Highlands (north of it) south to the mangrove swamps on the Ca Mau peninsula.


2-E. Geographical2- Non-Economic Environment (Cont.)

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The Red River and the Mekong River are navigable in their entirety and are considered to be the two major rivers in Vietnam. To help prevent flooding in their deltas, a system of dikes and canals has been erected. This has helped improve farming in the Mekong Delta due to salt water flooding from the South China Sea, especially during the long, wet monsoon season.

The average temperature in the north is about 81 degrees F (27 degrees C) and in the south a nice 70 degrees F (21 degrees C) and is generally humid.

Two monsoons control the weather, one is considered to be a dry monsoon which occurs mainly in the north from about October/November to March.

The other brings wet, warm weather to the entire country, with the exception of the mountainous areas, from April/May to October.

July and August are considered to be the hottest and most humid months.

2-E. Geographical (Cont.)


2- Non-Economic Environment (Cont.)

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3- Discuss about Challenge and Supportive Factor to Foreign Investors:

There are 10 first factors to be considered by investors when choosing the location for investment:

1) Customers approach 2) A stabilized social and political environment 3) Easy commercial condition 4) Reliability and quality of infrastructure 5) The capacity to hire qualified staff 6) The capacity to hire managers 7) Level of corruption 8) Cost of labor 9) Crime 10)The capacity to hire technical staff ________________________

(Source: MYGA, survey on direct foreign investment, January 2002)

“Analyze the Economic and Non-Economic factor of Environment in VN”“Analyze the Economic and Non-Economic factor of Environment in VN”

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3-A- Challenge to Foreign Investors in Vietnam:

Completing the structural reform agenda, including the implementation of WTO commitments and the banking reform roadmap;

Establishing an efficient regulatory framework for infrastructure while expanding the capacity to fill the supply gap in energy, transport and water;

Protecting the environment and better managing natural resources;

“Analyze the Economic and Non-Economic factor of Environment in VN”3- Discuss about Challenge and Supportive Factor to Foreign Investors (Cont.)

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3-A- Challenge to Foreign Investors in Vietnam (Cont.)

Establishing a public administration based on principles of efficiency, accountability and transparency,

Setting up social security systems that would provide for health care financing, pensions for retirees and support for temporary unemployed; and improving the quality of education throughout the system; and

Implementing the Anti-Corruption Law and regulations effectively.

______________

Source: The World Bank, http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/VIETNAMEXTN/0,,menuPK:387575~pagePK:141132~piPK:141107~theSitePK:387565,00.html#challenges

3- Discuss about Challenge and Supportive Factor to Foreign Investors (Cont.)


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3-B- Supportive Factor to Foreign Investors in Vietnam:

To perfect its investment environment, Vietnam will focus on improving the quality of its human resources, upgrading infrastructure and ensure transparency and consistency of investment policies.



Vietnam integrated itself to the region and the world:

Asia Pacific Economic Cooperation (APEC) -Member since 1998WTO (World Trade Organization), -Became a WTO member in 2006, ASEAN Free Trade Agreement (AFTA)-Cutting tariffs to join the AFTA- complete by early

2006 Ayeyawady-Chao Phraya-Mekong Economic

Cooperation Strategy ACMECS(Thailand):-Vietnam admitted to ACMECS as an official member in

2005

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3-B- Supportive Factor to Foreign Investors in Vietnam:

Changes in Political and Legal Framework: Constitution 1992: private sector granted equal treatment with state sector.Trade liberalization: Bilateral Trade Agreement with USA; AFTA implementation from 2003-06; targeting accession to WTO in 2006.

Macroeconomic Stability Maintained: GDP Growth 7.2% in 2003; 7.69% in 2004; 7.5%e in 2005. Industrial Output increased by 16.1% in 2003; 16% in 2004

and 16% in 2005. Reasonable interest rates and modest devaluation of VND

in spite of CPI of 9.5% in 2004.



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3-B- Supportive Factor to Foreign Investors in Vietnam (Cont.):

Improved Investment Climate:Development of about 110 Export Processing

Zones, Industrial Zones, High Tech Zones. About 5,110 foreign-direct investment

projects (75% wholly-foreign owned, 25% joint ventures) with a total approved capital of around USD 46bn

In 2003, the monopoly in the telecom sector started to phase out; internet telephony was allowed; four more mobile phone operators entered the market.

Infrastructure Projects: Increasing capacity and efficiency of currently

16 operational and 9 new airports. Expanding the number of deep sea ports. Up-grading highways Improving internet-access, telephone and

mobile phone availability and reduce cost.


Telecommunication

Transportation


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3-B- Supportive Factor to Foreign Investors in Vietnam (Cont.):

Competitive Quality of Workforce:

Over 50% populations are below 25 years old, 60% less than 30 years old

Working-age Population accounts 59.3% of total Population (46.7m People)

Literacy Rate about 94% in 2003 Special Focus on IT-Training in schools

fuelling software industry development Vietnamese workers have proven to be

skilful, reliable and highly trainable. Freedom to repatriate profit after

completing all stipulated obligation with Government (tax rate is 0%).

Import Tax Exemption for commodity (goods/luggage) to create fix asset.

Land rental fee reduction



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V-Conclusions and Recommendations Vietnam is among fastest growing economy in the

region and the world with many business opportunities, from both quantitative and qualitative aspect.

Government supports the open door policy, building up the infrastructure and improve in competitiveness.

Vietnam has witnessed fundamental changes during 13 years of comprehensive reform towards market and the world economy.

With further strengthening policies on development of enterprises, abolishment of monopoly of state owned enterprises, development of production factor markets, macroeconomic stabilization, acceleration of integration process, and modernization of public sector, Vietnam will gain higher benefit from opportunities in the globalization as well as minimize possible costs and reach the projected goals.


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VI- References:A-Books:1- International Business Environment (Handouts) - Dr. T. R. Dash, BBU, August, 20102- International Business: The Challenge of Global Competition- Donald A. Ball, Wendell, Paul, J.

Michael and Michael S. Minor, McGraw-Hill/Irwin, New York, 20043-Vietnam's economic development: Opportunities and challenges towards the integration

tendency Prof.,Dr. Nguyen Thi Ngoc Huyen and Prof.,Dr. Bui Anh Tuan, National Economics University, Hanoi, Vietnam

B-Websites:1- Investment and Trade Promotion Center,

http://www.itpc.gov.vn/investors/news/2010/10/2010-10-28.342326/MISNews_view/?set_language=en

2- MUTRAP, http://www.mutrap.org.vn/en/Lists/Posts/Post.aspx?List=04b7f557-7dc2-4103-91f3-a38d33dc893d&ID=178

3- VOANEWS.VN, http://english.vovnews.vn/Home/Vietnam-an-attractive-destination-for-foreign-investors/20063/36897.vov

4- Service Industry Promotion Center, http://www.taiwanbiztour.com/global/Content.aspx?id=365-The World Bank, http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/

VIETNAMEXTN/0,,menuPK:387575~pagePK:141132~piPK:141107~theSitePK:387565,00.html#challenges

6- http://www.haivenu-vietnam.com/vietnam-culture-attitudes.htm7- http://www.indexmundi.com/vietnam/unemployment_rate.html8- http://www.indexmundi.com/vietnam/inflation_rate_(consumer_prices).html9-http://www.businessweek.com/news/2010-08-31/vietnam-s-2010-economic-growth10-http://web.worldbank.org/ 11-http://www.vietnewsonline.vn/News/Business/6242/Vietnam-sees-2010-GDP-growth-at-65-7.htm


Final-Group Assignment, Presentation, Dr. Dash, 25,11,2010 (0524)

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