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Vietnam has a population of approximately 88 million and it is now the fastest growing economy in South East Asia. It is a member of ASEAN and the newest member of the World Trading Organisation (WTO).
In late 1987, the Vietnamese leadership began moving the economy from a centrally planned economy to a more market-oriented system. Whereas the system still operates within a political framework of strict Communist control, the economy is increasingly moving towards one governed by free market forces. Foreign investment is actively encouraged. 2006 saw the passing of the Common Investment and Unified Enterprise Laws that aim towards giving more confidence to investors wishing to take advantage of the increasingly buoyant investment environment. Hanoi still retains control over all major institutional organs in the country, but significant efforts are now being made to delegate investment approval authority to main regional cities such as Ho Chi Minh and Da Nang, as well as the provinces, in order to speed up the processing of foreign investment licensing.
The result has been an increasing pace of growth and a lifting in living standards, especially in the major cities of Hanoi and Ho Chi Minh and in the provinces immediately surrounding them.
Manufacturing industries, in particular, due to the very low labour costs, have posted major gains.
Access to the WTO strengthens Vietnam's ability to maintain sturdy growth rates, and at the same time puts additional pressure on the hybrid system of strong political controls and growing market influences.
The Vietnamese government is now allowing major tax incentives to those wishing to invest in certain industries such as manufacturing, high technology and training, or in remote areas that desperately need economic stimulus. An increasing number of industrial zones and parks are being opened to provide benefits to foreign investors.
Vietnam continues to receive a large amount of economic aid from institutions such as the World Bank Asian Development Bank, UNDP, and from individual donor countries. By 2013, a subway system should be completed in Ho Chi Minh City to remove the rapidly growing traffic congestion caused by a strong growth in the number of vehicles appearing on the roads every year.
Many foreign firms have been attracted to Vietnam by the potentially huge domestic market, despite the widespread poverty and unemployment. Other investors have specifically entered Vietnam in order to produce goods for export. These firms view Vietnam as part of their global production strategies, and seek to take advantage of its very low labour costs. Increasingly Vietnam is being seen as a cheap and viable investment alternative to China.
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