Box: Snapshot of Vietnam's Economy

Vietnam’s real GDP growth in the first quarter of 2003 reached 6.9 percent, slightly below the government target of 7 to 7.5 percent for the year as a whole and the 7 percent growth rate in 2002, reports Oxford Analytica, the U.K.-based international research group. Boosted by export growth, Vietnam’s economy has been performing well given the uncertain global economic climate following the war in Iraq. In the first four months of 2003, the value of exports increased by more than 35 percent, levels not achieved since the mid-1990s. In particular, textile and garment exports showed the strongest growth rate. An expansion of exports to the U.S. market accounted for the majority of this growth. Export earnings were also boosted by the higher international oil price.

Low levels of private investment are, however, likely to limit the growth rate over the next three years. In the first four months of 2003 the Ministry of Planning and Investment approved $677 million of new foreign investment, below the level achieved in 2001. Foreign investors remain cautious for many reasons. These include high nonlabor costs, poor infrastructure, red tape and a lack of transparent policymaking, low purchasing power, nonconvertibility of the currency, lack of skilled labor, and high levels of protection. Investment approvals from Japan, the country’s largest foreign investor, fell by 40 percent year-on-year in 2002. Japanese companies have preferred the Chinese, Thai, Malaysian, and Indonesian markets.