The Vietnam Economic Development - Essay Example

1.0 Introduction There is a major transformation occurring in Vietnam. Pessimist would guess that the region is again to turbulent times suchas the war it experienced in the not so distant past. However, this is far from the case. The nation is actually performing well in improving its economy which is remarkable given that most of its infrastructures and basic service units were virtually demolished during the Vietnam War. Much like what has occurred in South Korea, the country's economy is very bullish with the future still very promising. The aim of this paper is to provide a discussion regarding the events in the economy of Vietnam and its similarity to what had happened in the South Korean setting. In this paper, I am to delineate this similarities and how it can be used to forecast the economic growth of Vietnam. To do this, I examine not only the economic but also the social and political similarity between the two countries. I then proceed in discussing the implications of this similarity in the future developments in Vietnam's economy. 2.0 Brief History of Vietnam Vietnam, with the official name of Socialist Republic of Vietnam, is located in the South East Asia and constitutes a land rich in history and culture. It is bordered by China to the north, Laos to the northwest, and Cambodia to the southwest. On the country's east coast lies the South China Sea. With a population of over 87 million, Vietnam is the 13th most populous country in the world. Vietnam was formerly a Chinese territory but as with most Asian nations, the country fell under the yoke of colonial powers particularly that of France. The clamor for independence soon became powerful so as to initiate armed resistance. After years of guerrilla warfare leading to the 1953-1954 take over of the French fortified a base at Dien Bien Phu, the French government agreed to negotiations to end the war. However, the country was divided at t the 17th parallel, with the Vietminh in the North and the French and their Vietnamese supporters in the South. In 1963, the deteriorating political situation and the fear of the spread of Communism by the Americans resulted to the Vietnam War which pitted South Vietnam supported by the United States of America against North Vietnam which ultimately saw the victory for Communist North Vietnam and the unification of the Vietnam people. Upon taking control, the Vietnamese communists banned all other political parties, arrested public servants and military personnel of the Republic of Vietnam and sent them to reeducation camps. The government also embarked on a mass campaign of collectivization of farms and factories. Reconstruction of the war-ravaged country was slow, and serious humanitarian and economic problems confronted the communist regime. In a historic shift in 1986, the Communist Party of Vietnam implemented free-market reforms known as Doi Moi. With the authority of the state remaining unchallenged, private ownership of farms and companies, deregulation and foreign investment were encouraged. The economy of Vietnam has achieved rapid growth in agricultural and industrial production, construction and housing, exports, and foreign investment. It is now one of the fastest growing economies in the world. (Sullivan, 2006) 3.0 Social Similarity between Vietnam and South Korea In the Asia Pacific Region, one can find another country besides from Vietnam having experienced rapid economic development in the world since the 1960s. South Korea, which has the 3rd largest economy in Asia and the 11th largest economy in the world, has been defined as a High Income Nation by the World Bank and is listed by the United Nations as a prosperous nation. In terms of social beliefs and culture, the Vietnamese and the South Koreans are heavily influenced by Confucianism. At the heart of Confucianism are two fundamental principles, the necessity of correct behaviour and the importance of loyalty and obedience. Confucianism was firmly implanted in Vietnam during the thousand years of its occupation by China and mirrored its development. As in China, an intellectual elite developed and the principles of obedience and respect for education and authority were instilled throughout society profoundly influencing the family structure and creating a tightly defined social hierarchy. The profound impact of Confucianism remains strong in Vietnam. Social order is defined by its principles and the rituals or deference and obedience are still observed. Unlike the West, teachers and education are held in high esteem, children defer to their parents, even in middle age and beyond, and most wives still follow the wishes of their husbands without question. (Cumings, 2005) As in Vietnam, South Korea has many beliefs rooted in Confucian doctrine. Confucianism became a common philosophy in ancient Korea bringing about significant changes and exerting considerable influence on the Korean people. Confucianism continues to pervade the consciousness of many Koreans, shaping the Korean moral system, its national laws, and general way of life in Korea. The ubiquitous Confucian beliefs and values of contemporary Korean society highlight a plethora of social concerns, and include obligation towards others, respect for family, elders and authority, loyalty, honour, and filial piety. They also believe that it is essential to achieve harmony which they can do so by achieving consensus. (Sullivan, 2006) 4.0 The Nations at War: Clashing Ideologies Many similarities exist between the Korean and Vietnam Wars. Each case demonstrates a battle between democracy and communism. Both wars were waged against the backdrop of social upheavals that were occurring in many societies. As one Vietnam veteran said, "the Korean and Vietnam Wars were fought against an ideology, not an individual you can point your finger at." (Sullivan, 2006) Another similarity between Vietnam and Korea is that both these nations split between the communist north and democratic south. North Korea and North Vietnam were connected to communist China and received supplies, ammunition, and support from them. South Korea and South Vietnam on the other hand, favored democracy. The United States gave weapons, supplies, and military advisors to South Korea and South Vietnam, which soon led to troops actually fighting in each of these wars. Another common characteristic is that both wars ended in negotiations. Neither side won out right like they did in World War II. In Korea, a cease-fire was called and a demilitarized zone was made between the two hostile borders. In Vietnam, under the Paris peace treaty, both sides agreed to a cease fire and America agreed to pull out all military personnel, while North Vietnam agreed to release all American POWs. Although communist North Vietnam quickly violated this treaty and attacked South Vietnam after the US pulled out, both the Korean and Vietnam wars ended in some concessions for both sides. (Sullivan 2006, Cumings 2005) 5.0 Similarity in Economic Development Vietnam, along with South Korea, belongs to the next 11 largest economies in the world. Both of them previously belonged to the best economic performers in Asia which was aptly called the Four Asian Tigers. It must be noted, however, that South Korea is more economically at an advantage as compared to the economy of Vietnam. From examining the economic orientation of South Korea and Vietnam, one can also notice that both are geared toward a more market oriented economy and more foreign trade conducted with minimum government intervention. Both economies were highly boosted by the reforms. In 1986, the Sixth Party Congress introduced significant economic reforms with market economy elements as part of a broad economic reform package called "i mi" (Renovation). Private ownership was encouraged in industries, commerce and agriculture. Foreign investment grew threefold and domestic savings quintupled. Manufacturing, information technology and high-tech industries form a large and fast-growing part of the national economy. The South Korean economy was boosted following a series of ambitious five-year plans for economic development. Emphasis shifted to foreign trade with the normalization of relations with Japan in 1965, which resulted in a boom in trade and investment. Rapid expansion, first into light and then heavy industries, followed in the 1960s and 1970s. South Korea transformed itself from an exporter of mostly textiles and shoes into a major global producer of automobiles, electronics, shipbuilding, steel and, later, high-technology products such as digital monitors, mobile phones, and semiconductors. The country has become one of the leading business financial hubs in the world.(Korean National Statistics Online, 2007; Korea Ministry of Foreign Affairs and Trade, 2007) 6.0 Economic Outlook Given the great similarities between South Korea and Vietnam, one could agree that the latter is not far from achieving South Korea's success story. It must be said that Vietnam is still a relatively poor country with GDP of US$280.2 billion at purchasing power parity. This translates to about US$3,300 per capita (US$726 at market exchange rate). Inflation rate was estimated at 7.5% per year in 2006. Nonetheless, the spending power of the public has noticeably increased. Deep poverty, defined as a percent of the population living under $1 per day, has declined significantly and is now smaller than that of China, India, and the Philippines. (Chandler and Sprasso, 2006) There are also many developments in Vietnam which promises a brighter future. As a result of several land reform measures, Vietnam is now the largest producer of cashew nuts with a one-third global share and second largest rice exporter in the world after Thailand. Although agriculture's share of economic output has declined, falling as a share of GDP from 42% in 1989 to 20% in 2006, production in other sectors of the economy has risen. Among other steps taken in the process of transitioning to a market economy, Vietnam in July 2006 updated its intellectual property legislation to comply with TRIPS. Vietnam was also accepted into the WTO on November 7, 2006 and has the countries Japan, Australia, ASEAN countries, the U.S. and Western European countries as is trading partners. This implies that the market for its products is very much varied and is not tied to one country alone. Vietnam is also a relative new-comer to the oil business, but today it is the third-largest oil producer in Southeast Asia with output of 400,000 barrels per day. The country is also one of Asia's most open economies: two-way trade is around 160% of GDP, more than twice the ratio for China and over four times India's. These facts contribute to the notion that it won't be long when Vietnam would be a major economic power. References: Chandler, Clay and Prasso, Sheridan (2006).VIETNAM VROOOOOM...Asia's second-fastest- growing economy takes the global stage. Retrieved October 13, 2007 from http://money.cnn.com/magazines/fortune/fortune_archive/2006/11/13/8393174/index.htm Cumings, Bruce (2005). Korea's Place in the Sun. W.W. Norton U.S. Korea National Statistics Office Online (2007). Economic Trends. Retrieved October 13, 2007 http://www.nso.go.kr/eng2006/e02___0000/e02b__0000/e02ba_0000/e02ba_0000.html Korea Ministry of Foreign Affairs and Trade (2007). Economy and Trade. Retrieved October 13, 2007 from http://www.mofat.go.kr/me/index.html Sullivan, James (2006). National Geographic Traveler to Vietnam. National Geographic Publishing Read More