by Prema Nakra, Ph.D.

Located on the east side of the Indo-China Peninsula, the Socialist Republic of Viet Nam (Vietnam) is bordered by China, Laos and Cambodia. It declared independence from France by Ho Chi Minn in 1945. Its current borders were established in 1975 following the merger of North and South Vietnam under communist rule.

With a population of 88.8 million, Vietnam is the 13th most populous country in the world. Most of its people live in the Southeast Asian sub-tropical climate zone. Its neighbors are China in the north, Laos in the northwest, and Cambodia in the west. Vietnam's coastline of over 2,300 kilometers in the heart of Asia provides easy access to world markets. Vietnam is a home to three major international airports. Tan Son Nhat is Vietnam's largest transport hub and currently handles 75% of Vietnam’s passenger traffic. The country has been rapidly modernizing roads, seaports, airports, and its energy supply including oil refineries and hydroelectric facilities as well as planning for two nuclear power plants.

The agriculture industry today contributes approximately 22% of Vietnam's Gross Domestic Product (GDP) and employs nearly 50% of its workforce. Vietnam is a leading exporter of rice, seafood, coffee, pepper, textiles, footwear and furniture, and it is a major oil producer. It is the world's largest producer of cashew nuts and black pepper.

In 2010, approximately five million tourists visited Vietnam from all corners of the world. Vietnam offers a fascinating history, high culture, scenic panoramas both seaside and countryside, exotic plants and trees, a varying landscape from alpine mountains down to Mekong Delta, Christian churches, Buddhist pagodas, Cham temples, top quality hotels, and restaurants offering good food and service and friendly people.

Vietnam Joins the Global Economy

In a 2012 McKinsey Global Institute report, Vietnam has been one of Asia's economic success stories over the past quarter of a century. After a failed attempt at a socialist collective marketplace that nearly crash of the economy, the communist leadership started a cautious reform toward a market economy in 1980s. In 2007, Vietnam became a member of World Trade Organization (WTO). Political and economic reforms launched in 1986 have transformed Vietnam from one of the poorest countries in the world with per capita income below $100 to a lower middle-income country within a quarter of century with per capita income of $1,130 by the end of 2010. Even adjusted for real per capita DGP and purchasing power parity, income levels have increased six fold in the past 20 years from $560 in 1988 to approximately $3,354 in 2012. This has lead to a doubling of the size of the middle class over the past five years.

Market liberalization in Vietnam has helped Vietnam become one of the world's fastest growing economies in the region with an annual growth rate of 14.1% between 2007 and 2011. It enabled an economic boom with an average of 7% to 9% annual GDP growth. Even the recent global financial and economic crisis hit Vietnam less than most countries in Asia. Vietnam's economy recovered strongly in 2009 from the global financial crisis with real GDP growth of 5.3 percent per annum. The ratio of poverty has fallen from 58% in 1993 to 14.5% in 2008. Vietnam ranks among the world's top 15 countries in attracting foreign direct investment (FDI). In 2012, Vietnam recorded a trade surplus of $780 million. Looking forward, Vietnam is expected to achieve stable real GDP growth rate of 7.1% between 2011 and 2015.

In the remaining three articles of this series on Vietnam, I will detail the FDI that is occurring in the country, outline the opportunities available for companies interested in doing business in Vietnam, and list the challenges that still remain.