REASONS FOR VIETNAM'S STRONG GDP GROWTH RATES

In Vietnam, some key factors that have contributed to Vietnam's rapid GDP growth include:

§            Annual FDI remittances equal to 4.1% of GDP;

§            Annual remittances into Vietnam by overseas Vietnamese of $3-4 billion [1], equivalent to 7-10% of GDP;

§            Significant credit growth concurrent with significant increases in property values, leading to rapid increases in domestic demand and spending power. Money supply grew at an average annual rate of approximately 24% from 2000 to 2004.[2] Meanwhile, Average annual domestic credit growth during over the last 4-5 years was about 29% [3].

§            Reforms which have created a much more level playing field for the private sector, which has emerged as a significant engine for growth.

§            Significant growth in exports in recent years.

YEARS TO CATCH UP ON CHINA ON A PER CAPITA BASIS
On per capital GDP terms, Vietnam’s per capital GDP is only about 42% of China’s. Assuming that Vietnam’s GDP continues to grow at 7.1% per year, it would be approximately 12.7 years before Vietnam is at the same per capita GDP level at which China is presently. Cambodia and Laos will require a whole generation of around 25 years to catch up to China’s current level based on recent GDP growth trends.

[1] http://www.adb.org/Documents/Books/ADO/2004/update/vie.asp & http://www.iom.int/DOCUMENTS/PUBLICATION/EN/mrs_14_2003.pdf - page 11
[2] http://www.adb.org/Documents/Books/ADO/2004/vie.asp (data for 2001 until 2003) & http://www.adb.org/Documents/Books/ADO/2005/vie.asp (data for 2004 and 2005)
[3] http://www.vneconomy.com.vn/vet/?param=print&id=7256 & http://www.adb.org/Documents/Books/ADO/2005/vie.asp