Vietnam: Arriving in the World – and at a Crossroads

Summary

The year 2007 in Vietnam was bracketed by two events that could go down in history as watersheds in the country's post-Cold War life. On 11 January, Vietnam began its membership in the World Trade Organization (WTO). In December, thousands of Vietnamese took to the streets to protest against China's claims to the Paracel and Spratly Islands in the South China Sea. The accession to the WTO marked the full integration of Vietnam into the Western-led international system, closing a protracted process that began twenty years ago and opening a new era in the country's economic life as well as its relations with the outside world. The anti-China protests demonstrated the re-emergence of nationalism, and with their suppression by Vietnamese authorities, that the banner of patriotism has changed hands from the state to alternative elite groups that are Internet-based and wealthy. These protests and Beijing's urge to suppress them have put Hanoi in a dire strait where it cannot avoid taking sides. Vietnam has just arrived in the world but already stood at a crossroads.

The WTO Era, Year One

Vietnam's economy in 2007 continued to gain momentum in an overall stable macroeconomic environment but challenges and pitfalls are also mounting up, suggesting that it might be evolving into a bubble economy. Gross domestic product (GDP) reached US$71 billion and per capita GDP stood at US$835, double the figure of 2001. The country's balance of payments recorded a high surplus, due to massive influx of overseas remittance, foreign direct investment (FDI) and foreign aid despite a record amount of imports. Gross external debt was equal to 30 per cent of GDP while government debt accounted for 36 per cent of GDP. State budget revenues accounted for 25 per cent of GDP while the government continued to run a budget deficit, which was less than 5 per cent of GDP. However, off-budget spending approved directly by the prime minister and funded by the Vietnam Development Bank could add 3 to 5 per cent of GDP to the deficit, ‘which could turn Vietnam from a low-deficit country into one of the highest deficit countries in the region’.