• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

An Investigation of Vietnam's Barriers of Economic Growth and Development

Extracts from this document...

Introduction

An Investigation of VIETNAM'S Barriers of Economic Growth and Development Over the past few decades, Vietnam has made remarkable recovery from the damage of war and political reforms. Under Vietnam's communist party, the country's economy has transitioned from a centrally planned economy to a socialist-oriented market economy. Making it a multi-sectored commodity economy regulated by the people, whilst under state management and ownership. Numerous reforms, along with the modernization of the financial system, have led to rapid growth for Vietnam economically. In 2010, the Gross Domestic Product (PPP) of Vietnam was $275,639 million and ranked 40 out of 182 listed countries according to the International Monetary Fund. This is most likely due to rapid industrialization that has and is taking place. Industry and construction contributed approximately 40.9% of GDP in 2010 whereas the share of the agriculture sector has fallen to 21%. Although the rise in GDP has brought about a decline in poverty, larger school enrolment rates, bettered infrastructure, etc, this rapid growth rate has also brought with it negative factors that may hinder subsequent economic growth and development. For instance, Vietnam is facing large budget and trade deficits. In 2010, the current account balance (CAB) of Vietnam was -8.51 billion US dollars based on the International Monetary Fund, with the country's trade deficits amounting to US$12.4 billion. CAB value, being a negative, shows that the amount spent on imports coming into Vietnam is higher than that earned from the country's exports. ...read more.

Middle

This brings us to the next section of my investigation. Along with the problems arising in Vietnam, its current economic situation could have been and still remains a result of the various factors below: Income Poverty The Vietnam government has made effective attacks on poverty, reducing the countries share of income poverty from 58% to 21.45% in 1993-2010. Due to industrialization and reforms, more jobs and opportunities were created. The rise in income for people working in industrial zones resulted in more than a third of the population being pulled out of poverty. However, the increasing number of people moving into the city areas has caused property demands, and hence prices, to rise. Additionally, inflation is increasing the prices of staples remarkably, making it difficult for low-income urban and rural residents. In fact, a study in 2006 by the Vietnamese Academy of Social Sciences concluded that even higher growth rates will be required than in the past as poverty is still deep and widespread, and the remaining millions of people vulnerable to poverty fall far below the poverty line. This prevalent income gap in Vietnam, particularly the income disparity between the rural and urban areas not only lowers the basic standard of living in the country due to inequitable development, but also reduces consumption. This drop in consumption, coupled with the investment fever of the higher income-earners, might cause deflation. Although deflation may seem to help lower-income citizens to purchase more goods, price drops will hamper profits of firms and, hence, the overall economic growth of Vietnam. ...read more.

Conclusion

Therefore, their focus on agriculture has translated to the country over-depending on primary products as its main exports. This narrows the range of products, which can be purchased through international trade. This negatively impacts potential economic growth. On the other hand, an increasing number of people living in urban areas own cars and factories are producing goods constantly in order keep up with the ambitious growth targets of Vietnam's Communist leaders. The emissions from choking traffic and constant construction are starting to take a toll on the environment. The pollution, therefore, impedes the economic development of the developing country. In conclusion, we can see that despite Vietnam's improving economic growth, numerous debts accumulating in the country and the devaluation of currency can hinder further potential growth rates. These factors overlap with the Communist Party's political control of the economy and the slow change of economic policies, lack of infrastructure to support capital production and exporting low-value products, which in turn hinder economic growth. Additionally, over-population, growing income gaps between rural and urban areas, inefficient building of infrastructure and environmental damage created by excessive and rapid industrialization, have impeded on economic development by lowering the basic standard of living of the country. In order for Vietnam to grow and develop economically in the future, the political structure needs to allow a more efficient change in both social and economical policies. More importantly, the country needs to stop prevalent corruption and give firms incentives to generate more economic growth and, thus, attract more foreign investments for the country. Sources -http://siteresources.worldbank.org/INTPOVERTY/Resources/WDR/English-Full-Text-Report/ch2.pdf -http://www.arcadia-asia.com/commentaries/201003-Arcadia%20Market%20Commentary.pdf -http://www.viet-studies.info/kinhte/vietnam_OxfordAnalytica.pdf -http://siteresources.worldbank.org/INTPRS1/Resources/383606-1106667815039/gov_spending_vietnam.pdf -http://www.economist.com/node/11041638?story_id=11041638 -http://www.icsead.or.jp/7publication/workingpp/wp2006/2006-18.pdf -http://www.economywatch.com/economic-statistics/country/Vietnam/ ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. World Economics assignment. The core economic issues that are focused on in this ...

    In 2009, the trade of good has a deficit around �81.9 billion(19). As for the trade in services, the UK has traditionally been in surplus and certainly has been so from 1976-1997. The services trade approximately remained surplus �4 billion during four years which from 1980 to 1984.

  2. Barriers to Economic Growth and Development

    In general many commercial banks do not lend money to most of the developing nations but somehow the banks have loaned large amounts of money to the developing nations and mainly this was caused by the 1973 oil crisis. In 1973, the OPEC countries steeply increased their oil prices (after failing negotiations with the 'Seven Sisters', and some diplomatic problems)

  1. Growth and Development Problem Set - IB Economics exam questions and answers.

    to capture a wider conception of human development and to explore the relationship between growth and human development. Adapted from the Human Development Report 1996. Published for the United Nations Development Programme 8. Explain what is meant by the following terms used in the passage: (i)

  2. Economics Extended Essay - To what extent has the market for paintings in South ...

    The tables were made so that it would help me show the effects on the market over time. I knew one gallery owner personally and she got me in touch with the other galleries. The figures from the galleries have been analyzed to observe to what extent has the economic

  1. Fair Trade

    Often eco-hotels are built by local craftsmen, who express the regions tradition and culture. Whilst this gives the hotel a charmingly unique touch, it also preserves the local culture, and profits its people through providing them with work and thus income.

  2. Winners and Losers of Inflation and Deflation

    to supply goods and therefore firms will often grant their workers a raise in wages. This will increase costs of production and can cause a spiral of inflation with higher prices and higher wages. Savers are also losers due to high levels of inflation.

  1. What are the stages in economic development? Discuss this in reference to at ...

    It also indicates that the UK economy is rising in the service sector- a fact that can be attributed to almost 75% of the British economy. The service sector also includes major banking institutions and high-class hotels and restaurants. If the service sector is added to the PMIs for manufacturing,

  2. Negative external impacts of women's oppression on the economic and environmental welfare of Pakistan

    Demand for saima?s bracelets were exceeding supply. Following her entrepreneurial successes, she was met with respect from friends and family. Saima?s story is unfortunately a rare one. With gender disparity existing in a structural and foundational form, most women of Pakistan and other middle-eastern countries don?t get the opportunity to work outside of their house.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work