Vietnam Economic Sectors

Vietnam Economic Sectors

Only around 24% of the Vietnamese population live in cities, but these contribute around 70% of GDP. The agricultural sector has decreased in importance for the economy as a whole, but in terms of the number of economically active people it is still the most important branch of the economy in the country, as around 55% of the workforce is tied here. In 2018, the agricultural sector recorded one of the highest growth rates in recent years, but it is also facing major challenges given the country’s rapid urbanization and industrialization.

After rice production was not sufficient to feed the Vietnamese population until the end of the 1980’s, Vietnam became one of the largest rice exporters in the world since the beginning of the reform policy. The quality of Vietnamese rice could, however, be improved further – it is often still heavily contaminated with pesticides.

Rice cultivation makes up the majority of agricultural production, but there has been a trend towards diversification of agricultural production for a long time, which was accelerated by Vietnam ‘s accession to the WTO in January 2007: the cultivation areas for rice have therefore continuously increased in favor of sugar cane and tea, Pepper and other products downsized.

Vietnam, for example, has become the second largest exporter of coffee within 30 years. Indeed, the production of coffee in Vietnam is a “success story” in which several nationally known entrepreneurs have contributed.

According to mathgeneral, Vietnam is also an exporter of textiles and shoes. In order to gain better access to the US market and to enter into a “Trans-Pacific Partnership” with Washington, Vietnam would be forced to make concessions that would amount to a radical transformation of the economic system.

Although the country has large oil and gas reserves, production declined between 2003 and 2013. Up to now Vietnam has exported a large amount of crude oil, but had to re-import petrochemical products due to a lack of its own refinery capacities. A second refinery should be completed by 2017 – also with the participation of German companies.

Vietnam also has coal, phosphate, magnesium, chromium and bauxite deposits. The government’s plan to work with a Chinese company to promote the mining of bauxite (raw material for aluminum) in the central highlands has not only caused displeasure among prominent politicians such as General Vo Nguyen Giap.

Not only China but also Vietnam has deposits of rare earths. In June 2012, the Vietnamese and Japanese governments agreed to establish a research center that will promote the mining of rare earths in Vietnam and thereby break China’s de facto monopoly.

In order to be able to meet the increasing energy demand, Vietnam planned the construction of 14 nuclear power plants a few years ago – in cooperation with Japan, Russia and South Korea. The start of construction for the first nuclear power plant in Ninh Thuan Province was set for 2014, but was then postponed to 2020 for safety reasons. In November 2016, the Vietnamese National Assembly decided to stop the plans to build nuclear power plants due to the massive increase in costs.

In view of the rapidly increasing energy demand, the Vietnamese government is also making increased efforts to save energy. An Energy Efficiency Act came into force in 2011. After the Vietnamese government had relied on coal-fired power plants for a while, it is now increasingly promoting renewable energies.

Pham Nhat Vuong, currently the richest Vietnamese, profited from the building boom. Since economic growth stalled, the real estate industry in Vietnam has been in a deep crisis.

The tourism sector accounts for 4.5% of GDP. According to official information, 39% more tourists came to Vietnam in the first eight months of 2010 than in the same period last year. According to official figures, 4.8 million tourists came to Vietnam in 2014, but overall there was a decline in arrivals. This was mainly related to tensions with the People’s Republic of China (territorial conflict in the South China Sea), which discouraged many potential Chinese tourists from visiting Vietnam. In addition, other factors such as the cumbersome and expensive visa issuance and poor marketing also played a role.

In the meantime, however, the number of tourists has risen sharply again and reached almost 10 million arrivals in 2016. This is also due to the large number of tourists to China who are pouring into the country again after relations with Vietnam have eased. The boom continued in 2018 (15.5 million arrivals) – also reflected in the expansion of Vietnamese airlines. The rapid development of the Vietnamese flight market is indicative of the fact that the first large private airport opened in Quang Ninh province in December 2018.

The tourism sector benefits from natural beauties such as the Ha Long Bay in the north of the country, which has been declared a World Heritage Site by UNESCO. However, an incident in February 2011 revealed that the safety of the boat tours organized by various private providers was not in good shape, when a ship sank and 12 people, including 11 foreign tourists, drowned. A general problem is that the tourism sector in Vietnam is being expanded by force – without paying much attention to sustainable development – as the example of the island of Phu Quoc shows.

Vietnam has also become a consumer society. For example, beer consumption has risen massively in recent years since foreign beer producers discovered the Vietnamese market.

Vietnam does not have its own computer industry. Now the first computer game developed in Vietnam was launched – a game about the Battle of Dien Bien Phu in 1954.

Private trade - the engine of progress