The Economy - Economic Setting

The Economy - Economic Setting

In the 1980s, Vietnam was the world's third-largest communist country--ranking below China and the Soviet Union and above Poland--and the most densely populated. According to Vietnamese figures, the country's population in 1985 totaled more than 60 million, with an average density of 179 persons per square kilometer. In comparison, the German Democratic Republic (East Germany), ranking second in population density, averaged 154 persons per square kilometer. Vietnam's average annual population growth rate was reported to be 2.5 percent.

Demography

The 1979 census showed that more than 42 percent of the population at that time was younger than 15 years of age and nearly 5 percent was 65 or older. Furthermore, 71 percent of the Vietnamese population was 30 years of age or younger.

A population boom in the 1980s put pressure on food supplies and severely taxed the government's ability to create jobs. Harvest shortfalls were frequent, grain reserves remained low, and foreign exchange was extremely scarce. As a result, overcoming even a short-term food deficit was difficult for the government and costly for the people.

In 1984 United Nations (UN) nutrition specialist calculated the daily average food consumption among Vietnamese to be only 1,850 calories per day, nearly 20 percent less than the generally accepted minimum daily standard of 2,300 calories. In 1985, the Vietnam Institute of Nutrition reported average daily intake at 1,940 calories. The institute also estimated that roughly 25 percent of the children suffered from malnutrition.

Labor

The Vietnamese labor force in mid-1985 was estimated at 31.2 million, having increased at the rate of 3.5 to 4 percent annually between 1981 and mid-1985. A 1987 Vietnamese estimate put unemployment at more than 20 percent. More than half of the work force was committed to agriculture; however, observers estimated that the unemployment level in the agricultural sector was very low because agricultural workers were more likely to be underemployed than unemployed. In contrast, the unemployment rate in the nonagricultural sector may have exceeded 40 percent, meaning that more than 2 out of every 5 Vietnamese workers were jobless. A similar calculation for the nonagricultural sector in 1981 yielded an estimate of 20 percent, or 1 out of 5.

Unemployment was particularly concentrated among younger workers living in urban areas. According to Vietnamese government statistics, of the 7 million persons who entered the work force between 1981 and 1985, about 33 percent lived in urban areas, and only 15 to 20 percent reportedly had found jobs. The actual ratio of jobs to unemployed people may not have been as grim as statistics indicate, however. According to some observers, the high rate of inflation during the period forced many people, especially state workers, to take a second job in order to make ends meet.

Vietnam's economic prospects for the late 1980s and early 1990s depended on resolving population and labor problems. Government population projections in 1987 showed that the gender imbalance, with females more numerous, probably would persist through the end of the century. National security concerns were unlikely to diminish, and the armed forces were expected to continue their high demand for males of service age. A similar demand also was expected to continue in the sectors and occupations in which males were employed during the 1980s: agriculture, fishing, mining, metallurgy, machine building, construction, and transportation. Female workers probably would remain concentrated in subsistence agriculture, light industry, and, perhaps, forestry. Education, training programs, and the wage structure were expected to continue to favor males and male-dominated occupations, while the absence of these incentives would cause productivity gains in female-intensive industries to remain low.

Economic recovery policies that emphasized austerity and postponed industrialization were unlikely to create sufficient new employment opportunities. In the short run, the government's discharge of surplus state employees during the mid-1980s in order to curb expenditures would tend to increase unemployment. The stress on boosting production in light industry was expected eventually to reduce unemployment, but only if expansion were supported with state investment and bank credit. The coincident removal of restraints on the labor-intensive informal economy, which was uncontrolled by the state, and the likely influx of labor into this sector could then be expected to expand the informal economy relative to the official economy.

Natural Resources

Although Vietnam is relatively rich in natural resources, the country's protracted state of war has precluded their proper exploitation. Coal reserves, located mainly in the North, have been estimated at 20 billion tons. With Soviet assistance, coal mining has been expanded somewhat. Commercially exploitable metals and minerals include iron ore, tin, copper, lead, zinc, nickel, manganese, titanium, chromite, tungsten, bauxite, apatite, graphite, mica, silica sand, and limestone. Vietnam is deficient, however, in coking coal, which, prior to the outbreak of hostilities with China in 1979, it traditionally imported from the Chinese. Gold deposits are small.

Vietnam's production of crude oil and natural gas was in very preliminary stages in the late 1980s and the amounts of commercially recoverable reserves were not available to Western analysts. With the cooperation of the Soviet Union, Vietnam began exploitation of a reported 1-billion-ton offshore oil find southeast of the Vung Tau-Con Dao Special Zone. By early 1987, the Vietnamese were exporting crude oil for the first time in shipments to Japan. Production remained low, estimated at about 5,000 barrels per day, although Vietnam's minimum domestic oil requirements totaled 30,000 barrels per day. Despite optimistic plans for developing offshore fields, Vietnam was likely to remain dependent on Soviet-supplied petroleum products through the 1990s.

Vietnam's ability to exploit its resources diminished in the early 1980s, as production fell from the levels attained between 1976 and 1980. In the 1980s, the need to regulate investment and focus spending on projects with a short-term payoff pointed to continued slow development of the country's resource base, with the exception of areas targeted by the Soviet Union for economic assistance, such as oil, gas, coal, tin, and apatite.

Vietnam's fisheries are modest, even though the country's lengthy coast provides it with a disproportionately large offshore economic zone for its size. In the 1980s, Vietnam claimed a 1-million-square- kilometer offshore economic zone and an annual catch of 1.3 to 1.4 million tons. More than half the fish caught, however, were classified as being of low-quality. Schools of fish reportedly were small and widely dispersed.

As the 1990s approached,it seemed increasingly likely that Vietnam's economy would remain predominantly agricultural. This trend, however, did not necessarily limit attainable economic growth since Vietnam processed a significant amount of unused land with agricultural potential. According to Vietnamese statistics of the mid 1980s, agricultural land then in use theoretically could be expanded by more than 50 percent to occupy nearly one-third of the nation. Funds and equipment for expensive land-reclamation projects were scarce, however, and foreign economists believed that a projected increase in agricultural land use of about 20 to 25 percent was more realistic. Even if the reclaimed land were only minimally productive, an increase in land use would increase agricultural output substantially.

Both the availability of land and the density of settlement in traditional agricultural areas--about 463 persons per square kilometer in the Red River Delta and 366 persons per square kilometer in the Mekong Delta-- explained much of the government's commitment to the building of new economic zones in less-settled areas. During the period from 1976 to 1980, only 1.5 million out of the 4 million persons targeted for relocation actually were moved to new economic zones. The government's Third Five-Year Plan (1981-85) called for the relocation of 2 million people by 1985, and subsequent plans projected the resettlement of as many as 10 million by 1999. By the end of 1986, however, the Vietnamese reported that fewer than 3 million people had been resettled since the program began. Slow progress in bringing new land into production, low yields on reclaimed land, and hardships endured by resettled workers-- particularly former city dwellers, many of whom chose to return home--testified to the problems inherent in the resettlement program.

Historical Background

https://en.wikipedia.org/wiki/Economic_history_of_Vietnam
https://en.wikipedia.org/wiki/Vietnam


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