2005 hailed a successful year for economic performance, despite great challenges. VietNamNet names the top 10 economic events of 2005.

Successful issuance of international bonds

In October, Vietnam successfully issued $750mil worth of bonds on New York stock exchange. The bonds sold out quickly, with orders 6 times higher than the offered volume. Vietnamese financial experts hailed the issuance as a beyond-expectations success, and the offered volume was finally raised to $750mil from the initial $500mil. The event was praised by prestigious international press agencies, marking Vietnam’s deeper integration into the international market.

Economic growth and inflation rate high

Despite negative factors like global oil price hikes and the bird flu epidemic, the main economic indexes have increased. GDP growth is expected to reach 8.4% (with an 8.5% target), the highest level for the last nine years. Consumer price index (CPI) reached 8.4% (6.5% was the target), lower than 2004 (9.5%), meaning the two main indexes have seen improvement compared to 2004. High investment has been highlighted as the main reason.

National key projects kicked off

Many national projects were inaugurated in 2005, including Son La Hydropower Plant, Dung Quat Oil Refinery, Hai Phong Thermo-electric Plant, and Phu My Bridge. The construction of two big power projects in the second half of the year was partly prompted by mid year power shortages, while Dung Quat oil refinery, after an extended gestation period seemed to have links with skyrocketing oil prices. All three projects should help the national economy develop strongly in the future.

Recordable FDI and ODA flow

Total foreign direct investment (FDI) was $5.8bil in 2005, of which $1.8bil flowed to Hanoi. Committed ODA capital was also at a record high of $3.74bil, reflecting an optimistic view of international investors on Vietnam’s investment environment. The capital will be instrumental in the development of the national economy.

Consecutive troubles in power sector

Serious electricity cuts in mid 2005, especially in the north caused severe economic loss. Wrongdoings discovered in the electronic meter case in HCM City, and the programme on replacing current lamps with fluorescent bulbs were strongly criticised. The power shortage was found to be the result of bad programming, reflecting hastiness, while the electronic meter case was blamed on bad management in the power sector.

Real estate market freezing

The real estate markets in big cities like Hanoi and HCM City have been freezing, threatening the existence of many real estate businesses. This is considered an indispensable consequence of over-investment in real estate and unsuitable policies regarding the real estate market. Land and house prices have been pushed up to levels well exceeding real value.

Vietnam’s exports blocked by barriers

Vietnam’s catfish have been prohibited from sale in three states in the US, while Vietnam’s footwear faces an anti-dumping lawsuit raised by European producers. Vietnam is faced with the precedent of a lawsuit against Vietnam’s shrimp in the US several years ago. Troubles can only be settled when Vietnam is recognised by its partners as having a market economy, especially when it gains full WTO membership.

Automobile market quiet

The number of consumed automobiles in 2005 saw a sharp decrease compared to the previous two years, especially for the end of the year. High special consumption tax and policies on local production protection have not helped develop local auto industry, while pushing prices up. The application of the new tariff from 2006 has led to a stagnant auto market as consumers tend to wait for anticipated price decreases to purchase cars

Government paves the way for big corporations to enter the bourse

Vietcombank, Bao Viet, Vinamilk, Mobi Fone, EVN given government permission for equitisation. Vietcombank has taken the first step towards equitisation after successfully issuing VND1,200bil worth of corporate bonds.

Aviation market becomes more competitive

The presence of budget airlines in Vietnam, including Tiger Airways and Thai Air Asia, together with the appearance of foreign investors in the shareholder structure of Pacific Airlines have all made the aviation market more competitive. Flights linking big cities in the region taken by budget airlines, and promotional campaigns launched by domestic air carriers promise to bring more choices to passengers.

Source: VietNamNet, 27/12/2005