PART II. THE ECONOMYFDI Distribution by Sectors by 2006While there are <strong>for</strong>eign invested projects in mostprovinces <strong>and</strong> cities in <strong>Viet</strong> <strong>Nam</strong>, most investmenthas been in the key economic areas in the South includingHo Chi Minh City, Dong Nai, Binh Duong, BaRia, Vung Tau, <strong>and</strong> in the North including Hanoi, HaiDuong, Hai Phong <strong>and</strong> Quang Ninh. Particular focushas been in Hanoi <strong>and</strong> Ho Chi Minh City which havemore developed infrastructure, higher purchasingpower <strong>and</strong> a more skilled labour <strong>for</strong>ce.In recent years there has also been an increase inprojects in the 100% <strong>for</strong>eign owned <strong>for</strong>m. Theseprojects now account <strong>for</strong> 76.1% of the total licensedprojects <strong>and</strong> 58.1% of the registered capital, whilejoint venture enterprises make up 20.6% <strong>and</strong> 33.3%respectively. There are also 6 licensed <strong>for</strong>eign investedBOT projects in <strong>Viet</strong> <strong>Nam</strong> (water supply <strong>and</strong>electricity plants) with a total registered capital ofUS$1.37 billion.The <strong>for</strong>eign invested sector has seen rapid growth,gradually asserting itself as a dynamic component ofthe economy, <strong>and</strong> has made an important contributionto enhancing the competitiveness <strong>and</strong> efficiencyof the economy. In recent years, the <strong>for</strong>eign investedsector has accounted <strong>for</strong> a quarter of the country’stotal investment, 43.6% (2004) of industrial output,57.2% (2005) of the national export, <strong>and</strong> 15.9% ofthe GDP of <strong>Viet</strong> <strong>Nam</strong>.FDI Contribution to GDP (%)2000 2001 2002 2003 2004 2005GDP 100.0 100.0 100.0 100.0 100.0 100.0State 39.0 39.0 38.4 39.1 39.2 38.4Non State 47.7 48.0 48.7 46.4 45.6 45.7FDI 13.3 13.0 13.8 14.5 15.2 15.9Source: General Statistics Office6. State-owned enterprisesequitization processThe Government of <strong>Viet</strong> <strong>Nam</strong> is very keen to promotethe SOEs re<strong>for</strong>m program, i.e. the reorganisation <strong>and</strong>restructuring <strong>and</strong> development of SOEs <strong>and</strong> StateOwned Commercial Banks to improve their productivity<strong>and</strong> efficiency.Since 1986, the Government has pursued the re<strong>for</strong>mof State Owned Enterprises (SOEs) in three phases(restructure, renovation <strong>and</strong> development) throughthe implementation of 4 key measures:(i) re<strong>for</strong>m of SOE management;(ii) reorganisation <strong>and</strong> rein<strong>for</strong>cement of state ownedgeneral corporations;(iii) SOEs equitisation;(iv) transferring, contracting, leasing <strong>and</strong> selling SOEs.Since 1998, the Government has <strong>for</strong>mulated a detailedre<strong>for</strong>m program focusing on equitisation ofstate companies. By the end of 2005, about 2,203enterprises <strong>and</strong> businesses had been equitised <strong>and</strong>127 enterprises were transferred or 76 enterpriseswere sold, 390 enterprises were merged. Small <strong>and</strong>medium-sized enterprises account <strong>for</strong> 77% of equitisedSOEs <strong>and</strong> there are 54% SOEs with a total capitalof less than 5 billion VND <strong>and</strong> 23% SOEs with atotal capital from 5 billion VND to 10 billion VND. Accordingto certain surveys, the financial per<strong>for</strong>mance<strong>and</strong> productivity of most equitised enterprises hasincreased which constitutes a positive sign.24 <strong>Viet</strong> <strong>Nam</strong> - A <strong>Guide</strong> <strong>for</strong> <strong>Business</strong> <strong>and</strong> <strong>Investment</strong>
The process of equitizing SOEs in <strong>Viet</strong> <strong>Nam</strong>YearNumber of equitised stateowned enterprisesTotal1992 Started 01992-1995 3 31996 5 81997 7 151998 100 1151999 250 3652000 212 5772001 149 7262002 164 8902003 532 1,4222004 753 2,1752005 754 2,929In addition to the equitisation of SOEs, the Government also issued Decree 103/1999/ND-CP on regulations onselling, transferring, contracting <strong>and</strong> leasing of small-scale SOEs (i.e. SOEs with state capital of less than VND5 billion) to accelerate the reorganisation of the SOE sector.Major economic objectives of 2006-2010The 10th Party Congress held in 2005 <strong>for</strong>mulated the following key economic targets <strong>for</strong> the 2006-2010Five Year Socio-Economic Development PlanGDP growth rate:from 7.5% to 8% p.aOf which:- agriculture, <strong>for</strong>estry & fishery: 3% to 3.2% p.a.- industry & construction 9.5% to 10.2% p.a.- services 7.7% to 8.2% p.a.Industrial outputgrowth rate:- agriculture, <strong>for</strong>estry & fishery 4.5% p.a.- industry & construction 15.2% to 15.5% p.a.- services 11% to 11.5% p.a.Export turnover growth rate: 16% p.a.Economic structure by 2010:- agriculture, <strong>for</strong>estry & fishery 15% to 16% GDP- industry & construction 43% to 44% GDP- services 40% to 41% GDPPART II. THE ECONOMY<strong>Viet</strong> <strong>Nam</strong> - A <strong>Guide</strong> <strong>for</strong> <strong>Business</strong> <strong>and</strong> <strong>Investment</strong> 25