Pest Analysis Vietnam

Topics: Inflation, Vietnam, Investment Pages: 5 (1431 words) Published: June 23, 2011


Examining the political situation of Vietnam is complex since country itself represent a colorful political history (Sterling, 2006). According to Thompson G (2009), the policies of the current government operate under the name of communist, however, country’s government has a very positive attitude towards welcoming foreign direct investment (FDI) and developing Trade relations which are the opposite of the whole Communist systems. Vietnam government launched “DOI MOI” (appendix, P.) economic reform polices in 1986 ( In January 11th 2007, Vietnam nominated as the 150th member of World Trade organization ( Judging form this statement, Vietnam government seem devoted to enhance the country‟s economy and foreign direct investment.

In 2005, Vietnam took the major step in rubber plantation with approval Vietnamese Prime Minister Phan Van Khai. He advocated projects for restructuring of agricultural which enable land areas; approximately 600,000 ha (1 ha = 10,000 square meter) for rubber plantation ( Moreover, He promised additional 100,000 ha for rubber plantation by year 2010. However, The Ministry of Agriculture and Rural Development (MARD) only able to approved 44,000 ha land areas in 2010 that meet the criteria with their Departmental policies. In June 2009, The Vietnamese government approved to expand the rubber plantation area until 800,000 ha by the end of 2015 ( According to Daily “Vietnam News” (10, November, 2009), there are 678,600 rubber planted areas where by mean that additional over 100,000 ha will be available for rubber plantation in the future; which create the opportunity for foreign investors. Moreover, same journal stated the Vietnam government will support in the research of new and hybrid rubber clones as well as higher quality and better yields import rubber clones for the purpose of long-term rubber industries development plan (2010 - 2020).

According to Sterling (2006), there are limitation on political activities and free speech since Vietnam is using communist ideology. Vietnam Business News (21, January, 2011) mention that local agricultural business had not worked well with one another and there was still unhealthy competition among them. Moreover, the news stated Vietnam government will indirectly support the local agricultural business in infrastructure and human capacity. According to butterfly effect theory, this type of government intervention might result in creating political barriers for foreign rubber plantation investors. Although they are not consider as major political risk, Jeannet and Hennessey (2004) stated that any organization wishing to enter the Vietnam market should consider informal slash on fixed investment, Joint-Venture with the local organization and entering into country’s essential business line in order to reduce the political risk.


Vierra and Vierra 2010 stated that current economic power of Vietnam is a rapidly rising. In terms of annual GDP growth, Vietnam has held the third place since earlier of 21st century.(Lehmann, 2010). Average household per capita income dramatically increased to $1,168 in 2010 which is only $220 in 1994 (U.S. Department of State, 3rd June 2011). The recent global recession has hurt Vietnam's export-oriented economy (Economist Intelligence Unit, 2010). As for instance, raw rubber exporting which have 94% exporting in 2005 reduce to 25-30% in 2009 (appendix, P.). GDP growth was reduced to 5.3% in 2009 from approximately 8% growth rate in 2008 since the countries exports make up 90% of its GDP (Economist Intelligence Unit, 2010). However the government recently upgraded its real GDP growth forecast for 2011 to 6% (Vietnam Business News, 21 June 2011) . The country recorded inflation of 7.5% in 2006, which went up to 8.1% in 2007 and consumer price inflation reached a huge 23.1% in...
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