Vietnam
- Total external debt: $19.3 billion (World Bank, 2005)
- Total external debt payments: $954 million (World Bank, 2005).
- Population: 83.1 million (World Bank, 2005)
- Percentage of adults who can read and write: 90.3% (HDR 2005)
- Average life expectancy: 73.7 years (HDR 2005)
- HIV prevalence: 0.5% (HDR 2005)
- Total health spending: 1.5% of GDP (HDR 2004)
- Total spending on debt service payments: 1.82% of GDP
- Annual GDP: $52.4 billion (HDR 2005)
DROP THE DEBT FAST
Vietnam is the focus of the Drop the Debt Fast on Wednesday 30 April, which is also Reunification Day in Vietnam.
Political history of Vietnam
Vietnam’s history is characterised by a struggle against foreign occupation and intervention. Ho Chi Minh led a resistance struggle against the French occupation in the nineteenth and early twentieth centuries, which was finally successful after World War II following the French defeat at Dien Bien Phu in 1954. Subsequently Vietnam was divided into two zones; the Communist North and the US-backed South. What began as political and ideological opposition between the two zones, soon became an armed struggle, prompting international involvement, most notably from the US, in 1965. A long, costly and violent conflict ensued, with little significant progression on either side. Eventually, nearly a decade later, US troops withdrew and the country was reunited under the name of the Socialist Republic of Vietnam.
In the latter part of the 20th Century, Vietnam attempted an invasion of Cambodia in 1978 which went on for over a decade but eventually failed in 1989 and was embroiled in a border war with China in 1979. These events resulted in huge economic deterioration in the country, reaching a dire state by the mid-1980s.
The ‘doi moi’ or renovation policy brought a major breakthrough. Broadly speaking, the policy’s aim was to move from a centrally planned to a market economy, whilst retaining the socialist political infrastructure. There have been economic improvements, and Vietnam’s relations have improved internationally. In 1995 Vietnam became a full member of the Association of South-East Asian Nations (ASEAN) and resumed diplomatic relations with the US.
Challenges
Vietnam faces problems of inequality and poverty particularly amongst ethnic minorities and in rural areas. About 15 million of Vietnam’s approximately 60 million rural population live in poverty, which is especially concentrated in the Mekong Delta. Moreover, ethnic minorities, which make up 13-14% of the total population, are over four times more likely to be poor and 10 times more likely to be hungry than the majority Kinh or Chinese population in Vietnam. The largest ethnic minorities live in rural areas, and also there is evidence to suggest that social and economic factors contribute to the limiting of opportunities for ethnic minorities. The cancellation of Vietnam’s external debt would allow the much needed investment in public services such as health care and education which would help break down economic and ethnic barriers causing extreme levels of poverty for some Vietnamese.
Where has the debt come from?
Vietnam’s debt is overwhelmingly owed to official creditors – other countries and institutions. The World Bank coordinates foreign aid to Vietnam because of the large volume of resources that Vietnam receives from the Bank itself. This has led to a strong role for the Bank in the economic reforms that have taken place in the country, including massive privatisation programmes, expansion of the private sector, and opening up the economy to international markets. Vietnam still needs to mobilise huge resources if it is to tackle poverty, and the Bank itself warns that over-extending itself on international markets could lead Vietnam into trouble with its external debt levels.
Debt cancellation status
Vietnam is officially classed as a low-income country by the World Bank. It is considered to have a 'sustainable' debt: this is measured by the size of external debt in comparison to the value of exports, without taking into account domestic debt or what Vietnam needs to spend on tackling poverty. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. Vietnam has qualified for additional debt assistance from the UK, under its own Multilateral Debt Relief Initiative.
The New Economics Foundation (2007) calculates that Vietnam needs 100% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Information and sources:
UK Parliament International Development Select Committee, World Bank
Last updated: April 2008
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