Let’s begin with some facts. According to the CIA Factbook, the Vietnamese economy can be divided into three sectors: Agriculture, which contributes 19.7% to GDP; Industry, which contributes 38.6% (18% from manufacturing); and Service, which contributes 41.7%. And according to index mundi, state-owned enterprises – which cross the three sectors mentioned above – account for about 40% of GDP.
Agriculture
Harvesting rice
At the end of our second full week in Vietnam, we have learned a bit about the agricultural economy, having seen rice paddies, vegetable fields, and an organic farm outside of Hanoi. While we have not dived deep into the workings of the agricultural industry in Vietnam, we knew before we traveled to Vietnam that rice is a major export for the country [they rank third in the world in rice export, after India and Thailand (index mundi)]. Interestingly, however, rice is not the leading export from Vietnam: it follows behind mobile phones (see below), textiles, and seafood. The fact that exporting of mobile phones has surpassed such traditional Vietnamese products as textiles, seafood, and rice suggests a changing dynamic in the Vietnamese economy. Yet as we discussed in our reflection session on Friday, the agricultural sector still employs 48% of the labor force in Vietnam.
Service
While in Vietnam, we have lived its service economy. Guides have rowed us up and down rivers and across bays and lakes.
Steering the round boats
One of the many charming shops in Hoi An
We have bought goods (from basic necessities to beautiful silk suits, shirts, and scarves) from the hundreds of street side shops in Hanoi and Hoi An (many of them charming), and we have enjoyed outstanding service from the hospitality industry at our hotels and in restaurants. Vietnam has a thriving and well-developed service industry, of which tourism is a great example (see Greg Lilly’s post on “Time is Cheap in Vietnam” for an interesting perspective on the economics of this part of the Vietnamese economy). The service sector, which contributes 41% to GDP, employs about 31% of the workforce.
Heavy Manufacturing
Interestingly, our exposure to date has been restricted to family- and community-run businesses in the agricultural and service sectors. While small and medium sized enterprises (SMEs) account for a significant percentage of GDP both here and in the United States – and therefore deserve attention – I have become increasingly curious about the role of large manufacturing in Vietnam.
Samsung Electronics Vietnam
According to the World Bank, in 2012 manufacturing accounted for 18.8% of Vietnam’s GDP. Many of these firms are state-owned enterprises (SOEs), which, as stated above, account for 40% of GDP. SOEs dominate (in fact, have a monopoly) in such industries as energy (petroleum and gas exploration and production), telecommunications, dairy production, and banking and finance, among others. These companies provide jobs and pay a significant percentage of the taxes that provide revenue for the state (Vietnam News). In addition, foreign direct investment by major companies has increased the role of heavy manufacturing in Vietnam. For example, Samsung recently established a presence in Vietnam, and as of January 2014 mobile phones overtook textiles as the largest export for Vietnam (Vietstock).
Heavy manufacturing and SOEs are a significant part of the Vietnamese economy, yet for various reasons we have seen little of it. As Elon builds its relationships with Vietnam, we can hope to have the opportunity to visit a large manufacturing facility in this beautiful country. In the meantime, I hope we can learn more about the manufacturing sector of Vietnam through our visits and lectures in Ho Chi Minh City next week. We have yet to experience that part of the economy.
For now, tạm biệt and cảm ơn, Hoi An.
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