First, what is globalisation?

1. Topic 1 – The Global EconomyUndertake a case study of the influence of globalisationon an economy other than Australia, including an evaluation of the strategies used to promote economic growth and development in this economy.

2. First, what is globalisation? • The increased integrationof economies around the world leading to the development of a global market place. • It is the cross-border flows of trade, investment, technology, finance and labour between economies.

3. Distinguish between economic growth and development. What is economic growth? What is economic development? • An increase in the level of real GDP and productive capacity overtime. • The structural changes needed in the economy for sustainable economic growth to occur.

4. Case Study:The Socialist Republic of Vietnam Source: picasaweb.google.com Source: commons.wikimedia.org Source: commons.wikimedia.org

5. The Socialist Republic of Vietnam:Economic history • Communism: Centrally planned economy (little to no growth, famine, isolation) ↓ • Socialist orientated market economy • Economic convergence with globalisation • Benefits and challenges

6. 1986: ‘doimoi’ (renewal) policy • First steps towards a market economy • De-collectivisation of agricultural land • Freeing up of agricultural prices • Basic property rights for farmers • Improve efficiency and manage famine crisis • Decentralisation of government • More power to individual govts • Increased competition between local govts– more efficient. Source: commons.wikimedia.org

7. Business sector reform • Remained highly centralised until 2000 when private enterprise was legally recognised. • Special economic zones. Incentives for domestic exporters and foreign investment. • Provision of better infrastructure • Import duty exemptions • Reduced corporate taxes • Lower land and labour costs Source: tapbusinessdevelopment.co.uk

8. Trade and Trade agreements • Vietnam began to enter into bilateral and multilateral trade agreements. • Bilateral: US and EU • 1995 ASEAN • 2007 WTO • WTO agreements: • ↓ in average tariff rates • 17.4% to 13.4% over 5-7yrs • Lifting of import quotas • Smaller ↓ in agricultural tariffs (23.5% to 21%). • So that poorer farmers were still protected. Source: library.thinkquest.org Source: wto.nciec.gov.vn

9. Effects of industry, government, and trade reforms. • Merchandise trade as a percentage of GDP increased from 96.6% in 2000 to 162.1% in 2007 • Between 1995 and 2005, the share of agriculture in GDP ↓ from 27% to 21% • manufactures ↑ 29% to 41% • Role of SOE in manufacturing has fallen • FDI flows increased from $US 1,400m in 2002 to $US 9,065 in 2008 Source: commons.wikimedia.org

10. Effects of Globalisation:Economic Growth and FDI • Vietnams GDP (PPP): (US$b) 255.8 • Average growth rate of Real GDP (1995-2005): 7.3% • Average growth rate of Real GDP per capita: 6.2% • N.B: Gross domestic investment as a percentage of GDP ↑ from 33.2% in 2002 to 40.4% in 2007 with the national savings rate closely following suit. Source: The Economist, Apr 24 20008

11. Effects of Globalisation:Quality of life and income distribution indicators Source: flickr.com • Human Development Index ↑ 0.561 to 0.725 (1985-2007) • Percentage of population below international poverty line • 58.1%  12.3% (1993-2009) • Ginicoefficient 0.34 to 0.36 (93-06) • Good, but improvements still needed • 5 year Socio-Economic Development Plan 2006-2010 Source: flickr.com

12. Did the Vietnamese economy overheat? • Significant credit growth and increase in property prices  inflation - 6.7% between 2002 and 2007 BUT 28% in August 2010. • Inflationary pressure from maintaining value of the Vietnamese Dong, pegged to the $US • Government response: • Revised growth target from 9% down to 7% • Cutting government expenditures • Contractionary monetary policy • XR allowed greater flexibility

13. Effects of The International Business Cycle: GFC • Slowdown in US and EU economy – Vietnam’s two largest export markets. • Exports ↓ But Imports continued to ↑ • Growing current account deficit • -11.9% of GDP in 2008 • Value of FDI ↓ by 82% • Economic growth slowed to lowest rate in nine years, 6.2%. Source: The Economist, Sep 24th 2009

14. Government Response • Increased government expenditure • Interest rate subsidy for domestic exporters to protect local employment • Increased spending has also increased the level of public debt, but it is still considered to be sustainable.

15. Environmental Sustainability • Another challenge of globalisation. • World Bank identifies CO2 emissions and water quality as two major issues in Vietnam. • What are possible costs of these negative externalities? • Social and health costs • Loss of production due to illness • Loss of crops due to air quality • But so far, not a major concern of government policy – While spending on science, technology and the environment has increased, it still only represents a small fraction of total government expenditure. • 2006-2010 Socio-Economic development plan environmental goals so far not achieved. Source: flickr.com

16. Source: picasaweb.google.com

17. Future Directions • Focus at the moment is short-term policy to reverse effects of GFC. • Longer term focus may be needed: • Micro economic reform • Further decentralisation of government and deregulation of industry • Investment in infrastructure, health, educational and environmental reform. • Need to further improve productive capacity and competitiveness. Source: flickr.com