Foreign trade and foreign direct investment improved significantly. The shift away from a centrally planned economy to a more market-oriented economic model improved the quality of life for many Vietnamese. Per capita income, $220 in 1994, had risen to $483 by 2003 with a related reduction in the share of the population living in acute poverty. However, average income is widely disparate--$483 for whole but $1,640 in Ho Chi Minh City and much lower than average in poorer provinces of the central and northern highlands.

The Asian financial crisis in the late 1990s slowed the pace of economic growth that marked the earlier part of the decade. While returning to pre-crisis levels of growth and development has been slow, the pace has picked up in recent years, primarily as the result of ongoing economic and trade liberalization. Vietnam's economic stance following the East Asian recession first emphasized macroeconomic stability, then shifted its focus toward growth. While the country has moved toward a more market-oriented economy, the Vietnamese Government still continues to hold a tight rein over major sectors of the economy, such as the banking system and state-owned enterprises. The government has plans for reforming key sectors and privatizing state-owned enterprises, but implementation has lagged. Greater emphasis on private sector development is critical for job creation. Urban unemployment has been rising in recent years, and rural unemployment, estimated to be between 25% and 35% during nonharvest periods, is already at critical levels. Layoffs in the state sector and foreign-invested enterprises combined with the lasting effects of an earlier military demobilization further exacerbate the unemployment situation.

The December 10, 2001, entry-into-force of the Bilateral Trade Agreement (BTA) between the U.S. and Vietnam is a significant milestone for Vietnam's economy and for normalization of U.S.-Vietnam relations. Implementation of this agreement, which includes provisions on trade in goods, trade in services, enforcement of intellectual property rights, protection for investments, and transparency, is fundamentally changing Vietnamís trade regime and helping liberalize its economy. The BTA gave normal trade relations (NTR) status to Vietnamese imports in the U.S. market. Bilateral trade between the two countries has expanded dramatically, reaching $6.12 billion in 2004.

Paralleling its efforts to increase agricultural output, Vietnam has sought with some success to invigorate industrial production. Industry contributed 33.8% of GDP in 2004. State-owned enterprises are marked by low productivity and inefficiency, the result of a command-style economic system applied in an underdeveloped country. Foreign direct investment (FDI) is a new and dynamic feature of Vietnam's industrializing economy. Billions of FDI dollars from countries around the globe are helping to transform the industrial landscape of Vietnam.

Of late, Vietnam has achieved some success in increasing exports of some labor-intensive manufactures. Subsidies have been cut to some inefficient state enterprises. The government also has repeatedly stated its intent to "equitize" a significant number of state enterprises. However, only a relatively small percentage of remaining state enterprises have been equitized in recent years.

As a result of these reforms, and implementation of the U.S.-Vietnam BTA, exports expanded significantly, growing by as much as 20%-30% in some years. In 2004, exports accounted for 57% of GDP. Efforts to control Vietnam's import growth have achieved limited success. In the last 2 years, import growth has outpaced export growth. Vietnamís total external debt, accounting for 34% of GDP in 2004, was estimated at around $15.4 billion.