Vietnam's economy grew by a decade high in 2007

Vietnam's expanded last year at its fastest pace since 1996, led by manufacturing and services, after the Southeast Asian country joined the WTO.

GDP 8.5 percent last year after rising 8.2 percent in 2006, the General Statistics Office said in a statement in Hanoi yesterday. That was the fastest since the economy grew 9.3 percent 11 years ago.

Foreign direct investment jumped to more than US$20 billion last year from US$12 billion in 2006, with companies including Hon Hai Precision Industry Co(鴻海精密), the world's largest contract electronics manufacturer, and Compal Electronics Inc(仁寶) taking advantage of cheaper labor in Vietnam.

"The government is quite committed to its economic reforms," said Prakriti Sofat, an economist at HSBC Holdings Plc in Singapore. "It's basically industrial growth, and the manufacturing sector is obviously doing very well."

Industry construction account for almost 42 percent of Vietnam's GDP. Manufacturing grew 12.8 percent, construction rose 12 percent and the hotel and restaurant sector expanded 12.7 percent, according to today's release.

"Going forward, Vietnam has a lot of potential for tourism," Sofat said.

HSBC Vietnam's economy to expand 8.5 percent this year. The bank had a full-year forecast of 8.3 percent growth for last year.

Vietnam's last year to the WTO released it from US quotas on textile exports and detailed market access to be given to overseas companies, helping economic growth. The value of GDP increased to US$71 billion from US$61 billion in 2006, according to the General Statistics Office.

The government is targeting economic expansion of about 9 percent this year. The economy grew 9.5 percent in 1995, the year after a US trade embargo was lifted.

"Vietnam is an economy with much development potential and an attractive destination for international investors," Prime Minister Nguyen Tan Dung said in a speech on Dec. 6 at an annual meeting between the government and international organizations.

To shore up growth, the government needs to press ahead with its sales of stakes in state-owned banks in order to improve efficiency in the banking system and boost the equity market, Sofat said.

The government raised 10.5 trillion dong (US$656 million) last week by selling a 6.5 percent stake in Joint-Stock Commercial Bank for Foreign Trade of Vietnam, paving the way for telephone and beer companies to sell shares this year.

The benchmark VN Index rose 23 percent last year, rounding out a fourth yearly gain. The rally in the equity market has improved sentiment among the 85 million Vietnamese, boosting the domestic economy, Sofat said. Income per capita has increased to US$833 from US$720 in 2006, according to a Ministry of Planning and Investment statement last week.

Economic may have been hampered by low production capacity, increases in prices of imported goods and natural disasters, according to yesterday's General Statistics Office statement.

"There have been a number of shortcomings and weaknesses in our economy," it said. "Prices of important imported raw materials such as petroleum, gasoline, steel, fertilizer [and] plastic have been rising quickly in the world market."

Faster growth has spurred inflation, with consumer prices rising 12.6 percent last month from a year earlier, the biggest gain since 1995.

The government also let the dong gain for the first year since 1995 to ease prices of imported goods.