Chapter 1 - Economic policy reforms

Summary

1 The reform process

The period of economic reforms from 1975 to 1992 may be divided into the following stages:

1. • 1976–79: unifying the country and turning the economy into an integrated whole in accordance with central planning principles;

2. • 1980–86: experimenting and readjusting economic policies to orientate the country towards trade liberalization;

3. • 1986–92: affirming basic orientations for the renewal of economic policies.

The main features of policy changes through these stages are given below:

The period 1976–79

When the Vietnam war ended in 1975, along with the unification of the country's political institutions, the integration of the economies of North and South Vietnam was set in motion.

North Vietnam's economic model from the 1950s was based on that of a centrally planned economy. Although the economy was altered by the decades of war the country went through, the following points generally characterized its economy then:

1. • The state determined all important economic activities of the entire country through a system of production plans and goods distribution; there were also strict regulations on pricing and interest rates.

2. • The state and the collectives constituted the foundation of the economy, the collectives being heavily subsidized in activities such as investment and credit loans and they quickly developed to become a sizeable part of the national economy.

3. • Large-scale private enterprises were not encouraged to expand further, but were instead singled out to be finally incorporated into either state or collective units.

4. • The market mechanism operated only in small businesses and the household economy, that is to say in only a part of the agricultural, handicraft, and consumer goods retailing sectors. Many capital goods used for production were not allowed to be bought or sold on the market but were allocated by the state's planned distribution system.

5. The state monopolized foreign trade. Due to historical circumstances, Vietnam's trade relations had been mainly with the former Soviet Union and East European countries through bilateral treaties. […]