18 - The Private Sector's Participation in Regional Integration: A Perspective from Vietnam

Summary

After her national unification, Vietnam undertook continuous economic reforms under pressure from severe economic problems. During the period 1980–87, some micro-reform attempts were made with a bottomup approach, reflecting the enhancement of incentives at the micro level. These micro-reforms enhanced voluntary and decentralized interactions between individual agents and induced producers to increase outputs during the period 1982–85 (Vo and Nguyen 2006a). However, the micro-reforms in this period led to no fundamental changes in resource misallocation, trade restrictions, or macroeconomic management.

Since the start of doi moi (renovation) in 1986, Vietnam has strived to transform herself from a centrally planned economy into a socialistoriented market economy. Such a transformation relies to a large extent on its establishing and strengthening market institutions, developing the private sector, and undertaking proactive international economic integration. More importantly, these measures were combined, rather than undertaken separately. Specifically, the development of the private sector came in line with the facilitation of its participation in the international economic integration process.

As a key direction for more fundamental economic changes, Vietnam has improved its microeconomic foundations to support private sector development. Since 1979 two main steps have been implemented along the following lines: (1) the formal recognition of private ownership and right of doing business, and the promulgation and implementation of various legal frameworks on business/company types; and (2) the gradual relaxation of market entry.

In another aspect, Vietnam, recognizing the inefficiency of SOEs, attempted to “restructure and/or equitize state-owned enterprises (SOEs)” rather than “privatize” them. Whilst substantially reducing subsidies and “cheap” credit to these enterprises, it gave them greater autonomy. In recent years, SOE reforms in Vietnam included the listing of these enterprises in the stock market, equitizing large SOEs and some general corporations, transforming big SOEs and some general corporations into holding-subsidiary companies, and establishing business groups.

The acceleration of international economic integration, including the gradual liberalization of the trade regime, has played a key role in enhancing efficiency and promoting economic growth. Vietnam has had trade relations with almost all countries and territories to date and became a member of the Association of Southeast Asian Nations (ASEAN) and the World Trade Organization (WTO) in 1995 and 2007 respectively.