2 - Vietnam's Recent Economic Reforms and Developments: Achievements, Paradoxes, and Challenges

Summary

Economic reform in Vietnam was initiated in the early 1980s. However, the real turning point in the history of Vietnam's economic development came with the renovation (doi moi) reforms in 1986 and especially the radical market-oriented reform of 1989. As for other economies in transition, Vietnam has had to deal with three key sets of reforms: liberalization and stabilization; institutional changes that support market exchange and shape ownership; and the establishment of social programmes to ease the pain of transition (World Bank 1996). Vietnam's reform process has also been uneven. It was recognized even in 1996 that the reforms were limited and were not keeping pace with economic development. Moreover, the reform process in general slowed down during the period 1996–99, especially after the Asian crisis. The years 2000–2003 witnessed new commitments to continue with the reforms and some progress was made, especially in the development of private sector and trade liberalization. Meanwhile, the reform of state-owned enterprises (SOEs), the banking system, and public administration were slower than expected and this has limited the effectiveness and efficiency of other reforms.

Since the 1989 reforms, the face of Vietnam's economy and society has changed significantly. Vietnam has recorded remarkable achievements in terms of growth in gross domestic product (GDP), control of inflation, export expansion, and poverty reduction. It is now generally recognized that Vietnam is among the best developing countries in terms of having achieved relatively high economic growth while reducing poverty incidence. But some are of the view that in international comparison Vietnam's performance is not really spectacular and that there are problems in sustaining economic growth and ensuring quality of development.

This chapter is about the reform process in Vietnam with particular focus on recent developments. It also identifies some key problems and even “paradoxes” associated with structural changes in the economy. Paradoxes are understood in the sense that these changes are not to be expected of an economy in transition that also has a prolonged and high economic growth.