Vietnam - Overview of economy
Vietnam is one of the world's poorest countries, having suffered from years of war (1940-89) that damaged its economy and basic infrastructure . Thus, economic development is the nation's highest priority. It is still largely an agricultural economy, with 72 percent of its workforce engaged in that sector. Much of the country is made up of mountains and forests, with only 17 percent of its land arable.
Vietnam has a long history dating back to around 2879 B.C. when the first Viet state called Va-n Lang was
In terms of Vietnamese economic history, 5 themes are important. The first is the continual Vietnamese struggle to free itself from foreign domination, starting with roughly 1,000 years of Chinese rule, threats from the Mongols, and then external domination by the French, Japanese, and the United States. The second theme is the struggle against natural disasters such as floods and typhoons. Reflective of this struggle are the huge dikes protecting the capital, Hanoi, from possible flooding by the Red River. A third theme is nam tiên (expansion to the south), the need for additional land and territory, given the high population density of Vietnam. Through this process the Vietnamese moved south over time and took over lands which were once part of the Kingdom of Champa (1471) and the area of what is now southern Vietnam was once part of the Khmer Empire. Thus, the Vietnamese came to control both the rich Red River delta in the north and the Mekong River Delta in the south.
A fourth theme relates to Chinese cultural and intellectual influences, particularly in the cities. Close to 1,000 years of Chinese domination left an indelible influence on Vietnam, its culture, customs, and language. This influence has direct relevance to Vietnamese education and potential for human resource development. Unlike its Southeast Asian neighbors such as Thailand, Cambodia, and Laos, Vietnam is part of the Confucian world, as are Japan, Korea, and Singapore. Part of this cultural heritage is the great importance attached to learning and special respect for teachers, scholars, and mentors. A fifth theme is the importance of village life as the heart of Vietnamese culture and related wet rice cooperative culture. It is impossible to understand Vietnam without understanding its villages and their rich cultural traditions.
Vietnam historically had a royal system with imperial dynasties. The imperial capital of Vietnam was in central Vietnam in Hue. In 1858, France invaded Vietnam, capturing Saigon in 1861. By 1884 France controlled all of Vietnam, occupying 3 areas of the country known as Cochin-China (in the south), Annam (in the central region), and Tonkin (in the north). In 1887, France established the colony of Indochina, which included Vietnam, Cambodia, and Laos. Vietnam was the power center of the colony and the French trained the Vietnamese to help them administer the colony "backwaters" in Laos and Cambodia. The local populations in Laos and Cambodia both resented this practice. As in Cambodia, the French co-opted the imperial leaders and used them in their colonization process.
France's interest in Vietnam was economically motivated and the French thought that the Mekong River could be a gateway to the huge China market. Unfortunately, the Mekong turned out not to be a navigable river. To generate profits to run its Indochinese colony, the French introduced a plantation economy to facilitate rubber extraction and exports. Land alienation (transferring ownership to another) was the cornerstone of economic exploitation under the colonial government. The French also introduced consumer goods such as opium, alcohol, and cigarettes to generate revenues to support the running of their Vietnamese colony. The French film Indo-chine provides dramatic visual images of life (economic and social) during the French colonial period. Various rebellious movements against the French emerged and the French were extremely harsh in punishing those Vietnamese for their disloyalty.
During the Second World War, Vietnamese nationalists and revolutionaries cooperated with the West in fighting against Japanese occupation. On December 2, 1945, nationalist leader Ho Chi Minh declared an independent Democratic Republic of Vietnam and was hoping for U.S. support of the new regime. Instead, the French decided to reassert their colonial authority in Vietnam, resulting in the first Indochina War from 1946 to 1954, which eventually led to the French defeat at Dien Bien Phu in May, 1954. The Geneva Accords of 1954 then resulted in Vietnam being temporarily divided into North and South Vietnam at the 17th parallel. The United States opposed 1956 national elections called for by the Geneva Accords, which could have led to the peaceful unification of Vietnam under the leadership of Ho Chi Minh. Instead the south-north division persisted and eventually the U.S. war in Vietnam ensued (1959-75) with tremendous destruction and loss of life in many areas of Vietnam. Vietnam was eventually unified with the "fall of Saigon" on April 30, 1975.
For its first eleven years after unification, Vietnam became a fully socialist , state-planned economy with agricultural collectivization. Its international economic relations were almost entirely with the Eastern bloc countries such as the USSR, which provided most of its economic assistance. In December 1979, the Vietnamese army invaded Cambodia to remove the hated Khmer Rouge regime, led by Pol Pot. For the next 10 years, the Vietnamese army became bogged down in Cambodia fighting the Khmer Rouge insurgents who retreated to the remote jungles of west and northwestern Cambodia. Viet-nam's Cambodian adventure proved an adverse economic drag on the economy as well. Finally, Vietnam agreed to remove its troops from Cambodia in 1989 as part of a Cambodian peace process. Thus, the modern Vietnamese economy has really known only 12 years of peace, coming since the end of the Cambodian conflict in 1989.
In December 1986, at the Sixth National Party Congress, a new policy of doi moi (economic renovation) was introduced. This was a Vietnamese version of what the Soviets called perestroika . It basically used free-market mechanisms as a strategy to improve the economy and its productivity, and, in particular, to provide greater incentives for economic effort and performance. Prior to the introduction of this new economic policy, the economy was plagued by economic stagnation and excessive, triple-digit inflation . Vietnam's war-torn economy had multiple and extensive economic problems that required a fundamental rethinking of the economic system. Central to the economic renovation was also a commitment to reduce the large size of the state sector and state-owned-enterprises (SEOs). In 1988, the socialist cooperative method of agriculture was abandoned. While under the current economic system all land is still owned by the state, individuals can have long-term leases on land for their and their descendants' use.
With the new doi moi policy, the Vietnamese economy began to demonstrate impressive macroeconomic (economic system as a whole) performance in the 1990s. With the collapse of the USSR in 1991, Vietnam also opened its economy internationally, with dramatic increases in both international investments in Vietnam and international economic assistance. Still, a major stumbling block was the U.S. trade embargo , which was finally lifted in 1994. That was followed by Vietnam's joining the Association of Southeast Asian Nations (ASEAN) in 1995, and later the Asia-Pacific Economic Cooperation forum (APEC).
While the 1997 Asian economic crisis hurt the Vietnamese economy, the Vietnamese economy had much more immunity to this crisis than many neighboring economies, primarily because Vietnam did not have a stock market, nor an internationally traded currency. Also, rather than being part of the "Baht Zone" (areas with close economic interconnections with Thailand), Vietnam was partially a dollarized economy with strong economic links to greater China, an area showing greater currency stability during the Asian economic crisis.
Also, the 2001 global slump in the high technology sector has had minimal impact on Vietnam since it is producing more basic manufacturing/industrial products at the lower end of the technology scale, such as garments and footwear. Thus, Vietnam in 2001 had one of the highest economic growth rates (7.1 percent) in the world. In October 2001, the U.S. Congress finally approved the bilateral trade bill with Vietnam. This provides an important new opening for Vietnam to export to the large U.S. market and eventually to join the World Trade Organization (WTO). Vietnam has suggested the goal of becoming an industrialized country by the year 2020.