Vietnam - Economic development

With the defeat of the RVN forces in April 1975, Vietnam faced the task of restoring its infrastructure, damaged by the war, while working toward the goal of a technologically advanced society. Long-range planning centered on the second five-year plan (1976–80), which called for major emphasis on heavy industry and rapid agricultural growth. Due to factors including unfavorable weather, decreased foreign aid, and high military expenditures—combined with managerial inefficiency—the plan was a disaster. Industrial production grew by only 0.6% and agriculture by 1.9%. The third five-year plan (1981–85) was more modest in its objectives. Emphasis was placed on agricultural development and the promotion of consumer goods, with industrial development in the background. Socialist transformation remained a high priority, although a less rapid rate of change was expected than during the previous five years. Although the goals of the new plan were more realistic than those set for its predecessor, its success was limited. Growth figures in industry (9.5%) and agriculture (4.9%) improved significantly over the previous five years. Production remained spotty in key areas, however, and problems of mismanagement—primarily by the state sector—proliferated.

The fourth five-year plan (1986–90) continued the previous plan's emphasis on agricultural growth and expansion of exports and light industry. Efforts to promote Socialist transformation were to continue, but at a gradual pace and "by appropriate forms." Development aid continued to come primarily from the former USSR and other CMEA countries. In 1978, the SRV became fully integrated into the CMEA planning and development structure, and its five-year plans were coordinated with those of its CMEA partners. Planned Soviet outlays for the 1986–90 period totaled some $11–13 billion. This aid and trade waned with the decline of the USSR, with the full cutoff occurring in 1991. The SRV's new economic emphasis, doi moi (renovation) was instituted by Nguyen Van Linh following the sixth national party congress (1986). His plan included policy and structural reforms for a market-based economic system: price decontrol (liberalized prices), currency devaluation, private sector expansion through decollectivization of agriculture (food production), legal recognition of private business, new foreign investment laws, autonomy of state enterprises, business accounting methods, devolution of government decision-making in industry to enterprise level, and limiting government participation to macroeconomic issues. Implementation of these policies was achieved with varied success.

Inflation policy and agricultural reform resulted in immediate increases in rice production. Vietnam changed from a net importer of rice to the third major rice exporter after Thailand and the United States.

Agriculture remains the most important economic sector, accounting for about one third of GDP and about 63% of the labor force. There were 12,000 government-owned companies employing 30% of Vietnam's labor force that held 75% of the country's assets, and monopolized 86% of bank credit in 1992. The privatization program met with resistance from conservative politicians, the companies, and from foreign investors. Conservatives feared that privatization undermined the economic basis of socialism, and foreign investors were wary of poor investments with meager legal underpinnings. Opposition from managers who would lose a "free hand," and employees whose jobs might be replaced by new equipment also arose. In 1994 the director and deputy director of the textile company that was the flagship for this privatization program were dismissed for alleged corruption.

US president Bill Clinton's lifting of the 30-year-old trade embargo in 1994 opened the way for waiting American companies to do business in Vietnam. International assistance during the mid-1990s was from the World Bank for education and agricultural reforms, the Japan Overseas Economic Cooperation Fund for infrastructure programs, the United Kingdom for soft loans, technical training and refugee resettlement, and from the Asian Development Bank. A continuation of reforms promoting foreign investment and minimizing the state's role in the economy moved slowly in the late 1990s due to political corruption and inefficiencies.

The Asian financial crisis negatively affected investor confidence in the region, severely reducing Vietnam's main focus of economic development as of late. A complete overhaul of the financial regulatory system is still necessary in order to stimulate the economy. Vietnam's increasing integration in regional and international economic organization should impel more competitive production methods. Until 2006, as part of its commitment in joining the Asian Free Trade Area (AFTA), it will have to reduce tariff by 55 to 46%. At the end of 2001, Vietnam concluded a bilateral trade agreement with the United States, and it has now started toward the goal of accession to the World Trade Organization by 2004.