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Viet Nam — a Transition Tiger?

Viet Nam — a Transition Tiger? OPEN ACCESS

Brian Van Arkadie
Raymond Mallon
Copyright Date: 2004
Published by: ANU Press
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    Viet Nam — a Transition Tiger?
    Book Description:

    Viet Nam has seen consistent rapid economic growth and impressive declines in poverty since it initiated its Doi Moi economic reforms in the late 1980s. Viet Nam has taken a selective, step-by-step approach to reform—an approach often criticised by proponents of the Washington Consensus. That this approach has been so successful has come as something of a surprise to much of the international community. Analysing closely aspects of Viet Nam's reform process, enterprise development, income growth and poverty alleviation, Viet Nam: a transition tiger? argues that Viet Nam's remarkable development is not readily explained by the more orthodox versions of the Washington Consensus. Successful policy is not built on mechanistic replication of some general reform blueprint, but on responding pragmatically to specific national circumstances. Government policy has had an impact on economic performance but economic experience has also guided the formulation of economic policy. Faced with increasingly complex economic conditions, Vietnamese policymakers will need to rely more than ever on their flexibility and pragmatism if Viet Nam's remarkable economic performance is to be sustained.

    eISBN: 978-0-9751229-2-1
    Subjects: Political Science
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Table of Contents

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  1. PREFACE (pp. xi-xii)
    Brian Van Arkadie and Raymond Mallon
  2. Viet Nam and its recent experience with development
    • Since the late 1980s Viet Nam has been remarkably successful in achieving rapid economic growth and reducing poverty. While per capita income levels are still far behind most other East Asian economies, economic growth rates and rates of poverty reduction during the 1990s were amongst the highest in the world.

      In addressing that experience this book is intended to make two contributions. First, a comprehensive review of developments in the economy and the evolution of economic policy since the mid 1980s is presented. Second, and more ambitiously, an effort has been made to interpret and explain some key factors driving...

    • Viet Nam is the twelfth most populous country in the world, but only fifty-eighth largest in terms of land area (Communist Party of Vietnam 2001b). In terms of land area and population it is a little smaller than Germany. The population density is high and cultivatable land per person is very low. The population is heavily concentrated in the Red River and Mekong River Deltas. There is a long, narrow coastal strip linking the deltas. The two substantial highland areas (the Northern and Central Highlands) are more sparsely populated that the deltas. Viet Nam’s population is better educated and has...

    • Table 3.1 highlights Viet Nam’s economic turnaround from the late 1980s in terms of growth, food production, stability, resource mobilisation, and opening up of the economy to trade and foreign investment. This was achieved while maintaining progress in social development. This strong performance took place in an international context where median growth in per capita incomes in developing countries fell to zero over 1980–98 (compared with 2.5 per cent per year from 1960–79) (Easterly 2001).

      Following an initial economic recovery immediately after formal reunification in 1976, annual economic growth averaged only 0.4 per cent in the five years...

  3. The Doi Moi process
    • A good starting point for understanding the Vietnamese reform process is to examine the history of the system that was the object of reform from the mid 1980s. For the authors of this book, that involves venturing into territory of which they lack direct experience. Interpretations of developments since 1988 in this volume are strongly influenced by direct observations; for the earlier period, the study depends on written sources and discussions with Vietnamese officials involved in the reform process, bolstered by a certain amount of speculation extrapolating from later observation.

      Between 1954 and 1965, North Viet Nam had sought to...

    • A key characteristic of the Vietnamese reform process has been political continuity. The political and administrative system has adjusted, but not through abrupt change and frequently not through processes which are very transparent and easy to understand, either by foreigners or even most Vietnamese. This chapter briefly describes some of the salient characteristics of the Vietnamese political and administrative system.

      The institutional arrangements for economic management, planning and implementation are complex. Unambiguous statements of policy directions are rarely made. This reflects both the transitional nature of the economic system, and the challenges in reconciling commitments to a Marxist-Leninist state with...

    • This chapter sets out some of the main features of the beginning of the reform process in Viet Nam, particularly in the critical reform years of 1986–90. The successful performance of the Vietnamese economy in the crucial period of dynamic growth, 1992–97, was stimulated by policy reforms, including improvements in private property rights, increasing macroeconomic stability, and a continuing shift from state controls to market mechanisms as instruments of economic management.

      By 1986, the then Party Secretary-General recognised the problems resulting from the emphasis given to central planning and large-scale production, stating

      …we have made mistakes due to...

    • Agrarian collectivisation was intended to be an important part of the socialist strategy. Great efforts were made to develop agriculture using cooperatives as the basic unit for organising production, as well as for the distribution of inputs and marketing of outputs. This was particularly true in the north, where the cooperatives were developed both as productive units and as providers of social services (such as crèches and kindergartens). Following unification, efforts were made to extend this system throughout the country. Agrarian reforms introduced during the 1980s represented a decisive shift towards the family farm as the basic productive unit. This...

    • When the Seventh Congress met in 1991, significant reforms had already been implemented. Farmers had been given medium-term land-use rights, prices and the exchange rate were largely market determined, and laws on foreign investment, private enterprises, and companies had been enacted. Economic growth had accelerated to 6 per cent, following a recovery in agriculture and strong service sector growth as the number of individual and household businesses increased. Growth in industrial output also accelerated, but mainly as a result of previous large investments financed by the USSR in the oil and electricity sector. Exports had increased to four times the...

  4. Enterprise development
    • A pivotal ongoing component of the Doi Moi process has been the response of key economic actors to market opportunities. Early reforms facilitated increased contributions from households and businesses to economic activity, generating higher income and employment and reduced poverty during a period of profound restructuring of the economy. A strong supply response during the early stages of reform—especially the sharp jump in output resulting from increased household investment in agriculture and retail trade—was vital to macroeconomic stabilisation.

      An important part of the ongoing Doi Moi process is the creation of new market institutions, including a legal framework...

    • In contrast to the rapid progress in divesting land-use rights for agriculture, forestry and aquaculture, the approach to state enterprise reform has been cautious. Before 1998, the only substantial divestiture of whole enterprises was the relatively rapid liquidation and/or mergers of (mostly small) nonviable enterprises from 1991 to 1994. The equitisation¹ program adopted by the Seventh Party Congress in 1991 made particularly slow progress, with only 14 small and medium sized enterprises equitised by September 1997 (Communist Party of Vietnam 1991a).

      More rapid progress was made in sharpening the incentives facing state enterprises by hardening the budget constraint and introducing...

    • Prior to Doi Moi, the domestic private sector largely comprised households engaged in farming, handicrafts and limited retail trade services. At the time of the Sixth Congress, the Party distinguished between a socialist sector (state enterprises, collectives and households) and non-socialist enterprises. The state allowed small-scale non-socialist enterprises to operate in a few industries and services, but restricted private commerce to trade in unprocessed agricultural products (Nguyen Van Dang 2001).

      The role of household business in the economy expanded during the late 1980s and early 1990s, and households businesses are now an important contributor to output and employment, especially in...

  5. Economic growth performance
    • The economic difficulties facing the country in the period leading up to the implementation of Doi Moi were described earlier. Following an initial economic recovery immediately after formal reunification in 1976, attempts to impose central economic controls and conflicts in Cambodia and in the border area with China contributed to economic stagnation and increasing macroeconomic imbalances during the late 1970s. Annual economic growth averaged only 0.4 per cent in the five years to 1980. With population increasing by about 2.3 per cent each year, this represented a decline in per capita income. Prices increased by an average of more than...

    • The role of investment in the Vietnamese growth process may be interpreted as follows. Increases in the rate of capital formation did not initiate the acceleration in growth, and the high rates of growth achieved are not to be explained by the rate of capital formation. Nevertheless, rising rates of capital formation played an important role in the growth process in two important ways.

      Once the pace of growth accelerated, increased levels of capital formation were necessary to accommodate the growth in output. For example, without an expanded program of infrastructural investment, output growth would eventually have been constrained by...

  6. Income growth and poverty alleviation
    • The performance of the Vietnamese economy in relation to alleviation of poverty in the past decade has been exemplary. This is of considerable interest in the context of the international concern for poverty alleviation throughout the developing world. Donor agencies now place a high priority on poverty reduction, and poverty reduction programs have been enthusiastically adopted in many countries. However, the commitment to poverty alleviation as a goal has not yet been matched by plausible programs or very much success in most of the countries that have adopted poverty reduction as a key policy goal. The Vietnamese success in the...

    • The Vietnamese government estimated that almost one-third of the population is still receiving an income below the poverty line, highlighting the critical challenge posed by remaining poverty in Vietnam.

      In one sense, as in all developing countries, it is not difficult to explain widespread poverty—it reflects the low level of average income. Despite a period of successful growth, Vietnam’s average income is still low and the income of a large segment of the population lies just above the poverty line. Even a small adjustment in the position of the line or a modest decline in household income would put...

    • As noted previously, one long-term poverty issue concerns what is to be done with the upland, remote and isolated areas and ethnic minority areas where many of the poor are concentrated.¹ In some cases, limited development may be largely a matter of physical isolation, which will be reduced as the transport system is strengthened. But some areas have inherently harsh natural conditions, with a high propensity to natural disaster and a poor natural resource base. This is especially important for ethnic minorities, the majority of whom live in remote and isolated areas. Ethnic minority communities make up around 29 per...

  7. Conclusion
    • One objective in writing this book was to provide a comprehensive review of developments in the economy and the evolution of economic policy since the mid 1980s. Hopefully, the preceding chapters have described salient features of economic change in Viet Nam, helped illustrate the complexities of the economic policymaking process and highlighted some of the ambiguities in explaining Viet Nam’s performance. It is hoped that, at a minimum, this information will be useful to some readers in making their own assessment of Viet Nam’s performance and the major factors affecting it.

      A more ambitious objective was to interpret and explain...