In an effort to improve the country's economic conditions, in 1986 the Vietnamese leadership put forward a policy of Doi Moi (renovation). The Government took a number of the most important and comprehensive macro-economic reforms in its modern history, as follow:
- Shift from a centrally-planned economy to a multi-sector market economy with socialist orientation under State management
- Develop and diversify international economic relations
- Reform the State administrative system.
A package of measures were taken such as removal of subsidies, liberalization of prices, depreciation of currencies and introduction of an official floating exchange rate, liberalization of domestic trade and reduction of tariffs on commercial and non-commercial imports.
A legal framework for market economy has been developed step by step. To ensure domestic and foreign investment and create favorable conditions for business activities, Vietnam has promulgated a series of economic laws such as Law of Enterprise, amendments to the Law of Foreign Investment, Law of Trade, Law of Land, Law on Export and Import duties, Labor Code, Law on Environment, etc. This has led to the creation of more incentives for foreign investors, expanding investment fields, creating a stable business environment, reducing risks and streamlining procedures and licenses while relaxing import regulations and promoting of export activities.
The Government also seeks to make state-owned enterprises more efficient through the equitization process. The first stock market was set up in Ho Chi Minh City at the end of July 2000 to attract more capital for enterprises.
After 15 years, the policy of Doi Moi has brought important results. The inflation rate, which reached 700% in the 1980s, has kept under 6% in 2000. Economic growth averaged 8% from 1991 to 1998. In 1999 the economy was seriously affected by the economic crisis in the region and natural calamities; its GDP growth was only 4.5%. However, economic performance is inspiring in 2000, with GDP growth of 6.7% in the first three quarters of the year. Vietnamese GDP has increased two fold over the past decade.
A country with chronic food shortage in the 70s and 80s, Vietnam has become the second largest exporter of rice in the world, exporting 4.5 million tons in 1999. The total volume of exports in 1999 reached US $11.54 billion and imports reached US$11.6 billion. Garments and textiles, agricultural products like rice, coffee, tea, rubber, aqua-culture products and oil are intensive export commodities.
The balance of international payments was positive due to the inflow of investment capital through various means such as FDI and ODA. Vietnam has attracted 2,300 projects with US $36 billion in foreign direct investment committed since the adoption of Foreign Investment Law. The economic structure has been changing vigorously since 1992 in the direction of increasing the proportion of industry and services. As a result, the value of industrial output in 1999 increased by 10.4% and services rose by 4.3%. A number of industrial centers and zones have been set up throughout the country to help reduce unemployment in the cities as well as underemployment in the rural areas.
Vietnam is still facing great challenges and needs to continue both economic and public administration reforms. Vietnam still is a developing country with GDP per capita, production and consumption rates of basic goods among the lowest in the world. Agriculture makes up 36.6% of GDP and 78% of the population lives in rural areas. Domestic saving and investment remain low and do not yet allow a high and sustainable growth rate.
The large gap in development between Vietnam and other Southeast Asian countries can only be reduced by a higher sustainable growth rate over many decades and through efficient industrialization and modernization of the country. Vietnam has to build an economy with more sophisticated technologies and trained manpower, and needs to integrate into the regional and world economy and cope with fierce competition in order to create a prosperous economy and reduce the gap with other countries.
Economic progress has also to be combined with social policies so that the achievements of the economy can be channeled to all groups in the population in terms of education, employment, health care and welfare. This has raised the quality of life in Vietnam significantly and also has made it an increasingly important consumer market. Vietnam needs several crucial years to reach an economic take-off. In the long-term, Vietnam's economy will meet with a bright future.
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