In recent years, Vietnam has been known to the world as a country where the reform process has been carried out successfully. To reach these initial achievements, Vietnam has made a lot of effort to overcome numerous difficulties.

Despite having been an independent nation since the 2nd of September 1945, Vietnam still kept undergoing 30 years in war of resistance before managing to become an entirely unified country in 1975. Since then, Vietnam has faced new challenges in the social-economic development process. However, due to the low starting point of the economy, serious consequences of wars together with other shortcomings and mistakes, maintaining too long the centralized bureaueratic State-subsidized mechanism, Vietnam plunged into a grave crisis in 1985.

In that context, in December 1986 the VI Congress of Vietnam Communist Party worked out policies to reform the economy of which the major contents were to wipe the planned mechanism, building a multi-sectoral market economy under state management in accordance with socialist orientation. Then, in June 1991, The VII Congress completed the reform policies.

After more than ten years of reform, Vietnam social-economic situation has made fundamental progress, changing the social appearance. However, there still exists many intricate problems:

1. Some major (essential) data:

• Population:
  (Unit:1000)

• Manpower:
  (Unit: Million people)

• Gross Domestic Product:
  (Current price: Billion VND)

• Agricultural total yield value:

· · Table 4 : Total value of agriculture yield
(Unit: billion VND)

• Industrial total output value :
  (Unit: billion VND)

• Total import-export turnover:
  (Unit : billion VND)

• Foreign Direct Investment :
  (Unit: million USD)

• Number of literate people:
  (Per 10,000 people)

• Medical staff:
  (Unit : 1000 people )

8. Number of Telephone subscribers:
   (Unit : set)

II. Economic development process before Doi Moi (renovation) :

1. Since 1945-1975:

The August revolution in 1945 succeeded while there was a great danger of poverty, illiteracy as well as foreign invasion. Soon after the Democratic Republic of Vietnam was founded on the 2nd September 1945, the whole nation had to once more combine all efforts for the 9-year long national salvation war against foreign invaders. With the Dien Bien Phu victory (7 May 1954) peace was restored, but the country was then provisionally partitioned into 2 regions.

In the recovering period after war, since 1954, northern Vietnam’s economy grew well, quickly recovering agriculture and transportation. Many sectors took part in the economy. Since 1958, The North has realised socialist transformation in the economy, establishing centralised-economy developing model and nationalising all means of production , planning the national economy from the central. The state carried out a product distributing system by norm payment and budget subsidies through coupons. With the first five-year plan ( 1961-1965), the North moved into a constructing period.

The state paid close attention to developing education, health care and many public works. The new mechanism's pre-eminence was brought into full play, preliminary heavy industry facilities were formed solving essentially food problems... In 1964, however, the economic pattern began showing its shortcomings.

At this time, the US was carrying out a war of destruction against the North forcing Northern people to work, struggle and support the South. This situation lasted in ten years, from 1965 to 1975.

Meanwhile, since 1954, the economy in the South of Vietnam went towards market model of which the main aim was to serve the war.

2. From 1975 to 1996:

After the South of Vietnam was completely liberated in 1975 and the country was re-unified in 1976, Viet Nam carried the second five-year plan( from 1976 to 1980). It contained many voluntarist points, most of the targets in the plan were impossible to meet. Production was stagnant keeping the annual growth rate to only 0.4% (against the planned 13-14% expected) while population growth was more than 2.3% per year. Food shortage was so severe that 1,576 millions tons of food had to be imported in 1980. Budget deficit remained high, prices rose 20% annually and import was 4 to 5 times greater than export. The state was in short of investment capital for the economy leaving many plans unfinished, leading to a serious shortage of essential consumer goods.

In that context, the IV Congress of the Vietnam Communist Party decided to carry out socialist transformation nation-wide with two main goals; building the system of collective mastery and large-scale production. Thanks to the excessive aims posed by the third five-year plan (1981- 1985), the economy got many imbalances and sank into serious crisis. Stagnant production was manifest in all aspects. Inflation rose very fast, from 30-50% annually in early 1980s to 587.2% in 1985 reaching the super inflation level of 774.7% in 1986. The people's living conditions were terribly difficult.

In face of that situation, the Communist Party of Vietnam started and led the "Doi Moi"( renovation) process.

III The renovation process:

A) Fundamental viewpoints of the renovation :

The renovation policy started with the VI Congress of the Communist Party. Its fundamental viewpoints were :

- Developing a multi-sectoral economy.

- Shifting the economy from the bureaucratic planned centralised and State-subsidized mechanism to the socialist-oriented market economy under State's management.

- Opening the diversified and multilateral economy as well as enhancing foreign economic efficiency on the basis of expanding economic co-operation to the countries in the region and all over the world.

- Democratising all fields of the socio-economic life , implementing administration reforms and building a state governed by law.

B) Achievements after ten years of reform:

a. The 1986-1990 five-year plan:

The main driving force behind this plan was no longer to boost investment as before but renovating the administration mechanism.

Many resolutions and decisions were issued by the government and ruling party in an attempt to improve economic management, monetary and agricultural policies... During these early years of this five- year plan, however, the fact that the old mechanism did not yet disappear and the new one did not prominently emerge made reform ineffective. GDP increased by 3.9% on average in five years.

Since the late 1980s, there has been evident changes, especially some positive changes in agriculture. In 1988, Vietnam put forward the "Khoan" regulation fixing of farm output quotas fore each household is assigning land to farmers and considering each household as one economic unit.

As a result, instead of having to import 450,000 tones of food as it did in1988, Vietnam became one of the rice exporting countries ( nearly one million tons) in 1989 and was the world third biggest exporter of rice in 1990 with 1.5 million tons. Other key industries such as electricity, laminated steel, cement and crude oil attained fairly good growth.

Average import- export value increased by 28 %, gradually reducing trade deficit. The ratio of export to import in 1986-1990 period was 1 to 1.8 in comparison with 1 to 4 in 1976-1980 period.

Another great success was that inflation had been controlled and driven back ( from 774.7 % in 1986 to 223.1% in1987, 34,7% in 1989 and 67,4% in 1990) .

In short, the successes of renovation in the 1986-1990 period were production recovery, growing economy and rolled back inflation. The more important thing is the fundamental shift to a new management mechanism. These successes make more sense as the reform process had been implemented before East- European countries and the former Soviet Union got into total recession. However, it took Vietnam 5 years more in order to get rid of the social-economic crisis.

b. Achievements from 1991-1996 :

In June, 1991 the Sixth Congress of the Communist Party of Vietnam worked out the strategy "Stabilizing and developing the socio-economic situation to the year 2000", putting forth the orientation and tasks for the 1991-1995 five-year plan. The major obstacle then was the long-lasting economic embargo together with economic blockade imposed by the United States while Eastern Europe and the former Soviet Union were jammed in serious crises. The total foreign trade turnover from Vietnam to "rouble" areas sharply decreased, in 1991 accounting for only 15.1% of that in 1990. However, it was of great advantage that renovation started having effectiveness, economic units are gradually adapted to the new management mechanism.

The outstanding achievements are :

1. Fundamental changes in economic management mechanism:

There have been activating many sectors in the economy, namely: state-run, state capital, private capital, co-operative, individual... in which the non state-run sector accounted for 60% GDP. Economic sectors were handed with rights of land use and export-import activities. The state -run sector, however, was still given special attention to help it play the decisive role in the economy.

2. World leading economic growth rate attained.

In 1991-1995 stage, GDP on average increased by 8.2%, reaching 9.5% in 1996. The agricultural field, especially food production firmly developed, adding to the yield one million tons every year. Industrial production, adapted step by step to the new mechanism, increased on average 13.5% per year ( the highest level ever expected before). Domestic production began accumulating, ensuring more than 90% of annual accumulation and consumption funds.

3. Economic structure reform:

Economic branches structure moved round to raising the proportions of service and industry areas, steadily reducing that of fishing, forestry, and agriculture.

Economic areas structure also began to shift towards establishing essential areas, central industrial zones, export processing zones as well as areas specialized in growing industrial plants and producing food.

4. Controlled and driven back inflation:

Thanks to production development, convenient commodities circulation and anti-inflation experiences from several years before, prices were gradually stabilized. Prices of goods and services increased by 67.5% in 1991, 5.2% in 1993, and only 4.5% in 1996.

5. Speeding up "the opening and integration" process:

Vietnam has so far established diplomatic relations with 164 countries. This is the first time Vietnam has ever had normal relationship with every countries and important economic-political centres in the world. On 28 of July 1995, Vietnam became an official member of the Association of South East Asia Nations ( ASEAN). Also in July 1995, Vietnam signed a frame work agreement with EU on technical, commercial and economic co-operation and normalized diplomatic relations with the United States. Vietnam also applied for admission into the Asia-Pacific Economic Co-operation Forum ( APEC) and World trade Organization ( WTO).

By the end of 1996, Vietnam had official economic-commercial relations with more than 120 countries, foreign trade turnover rapidly increased by more than 20% a year ( fig 7). Vietnam has been granted non-refund aids and loans for social-economic development investment by many countries and international organisations. The total ODA loan that Vietnam received from 1994 to 1997 were 8.53 billion US dollars. There were 1868 licensed investment projects with total capital of 26,976 million US dollars from 1988 to December 1996.

6. People's living standards improved:

Education, health care were consolidated and strengthened. Material and moral life of the vast majority of people were improved. The number of well off and wealthy households increased while that of poor ones decreased. More than one million jobs were created each year.

7. Getting rid of crisis:

After ten years of reform, Vietnam has managed to get rid of the socio-economic crisis, completing the first stage of the transitional period, creating premises for entering the industrialization stage .

C. Factors leading to the success of renovation :

- From the very beginning, the renovation which was implemented and mobilized at the ripe time has been a combination between people's effort and the leadership of Communist Party of the Vietnam.

- On the basis of Vietnam's practices, economic reforms have been regarded as the central target, bringing into full play all forces of the nation, advancing to political reforms.

-The renovation has chosen the right goals, contents and implemented measures aimed at macro policies to ensure growth and overcoming the crisis.

- Developing the economy together with stabilizing politics and improving people's living standards.

- Domestic reforms were connected closely with the renovation in foreign affairs, creating a favorable international environment and attracting capital, technology...

D. Major outstanding difficulties :

1. Feeble economic potentials :

Although there has been high economic growth rate for the past time, economic scale, due to low starting point, remains modest. The growth of some branches, especially agriculture, is still limited unless there is great investment on science, technique and technology. Up to now, Vietnam is still one of the poorest countries in the world. The infrastructure remains backward and antiquated, hardly meet the demand of economic development for the time to come.

2. Low efficiency of production and business:

The vast majority of products that have been rapidly boosted are in form of resource exploitation. Many industrial and consumer goods are of low- quality, failing to compete with foreign- made commodities. In the service sector, operation is still in confusion. The efficiency of investment and production are low, part of the resources has been wasted, many big businesses have gone bust. Internal saving and investment remain stagnant creating difficulties in mobilizing the people's saving for producing goods and carrying out business.

3. Mechanism of economic management is to be consolidated, regulations and law violated:

Due to the needs of change, it demands both abolition of the old economic mechanism and building new one to be carried out at the same time. The legal system and management standard (both macro and micro level) were not in harmony and effective. Much of the Vietnamese laws still differ from those of other partners' and are not clear enough. Administrative procedures are cumbersome, and the income distributing system so far not rational leading to rather rampant corruption.

4. Low qualified economic managing officers and less skilful labourers:

So far, people known little about the market economy. Besides, labourer training has not been paid due attention. A lot of state-owned enterprises go bust. Management and production skills fail to meet the requirements of the reform.

IV. Industrialization and modernization :

1. Vietnam to become an industrialized country in 2020 :

In its VIII Congress held in June 1996, the Communist Party of Vietnam set up the goal of bringing Vietnam, from now to the year 2020, to be "an industrial country having modern technical- material facilities, a suitable economic structure, advanced productional relationship coping with productive forces' development, high material and moral living standards, well-secured national defense and social order, wealthy people, strong nation and civilized society".

For the remaining years of 1990s, the main contents of industrialization and modernization is:

- Agriculture industrialization, modernization and rural development.

- Industry development.

- Infrastructure construction.

- Quick development of tourism, airline services, navigation, post and telecommunications, trade, transportation, finance, banking, auditing, insurance, technology, law and information...

- Appropriate development of territorial areas.

- Widening and enhancing the efficiency of foreign economic relations.

2. Major tasks and targets toward the year 2000 :

* To Focus on development targets and achieve average economic growth rate from 9 to 10 % per year; by the year of 2000, per capita GDP will double that of 1990 the growth rate of agriculture, forestry and fishing will be from 4.5 to 5% a year , industrial production 14-15% , service 12-13%, To increase investment for development to nearly 30% of GDP. Industry and construction will account for 34-35% of GDP, agriculture, forestry and fishing 19-20%, service 45-46%.

* To Push up the country's financial potential and ability and to make the national finance healthy. To mobilise 20-21% of GDP for state budget through tax and fee-collection. To maintain the consumption price index under 10%, and to control the budget deficit under 4.5% GDP. To enhance convertibility of VND (Vietnam Dong) and stabilize exchange rate.

* To expand and enhance effectiveness of foreign economic relations:

The export increases on average by 28% per year, raising the export level per capita to above 200 USD in 2000. The import annual increases about 24%.

* To Solve some social problems:

To eliminate illiteracy and achieve basically compulsory primary education in the whole. To raise the number of trained labourers up to 22-25% of total workforce. To reduce the population growth rate down to under 1.8%, to create jobs for 6.5 to 7 million people, to prevent and control environmental pollution in cities and industrial zones.

* To create solid premises for further development beyond 2000.

489 New South Head Road, Double Bay
NSW 2028
Tel: 02 93271912 / 02 93272539
Fax: 02 93281653
Email: vnconsul@ihug.com.au