Vietnam's 20-Year Reform: Experience and Emerging Issues

 

The reform process in Vietnam has been going on for 20 years and has brought about important achievements. The economy has recovered from crisis and entered a period of high growth. The averaged annual GDP growth rate was 7.5 per cent and reached 8.4 per cent in 2005. Generally speaking, the economics reform in Vietnam was a shift from a centrally planned economy to a market economy with socialist orientation and international integration. In our concept, the socialist orientation means “rich people, strong nation, democratic, equal and civilized society”. The process can be characterized by the following contents and features:

 

Firstly, the reform originates from the interest of the people and of the nation. It requires careful studies of the areas and roadmap, and implementation measures to ensure the macro stability for development and to minimize unnecessary collapse during transition. Starting with pilot activities in late 70s, early 80s, the economic reform in Vietnam has so far undergone a comprehensive and consistent program. Pilot experiments first were implemented in agriculture and distribution systems, then spread into industrial production, investment, infrastructure development and then continued to foreign trade and FDI attraction.

 

In other words, the 20-year reform process of Vietnam was a movement from the policy of ensuring food security, generating income for the people (in the early days the majority of the people are farmers) to a policy of mobilizing resources for rapid economic development and active participation in globalization. In the process, the resources of the people and enterprises, particularly the private sector, have been mobilized. The booming number of enterprises established in the beginning of the year 2000 after the introduction of the Enterprise Law is strong evidence of this. It should be noted that in early 1990 there were only about 11 thousand state-owned enterprises and almost no private business and today, there are 30-40 thousand new private enterprises registered each year.

 

During the reform process, legislation and the legal framework were adjusted in line with the requirements and needs for each specific stage. For example, in the first 10 years of the reform, Vietnam gave priority to strengthening the role and function of the government in order to face with and overcome the crisis. But since the early 1990s up to now we have been focusing on building the foundation for a market economy, i.e. completing the legal framework for a market economy and a state of rule. Currently Vietnam is implementing three programs to renovate the functioning of the state system namely: (1) to renovate the supreme legislation and supervision of the national assembly (2) to reform the national administration and (3) to renovate the jurisdiction and justice to build a state of rule.

 

The goal of reform process is social development and progress. Economic growth is considered to be a tool to reach that goal. Economic achievements were focused on implementing social targets, solving social problems with special focus on difficult area and poor region and poor people. This explains why Vietnam has been evaluated as a country where the Human Development Index (HDI) is ahead of economic development. (In 2005 the HDI of Vietnam was 0.704 ranked 108 in the middle level of 177 countries while the GDP was at a lower level raking 123 place).

 

With such a goal, the reform received a high consensus in society. Basically, Vietnam did not encounter instability or large scale chaos which might have lead to social polarization such as happened in other transitional economies. The good cultural foundation and tradition, the spirit of mutual assistance in the community played its role as an important factor for social stability and political stability in Vietnam.

 

The reform process in Vietnam has also been a combination of internal development policy and open external policy. The major content of foreign policy of Vietnam has been to link its economy to the world development flow with the motto: “Vietnam is prepared to be a good friend and trusty partner in the international community”. In the 20 years of reform, Vietnam has enjoyed an ever-growing expansion of friendship and cooperation as well as support from the world community. We are eager to learn and welcome ideas as well as suggestions from foreign countries and international experts for our process in making laws and economic development strategies. “Vietnam business forums” which are organized annually provide good chances for Vietnamese government to pick up comments and contributions from donors for the country’s social and economic development plan and the reform process.

 

Vietnam has truly become a stakeholder of the development of the international community. The country has diplomatic relations with 167 countries, and trade relations with 224 countries and territories. Vietnam is now member of many international organizations and is making utmost efforts to join the WTO this year. The Vietnamese economy is open. The total import – export value is equal to the country’s GDP. Total FDI reached over US$ 50 billion.

 

Vietnam is also one of the countries that have implemented the millennium development goals (MDGs). In the last 10 years, while GDP was doubled, the poverty rate has been reduced by half, that is to say, a total number of 25 million people have escaped poverty. Rapid progress is also shown via many other indexes like education, averaged age index and health care. In 2005, 95 per cent of the Vietnamese population were literate, the averaged life expectancy was 71.5.

 

The reform process in Vietnam originated from the reality of the country, thus carried out in a uniquely Vietnamese fashion. It was a comprehensive economic – social and political reform. The process started with economic reform and then associated with social and political reform. It was also a process of determination and creativeness of the nation. The core of the reform was to create a high consensus in society in the mindset, orientation and development roadmap. According to some recent studies by international institutions, the majority of Vietnamese people are optimistic about the development perspective of the country and are supportive of government policy.

 

The above-said are a few experiences and lessons that have been drawn from our 20-year reform process. Now I would like to raise some issues in which we would like you to share with us your experiences and ideas:

 

In Vietnam “the train of reform” has been on the track. The government and the people wish to speed up the development process. The country’s potential such as human resources, economic and political geography, and international cooperation environment are all favourable. But still the question remains to us “How to grow faster?”. Twenty years of reform have given us valuable experience but there are always new issues and problems that need to be addressed.

 

Our biggest challenge is that Vietnam is still a poor country. The competitiveness of the economy and our businesses is still low. Therefore, it is very important for us to improve our competitiveness and narrow the development gap with other countries in the world. Like many other economies, the requirement for Vietnam is to increase the speed of growth and to ensure sustainable development, at the same time to preserve the culture values in the transition from an agriculture society to an industrial society as well as to preserve national traditions, thus making a good preparation for our next generation in their integration into the world and the region. For that purpose, Vietnam needs a long term vision, and more comprehensive approach, and effective implementation of necessary measures to position Vietnam in the world economy.

In the years to come, Vietnam will focus on the following action plan:

-Develop the market economy, to integrate with the world and bring Vietnam out of the poor country list by the year 2010 and joint the list of the middle industrial countries by the year 2020;

-Continue comprehensive measures to ensure democracy and create a good environment for people to participate and enjoy the benefits of the reform process;

-Build a “state of rule” of the people, by the people and for the people.