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Overview: Viet Nam embarked on Doi Moi policy in 1986 with three main pillars: (i) to shift from a centrally planned economy to a market- oriented one; (ii) to develop a multi-sector economy in which the private sector plays an increasingly important role; and (iii) to actively and effectively integrate into regional and global economy in accordance with Viet Nam’s situation.
Since the Sixth CPV’s Congress in 1986, the Doi Moi has recorded significant accomplishments and Viet Nam’s economy maintains consecutive high growth rate. WTO membership enables Viet Nam’s economy to integrate further into the global economy and to utilize external resources to boost industrialization and modernization. Viet Nam aims to basically become a modern industrialized economy by 2020.
The 1987 Foreign Investment Law was the first legal document that helped form the legal framework for the Vietnamese market economy. In 1991, the Private Enterprise Law and Corporate Law were introduced. The amended 1992 Constitution affirmed the existence and development of a multi-sector economy under a market mechanism, including the foreign-invested sector. This was followed by the promulgation of a number of laws essential for the formation of the market economy, including Land Law, Tax Law, Bankruptcy Law, Environment Law, and Labor Code, etc. Hundreds of ordinances and government decrees were enacted to guide the implementation of these laws for national socio-economic development.
Along with the law-making process, market economy institutions have also been established. It is the Government policy to eliminate the central planning mechanism, emphasize monetary - market relations, focus on economic management measures and establish an array of financial institutions, banks and basic markets for money, labor, goods and land, etc. The administrative reform was promoted so as to improve economic competitiveness and to help create a more favorable business environment and mobilize all resources for economic growth. The political will of the Vietnamese Government is also reflected in the strategy for administrative reform in 2001-2010, which emphasizes the simplification of administrative procedures, amendment of laws and improvement of economic management. These changes will help establish a dynamic mechanism to meet the development requirements of the country in the new context.
Overall, tremendous economic reforms taking place over two decades of Doi Moi have yielded encouraging results. Viet Nam has created an ever more competitive and dynamic economic environment. The multi-sector economy has been encouraged to develop, thus mobilizing effectively all social resources for economic growth. External economic relations have been expanded, attracting greater foreign direct investment and broadening export market. Labor export, tourism industry and remittances from overseas Vietnamese have been strongly promoted to generate increasing foreign earnings for Viet Nam.
Over 20 years of Doi Moi, Viet Nam’s GDP has continuously increased from 3.9% between 1986 and 1990 to 8.2% in the following 5 years of 1991-1995. Between 1996 and 2000, Viet Nam’s GDP growth reached 7.5%; lower than that of previous five years amidst the Asian financial crisis. Since 2001, Viet Nam maintained a high and stable growth rate: 7.3% in 2003, 7.7% in 2004, 8.4% in 2005, 8.2% in 2006, 8.5% in 2007; and 6.2% in 2008 and 5.32% in 2009 despite the global economic and financial crisis.
Upon the amendment of the Enterprise Law in 2000, private businesses have enjoyed strong encouragement for development. This Law institutionalized the freedom of all individuals to doing business in areas not prohibited by law. It also removed administrative obstacles that hampered enterprises such as complex licensing, administrative procedures or fees, etc. 2005 Enterprise Law, which is applicable to both domestic and foreign–invested enterprises and came into effect on July 1st 2006, provides more encouragement through equal rights and obligations of enterprises regardless of ownership forms.
With a view to raising the productivity of the state-owned sector, priority has been given to concrete policies and measures to adjust and reorganize SOEs, particularly in finance management of SOEs, management of state investment in SOEs, or the equitization of SOEs. Until 2009, almost 4,000 SOEs have been equitized.
Viet Nam has succeeded in translating economic achievements into social progress. Benefits of Doi Moi process, for instance, are delivered to the majority of the population on a relatively equal basis. Economic growth is combined with the improvement of life quality and development of healthcare and education. The Human Development Index rank of Viet Nam increased from 120/174 in 1994 to 109/177 in 2007. The average life expectancy was raised from around 50 in the 1960s to 73 in 2008. The poor household ratio dropped from over 70% in early1980s to 14.75% in 2007 (or 2.7 million poor households) and estimated 13% in late 2008.
Foreign Trade and International Economic Integration: As Viet Nam is actively integrating into global economy, Viet Nam’s economic ties with other countries and international organizations have been expanded. Viet Nam is now a key member in ASEAN and active member in APEC, ASEM, and other international economic organizations. Viet Nam is also realizing its commitments in ASEAN Free Trade Area. Economic cooperation with major economies like the US, EU, Japan, Russia, China, and India has been broadened. Viet Nam signed a bilateral trade agreement and is negotiating an investment agreement with the US. Viet Nam is also negotiating a Comprehensive Partnership and Cooperation Agreement with EU and Economic Partnership Agreement with Japan. In January 2007, Viet Nam joined WTO, marking its full integration into global economy.
Since Doi Moi, Viet Nam’s foreign trade has increased 20% annually. From around US$ 0.5 million before Doi Moi, total export reached US$ 48.4 billion in 2007, US$ 62.7 billion in 2008 and US$ 56.6 billion in 2009; 2008 import was US$ 80.4 billion and 2009 import was US$ 68.8 billion. The structure of exports has also seen a positive change. During the 1991-1995 period, major exports of Viet Nam were crude oil, fisheries products, rice, textiles, coffee, forestry products, rubber, peanuts and cashew nuts. In 2008, Viet Nam mainly exported crude oil, garment and textile, footwear, seafood, wooden products, electronics and rice. This structure reflects the rise in processed and manufactured products and decline in unprocessed products, including agricultural, fisheries, forestry products and minerals. Despite this shift, unprocessed export products still make up a large proportion. Therefore, greater efforts are needed to rapidly raise the proportion of industrial exports.
Foreign Direct Investment: In December 1987, the Foreign Direct Investment Law of Viet Nam was introduced to help form the basic legal framework for foreign investment activities in Viet Nam. The Law was amended and supplemented several times, notably in 1996 and 2002, which created a more open and attractive environment to draw foreign investors into crucial industries such as export-oriented processing and manufacturing, and key economic zones of the country.
Over the past years, Viet Nam has drawn increasing inflows of FDI. From a negligible figure of 1986, FDI into Viet Nam reached US$ 64 billion in 2008. FDI in 2009 reached US$ 21.5 billion amidst the global economic slowdown. FDI not only generates profits for foreign investors but also represents a significant capital source which comes along with technology transfer and advanced business skills. FDI helps better tap national potentials, creates tens of thousands of jobs, and making contribution to socio-economic development in Viet Nam.