Vietnam The Economy
farmers transporting goods to market
SINCE REUNIFICATION IN 1975, the economy of Vietnam has been
plagued by enormous difficulties in production, imbalances in
supply and demand, inefficiencies in distribution and
circulation, soaring inflation rates, and rising debt problems.
Vietnam is one of the few countries in modern history to
experience a sharp economic deterioration in a postwar
reconstruction period. Its peacetime economy is one of the
poorest in the world and has shown a negative to very slow growth
in total national output as well as in agricultural and
industrial production. Vietnam's gross domestic product
(
GDP--see Glossary) in 1984 was valued at US$18.1 billion
with a per capita
income estimated to be between US$200 and US$300 per year.
Reasons for this mediocre economic performance have included
severe climatic conditions that afflicted agricultural crops,
bureaucratic mismanagement, elimination of private ownership,
extinction of entrepreneurial classes in the South, and military
occupation of Cambodia (which resulted in a cutoff of much-needed
international aid for reconstruction).
In the 1980s, the country was at a crossroads between
economic liberalization and complete government economic control.
It is possible that the leadership changes undertaken at the
Sixth National Party Congress of the Vietnamese Communist Party
(VCP, Viet Nam Cong Son Dang) in December 1986 marked the
beginning of the end of an era dominated by revolutionaries who
emphasized security at the expense of social welfare and
modernization. In 1987 Vietnam took practical steps to resolve
chronic economic problems such as rapid inflation, slow and
erratic economic growth, deteriorating living conditions, and
severe trade imbalances. The new economic policy laid out at the
Sixth National Party Congress addressed these issues while
avoiding others such as high unemployment and substantial
arrearage on foreign debt payments.
At the party's Second Plenum in April 1987, a new,
reform-oriented leadership proposed measures that would give
greater scope to the private sector, reduce the budget deficit,
and boost the output of agricultural and consumer goods in order
to raise market supplies and exports. Specifically, the
government sought to make prices more responsive to market forces
and to allow farmers and industrial producers to make profits.
Barriers to trade were lowered; the checkpoint inspection system
that required goods in transit to be frequently inspected was
abolished; and regulations on private inflow of money, goods, and
tourists from overseas were relaxed. In the state-controlled
industrial sector, wage raises were scheduled, and overstaffing
in state administrative and service organizations was slated for
reduction. Government leaders also planned to restructure the tax
system to boost revenue and improve incentives.
Earlier efforts to reform the economy had employed methods
similar to those proposed in 1987. These previous recovery
policies, while achieving short-term gains toward economic
recovery, eventually faltered because of poor implementation,
lack of commitment, and decisions to industrialize and socialize
the country regardless of cost. The 1987 effort to cure Vietnam's
economic ills held more promise of being sustained, however. The
power of the new reform-minded general secretary of the party,
Nguyen Van Linh, appeared to strengthen as other reformers
assumed key party Political Bureau positions. Moreover, Soviet
pressure to improve economic performance increased markedly
during 1987. A high Soviet official attending Vietnam's Sixth
National Party Congress pointed out Vietnam`s urgent need to
reform and offered the Soviet Union's own reform efforts as a
model for Vietnamese programs.
Data as of December 1987
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