Vietnam's Economic Transition

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VIETNAM – Transition throughout the years

Background:
Vietnam was conquered by France in 1884 and became part of French Indochina in 1887. It was declared independent after World War II, but still ruled by France until 1954; eventually dividing into Communist North and anti-Communist South (led by the Americans).

Planned Economy:
In 1975 North Vietnam overran the South, and reuniting Vietnam under the Communist rule. This is technically the first transition of the economy. The Communist party created 5-year plans to dictate the economy => Planned Economy * Government decided what to produce, how to produce and for whom to produce. * This can be seen by the Second five-year plan (1976-1981) and Third five-year plan (1981-1986) * Resources are allocated equally to the people

Transition period
* Why?
* Both the 5-year plans had failed. The main reason being that Vietnam had set such extraordinarily high goals. * Theoretically it is impossible for any government to successfully plan the economy. * The Government implemented “Doi Moi” Policy (Renewal Campaign) in 1986, wanting to convert Vietnam from a planned economy to a free-market economy. * Difficulties:

* Relationship between Vietnam and Soviet Union
* Poor equipment and little capital
* Lack of ability to control inflation
* Suffocating bureaucracy

Current situation
Originally the “Doi Moi” Policy was to convert Vietnam into a free-market economy. But in 1990 the VCP (Vietnam Communist Party) published a new plan “The Draft Strategy for Socio-Economic Stabilization and Development up to the year 2000” that changed Vietnam’s economy, which was on its way to becoming a free market, to a Socialist-oriented market economy. * Government is still the main factor of the economy.

* It is a mixed economy, which follows the...
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