Vietnam -Business Economics for the World Market

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Business Economics for the World Market
Vietnam Group Project
Summer 2012

Post World War II Economic History
The post WWII economic history of Vietnam has been through many changes. These changes were due to the result of war, political ideologies, and natural resources. The most notable change was the division of North and South Vietnam. The economic division of North and South Vietnam had been in place since the colonial influences of France. Each division had its own economy with unique resources and industries. It wasn’t until 1954 that the North/South division became political – communist in the north and capitalist in the south (Spartacus Educational).

During the mid 1950s and into the late 1960s the Vietnamese Economy, which had been slated for heavy industrial production, suffered many major setbacks and losses. Most of these setbacks came as the result of war, when air-strikes destroyed a huge amount of infrastructure and manufacturing facilities. During the Second Indochina War, numerous acres of farmland were destroyed, shipping routes for raw materials were destroyed, and what was left of the labor force spent most of their time repairing bomb damage (Mongabay).

From the political division until the mid 1970s, South Vietnam relied mostly on foreign aid in order merely maintain an existence. This aid, most of which came from the US, developed a military, and constructed a large amount of infrastructure. Much like its northern counterpart, South Vietnam experienced extensive destruction during the Second Indochina War. Large amounts of farmland, forest, infrastructure, and cattle were destroyed along with an enormous human toll (Mongabay). The human toll for Vietnam was extremely significant. Vietnam lost about 1.5 million soldiers and civilians and lost another 1 million people who fled the country. Those who fled included many skilled workers and intellectuals. To further strain the economy of Vietnam, the Vietnam War left over 800,000 orphans, 300,000 people with disabilities who could no longer work, and nearly 1 million widows (The Vietnam War: Landrum Perspective). In response to the disheveled economy Vietnam’s communist party created a series of 5-year plans, the first beginning in 1976, which set economic strategies, goals, and plans for the country. The first 5-year plan was developed for North Vietnam only, while the subsequent plans were developed for one unified communist Vietnam (Wikipedia). The second 5-year plan (1976-1980) set unrealistically high goals for agricultural growth, industry, and national income all with targeted rates between 10 and 20%. The VCP had a timeline of 20 years for full unified communist integration. This would give the company to develop both industrial and agricultural activities and provide the country with all resources necessary to run a communist country. This plan proved to be too much for Vietnam to handle alone and required approximately $7 to $10 Billion in foreign aid from western countries, China, and Russia. During this period, Vietnam’s economy was dominated by small schedule capitalist production, and was deemed an overall failure (Wikipedia). When it came time to develop and implement the third 5-year plan (1981-1985), the failure of the preceding plan played a huge role. This plan was developed cautiously and it was implemented only one year at a time. The leading objective of this plan was to develop agriculture by focusing on small scale production and “family” related economic policies. Additionally, the government gave individual families access to resources, science, and technology in order to cultivate their land in order to meet specific annual quotas. If the family came up short of the quota, they had to make it up in the next year, and if the family had a surplus, they could sell it on the open market. During this period, food production increased by 18% and investments in heavy industry increased by 17%...
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