vietnam economy
Economy of Vietnam
By
Adam McCarty
Introduction
Vietnam has been a country ruled by colonists, divided or at war for most of the twentieth century. Unification of the country in 1976 was followed by invasion of Cambodia in
1978, and a subsequent brief but violent war with China. This troubled history had profound consequences for economic development in general, and attempts to impose central planning in particular. Central planning was imposed upon Northern Vietnam in the 1950s, and upon Southern Vietnam after 1976, but less extensively. The experience with central planning was therefore brief and incomplete.
Vietnam’s economic transition, typically identified as “starting” in 1986, was a relatively painless affair of structural adjustment and stabilisation – at least for the first decade. The state sector was never large in Vietnam, where 80 percent of the population lived in rural areas, mostly growing rice. Further, by 1986 the planned part of the economy was thoroughly undermined. The collapse of the CMEA trading relationship forced restructuring in the modest state-owned enterprise sector, which shed almost one-quarter of its workforce during 1988-1992. Institutional reforms also, however, created a boom in the urban household services economy that soaked up the unemployed. The shift in markets was relatively easy without the burden of a large military-industrial complex, and Vietnam’s exports to CMEA found new Western buyers with ease.
The 1990s have seen a transformation of the economy of Vietnam. Structural changes occurred during 1987-1991, but changes in institutions (“rules of the game”) have lagged and the legacy of administrative control remains. Further, important services, such as accounting, banking, and the legal system remain highly rudimentary. In some regards, therefore, “transition” is a generational process.
Before reunification
In 1954, Vietnam was divided in two at the 17th parallel. In the North, under the rule
By
Adam McCarty
Introduction
Vietnam has been a country ruled by colonists, divided or at war for most of the twentieth century. Unification of the country in 1976 was followed by invasion of Cambodia in
1978, and a subsequent brief but violent war with China. This troubled history had profound consequences for economic development in general, and attempts to impose central planning in particular. Central planning was imposed upon Northern Vietnam in the 1950s, and upon Southern Vietnam after 1976, but less extensively. The experience with central planning was therefore brief and incomplete.
Vietnam’s economic transition, typically identified as “starting” in 1986, was a relatively painless affair of structural adjustment and stabilisation – at least for the first decade. The state sector was never large in Vietnam, where 80 percent of the population lived in rural areas, mostly growing rice. Further, by 1986 the planned part of the economy was thoroughly undermined. The collapse of the CMEA trading relationship forced restructuring in the modest state-owned enterprise sector, which shed almost one-quarter of its workforce during 1988-1992. Institutional reforms also, however, created a boom in the urban household services economy that soaked up the unemployed. The shift in markets was relatively easy without the burden of a large military-industrial complex, and Vietnam’s exports to CMEA found new Western buyers with ease.
The 1990s have seen a transformation of the economy of Vietnam. Structural changes occurred during 1987-1991, but changes in institutions (“rules of the game”) have lagged and the legacy of administrative control remains. Further, important services, such as accounting, banking, and the legal system remain highly rudimentary. In some regards, therefore, “transition” is a generational process.
Before reunification
In 1954, Vietnam was divided in two at the 17th parallel. In the North, under the rule