Economic regime has always been an essential national issue, affecting not only development in particular but also the stability of socio-political systems in general. Effective regime promises development and contribute to sustainable business ventures and investments. On the contrary, ineffective economic regime will not only lead to fiscal sluggishness, poverty, and hunger, but also political unstability or even collapse. Vietnam’s economy has endured a long and painful process of selection over the past 70 years. Currently, the economy requires further innovation in many aspects so that the country can attain the most efficient and effective economic regime capable of bringing about rapid and steady development, wealth, and power.

It has been 70 years since the victory of the August Revolution. From an impoverished and enslaved country that saw more than two million people die of hunger in 1945, Vietnam has become an independent socialist country with its population enjoying a stable quality of life. In the 70 years of building and strengthening the nation, Vietnam has experienced a number of challenging historical events and has developed by leaps and bounds despite these difficult periods to make historical achievements. During the 30 years of wars against the French and Americans, tens of millions of Vietnamese fell for the country’s independence and the establishment of socialism. The wars ended with “world-shocking” victories for Vietnam, which launched a period of peace and development in the country. Over the last 70 years, the country has made grand efforts towards progress and modernization, which has been met by global admiration. Since 1975 especially, the country has experienced significant changes. From a poor country with little clout on the international stage and subject to blockades and embargoes, Vietnam has become a country with a fair level of development and markedly improved economic, political, defense, and security capabilities. It is now a member of 70 international organizations, a strategic partner of 14 countries, a comprehensive partner of 10 countries, and a field-specific strategic partner of two countries, namely Denmark and the Netherlands. It has diplomatic relations with 185 of the 193 member countries of the United Nations. In particular, Vietnam has been a proactive member of ASEAN and has been active in building the ASEAN Community and negotiating the Trans-Pacific Partnership Agreement (TPP).

These achievements can be attributed to changes in the Communist Party of Vietnam’s thinking and worldview on politics, economics, foreign relations, and culture. Amidst the country’s historical trials, the Party’s renovations have made the Government stronger and the country more developed, more powerful, and more stable economically, in turn making the population more prosperous and happy. The Party’s process of thinking renewal was not altogether smooth as it struggled to move the country forward, but it has ultimately created lasting improvements for Vietnam.

The centrally planned, bureaucratic, subsidized economy was a favorable system during times of war; it managed to use the physical and human resources from the population effectively as Vietnam fought the two great resistant wars. However, this economic regime was not capable of harnessing the country’s productive potential and the people’s creativity during peacetime. When peace was eventually restored in the country, this outdated economic system became an obstacle to national development. More than ten years after the liberation of the South and national unification, Vietnam was experiencing a socio-economic crisis. Not accepting the hardships, people in many places throughout the country bent the rules in search of a better future. Secret contracting was carried out in agriculture across the country while a number of businesses experimented with new management methods. As a result, the national discussion turned to the economic climate of the State, collective, and private enterprises. Those early thoughts about renovation were not immediately accepted and many individuals and organizations were sanctioned during this transitional period.

The Party’s official policy did not change until its 6th Congress. The Party’s 6th Congress introduced radical changes to its financial considerations and confirmed Vietnam’s commitment to economic development with the socialist-oriented market economy. Specifically, the Party stated, “The socialist society that our people are trying to build must operate on a highly developed economy based on modern productive forces and suitable, progressive relations of production”(1). 30 years after introducing the renovation, a new history of the Party and the country has been written by its economic achievements. The Party’s transitional thinking at this critical time was extremely creative and effective in the circumstances, which has led to 30 years of successful economic activity and growth. Looking at other countries that have refused to change their own economic systems and their relative poverty, the Party’s clarity of thought during those difficult times is clearly evident.

The socialist-oriented market economy has now taken shape and is being steadily improved. This economic model has helped Vietnam to grow even stronger, wealthier, and more successful. Vietnam’s abandonment of the centrally planned, bureaucratic, subsidized economy for the socialist-oriented market economy demonstrates the ability of an economic system to provide a poor country with opportunities to become wealthy and powerful. In the early days of the economic renovation, Vietnam took halfway measure that partially targeted the transition to a market economy while still clinging to the centrally planned, bureaucratic and subsidized economy. It took some time to completely abandon this model and fully commit to the market economy system, though. This new economic model was revolutionary in that it did not strictly require one single form of ownership for productive materials but rather emphasized its nature to create a progressive and suitable productive relations. This was a major development in the Party’s theoretical renewal on economics as it affirmed and clarified its points of view and economic theories, which focused on improving all economic sectors to create a wealthy, powerful, socialist country.

Due to its economic renovation and transition to the socialist-oriented market economy model, Vietnam turned its stagnant system into an economy with the second highest growth rate in Asia. Its annual average economic growth during the 1986-2014 period was 6.6%. The figures for the 1991-1995, 1996-2000, 2001-2005, and 2006-2010 periods were 8.2, 7.0, 6.9 and 6.32% respectively, while the figures for the 2011-2015 period are expected to reach 5,82%. The size of the economy continues to grow 30 years since the introduction of the renewal. In 1990, the country’s GDP was only equivalent to $6.5 billion. That figure increased by 4.8 times in 2000 to $31.2 billion and by 20.7 times in 2010 to $134.6 billion and is projected to go up by 31.4 times in 2015 to $204 billion. The country’s GDP per capita rocketed from $98 in 1990 to $2,052 in 2014, an increase of 20.93 times. Vietnam officially became a low middle-income country in 2009, narrowing the income gap with other countries around the world in relative terms.

By transitioning to the socialist-oriented market economy, Vietnam has managed to restructure economic sectors. In 1990, agriculture made up 38.74% of the country’s economy. In 2014, agriculture accounted for only 18.1%. One of the most successful sectors due to the socialist-oriented market economy is the import and export industries. Before 1990, when Vietnam was a member of the Council for Economic Mutual Assistance (COMECON), the country’s export was equivalent to only a few hundred millions US dollars a year. By 1990, when the renewal cause had been around for five years, the figure had increased to $2.4 billion. In 2014, it reached $150 billion, 62.5 times higher than in 1990. More importantly, the country’s export-to-GDP ratio in 2014 was 80.6%, which was a testament to its dramatic economic development.       

Another major achievement brought about by the economic transition is the population’s markedly improved living standards. Social welfare policies have been implemented and have received positive results. Overall, the number of “poor” households is decreasing at about 2.0% per year. In 1993, 58% of all households in the country were categorized as poor while in 2014, that figure dropped to 8.0% despite the rise in the poverty line.

These achievements confirm that the country’s choice of the socialist-oriented market economy was effective in relatively dire circumstances and has continued to exhibit success.

However, it must be acknowledged that the Vietnamese economy remains well behind many developed countries despite its recent improvement. Vietnam’s development does not fully reflect its potential; there remain many shortcomings and issues in its operation. Experts believe that the Vietnamese economy “refuses to grow” and in fact is relatively unstable at the macro level. Inflation lurks is threatening and macroeconomic balances are not very sustainable. In particular, Vietnam’s labor productivity is relatively low compared to other world countries’.

Thus, even though the economy has grown in size and relatively reduced the gap with other countries, it has not done so in absolute terms, which is reflected in Vietnam’s comparatively small GDP per capita figures. For example, in 2000, Vietnam’s GDP per capita was $433 while Thailand, Malaysia, and South Korea reported $1,969 (4.5 times larger), $4,005 (9.2 times larger) and $11,948 (27.6 times larger) respectively.

In 2014, when Vietnam’s GDP per capita reached $2,052, the figures for Thailand, Malaysia, and South Korea were $5,561 (2.7 times larger), $10,830 (5.3 times larger) and $27,970 (13.6 times larger) respectively.

The data shown above illustrates that the dire condition of the Vietnamese economy in comparison with the rest of the world. If Vietnam does not introduce significant solutions regarding its economic regime, its economy is likely to lag even further behind on the international stage. Policies must target progress in the socialist-oriented market economy model and construct a framework that is modern, integrates efficiently into international economics, and has different forms of ownership and various economic sectors. Considerations should also be made towards consistency and accordance with the market principles as well as ensuring equal competition and transparency. These changes have the potential to create new momentum for growth in the Vietnamese economy. However, the 30 years of national modernization and 70 years of development and defense have demonstrated that Vietnam must rid itself of all remnants from the old economic system and introduce even more radical reform to achieve greater economic growth. The socialist-oriented market economy provides the foundation for harnessing all of Vietnam’s resources and creativity for the sake of development. Therefore, Vietnam must optimize the economic regime and use the market economy’s tools available to form a dynamic and effective economy. Currently, Vietnam’s economy has favorable conditions to modernize its system with a liberal business climate compatible with those in markets around the world. Vietnam’s market does not prejudice against any element or entity; all economic sectors receive equal treatment and play by the same rules without any privilege. These components of the socialist-oriented market economy allow operations that maintain equal footing and strict accordance with the law to be protected by the law and are encouraged to grow.

To fulfill the aforementioned tasks and build an effective and dynamic economic regime, radical changes must take place in economic thinking, particularly concerning development issues of humanity. Also, a progressive attitude and a culture of understanding the world must be fostered to optimize the resources in order to build the country, make use of every strength of humanity to protect the country and mobilize all possible resources of humanity to enrich the country. An economic system that inspires every Vietnamese individual to rise above themselves and believe in the promise of opportunity is essential for the future success of the country on a purely human level. If all available resources and creative powers for development are effectively mobilized, contributing to the developmental mindset amongst the Vietnamese people, Vietnam will become a more prosperous and strong country.

Assoc. Prof., Dr. Le Quoc Ly

Vice President of Ho Chi Minh National Academy of Politics