Striving Towards Doi Moi II

Abstract

In recent times Vietnam has had several very good years. The 1989-95 period, which marked the high point of socio-economic reforms after the launching of doi moi (renovation) in 1986, witnessed average annual growth of 7.8 per cent; the development of a multi-sector (mixed) economy; and a significant opening to international markets. This period also saw Vietnam's political re integration into the world community, marked by normalization of relations with the United States (1994-95), entry into the Association of Southeast Asian Nations (ASEAN) in July 1995, and a growing participation in regional and international organizations. At the same time, it enjoyed an expansion of official aid flows to underpin the country's restructuring and development processes. Can this success be sustained? Although the recent Southeast Asian cur rency crisis has had minimal effect on Vietnam, due to its relatively closed and underdeveloped financial sector, the ensuing regional slowdown is likely to highlight Vietnam's problems of competitiveness and restructuring as it inte grates further into the world economy. Indications of the deceleration of eco nomic reforms first appeared in mid-1994, as the state's capacity for effective absorption and management of increased foreign capital inflows experienced severe strains. Investment inflows continued to increase until mid-1995, but Vietnam's institutional framework remained essentially unchanged, particularly in the financial sector and in project licensing and implementation. This situ ation adversely affected investment conditions, which in turn began to have an impact on the country's macro economy. In early 1995 the leadership initiated a drive to reform both state and party structures ? targeting immediate inad equacies while attempting to modernize and rejuvenate the institutions in a more fundamental manner ? but this quickly stalled. While inter-departmen tal policy co-ordination and execution on issues like trade and foreign affairs have improved somewhat under reform, the impact of doi moi had fully run its course by the end of 1995. Developments in 1997 were largely determined by events in the preceding year. These included: intense debate on, and contending approaches to, the