Vietnam's Economic Reform: Approaching the 1990s

Abstract

In the determination of national policy, Vietnam's leaders in the closing years of the 1980s are constrained by economic considerations. Fourteen years after victory over the United States and unification of the North and South, the Socialist Republic of Vietnam (SRV) remains one of the poorest countries in the world. With a standard of living that for most Vietnamese is lower than at any time since 1975, a shrinking per capita income variously estimated to be between US$180 and US$300 per year, unemployment amounting to between 20 and 30%, faltering food production, and soaring inflation, Vietnam carries a developed nation label. It is one of the few countries in modern history to experience an economic decline in a postwar reconstruction period and, along with North Korea, is one of only two communist nations to have defaulted on its international debt. Commercially isolated from most of the world, Vietnam's precarious economy discourages foreign investors despite the potentially profitable appeal of its low-cost, relatively high-quality labor force. Added to this is an agricultural and industrial production system characterized by low labor productivity and underutilization of resources, managed by a bloated centralized bureaucracy ill-equipped to make economic decisions. In short, the country's economy largely defies standard economic models and has been termed a basket case by several observers, and a coffin case by at least one. In contrast, Vietnam is surrounded by Asian neighbors enjoying unprecedented economic prosperity. Even Cambodia, struggling with its political instability, stalemated military conflict, and nascent economic infrastructure, remains relatively free of Vietnam's oppressive inflation rate and appears to be faring better in undertaking needed economic change.