Achievements Of Vietnam Economic Reform

Even though Vietnam made noteworthy socio economic achievements during the 1990s, growth imbalances in the economy and conflicts arising in strategies involving reduction of poverty were reported. Vietnam economy has undergone transformation ever since the measures pertaining to market economy were adopted. Despite Vietnam being regarded as a poor country, poverty has been reduced to a great extent.
It was 58 percent in the year 1993, which dropped to 37 percent in the year 1998. The phase between 1993 to 1998, income inequality was negligible from 0.33 -0.35 as per Gini coefficient.

Macroeconomic indicators:

Achievements of Vietnam economic reform can be understood by going through the following section:

Inflation:

Owing to achievements of Vietnam economic reform, rate of inflation was greatly reduced.

Previously, the country was going through hyperinflation, with a rate of 774.7 percent in the year 1986. Inflation rate dropped to 67.6 percent in the year 1991. Further reduction in the rate of inflation was recorded as 5.2 percent in the year 1993, followed by 14.4 percent in 1994. This has been a remarkable achievement of the country and it happened only within a span of five years.
Vietnam metamorphosed from a centrally planned economic structure to a market economy. The achievements of Vietnam economic reform can be attributed to the nation’s compliance with the fiscal and monetary policies; the fact that price subsidies were eradicated; price liberalisation; introduction of a flexible exchange rate policy. Since, inflation was tamed very judiciously, it laid the dais for subsequent growth in the economy because an optimum inflation rate goes a long way in maintaining a stable economy.

Growth in economy:

Since 1991, economic growth in Vietnam has remained more or less consistent. The GDP increased to 8.2 percent from 3.25 percent between 1987 to 1995.

Sector wise briefing: Industrial production rate was recorded as 13.3 percent between 1991 to 1995. The agricultural sector registered a growth rate of 4.5 percent between 1991 to 1995. Since 1991, the food industry recorded a 26 percent increase as compared to the previous years. The service segment registered a growth rate of 8.6 percent during the 1986 to 1991. There was improvement in the different sectors of the economy. Trade liberalization, adopting latest techniques in pricing of food products, launching of the taxes pertaining to agriculture, all these factors propelled economic growth in the country.

Trade in Vietnam:

Vietnam trade has been equally held responsible for achievement of Vietnam economic reform. Export value for period between 1991 to 1995 was USD$16 billion. Value of import for the same period was USD$18 billion. Consequently, Vietnam’s export/GDP ratio also increased. The increase was from 26.46 percent in 1991 to 31.94 percent in the year 1995. The import/GDP ratio also increased from 13.7 percent in 1987 to 31.57 percent in the year 1999. This further increased to 40.27 percent in the year 1995.

There has been extensive diversification of the import market as well as the export market in the country. As many as 105 nations share trade assignments with Vietnam. However, the Asian region are regarded as the biggest trading partners of the country. FDI or foreign direct investment have increased. Due to projects pertaining to foreign investment as many as 65,000 job opportunities were created in addition to other jobs, which were indirectly linked to these projects. Other factors responsible for achievements of Vietnam economic reform include maintaining healthy economic relation with other nations.

The banking sector in Vietnam is segregated into two levels comprising central bank in the first level with the commercial banking sector following on close heals and making up the second level. Fiscal polices together with monetary polices are taken care of by the Central Bank. In this sphere the following factors can be said to have triggered the achievements of Vietnam economic reform.
Readjustments made towards market economy
Taxation system being effective and efficient.
Interest policy rates pertaining to credit adjustments
Economy having multiple sectors
Strong private sector
Reduction in the role of the state economy and restriction of monopolies.

Social indicators:

Achievements of Vietnam economic reform is best manifested in the key indicators (social) of the economy. Human development index increased from 116 to 109 between the period 1992 to 1998. Achievements of Vietnam economic reform can be best understood under the following categories (for social indicator). There are other categories of social indicators but two prominent ones have been given here.

I) Education:

The enrollment rate(primary) in case of females was 87.1 in 1993 and 90.7 in 1998. Enrollment rate (primary) with regard to males was 86.3 in the year 1993, which went up to 92.1 in the year 1998. Enrollment rate (secondary education) in case of females was 29 in the year 1993 and increased to 62.1 in 1998. The enrollment rate (secondary education) in case of males was found to be 31.2 in 1993 whereas it was recorded as 61.3 in the year 1998.

II) Child Nutrition:

Stunting in small children greatly reduced during the period 1993-1998. Females with stunted growth decreased from 51 to 33 during the years 1993 and 1998 respectively. With regard to males, the decrease registered was from 50 to 35 during the same period. Children with stunted growth also reduced from 51 to 34 during the period 1993 to1998.

Achievements of Vietnam economic reform is also evident from the fact that there has been considerable downsizing of poverty in Vietnam. However, there are few places, which are lagging behind the others.

Poverty reduction in Vietnam has not taken a uniform reduction pattern though. The region representing Red River Delta, poverty reduction was at the rate of 34 percent. In the region representing the Mekong Delta, the rate of reduction in poverty was recorded as 10 percent.

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Last Updated on : 26th June 2013

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