State Owned Enterprise Reform In Vietnam

Due to the various economic reforms laid down by Vietnam towards the latter half of the 1980s, economic growth was observed. The yearly rate of growth pertaining to gross domestic product or the GDP was recorded as 7.6 percent during 1991 to 2000.
The industrial productivity also showed an upward trend and registered 13.7 percent growth. The State Owned enterprises or the SOEs grew at 12.3%. The importance of the SOEs in Vietnam lies in its being the pivot of economic growth in the country. More so, because of their inefficiency.

For such inefficiencies, state owned enterprise reform in Vietnam has taken place time and again depending on the demand of time.

Procedure followed in state owned enterprise reform in Vietnam:
Economic reform in Vietnam commenced during the first half of the 1980s. Changes pertaining to planning as well as the management was effected. Despite the reform yielding considerable success, reform was taken up within the limitation of the centrally planned economy or CPE.
As such, it failed to attend to the hassles of the state owned enterprise sector. This led to the economic crisis faced by the country during 1980s. Seeing the failure of the reform and subsequent crisis in the economy, the Vietnamese government gave up the CPE or centrally planned economic structure and replaced it with a structure more oriented towards the market economy. State owned enterprise reform in Vietnam gave rise to corporate governance.

After the Northern as well as the southern part of Vietnam became united in the year 1975, the then government put in all efforts to develop the nation. The five year plan implemented by the Vietnamese government had to be implemented. The five year plan mainly revolved around state owned enterprises or the SOEs. As much as 21.4% of investments in the year 1976 was incurred on heavy industries. The light industry could attract only 10.5% of the investments. Even though expenses were incurred on this sector, state owned enterprise reform in Vietnam did not live up to the expectations. National income growth rate achieved was only 1.7% whereas the targeted growth rate was between 13% to 14% annually. Anticipating a collapse of the economy, alteration sin the strategy were embraced at the National Party Congress held in 1979 July. The eminent change included Decree 25/CP. With the introduction of this strategy, the state owned enterprises were expected to function as per three plans.

Decree 25/CP:

Features of the first plan:
This plan was obligatory and the government provided assurance with regard to the inputs. Products obtained from this plan were priced centrally and were required to be shifted to the SOEs or the state owned enterprise, which traded.

Features of the second plan:
Instead of the government providing the inputs, the inputs were acquired by the state owned enterprises directly.

Features of the third plan:
The third plan was regarded as auxiliary. This plan was not obligatory and could be devised by the state owned enterprises or the SOEs.

Achievements due to state owned enterprise reform in Vietnam:
That the state owned enterprise reform in Vietnam was successful is proved by the fact that there was growth in export activities and production volume. These achievements however failed to do much good to the country. Vietnam was also making itself ready for the global market.

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Last Updated on : 26th June 2013

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