Economy of Vietnam - History

History

Civilization in Vietnam had been built on agriculture. The feudal dynasties always considered agriculture as a major economic base, and their economic thoughts have been predicated on physiocracy. Land ownership was regulated, and large-scale works such as dykes were conducted in the Red River Delta to facilitate wet rice cultivation. In peaceful times, soldiers were sent home to do farm work. Furthermore, the court prohibited slaughtering water buffalo and cattle and held many agriculture-related ceremonies. Handicrafts and art were valued, but commerce was deprecated, and businessmen were called by the derogatory term con buôn. The national economy was self-sufficient, with little trading with other countries.

From the 16th century, Confucianism was losing its influence on the Vietnamese society. Monetary economy began to develop, but unfortunately, in negative ways. Early commercial ports such as Hội An were constrained and foreign countries with their different cultures and their invasion ambitions were seen as a threat. This policy of closure led to a degree of stagnation in the Vietnamese economy, and contributed to Vietnam becoming a French colony.

Until the French colonization in the mid-19th century, Vietnam's economy had been uniformly agrarian, subsistence-based and village-oriented. French colonizers, however, deliberately developed the regions differently, designating the South for agricultural production and the North for manufacturing. Though the plan exaggerated regional divisions, the development of exports — coal from the North, rice from the South — and the importation of French manufactured goods stimulated domestic commerce.

When the North and South were divided politically in 1954, they also adopted different economic ideologies: communism in the North and capitalism in the South. Destruction caused by the Second Indochina War from 1954 to 1975 seriously strained the economy. The situation was worsened by the country's 1.5 million military and civilian deaths, and the subsequent exodus of 1 million refugees, including tens of thousands of professionals, intellectuals, technicians and skilled workers.

The government's Second Five-Year Plan (1976–1981) aimed for extraordinarily high annual growth rates in industrial and agricultural sectors and national income and sought to integrate the North and the South, but the goals were not attained. The economy remained dominated by small-scale production, low labor productivity, unemployment, material and technological shortfalls, and insufficient food and consumer goods. The more modest goals of the Third Five-Year Plan (1981–85) were a compromise between ideological and pragmatic factions; they emphasized the development of agriculture and industry. Efforts were also made to decentralize planning and improve the managerial skills of government officials.

From the late 1970s until the early 1990s, Vietnam was a member of the Comecon, and therefore was heavily dependent on trade with the Soviet Union and its allies. Following the dissolution of the Comecon and the loss of its traditional trading partners, Vietnam was forced to liberalize trade, devalue its exchange rate to increase exports, and embark on a policy of economic development.

Throughout the 1990s, exports increased significantly, growing by as much as 20% to 30% in some years. In 1999, exports accounted for 40% of GDP, an impressive performance in the midst of the economic crisis which hit other countries in Asia. Vietnam became a member of the World Trade Organization (WTO) in 2007, which freed Vietnam from textile quotas enacted worldwide as part of the Multi Fibre Arrangement (MFA) in 1974. The MFA placed restrictions on the import by industrialized countries of textiles from developing countries. For China and other WTO members, however, textile quotas under the MFA expired at the end of 2004 as agreed in the Uruguay Round of trade negotiations in 1994.

In 1986, Vietnam launched a political and economic renewal campaign (Đổi Mới) that introduced reforms to facilitate the transition from a centralized economy to a "socialist-oriented market economy." Đổi Mới combined government planning with free-market incentives and encouraged the establishment of private businesses and foreign investment, including foreign-owned enterprises. By the late 1990s, the success of the business and agricultural reforms ushered in under Đổi Mới was evident. More than 30,000 private businesses had been created, economy was growing at an annual rate of more than 7%, and poverty was nearly halved.